The Economics of Good Intentions; J. Cobb

Appearances vs. Reality Good intentions have to contend with the very real economic forces of self-interest. The government can command and regulate people, but the direct use of mandates often fails because the indirect results of a free market system can have more powerful, contradictory effects. Some government policies, enacted with benevolence ,just fail, or worse, they produce opposite results from the lawmakers' good intentions. Joe Cobb is the Heritage Foundation's John M. Olin Fellow in Economics. Thomas Sowell's book, A Conflict of Visions (1987), is highly recommended for a more detailed discussion of the ideas in this essay. For example, it might seem like a good idea if workers at the bottom of the wage scale could receive more income. Hence, the administration proposed to increase the minimum wage for low-income workers. But what if a law against low wages resulted in fewer jobs for low-productivity workers?

Reducing tax rates on successful business investments could encourage jobs, but it might make the richest members of society better off. Would that hurt anyone, or just appear to favor the wrong people? Economists study how a market coordi nates the indirect results of many different unrelated actions and their unintended ef fects. Economics is not about anyone's intentions, good or bad, but about "non intentions" -the beneficial indirect social results of everyone's self-interested, profit seeking behavior. Trickle-Down Economics The absence of some consciously good intentions in public policy, and in a free market generally, provokes the scornful label "trickle-down economics." That slo gan implies the intention of some govern ment policy to make rich people wealthier so they can patronize the poor. The contempt implied in the slogan sug gests a belief that intentions, good or bad, are a necessary part of any policy, and the absence of consciously good intentions, 484 Have Good Intentions 485 Don't Care The Failed Economicsof Vice Good Intentions Indirect Virtue Results of Self-Interest ::0 I mc CD.::; a (I) ::0.

m ~5.8.tit Have Good Intentions therefore, means a free market must have bad intentions. At the same time, those who use the slogan to attack political opponents are themselves less than intellectually honest because the same term could describe any policy to make the poor richer too. People from every social class spend money on goods and services, which "trickle around" the economy and increase incomes. A sim ple diagram illustrates the kind of error this single-minded concern with intentions can produce. The rows are good and bad results, intersecting with good intentions or the absence of any conscious motives. Compassion with good results is obviously a virtue, and vice might come from neglect ing a problem. But the policymaker who believes intentions are essential for good results is unable even to see the logical case for an indirect system such as the free market. Ruling Indirectly Laws and public policy that are based on our knowledge of indirect effects are among the most successful in modern soci ety. Rules such as private property rights and formal ways to draft enforceable con tracts are made for people to deal with each other without government's direct partici pation.

The good results of those policy rules are strictly indirect consequences. A lawsuit may go to court or the police may be called Don't Care if people violate the rules, but the govern ment's role has nothing to do with the good intentions of political leaders. Government really cannot, and should not, care what people do so long as they follow fair and equal rules. Systematic Malpractice Should good intentions play any role in government policy at all? Noone gives an automobile mechanic credit for good inten tions if your car is still not fixed. Generals aren't praised for good intentions ifthey lose a battle. If economics and politics were any kind of exact science, there would be no question. Good or bad results are all that anyone would look for. The failed economics of good intentions is a kind of systematic malpractice in public policy, and it continually recurs. Its advo cates fail to understand the repeated failure of their policy ideas, because they have no malevolence. Their pious style of scornfully dismissing as trickle-down economics all reforms that are not based on benevolent social engineering or political planning has prompted economist Thomas Sowell of the Hoover Institution to identify them as "the morally self-anointed."

But like generals before a battle, elected leaders have a duty to look beyond inten tions and focus on producing good results. Public policy has to be based on an under standing of the non-intentions and indirect effects of economic and social behavior. D THEFREEMAN IDEASON LIBERTY Nature Versus the Central Planners by Robert A. Peterson F or the past 100 years, central planners have used the language and methods of science to explain and justify their attempts to fine-tune most of the world's advanced economies. Pointing to the successes of re searchers in the hard sciences, they have led people to believe that a little inflationhere or a lot of regulation there can actually fine-tune an economy-the same way a mechanic can adjust the points, set the timing, and put new spark plugs in a classic car engine. Using the veneer of scientific language, government officials explain how in five years a deficit will be reduced, or how so many shoes or tanks will be produced, or how so much health care will be made available. Like some ancient soothsayer, the officialeconomist looks for good omens in the economic data and tells the ruler or rulers what they want to hear. When the projected results don't materialize in dem ocratic countries, we are told it was merely because the central planners weren't skilled enough. Just find enough Rhodes scholars, create a Brain Trust, and all will be well.