First, cause no harm

To my The golden rule of liberty post, Wally asks a great question:

Freedom to choose how we live our lives is certainly something we value as a culture with a strong individualist current. But what if we’re wrong?

It think it’s a great question because the answer is a key reason I appreciate liberty. My answer to Wally’s question is that if we’re wrong about liberty, we haven’t caused direct harm.

This point is overlooked in greater-good cost-benefit analysis. Interventionist and non-interventionist actions are both treated as causing an outcome. But, I don’t believe the liberty-minded action causes anything. We only imagine it does through a trick of the tongue.

Consider these two statements:

1. If we raise the minimum wage, that causes some folks to have a harder time finding a job and some folks to get paid more than they otherwise would.

2. If we don’t raise the minimum wage, that causes more people to be able to find jobs, but at less pay than they otherwise would.

What’s the difference? In #1, some people are made worse off for the supposed benefit of others.

What about #2? While minimum wage advocates want us to bite on the idea that we are standing in the way of some unfortunate souls making more money, the truth is we’re not leaving them any worse off than they were before. We’ve done them no harm.

In fact, we’re not even preventing unskilled workers from earning as much as minimum wage advocates want them to. After all, nothing is preventing minimum wage advocates from hiring unskilled workers at the wage they prefer, is there?

In case that example doesn’t work for you, try this one:

1. If we pass each other on the street and you give me a dollar that you took from another passerby, you make me richer and the other guy poorer.

2. If we pass each other on the street and you don’t take a dollar from another passerby to give to me, you keep me from becoming richer.

In #1, you’ve caused harm to some else, even though it was offset by the benefit to me. In #2, you did not cause harm to me by not causing harm to someone else. You caused me no direct harm.

The golden rule of liberty

In discussions about what government ought to do, rarely does one consider:

What if I’m wrong?

If there’s a chance that your policy causes more harm than good, or even any harm, shouldn’t you be more concerned? 

Good intentions and the gotta-do-something attitude are often accepted as valid justification for causing harm, but I think that’s a mistake.

If I’m walking by someone on the street who is having a heart attack, I could attempt to perform open-heart surgery. That would cause him more harm since I have no medical experience. Even though I had good intentions and a gotta-do-something attitude, most people wouldn’t give me a pass for with that reasoning.

Yet, we let so many people and politicians get by on that reasoning when it comes to public policy.

I hear proponents of the minimum wage, for example, support their position with a ‘greater good’, cost benefit analysis that sounds like this: Sure, it might make it harder for some to find a job, but it’s worth it if some people get paid more than they otherwise would.

My response: The folks who will have a harder time finding a job want to thank you for making that decision on their behalf.

They usually chuckle and say something like: Well, that’s okay. The ones who get paid more will also thank me.

What amazes me about such exchanges is how blase folks are about making decisions that might harm others, even if their cost-benefit analysis is correct, and how little they care about whether they are right or wrong. They act as if their good intentions gives them a pass for being wrong and causing harm. That’s reckless.

A key reason I appreciate liberty isn’t because I believe the costs (like those in the above example) outweigh the benefits (though I do believe that), it’s because I believe I should be very careful when I’m thinking in terms of who to harm — even if I believe the benefits exceed the costs.

I don’t like it when others decide it’s okay to harm me for what they think is the greater good, so what entitles me to inflict harm on others? Treat others as you, yourself, would like to be treated.

Few of the reckless greater-do-gooders like it when others decide it’s okay to harm them. Yet, they rarely make the connection that because they don’t like it, maybe they should refrain as much as possible from advocating harming others.

I’m not a fan of society-level cost-benefit analysis, because it separates the analyzers from the direct costs and benefits and makes it too easy to be careless and support the outcome that garners the most favorable agreement with peers.

It’s to easy to say this: I support this because I think we* have to do something. We* just can’t sit by and let these people suffer.

*Of course, by ‘we’, they usually mean others.

It’s not so easy to say: You know, it may be unfortunate, but we all have unfortunate things happen to us and need to make adjustments. Besides, if we do something to help them though government, that just means we’re causing harm to others. Maybe, if we really do believe it is worth it to help them we should open our own checkbook, volunteer our time or start an organization to help them, rather than just make empty declarations.

The price system is the best communication network

I enjoyed this post from Russ Roberts on motives vs. results. One piece of it:

So my opposition to a minimum wage or government schools or agricultural price supports or bank bailouts or mandatory health insurance or mandatory retirement contributions or mandatory eating habits doesn’t come from my selfishness or greed. Rather it comes from respect for my fellow human beings and a belief (not a faith) that leaving people free to choose what is best for themselves usually works out better than strangers making decisions for them.

When you catch yourself supporting government fixes because the cost-benefit analysis seems so clear and right to you, just do me three favors.

First, keep in mind that you are wanting to impose your will on others through government. I don’t believe many people consider that.

Or, they dodge that accountability by saying others want it too and hiding behind a majority or plurality vote. It’s the bandwagon effect or the old psychology experiment where the subjects gave electric shocks to a fake test subject under the command of a researcher. And they kept giving electric shocks even though it sounded like they were causing great harm to the fake subject, because they were just doing what they were told.

Second, consider that your cost-benefit analysis might be wrong. Unless you are extremely wealthy, there’s no evidence that you have any great talent at being correct with cost-benefit analyses. Perhaps you’re doing okay. Fine. That says that you’ve made some safe bets and the best thing you can do is model that behavior for others, rather than force them to follow your path, because your path may not be right for them.

Finally, since there is a possibility that you could be wrong, why not fall back on the standard doctors use — and the argument environmentalists use for global warming — do no harm? In other words, why impose your will on others if you might be wrong?

I also liked the comment to Russ’s post from Steve Horowitz:

Profit is a motive, yes, but more important, it’s about knowledge – it’s a coordinating signal. We need a profit and loss system not primarily to “motivate” people, but to generate the knowledge signals we need to get the *results* we care about if we want the world to be a more peaceful, prosperous place.

That’s very well stated. Profits convey knowledge. Each of us use that knowledge daily. The builders of the city that I linked to in this post did not use the knowledge conveyed by profits and now they have a ghost city.

When I decided recently to abandon my effort of making an agility ladder out of duct tape and instead bought one, I responded to the profit motive and the knowledge it conveyed to me (it was not worth my time).

I’m certain there are things you stopped doing and started doing in this past week where you too were responding to the knowledge you gained from profits.

Cost benefit BS

In the Wall Street Journal today, Allysia Finley offers several examples of cost benefit analyses (CBAs) to support more government force with similar arguments to government-forced contraception coverage to illustrate why such CBAs are absurd.

I recommend reading the whole piece, Coffee is an Essential Benefit Too.

Here’s one CBA:

Fitness club memberships. Most doctors agree that exercising is one of the best ways to prevent disease. However, gym memberships can run between $240 and $1,800 per year. Such high prices force us to choose between exercising and buying groceries. While we could walk or jog outside, many of us prefer not to. Therefore, employers should be required to pay for workers’ gym memberships. Doing so might even reduce employers’ health costs, which is why many companies already subsidize memberships. Those that don’t are limiting our freedom to exercise.

Related articles

• Cost Benefit Analyses Suck (ourdinnertable.wordpress.com)
• Much ado about rubbers? (ourdinnertable.wordpress.com)

Cost Benefit Analyses Suck

Rick Santorum wrote in the Wall Street Journal this past weekend about his Economic Freedom Agenda.  Most of it sounds good.  This part bugged me though:

I’ll review all regulations, making sure they use sound science and cost benefit analysis.

One reason it bugs me is that Candidate Obama made a similar promise four years ago. The Obama/Biden campaign promised to go through the budget and “keep the stuff that works and stop the stuff that doesn’t.”

Sounds good, but it didn’t happen.  And there’s a good reason it didn’t happen.  That brings us to the second reason Santorum’s comment bugged me: It’s impossible.

Believing it is possible is a true marker of naiveté or willing deceit.

Cost benefit analyses sounds good to a lot of people. They teach you cost benefit analysis in college, after all, no?

But cost benefit analyses have a major weakness — they’re usually wrong.  They’re wrong for a couple of reasons.

First, cost benefit analyses can be made to say what you want them to say, so they are subject to the same political wills as if the cost benefit analysis didn’t exist. The cost benefit analysis serves one purpose: to fool those who don’t understand this about cost benefit analysis.

Publicly funded stadium, museum and public transit projects are notorious for such analysis.

Even when a cost benefit analysis is conducted with the best of intentions by supposedly competent folks, it is usually wrong. As I mentioned here, Richard Feynman said:

The first principle is that you must not fool yourself…and you are the easiest person to fool.

He said this because he specialized in finding where experimental physicists had fooled themselves while conducting their experiments.

Unfortunately, the only true cost benefit crucible is the real world — and even that can be misinterpreted, and often is.  Economists still debate whether FDR’s actions in the Great Depression helped or hurt.

The truth is that government programs face incentives different from the free market. There’s always plenty of reasons to keep a government program around, even when it clearly does not have desirable outcomes (e.g. minimum wage).

But, the main reason to keep a program in the free market is if its doing its job.  If its not doing the job, the market (or “us”) finds ways to use those resources better.

The restaurant where I had my first W2 job went out of business long ago. It was bulldozed and replaced with a convenience store that does brisk business and has for years.

Had it been a government program, the old restaurant would still be open, supported by your always forgiving tax dollars.  It wouldn’t have many customers, but that’s okay. Politicians will claim they are keeping folks employed. Voters can feel good about voting for them for that reason and the cooks in the restaurant feel great about getting paid to not work that hard.

Ask folks then if they’d like to keep the restaurant, they might be inclined to say yes, you know, to keep the workers employed.  Ask them if they eat at the restaurant, they would tell the truth. No.

Nobody would be able to see the true opportunity cost of all that. They would never have guessed that had the restaurant been allowed to go out of business, it would have been replaced by a convenience store that produces much more value for the community and more jobs. And higher paying jobs.

Ask folks in the community now if they’d like to put the restaurant back in place of the convenience store and most would laugh at you.