Do No Harm

An interesting thread came up on this blog post on Cafe Hayek.

One commenter, JohnDewey, defended government agencies calling it unfair to say that government agencies do not add any value.  He admitted that agencies like the USDA may not operate as efficiently as a private solution, but it’s still better than nothing and therefore it adds value.

I disagreed.

Dewey used an example of an untilled field.  He said a man and horse-drawn-plow adds some value to the field.  Maybe not as much as a man and a powered tractor, but let’s not forget it adds some value.  In his example, government agencies were the man and horse-drawn-plow.

I disagreed as did others.  A commenter known as vikingvista pointed out that Dewey lacked the imagination to consider what Bastiat wrote about in the 1800s as the unseen, or how much different and potentially better things could be without government involvement.

I agreed.  But, this is a difficult point to grasp because it’s abstract.  It’s difficult to imagine how things might be different.  That’s because most good things are a result of accidental innovation.  None of us can really imagine the unseen because that would require us to be able to predict something we can’t predict — which accidental experiments will be successful.  If you could predict such things, you should do very well investing in the stock market or directly in business start ups.

But, I wanted to try to bring this abstract point home.

I wrote to JD that he was using the wrong reference point to determine if the horse and man add value.  He was using “nothing” or an untilled field as the reference point. Certainly, a horse and man can produce more crop than an untilled field.

But, the untilled field is not the correct reference point.  It ignores opportunity cost.  A better comparison is the powered tractor field because powered tractors are readily available an in use these days.  The horse and man will produce less per unit of input than the tractor and man.  Even if the man can’t afford to buy the tractor, he can afford to buy crops grown by other people with tractors.  So, it’s not worth his time to try to produce crops with his horse.

JohnDewey disagreed.  He still contended that man/horse added some value.

I used one more example.

I appointed myself his new manager at work and declared that I didn’t trust any technology that’s been developed in the last 40 years, so he and his co-workers must carry out their work with tools and methods that have been around longer than that.

I imagine when my superiors experience my team’s productivity sinking to a fraction of what it was before, they wouldn’t buy JohnDewey’s argument that “it’s better than nothing.”  Neither will shareholders.  They’ll correctly compare our new output to what it could be using modern tools and methods and fire me because they will have correctly viewed that I damaged, rather than helped, the team.