I’ll explain my reasoning about how it contributes to what I’m trying to achieve with Theoretical Foundations in Thursday’s post, but for now I’d just like to jump right into the exercise itself.
The work programme description on this topic starts by saying:
Many non-progressives profess that any significant state or collective action to try to achieve social and economic goals is bound to be ineffective or even counter-productive. They often use complex yet elegant theories and models drawn from neoclassical economics to prove this.
I want to compile a list of all of the main arguments along these lines. Or, as our opponents might put it, a catalogue of the reasons why progressive policies will always fail. Here’s what I’ve come up with so far:
(I should note that I’m not saying that every one of these arguments is necessarily wrong. In some instances, it may be that many progressive would accept the argument, at least up to a point. Nevertheless, they are all arguments that, if true and/or believed, make progressive action harder.)
- Government attempts to ‘pick winners’ by giving public assistance to particular companies or industries are misguided, as politicians and public officials cannot allocate resources as well as the market can.
- Similarly with efforts to take a strategic approach to assessing what training is needed to meet a country’s skill needs — this amounts to ‘manpower planning’ and has also been discredited.
- The market is better at fostering innovation than any form of centralised decision-making can ever be (an argument advanced by John Kay, as described in an earlier post).
- Public officials’ actions and advice are guided not by commitment to the public interest but by their own rational self-interest (as predicted by ‘public choice theory‘) leading to budget-maximizing and bureau-shaping activity.
- Public sector organisations are inevitably less productive and efficient than private sector ones because they are not subject to the same market discipline, including shareholder demands and the ultimate threat of bankruptcy.
- Because ‘exit’ is more effective than ‘voice’, it is better to give people more choice in the services they receive than to give them greater say in decisions about the way those services are provided (see this post).
- The effectiveness of government action will be undermined because people do not behave in the way that governments want them to, leading to problems with perverse incentives and moral hazard.
- Increases to public activity will ‘crowd out‘ innovation and investment by the private sector (which is where genuine wealth-creation takes place).
- Attempts to provide resources to the poor will tend to get captured by the middle class unless they are tightly targeted.
- Tax rates need to be kept low and relatively flat (i.e. not too progressive) in order to reward innovation and effort, or else the economy will suffer.
- In any case, efforts to tax the rich will inevitably be ineffective as they will find ways to avoid the additional taxation.
- Providing too much of a welfare ’safety net’ is counter-productive since unless income support levels are minimal this can create ‘benefit dependency’.
- Monetary policy needs to be tightly focussed on keeping inflation rates very low, and cannot afford to take into account the impact of its interventions on employment or investment.
- In fact, according to the ‘Policy Ineffectiveness Proposition‘, governments really cannot have any positive effect on the economy, because people will use ‘adaptive expectation’ to respond immediately to any government action (taking into account its long-term costs) and thus neutralise it.
This might seem like quite an economically-focussed set of arguments, and indeed most of them do derive from the discipline of economics.
But their potential application goes well beyond the economy, and has implications for just about any area of social spending. Some of the arguments, like #4 and #7 above, even have implications for the desirability and effectiveness of government regulation of societal behaviour.
It is also, almost certainly, an incomplete list. And I’d like to enlist your help in order to add to it. What other arguments against the effectiveness of progressive action can be included in this list?
I’d also be interested in any help in identifying the definitive texts setting out these arguments (and those that are added to the list). And, for that matter, any assistance in steering me towards devastating rebuttals to these arguments would also be much appreciated (although that’s primarily a task of a slightly later phase of this topic).
Do progressive policies always fail? I don’t believe so. But I also believe that they are much less likely to do so if we are aware of, and able to consider and take account of, the arguments that are mounted against them.