In his 1977 book, The Public Use of Private Interest, Charles L. Schultze described how American politics is shaped by what he called the "do no direct harm" rule. If you have a tendency to spend your summertime days thinking about why government often favors a regulatory approach, rather than a price-based approach (like pollution regulations rather than pollution taxes) to achieving policy goals, it offers food for thought.
Schultze pointed out that in our market-oriented society, we generally accept that markets will sometimes shift in ways that cause losses as well as gains. But in our political decisions, he argues, we don't want to accept that direct harms might occur. Thus, when politicians become involved in a decision they prefer to operate through regulations, with administrative procedures as a back-up. Such regulations are often justified as a matter of fairness, and making sure that variation in individual cases is taken into account. But an economy full of regulations is also one that continually empowers politicians, both to write new rules and to intervene in administrative processes. Schultze wrote:
[W]e tend to subject political decisions to the rule, "Do no direct harm." We can let harms occur as the second- and third-order consequences of political action or through sheer inaction, but we cannot be seen to cause harm to anyone as the direct consequence of collective actions. The rule is far from absolute, and exceptions abound. But it does strongly influence policy. ...
The rule of "do no direct harm" is a powerful force in shaping the nature of social intervention. We put few obstacles in the way of a market-generated shift of industry to the South or the substitution of synthetic fibers for New England woolens, events that thrust large losses on individuals, firms, and communities. But we find it extraordinarily difficult to close a military base or a post office. We have elaborate procedures for changing zoning regulations and provide case-by-case adjudication where losses in property values may occur. But movements of private industry that destroy property values occur at will. When we intervene through regulation, we try to write the regulations and provide administrative discretion to take care of as much individual variation in circumstances as possible so as to prevent harms that can be immediately imputed to the regulation. Such regulations then grow at an exponential pace as experience in a far-flung economy steadily generates thousands of specific problems.
More important, efficient ways of achieving results are often precluded by fear of some direct losses. The impersonal and blind-to-equity operation of effluent charges or incentive-reimbursement schemes for Medicare is eschewed in favor of regulations and case-by-case adjudication. When a large loss to a specific firm or industry threatens, we ease the regulations. ...
In a similar vein, once government takes on responsibilities for providing services such as day care or skilled nursing-home care (under Medicare), an extension of the "do no direct harm" principle inevitably leads to the assumption by government of responsibility for the quality of services delivered. Increasingly detailed and ambitious standards of quality are developed that shift the policing mechanism from consumer choice to government regulations. ...
Because incentive-oriented approaches to social intervention rely on decentralized reactions to prices, they seem to deprive government of control of case-by-case results. If nothing else, this would make legislators nervous. They would have to forgo the opportunity to provide their programs with all sorts of adjudication procedures drawn up to take care of specific losses. They would also forfeit the opportunity to second-guess administrators and to provide services to constituents through intervention in administrative decisions.Schultze goes on to argue that the underlying issue is a lack of understanding of how price-mechanisms and markets work. In describing how politicians see the world, he writes:
Somehow the cars get into showrooms and the loaves of bread onto the grocery shelves, but the whole thing is like an oft-repeated high-wire act: we don't really understand how it's possible, but it's been done so often we are no longer surprised. ... Because the way in which markets achieve results is both indirect and seldom understood, it is not surprising that more direct techniques of social intervention are usually chosen. If we want to achieve a specific reduction in polluting wastes, what could be more natural than specifying in law the desired outcomes and requiring people to meet them? If we want producers to adopt measures that reduce industrial accidents, why not simply require that the measures be undertaken? If there is too little commuting by mass transit and too much by automobile, what could be a more appropriate remedy than providing the money to build mass-transit facilities? If we think people should have more day care or training opportunities, why shouldn't the government establish and subsidize day care and training centers?
I find it hard to grasp the concept that electrons can best be described as a probability density function. To me, either they are there or they are not there. Luckily, I am not called upon to legislate on how to shift electrons about. In the same vein, it is devilishly hard to convince someone that an indirect, roundabout, and seemingly less certain way of accomplishing the objectives of social intervention should be preferred to a simple specification of required outcomes.
