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THE MAGIC WAND

People have become conditioned to turn to government and say, “Fix this.”

This is what happens when a people’s desire for positive rights overtakes their dedication to negative rights. To say that someone has a positive right to a thing is also to say that other people have a corresponding duty to provide that thing when any cooperative effort falls short. So growing coercion always accompanies the growth of positive rights.

In their zeal to attain things they want, people have come to regard government as a magic wand of sorts, capable of achieving practically anything.

Franklin Roosevelt’s Second Bill of Rights declared that all people have a “right to a useful and remunerative job.”1 But how can this possibly be the case? Business owners hire the employees they require based on what consumers want and are willing to pay, and how productive the workers are. What if there are unemployed people no employer needs? The government could levy fines on businesses for not hiring these people, but that wouldn’t create useful jobs, merely busywork. To say that a person has a right to a useful and remunerative job is to ignore what that person has the skills and will to do and the extent to which other people value what that person does.

The belief that government can alter these realities to achieve a goal is magic-wand thinking. Directing government to coerce an outcome into existence does not, in fact, mean that the outcome will emerge. Whatever human limitations prevented people from achieving an outcome by cooperation might well also prevent them from achieving that outcome by coercion.

The faith that people unthinkingly place in government to accomplish goals is at the same time a faith in the people who work in government, so-called public servants. But people who work in government are no more knowledgeable, capable, motivated, or well intentioned than their counterparts outside of government. Humans who work in government are the very same kinds of humans as those who don’t, and they are subject to all the same motivations as everyone else. So many people miss this fundamental point in so many ways that it is mind-boggling.

The failure to recognize this basic truth becomes painfully clear nearly every time someone identifies a problem he would like to address, be it the need for a living wage, affordable housing, or medical care. Almost invariably, government emerges as the supposed solution to the problem. But what people imagine will happen and what actually happens when we ask government to fix a problem are rarely, if ever, the same thing. To see why, consider the three broad groups of people involved: voters, politicians, and bureaucrats.

People typically imagine that the voters’ goal is to advocate beneficial laws, and that the way they do this is by voting for politicians who support the sorts of legislation the voters favor.

What people imagine will happen and what actually happens when we ask

government to fix a problem are rarely,

if ever, the same thing

People typically imagine that the politicians’ goal is to do what’s in the best interest of society, and that the way they do this is to design and vote for effective laws of the type the voters want. People typically imagine that the bureaucrats’ goal is to serve the public, and that the way they do this is by executing the laws to the ends that the legislators intended.

But none of this comports with what we understand about human behavior.

The goals of the voter, the politician, and the bureaucrat are all the same, because each is a human being and all human beings have the same ultimate goal: to

maximize their own happiness. The way the voter maximizes his happiness is to become informed and to vote if he expects that the benefit from doing so will exceed the cost. The way the politician maximizes his happiness is to convince at least half of the people who choose to vote to vote for him. The way the bureaucrat maximizes his happiness is to craft his job to satisfy his needs. Although this runs counter to the popular imagination, it all becomes pretty clear, pretty quickly, under even the weakest of microscopes.

Voters

All human beings seek to maximize their happiness. Voters are human beings. Therefore, voters seek to maximize their happiness. That’s what they do, because that’s what everyone does. But how? A simple thought experiment tells the tale.

Imagine a society composed of a hundred people: ninety in group A, and the remaining ten in group B. These hundred people are considering a proposed law that will have the government take $10 from each person in group A, burn half of the money, and divide what’s left among the people in group B. What happens if this proposed law is enacted? The ninety people in group A will each pay $10, for a total of $900. Burning half of it leaves $450 to be divided among the ten people in group B, giving each person in group B $45. The people in group B will clearly favor this proposal and will vote for it. The people in group A, however, will see no wisdom in this legislation and will vote it down handily. In any rational world, this legislation will be defeated 90–10, and everyone will move on to other, hopefully more reasonable, things.

This is how we imagine that voter behavior works in a democracy, and although it gets the big picture right, it misses where details are concerned. The most important detail missing here is that voting isn’t costless. In terms of money, time, effort, aggravation, or a combination of all four, it costs something to vote. First, a voter has to pay attention to what laws are proposed. He then has to read the proposed law. Next, he has to think about whether what the law proposes is good and reasonable, and decide which way to vote. Finally, he has to go to the voting place, cast a vote, and return home. This means that he also has to pay attention to and think carefully about issues, candidates, and elections. He has to assess what proposed laws will cost generally, and what they might cost him personally. He has to assess whether he thinks political candidates are even telling the truth.

In short, there is not one simple cost. There are a number of them. And they add up.

In our thought experiment, we can simulate all of these costs with a fee. Consider the same proposed law: The government will take $10 from each of the ninety people in group A, burn

half of the money, and divide what’s left among the ten people in group B. But this time, there is a $20 fee to vote. What happens when this proposal is put to the vote? Each person in group B still stands to gain $45 if the proposed law is passed. That’s more than the $20 voting fee, so the people in group B have an incentive to vote for the proposal. But what of the people in group A? If the proposal passes, each person in group A will have to pay $10. But since it costs $20 to vote, the people in group A are actually better off not voting. For a person in group A, the cost of living with the new law is lower than the cost of voting against it. Not only will the law pass under these circumstances, it will pass unanimously, 10–0.

All of this is more complicated in the real world, of course, but the complexities merely add noise to the underlying reality.2 The underlying reality is that, in a democracy, laws are not enacted based on whether they are good for society. They are enacted based on whether they benefit or harm the people who have an incentive to vote. As a result, laws that impose on society a greater cost than benefit often pass. They do so when the benefit is concentrated in the hands of a small group of people and the cost is spread over a large one. This is the principle of concentrated benefits and dispersed costs. And this principle results in all kinds of legislative mischief.

In 2015, Phoenix voters were asked to vote on a proposal to increase the city’s sales tax by 0.3 percentage points in order to raise more than $30 billion to build and maintain twenty-six miles of light rail in the city.3 The plan also included laying 680 miles of asphalt, creating 1,080 miles of bike lanes, and adding 135 miles of sidewalks. In addition, the City Council voted that if the proposal passed, the City Council would shift $16 million annually from the transit budget to the city police budget.

From the money citizens spent on advertising trying to influence voters, it appears that people overwhelmingly supported the plan. In total, citizens spent almost $400,000 advertising in favor of the proposal, and just over $400 advertising against it.

But a different picture emerges on closer examination. That $400,000 came mostly from engineers, contractors, and police—groups that all stood to collect the lion’s share of that

$30 billion in spending. Meanwhile, the cost of the proposal was spread over the 1.6 million people living in Phoenix. For a family that spends $30,000 a year on goods subject to the tax, a 0.3-percentage-point sales tax boost costs $90 per year—or less than a basic Netflix subscription. For the average voter who did not stand to gain personally from the light rail project, the cost of fighting the project (given all the other daily demands on people’s time) wasn’t worth it.

Where the outcome of the vote was concerned, the question wasn’t whether the light rail project was a good idea for Phoenix voters. What mattered was that it was a great idea for a small group of Phoenix voters and an idea not worth fighting over for almost everyone else. How do we know it wasn’t worth fighting over? There are more than 830,000 registered voters in Phoenix.4 Yet only about 135,000 cast votes on the light rail proposal.5 Fewer than 20 percent of Phoenix voters bothered to vote on the matter at all. Given the incentives involved, a good portion of that 20 percent probably stood to gain personally from the light rail construction.

The transit proposal passed, 55 percent to 45 percent. Voters are often criticized for being ignorant or unconcerned.

What voters actually are is rationally ignorant. There are any number of things they do not know, and given the various voting and information costs they face, it is perfectly reasonable that they remain ignorant of these things. After all, they have more important things to do, like mowing the lawn, picking up their children from soccer practice, making dinner, and worrying about paying bills. The problem is that, in our idealized way of looking at the political process, we generally assume that voters are something that they are not: concerned with all things in equal measure and ready, willing, and able to act on that concern.

Politicians

Politicians are also human beings, contrary to what you might hear elsewhere. And human beings seek to maximize their happiness. As with voters, the syllogism holds here, too.

When asked what a politician’s goal is, many people idealistically respond, “To do what’s in the best interests of society.” There are some politicians who truly do seek to do what’s in the best interests of society (to the extent that they know what those interests are). But two politicians who are identical in every way except that one’s primary goal is to do what’s in the best interests of society and the other’s is to get elected will experience remarkably different results. The latter will, on average, win more elections, precisely because that is his goal. Economist Thomas Sowell says it more succinctly: “No one will really understand politics until they understand that politicians are not trying to solve our problems. They are trying to solve their own problems—of which getting elected and reelected are number one and number two. Whatever is number three is far behind.”6 The way politicians get elected (then reelected) is by offering (then appearing to deliver) things the voters want. The problem with this statement is that there is really no such thing as “the voters.” There are many individuals who vote, and each of those

individuals wants something different.

Consider individual voter preferences for government services, be it healthcare, public schooling, or public transportation. The particular service doesn’t really matter, as the same result inevitably emerges. The military provides as good an example as any. Many voters believe that we have no business intervening militarily in other countries. These voters prefer that the government maintain a relatively small and inexpensive military. Many other voters believe the United States should pursue an interventionist foreign policy, part of which includes having a large, well-equipped, and necessarily expensive military. Fewer voters occupy the middle ground between these extremes—a military large enough to be expensive but not large enough to be effective.

In seeking votes, a politician will position himself to attract as many voters as possible. A politician who positions himself as a “dove” will attract the voters who want a small and inexpensive military. A politician who positions himself as a “hawk” will attract the voters who want a large and expensive military.

But what of the minority of voters in the middle who want a moderate-sized, yet ineffectual military? The politician who is closer to the middle will get their votes. So the dovish politician has an incentive to move to be a little less dovish so as to pick up those voters. Then the hawkish politician has an incentive to move to be less hawkish so as to take those voters away from the dove. The dove then has an incentive to become less dovish still to win them back. The politicians play this game until they end up roughly in the middle, with each holding about 50 percent of the vote. In the end, what determines how the election will go is what the minority in the middle want. Carrying the minority center is what makes the difference between winning and losing.

This phenomenon happens with such regularity that it has a name: the median voter theorem. The theorem holds that, with majority voting, the median voter’s preference will win even if it is the preference of the fewest number of voters.

Consider public education. If you pick an American at random and ask for his opinion about funding for public education, more likely than not he will say that funding for public education is a problem. But you’ll get markedly different answers to the follow-up question, “How so?” Many will say we aren’t spending enough. Many others will say we are spending too much. The same applies to healthcare, national rail service, and Social Security. About half of polled voters say we should increase the size and scope of these services, and about half say we should cut them. Very few say that they are about the right size.

Politicians seek to win elections not by offering sound public policy that will yield good results but by appealing to 50 percent plus one of the voters. The way they appeal to that many voters is by appealing to the median voter. But the median voter often wants something very different from what people with strong opinions on either side of an issue want.

Removing the rose-colored glasses that have us romanticizing politics is the first step to understanding politicians. Politicians seek first to maximize their own happiness, because that’s what all humans do.

Public Bureaucrats

So far, we have seen that neither voters nor politicians act in ways most people assume they do. The group left to consider is public bureaucrats—people who work in government but are not elected. We imagine that public bureaucrats work to serve the public. We go so far as to refer to them as “public servants.” But bureaucrats try to craft their jobs to satisfy their needs, because, like the rest of us, they seek to maximize their happiness. Although bureaucrats exist in the public and private sectors, competition forces private-sector bureaucrats (or at least their managers) to focus on satisfying their customers’ needs, because they will make no money any other way. Public-sector and private-sector bureaucrats are not intrinsically different; they behave differently only because they face different incentives.

Bureaucracies come in any number of sizes and shapes, but that doesn’t seem to have much impact on how they behave. Consider the Department of Veterans Affairs, which exists largely to provide medical benefits for veterans of the U.S. armed forces. The cabinet-level department, formed in 1930, employs more than 375,000 people. Were it not part of the government, it would fit comfortably among the top ten of U.S. employers.

The VA’s stated goals are laudable. Providing good medical care to veterans after their years of service is something on which most Americans can agree. So why is it that most people seem to know that the medical care the VA offers is substandard?

Government is a powerful tool but not a magic one

The VA provides substandard care precisely because it is a government bureaucracy, and the people who work there face few consequences for placing their own needs above the needs of the people they purportedly serve. Certainly the VA has many dedicated and compe-

tent employees. But all it takes is one incompetent or lazy nurse, secretary, or manager to counteract the good done by many competent people. If only 1 percent of VA workers is incompetent, that’s almost 4,000 people in positions to create mischief.

How bad have things gotten at the VA? In 2014 it came to light that thousands of patients were backlogged at the Phoenix VA hospital, some of whom died as they waited for care. VA investigators discovered that administrators had been well aware of the problem but had falsified wait-time data in order to collect bonuses.7 This is perhaps the worst kind of example of bureaucrats’ crassly pursuing self-interest at the expense of those they were charged with servicing.

These problems were not local to Arizona. VA administrators all over the country were doing precisely the same thing. A 2016 USA Today investigation found that “supervisors instructed employees to falsify patient wait times at VA medical facilities in at least seven states” and that “employees at 40 VA medical facilities in 19 states and Puerto Rico regularly ‘zeroed out’ veteran wait times.”8

The people who did these sorts of things were not worthy of the title public servant, but we would probably be better off if we dropped that phrase from our lexicon regardless. People serve themselves first, and incentives dictate the rest of their behavior. If this is natural, and it appears for all the world that it is, producing different results requires realigning incentives.

Maybe the VA bureaucracy fails so spectacularly because it is large to the point of being unwieldy. If that is the case, our experience with smaller bureaucracies should yield different outcomes. We should be able to point to any number of statelevel bureaucracies that actually satisfy their customers as a rule. Every state in the union has some variant of a Department of Motor Vehicles, and almost every citizen in each of those states will, sooner or later, visit one of those offices. So what do we think about our respective DMVs?

People generally loathe their trips to the DMV. Customers face long wait times. Once to the front of the line, people often learn that they have insufficient documentation in hand, even though they have taken pains to comply with published lists of requirements. All of this is served up by surly clerks who clearly do not concern themselves much with the “customer experience.” But why would they? They do not have to.

A trip to any local bureaucratic office yields much the same result, because such outcomes are baked into the system. If human beings seek to maximize their own happiness, then that is what they will do in the face of their incentives and constraints. The incentives and constraints government bureaucrats face do not force them to put anyone else’s interests before their own, so those who choose not to simply don’t have to.

The story is exactly reversed for business owners. It is uncommon, for example, to see all of the best parking spaces in a store’s parking lot reserved for store employees. You might see one set aside for the employee of the month or some such thing, but that tends to be the extent of it. In fact, managers will often ask their employees to park away from the building to keep the spots near the entrance open for customers. But post offices, schools, and municipal buildings? Not so much. Often, the prime parking spots there are reserved for the employees.

This isn’t because private-sector workers are more conscientious. Workers in the private sector would love to reserve the spots close to their buildings for themselves. They don’t because customers who find the parking inconvenient will take their business elsewhere. The same is not true where government bureaucracies are concerned. Bureaucrats work for government, and government faces no competition. People who work at the post office, as kind and thoughtful as they may be, have less incentive than do workers at the local grocery store to be concerned with customers’ having a good experience and coming back. If the U.S. Postal Service cannot earn enough money from customers (as it hasn’t for more than a decade), it can turn to the federal government for increased funding.9 The government, in turn, will coerce the funding from taxpayers. By contrast, a grocery store will just go out of business, to be replaced with one that can serve its customers better.

Voters, Politicians, and Bureaucrats: A Word of Caution

People attribute almost magical powers to government because they clearly see the outcomes they want to attain—more jobs, less crime, better education—and they clearly see that government has the power to coerce. People imagine that, to achieve X or to prevent Y, all one need do is pass a law requiring people to do X or prohibiting them from doing Y.

But this entire concept is based on a false assumption. Remember, people don’t respond to laws; they respond to incentives. This goes for the voters who elect politicians, for the politicians who craft laws, and for the bureaucrats who implement the laws. People are people. Voters have a strong incentive to avoid the cost of becoming informed; politicians, to attract more voters; bureaucrats, to make their jobs less difficult. These incentives explain why empowering government to pursue one outcome often produces a very different outcome. They also explain why the customer experience is so different in public-sector versus private-sector services: the Postal Service versus FedEx, Amtrak versus Southwest, applying for a driver’s license versus applying for a credit card, or applying for federal financial aid versus applying for a bank loan.

Government is a powerful tool but not a magic one. And once people realize that unintended outcomes are the rule rather than the exception, they can begin to temper their expectations as to what government can actually achieve. Government cannot accomplish all things, and it is dangerous to believe that it can do so. Every sentence that begins with “The government should…” implies the use of coercion. And the coercion that follows is not always worth what it costs, in terms of money, time, emotional distress, or human dignity. The trick is in knowing under what circumstances the reality of what coercion can achieve is more desirable than the reality of what cooperation can achieve.