Limited knowledge provides the limits to government

There was an interesting article by Mai Chen in the Herald on Wednesday.  There is a lot of lawyer rhetoric in there.  The only reason I really noticed is that I was reading McCloskey’s “the Rhetoric of Economics” and just yesterday went through the chapter on Coase when the rhetoric of lawyers was discussed.   This explains this:

At a high level, it requires New Zealanders to agree on a vision for our society – the kinds of things which make New Zealand a place we want to live and raise our children. But the hard edge also requires that we measure our progress towards achieving that vision, and hold Governments to account on their performance against such measures.

Sounds good doesn’t it.  Pity it involves no conception of whether the vision is attainable or the underlying trade-offs involved.  The lack of discussion of trade-offs, or comparisons of counterfactuals, is a perplexing feature of this sort of writing for an economist – and makes the statement mentioned above absolutely useless for policy analysis.

This sounds harsh – a lot harsher than I mean it to be, and as a result I want to point out the positives here.  The sort of aimless push for a “vision” is poppycock at a surface level – but it contains a strong grain of truth that we should recognise.  Ultimately, the decision about what trade-offs society is willing to make should be made by society!

Measurement and quantification are areas this article is supporting – and I agree 100% with Mai Chen here.  By measuring things, and understanding them, we can:

  1. try to understand the trade-offs
  2. explain the trade-offs to the public is a (hopefully) transparent way
  3. express whether the actions of the institution that is government are representative of the will of the people.

Quantification is an important tool for this, and to be fair to Mai Chen you could interpret the term “vision” as a way of communicating these trade-offs in a way the public can understand.  Rather than being poppycock as I have described it, such description way in fact be the way forward!

But the key point here is not to let ourselves get obsessed with targeting measures so directly (although the any benefits should be quantified and tested), and guiding the economy.  We should base policy on the trade-offs that exist and what society desires.

However, our knowledge of these trade-offs is imperfect and as a result the actions of government should be cautious.  As Noah Smith said “caution about policy is very similar to doctors’ maxim of “first, do no harm.” As a doctor, you wouldn’t say “I can’t figure out how this organ is helping the body function, so let’s just take it out.””.  Remember, government is an institution that is intervening in the volutary trade of individuals and groups due to issues of equity or co-ordination – in the same way we don’t want a doctor arbitrarily fiddling with our body because he has “a vision” we wouldn’t want a government arbitrarily messing around with our ability to trade due to their “vision”.


2 replies
  1. boristhefrog
    boristhefrog says:

    Never convinced by the ‘vision’ thing… Stalin had a great vision… as did Pol Pot…. The other problem is that the ‘vision’ people may want is very likely to be the ‘mom & apple pie’ type of thing that gets bandied around from time to time… what trade offs can you make about ‘safer communities’ or ‘greater opporuntiites’ and how do you measure a Government’s performance against such waffly ‘goals’ as these…

    I agree that talking about goals as opposed to vision allows a discussion about trade offs and I think that is a good thing as well… but maybe we should limit the discussion to a list of goals (getting back into the top half of the OECD anyone?) rather than grandiose visions of what we think the world should look like…

    • Matt Nolan
      Matt Nolan says:

      Hi Boris,

      Of course I generally agree with you – the one thing I’d add is that any “goal” isn’t so much a target to start with, as an area that we want to look at. Then we can figure out trade-offs, and ask society how it feels.

      The idea that government can, or should, do much more is based on this strange command and control version of the economy – that requires unrealistic institutions and knowledge IMO.

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