About the Author: Clifford Winston is a Principal Investigator in the Economics Program at the Brookings Institution.
Albert Einstein’s definition of insanity – doing the same thing over and over and expecting different results – describes the behavior of American policymakers. Whether the goal is to reduce inequality, slow climate change, or reduce the market power of dominant companies, government policies have simply not worked. Nonetheless, pushed by policy advocates, elected officials adopt new policies and expect positive results without knowing why previous policies failed to achieve their goals.
Political economy theories on government emphasize the importance of organized special interests, including members of government, who distort policy making and implementation or – the flip side – resist change. effective policies. While these theories are plausible, the causal evidence is weak and the best conclusion that can be drawn is that the government suffers from a standstill bias because it does not include essential reforms in new policies that it does. ‘he adopts. This implies that it is extremely difficult to indicate how, in practice, the government can overcome its inefficiencies and improve its policies.
Lobbying is high on the list of possible explanations for the government’s continuing inefficiencies. But the evidence that companies improve their financial performance by lobbying is elusive. In fact, corporate performance can, on the whole, suffer when corporate executives use corporate resources to satisfy their own ideological lobbying preferences. Either way, most businesses don’t lobby decision-makers, even when it may seem in their best interests to do so and, most importantly, most members of Congress don’t want to hear from lobbyists.
With growing campaign spending and widespread condemnation of a legal system that does little to reduce contributions or even force public accountability, evidence that campaign contributions have a decisive impact on government effectiveness are surprisingly lacking. Recently, Anthony Fowler and his co-authors at the University of Chicago and Northwestern gathered “data from nearly 19,000 elections and nearly 3,000 companies spanning more than three decades.” They found little evidence that public policy is skewed in favor of business because of business contributions to campaigns.
Why, then, do companies give so much in campaign contributions? In fact, they don’t contribute much. Many large companies don’t even have a corporate PAC, and many of those that do are only making nominal contributions. Interest group spending is primarily defensive, as my former Brookings colleague the late William Frenzel, Congressman for 20 years, has told me on several occasions. This explains why spending has increased, even though individual business spending is not significant. As new policy proposals emerge, more and more companies are spending increasingly small amounts to maintain the status quo.
The supply side explanations for policy inefficiencies have been advanced much less often than the interest group explanations; however, a combination of entrenched ideology of decision-makers, lack of resources and insufficient incentives for efficiency seem to explain why policies are seldom reformed. As noted, the private sector often prefers this situation too.
For example, very few Congress staff have formal training in STEM – science, technology, engineering, and mat. During the testimony of Facebook CEO Mark Zuckerberg in April 2018, senior members of Congress did not seem to understand how Facebook made money or targeted ads, and some members could not distinguish Facebook from a platform. mailbox or an Internet service provider. Unsurprisingly, Congress has taken ideological stances toward Big Tech, is unable to attract and retain technically savvy employees to help them shape effective technology policies, and has no incentive to take a long-term view. and to promote constructive ways in which technology can help shape society.
The status quo bias prevents policymakers from learning about the effects of their policies and why and how they might be reformed. It also allows inefficiencies in one area to persist and exacerbate inefficiencies in other areas. For example, tariffs hurt American consumers by raising the prices of the products of the foreign companies they prefer, while making it easier for American companies competing with foreign companies to exercise their market power by raising their prices without losing money. many customers. The self-selection of those who choose to work and stay in government and the inflexibility introduced by a tangle of rules better understood by government incumbents and employees “in perpetuity” undoubtedly reinforces the status quo bias and makes less likely the government will reform its inefficient system. Strategies.
The status quo bias can be an unsatisfactory explanation for inefficiency because it is difficult to quantify and encompasses so many factors that are difficult to pin down. Nonetheless, it is largely consistent with the evidence. Of course, every policy in the headlines brings up a discussion of which particular interests hold the best cards and how to beat them. One can certainly speculate on the causes of ineffective policies, but it is wrong to be optimistic that there is always a practical road map of competing interests to guide policy reform.
Unfortunately, inefficiencies in government policies cannot be corrected by simply identifying effective policy reforms and telling policy makers to overcome obstacles to implement them. This won’t happen because we don’t know – and we may never know – the right buttons to press.
Fortunately, as I document in my book, Gaining ground: markets at the service of government, the strength of markets is that they adapt to changing circumstances and tackle both their own problems and government inefficiencies over time, often by developing and applying new technologies. . Reason can be defined as the realization that market forces have become the only viable alternative for American society to effectively achieve its goals.
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