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Boudreaux on Government’s Nature

Summary:
Don Boudreaux writes: One general lesson that I draw from facts such as this one [the fact he’s referring to is that during the pandemic, the FDA actually used the Covid-19 emergency as a pretext to slow the approval of SARS-CoV-2 tests, rather than what many of us would have liked, which is the opposite] is about the unfortunate but largely unalterable reality of government. Government has a nature no less than does any virus. It’s therefore not only pointless, but dangerous because distracting, to make declarations about what interventions government ‘should’ have pursued, and should pursue in the future, to better protect us from contagious pathogens as if government’s nature is amenable to good intentions expressed by persons adequately informed about science.

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Boudreaux on Government’s Nature

Don Boudreaux writes:

One general lesson that I draw from facts such as this one [the fact he’s referring to is that during the pandemic, the FDA actually used the Covid-19 emergency as a pretext to slow the approval of SARS-CoV-2 tests, rather than what many of us would have liked, which is the opposite] is about the unfortunate but largely unalterable reality of government. Government has a nature no less than does any virus. It’s therefore not only pointless, but dangerous because distracting, to make declarations about what interventions government ‘should’ have pursued, and should pursue in the future, to better protect us from contagious pathogens as if government’s nature is amenable to good intentions expressed by persons adequately informed about science. Much of the disagreement among people about Covid policy springs from the different assessments different people make about the amount of knowledge to which government can reasonably be supposed to have access and the ability to process, and about the likelihood that government officials will act in the public interest when acting in this manner runs against these officials’ own interests. If our earthly affairs were governed by a supernatural power akin in both knowledge and motivation to the Christian God, then even I would trust this power with the authority to lock humanity down if and whenever this power deemed such a move to be the best. But of course the state is a power categorically and dramatically inferior on all dimensions to any such supernatural power. While no one directly and expressly denies the truth of the previous sentence, a shockingly large number of people endorse government policies as if the previous sentence were untrue. Among the many surprises of the past 18 months has been the number of people who, pre-Covid, understood that the state is not a godlike institution, but who, once Covid appeared, joined ranks with those who believe that the state is both capable of being, and eager to be, godlike.)

This insight is simple yet profound.

When I was a senior economist at the Council of Economic Advisers in the early 1980s, I saw this all the time and even participated in it to some extent. The easiest thing to do to be true to the above insight was to criticize the various proposals for more regulations and more spending programs coming from other agencies within the federal government. If I helped stop programs from being implemented or expanded, I helped minimize the probability that “government’s nature” would lead to some bad results.

But if we (I have in mind my boss Martin Feldstein here) pushed for various programs, then my fear was that “government’s nature” would take over.

The main one that Marty and I worked for and agreed on was a “tax cap” for employer contributions to employees’ health insurance premiums. Our idea was that any contribution over about $1,800 per year (this was in 1982-83 dollars) would be treated as taxable employee income. The idea was that then incremental increases in insurance premiums would be treated like other employee income and so the incentive to expand insurance due to its tax-free nature would end. (I tried to persuade Marty to advocate lowering marginal tax rates at every level somewhat in order to make it revenue neutral, but he was a deficit hawk and was having none of it.)

But Marty wasn’t happy with that. He was a bit of a dirigiste. He wanted employers not to be able to deduct their payments for health insurance from their taxable income unless their insurance included at least a certain co-insurance rate (I think 20%) and a certain deductible. I argued with him until I was blue in the face that this would introduce a new distortion. I also pointed out that this would totally upset the Kasier Permanente business model. But he wanted what he wanted. His health economist friends from around the country would write me, tell me to say hi to Marty, and ask me to express their disapproval of his micr0-managing idea. I faithfully did so. Finally, after about the 4th one, Marty told me to quit raising the issue.

The issue, by the way, got nowhere.

David Henderson
David R. Henderson (born November 21, 1950) is a Canadian-born American economist and author who moved to the United States in 1972 and became a U.S. citizen in 1986, serving on President Ronald Reagan's Council of Economic Advisers from 1982 to 1984.[1] A research fellow at Stanford University's Hoover Institution[2] since 1990, he took a teaching position with the Naval Postgraduate School in Monterey, California in 1984, and is now a full professor of economics.[3]

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