What is vs. what I wish it were

by Russ Roberts on January 22, 2007

in Politics

Andy Grove (who has helped transform the world and who I respect greatly) makes the following observation in a piece on energy policy in today’s Wall Street Journal editorial page:

The first question that needs to be examined is this: If business’s
task is to generate revenue and profits for its owners, what is the
equivalent task for a nation and its government?
The principal
measure is the Gross Domestic Product of the country. Changes in this
number are commonly used yardsticks of economic health. Moreover, when
one compares two national economies, say the economies of the U.S. and
China, the first measure we use in this comparison is GDP. But when we
talk of GDP, we must consider not just the GDP of today, but the
long-term stability of the productive capacity of our economy. This is
how factors like national security enter into the objectives of a

What he appears to be saying is that the task of the government is to produce economic health and that the change in GDP is a measure of economic health.

But government can’t have tasks. That’s like saying the task of New York is to do increase property values or cure cancer. How can a diverse group of people with diverse interests have a task?

More importantly, even when you consider politicians individually and not as members of some imagined monolithic willful government, their tasks are very different from the tasks facing the executive in a business. You might hope that a politician cares about a particular issue the way that you. But why would you expect a politician to do so?

Suppose I’m thinking about Steve Jobs, the CEO of Apple. I would never be so naive as to hope he’ll come out with a portable phone that uses an old-fashioned rotary dial because I’ve always loved those old-fashioned phones. Or that Ben and Jerry’s will make their ice cream less tasty because America has an obesity problem or just because I have trouble restraining myself when I open one of their cartons. Or that Ford will come out with a car you have to push to get it started because that would be great exercise. Imagine writing an editorial along these lines, reprimanding these companies for being short-sighted and only caring about staying in business or trying to make profits. We all understand that making profits is what businesses try to do.

So why do we expect politicians to do something other than to try and stay in office? That’s what they do. Don’t ask politicians to do something they aren’t motivated to do.

In the case of GDP, there is some incentive for politicians to pass legislation that enhances the prospects for growth. But that can never be a politician’s goal. And politicians will constantly trade off growth for benefits to particular groups as long as those groups loom large in the political calculus of the politician.

Here’s the end to the Grove piece:

Our nation’s corporations have been under severe
criticism for a variety of shortcomings. Even so, the
capitalist/free-market system of corporations consistently produces
results. When corporations do not produce, they become irrelevant and
often perish. In other words, if the brutal facts are not faced by the
leaders, the brutal reality sets in. By contrast, our national
strategy-setting and -execution machinery often seem broken. Consider
this: Could we pull off the Manhattan Project today? With its
complexities of planning and execution, under extreme time pressure? I
doubt it.

Fruit flies can teach us how to cure diseases in human
beings. Why not study how businesses set strategies and execute them,
and adopt the best methods to address the overwhelmingly important
issues facing our society?

But of course our "national
strategy-setting and -execution machinery often seem broken." It isn’t designed to work the way he thinks it does–to solve problems. Public policy isn’t run like a business because there’s no gain to the players to run it that way. All the study in the world isn’t going to change that reality.

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Randy January 22, 2007 at 2:48 pm

I was thinking the other day about the folks who are always saying that if we all work together we can accomplish great things – but who will then turn right around and deride the corporations – which are a group of people working together to accomplish great things.

The problem of government isn't an inability to accomplish great things, but in deciding what constitutes a great thing, and which great thing to work on. And of course, some of us think that, to the greatest extent possible, we should be allowed to decide for ourselves which great things we wish to work on.

PEG January 23, 2007 at 6:39 am

Then how do you suggest government be fixed?

Ben January 23, 2007 at 8:36 am

Another problem with the idea that the federal government needs to maximize the GDP is that, in our Keynesian method of calculating this statistic, government spending counts toward the GDP. Thus, government could simply increase the GDP by increasing taxes, or inflating the money supply, and then spending the money on pork barrel projects.

If the primary task of government is to increase the GDP, and if government spending counts towards the GDP, then socialism would be the best way to maximize our GDP. The government could simply declare a level of GDP, and then print the amount of money needed to get there. Obviously, that's not the way the world works. Government spending is never productive.

Bart Hinkle January 23, 2007 at 9:34 am

The primary task of government is to protect individual rights and secure liberty. Anytime government puts a secondary or tertiary purpose ahead of that primary purpose, it goes astray — and starts thinking of, say, national security as a mere factor in some grander goal, rather than its raison d'etre.

That's usually when all hell breaks loose.

triticale January 23, 2007 at 10:38 pm

What is the goal of government? We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. –That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.

Python January 24, 2007 at 3:23 am

The goal of the government? Look no further than the introduction to the document which forms the government:

"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."

What is up for debate is how the government goes about these things. How should the government "insure domestic Tranquility"? Well, at the very least it should not override the call to "…secure the Blessings of Liberty…"

Somehow along the way, the word "welfare" changed from a descriptive noun (like "childhood") into a social program. When do we get the social program for "tranquility" or "Liberty" or even "pursuit of happiness"? Actually, the fewer programs we have the more Liberty we can use.

Ryan Fuller January 24, 2007 at 10:40 am

"Then how do you suggest government be fixed?"

If a child were wandering around an antique shop with a hammer, how would you fix that? I'd probably start by taking away its power to break things, then put it in an out of the way corner someplace.

Lee January 24, 2007 at 11:52 am

Most of you are confusing two seperate interpretations of "the purpose of government."

1. The purposeful actions of those individuals that comprise government.
2. The purpose intended for the institution of government.

The second could be many things to many different people. To the Democrat, the government's purpose may be to protect the poor from the wealthy. To the Republican, the government's purpose may be to promote and enforce particular moral values. To the Libertarian, the government's purpose is simply to maintain personal liberty and property rights.

Russell was getting at the first meaning. The purposes, incentives, motivations, goals etc. of those who comprise governmental institutions, who continue to pursue their own goals irrespective of the multitude of purposes others may attach to their activities.

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