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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