First, Do No Harm to the Body Politic

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In my most recent column for AIER, I argue that the ability of physicians to successfully intervene in human bodies does not imply, or even suggest, that it’s wise for governments to intervene in economies. A slice:

Perhaps the biggest difference between a physician’s intervention into a human body and the state’s intervention into an economy is that, unlike with economic intervention, there is seldom any disagreement over the precise goal of medical intervention.

When you consult a physician for treatment of an ailment, you and the physician both agree on the goal: be cured. This goal is straightforward, uncontroversial, and the physician’s success at achieving it is reasonably easy even for you to verify. Of course, in many cases your physician will inform you of unavoidable trade–offs: this medication will rid you of hypertension but will also give you headaches. You are then free to accept or to reject this treatment, with no one else of any relevance having an opposing opinion about what your decision should be. Knowing the trade–off and knowing your own preferences, you can choose the correct – the ‘rational’ – course of action.

Economic intervention is fundamentally different. Even if – contrary to reality – every citizen knows the trade–offs involved for every proposed policy, there is no one single mind to decide which of these trade–offs to accept and which to reject. Americans might unanimously agree that raising the top marginal income–tax rate by ten percentage points will decrease some measure of after–tax income inequality by six percent, but only at the expense of reducing the average annual rate of economic growth by one percentage point.

Despite complete agreement about the trade–off’s ‘objective’ facts, there will almost certainly be deep disagreement about whether or not trading slower growth in exchange for greater income equality is acceptable. One group of people will judge it to be acceptable while another group judges otherwise. And as the work of economists such as Kenneth Arrow and Duncan Black reveals, there is simply no sure way of deciding which group’s preference should prevail.

And so unlike a physician intervening into a human body, government officials intervening into an economy cannot know even if a fully informed ‘patient’ – the collection of people in the economy – wants any particular treatment or not.

Analogies are indispensable both for furthering our understanding and for communicating our understanding to others. But analogies must be used with enormous care. Their careless use in economics risks inflicting great injury to the body politic.

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