Tuesday, April 23, 2013

A Marxist walks into a Bureau

In 1960, at the Dept. of Labor, his name is Thomas Sowell, and he thinks he has a great idea. As he tells it;
So you were a lefty once.
Through the decade of my 20s, I was a Marxist.
What made you turn around?
What began to change my mind was working in the summer of 1960 as an intern in the federal government, studying minimum-wage laws in Puerto Rico. It was painfully clear that as they pushed up minimum wage levels, which they did at that time industry by industry, the employment levels were falling. I was studying the sugar industry. There were two explanations of what was happening. One was the conventional economic explanation: that as you pushed up the minimum-wage level, you were pricing people out of their jobs. The other one was that there were a series of hurricanes that had come through Puerto Rico, destroying sugar cane in the field, and therefore employment was lower. The unions preferred that explanation, and some of the liberals did, too.
Did you discover something that surprised you?
I spent the summer trying to figure out how to tell empirically which explanation was true. And one day I figured it out. I came to the office and announced that what we needed was data on the amount of sugar cane standing in the field before the hurricane moved through. I expected to be congratulated. And I saw these looks of shock on people’s faces. As if, “This idiot has stumbled on something that’s going to blow the whole game!” To me the question was: Is this law making poor people better off or worse off?
That was the not the question the labor department was looking at. About one-third of their budget at that time came from administering the wages and hours laws. They may have chosen to believe that the law was benign, but they certainly weren’t going to engage in any scrutiny of the law.
What that said to me was that the incentives of government agencies are different than what the laws they were set up to administer were intended to accomplish. That may not sound very original in the James Buchanan era, when we know about “Public Choice” theory. But it was a revelation for me.
When the above story was related to the commenters at Baseline Scenario, a somewhat different conclusion was reached;
Thomas Sowell’s story suggests that he was in the wrong department, not that the incentives of any government agency are inherently flawed. It’s the same issue within any large organization; power is guarded jealously, and maintenance of the status quo takes precedence over evaluating its effectiveness.
The solution is not to abolish all efforts at societal change by government, but to set up laws intelligently such that separate organizations are responsible for administration versus evaluation. In theory the legislative branch should be evaluating the results of its laws as administered by the executive, and tweaking them as appropriate. 
Yes, that certainly is the theory. But, as Owen Glendower said heard when he claimed to be able to call spirits from the vasty deep: Does it come when you call it?  We eagerly await the evidence of what the right department would have been.

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