Who's Guilty Here?

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John
Liechty in "Blame,
Shame, and the American Public
" has raised a central question:
Who is responsible for the past and continuing tragedies occurring
in Iraq and Afghanistan? Historical outcomes being a mildly complex
web of causes and effects, blame, guilt and shame can be distributed
quite freely among many persons. And I have no quarrel with the
grades he has given out.

However,
I do believe that grading of people in this and similar historical
situations fails to get at the root of the matter. If, for example,
the "American public has to share the blame and shame,"
which I agree it does, then what does this imply is the remedy to
prevent future foolishness? Shall we all take a course in how to
be wise? Shall we all read 300 history books and learn our lessons?
Shall we all then vote intelligently on the candidate of our choice?
Shall our leaders and press do likewise, and shall they then elevate
their thinking? Shall they then present us with wiser options to
vote for, and shall they then behave more intelligently in office?

Without
a doubt, greater knowledge and wisdom will result in better decisions.
However, how shall these educational exercises come to pass? And
if they could happen, would they accomplish the desired end, wiser
leaders making wiser decisions? Unfortunately, they would not make
a great deal of difference. The average person today probably knows
more than the average person did 100 years ago, despite the monstrous
failings of the educational system, but has that improved the quality
of decisions made in the name of the American public? I submit that
it has not.

Let
us examine why our system (actually any State) cannot help but produce
harmful and destructive decisions, or more accurately an average
amount of harm that exceeds what might occur in the absence of the
State.

Who
is responsible for the President's decisions? The voters? He? Both?
Naturally, he is directly responsible. This misses the point, though,
which is that the President has considerably more latitude to blunder
than if he were managing a self-owned business. He can misbehave
for 4 years before facing re-election, and by then some new events
can be counted upon to dull the voters' memories. Impeachment is
a dull tool infrequently invoked and subject to political forces.
The President can, if he is clever, manipulate information for a
considerable period of time. He can concoct foreign and domestic
crises, etc. Furthermore, if he blunders, he does not bear the cost
of his errors, apart from perhaps a loss of reputation or place
in history, matters that are highly uncertain anyway. He can always
count upon getting a warm welcome somewhere from some enthusiastic
diehard supporters, and with a modicum of care he will not lose
his pension. If the President were running a business and making
poor decisions, the axe would fall much more quickly and swiftly.

This
is only the half of it. The President can blunder more than a businessman
can because voters are not equivalent to customers. Produce the
wrong product and the customers desert the company in droves, quickly
and without compunction or loyalty. Blunder into a foreign war,
and look what happens. A great many voters do not care. They are
not being asked to fight and pay the price of death, disability,
health, and conscience. Their taxes may rise, but they do not notice
this because they can't calculate them anyway. If the public debt
goes up, that's not their worry. Since most of the costs of the
war are borne by remote others, voters have a reduced incentive
to behave responsibly regarding the war. A customer who buys a car
will be pounding the dealer's door the next day if a rattle develops.
A voter will sleep peacefully through manifold press reports of
death and destruction. Eventually, of course, if casualties rise
high enough, or some other report or story is irksome enough, the
voter's feelings may change. The fact remains: Decisions in the
political (public) sphere do not occasion the vigilant watchfulness
aroused by a private decision in which one bears all the costs of
error. Neither the President (still less the career officials) nor
the voters have the incentive to make careful decisions. Hence,
under these conditions, a higher, often intolerable, degree of imbecility
necessarily prevails in all public actions.

Voters
are irresponsible. They have little incentive to be otherwise, because
educating themselves on many and sundry political matters is costly,
but their lone vote hardly ever brings them a sufficient return
on their investment in terms of real impact on decisions. The President
acts relatively irresponsibly because the voters are, and he knows
he can get away with it. So everyone together seems to be responsible
for the outcomes, and yet no one is responsible. This is the paradox
of the system of voting and handing over immense power to leaders.
It is the paradox of any State in which one or a few rulers rule
many subjects.

So
where is the blame to be placed? When President Bush is replaced
by a wiser leader because the American people have learned the lesson
of his blunders, will significantly better decisions be the result?
No, it will not happen, because the incentives built into the system
have not changed.

If
you do not like the cake, changing the brand of flour or salt won't
solve the problem. Changing the baker may do little as well. The
recipe is at fault.

Our
recipe is the Constitution. Once it called for sugar and spice and
everything nice. Today it calls for high fructose corn syrup, artificial
flavoring, and a list of chemicals longer than the original recipe.
Either go back to the original recipe, fix up its defects, and work
with it along sensible lines, or else learn how to live without
any common recipe at all (anarcho-capitalism for example). In either
case, give up the vain hope of reforming the American system by
changing the voter or the people in office.

July
7, 2005

Michael
S. Rozeff [send him mail]
is the Louis M. Jacobs Professor of Finance at University at Buffalo.

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