Plenty of work coupled with a lack of motivation to spend time on editing has meant that its been quite a while since I last wrote a proper, thought-out post although I do have plenty of accumulated material to write about. While the lack of motivation hasn’t changed, I thought I should just put this down.
In a short conversation over lunch, one of my colleagues talked about how hedge funds are now back in business after all the losses they made recently (probably based on a report from bloomberg.com). He then went on to say that there should be some protection – government regulation – for the consumers. As I resisted, the discussion went on to the food and drug industries. I mentioned how regulations against drugs prevents people from using new drugs even if they sorely need them and are willing to take the risk. He countered by saying that it is not possible for any individual to take responsibility for evaluating all the available goods (be they drugs or foods) and so a government agency is needed. I replied that doctors should certainly be capable of doing the required evaluation. He replied “saare doctors bike hue hain” – all the doctors are mercenaries and have been bought over (presumably by drug companies). I asked “And how about the employees in the government?” and that was the end of the conversation.
Note the reason given to justify the existence of regulation – the people who are competent to evaluate are mercenaries and so, will not act in the interests of consumers, whereas a neutral government body not motivated by profit, will. There is plenty of evidence – living in India, I will not bother to write about it – about how “neutral” government bureaucrats – known, not so fondly as babus – act. How then does an intelligent guy offer such a reason? The short answer is altruism. Just a week back we had a discussion about altruism in which I argued that it is for moral reasons and not economic ones that people accept socialist ideas. My colleague is well aware of my views and probably does not explicitly believe in altruism himself. But he has not explicitly rejected it as evil either. The deeply rooted morality of altruism makes him look with implicit suspicion at the profit motive and – by extension – at all private activity. It seems safer to trust a faceless bureaucrat working in a non-profit organization than to trust a doctor who stands to profit by selling you unproven drugs regardless of all the corruption that the bureaucracy is famous for. After all, by the altruist morality, the non-profit government organization has a noble aim – to serve others. The private doctor is just a lowly human driven by his own profit (which tends to morph into greed). According to the altruist morality, the doctor would have to make a sacrifice to forego the quick cash that he could make by being unscrupulous. And as everyone knows, very few people make sacrifices. So the altruist morality implicitly implies that private individuals will tend be more unscrupulous than public organizations. The facts do not bear this out. And it is simple to see why. Once one assigns a face to a bureaucrat instead of referring to a convenient collective called the government, it is clear that the bureaucrat is also working for profit. And unlike the doctor, whose career depends on his reputation, his career depends on – as Ayn Rand eloquently described in Atlas Shrugged – the aristocracy of pull. If a doctor makes a mistake or even if he is simply thought to have made a mistake by the public, his career is ruined. The faceless bureaucrat has no such responsibility. The profit motive cannot be abolished just by choosing to think of a certain group of individuals in terms of a collective – government. Within a framework of voluntary trade, the profit motive is not evil but good. It is what makes individuals want to prosper. It is what motivates them to work. Within a coercive framework of government regulation, the profit motive produces what is called “corruption”. A bureaucrat has nothing to gain by being scrupulous and a lot to gain by being unscrupulous at little risk. So he chooses to be unscrupulous. If his actions ever get traced back to him, the altruists have a field day damning his greed and the profit motive. But what is it that is corrupt? An unthinking bureaucrat doing what everyone around him does? Or the ethical system that invariably sets up men in situations where they stand to gain by duping others?
One should also look at the secondary consequences of oppressive regulations (take a look at other pages on FA/RM too). Regulations enormously raise the cost of compliance to standards – both directly in terms of the costs of running a regulatory agency and indirectly through the aristocracy of pull (lobbying is a nice euphemism). This effectively puts local small-scale industry at an enormous disadvantage and gives an unfair advantage to the bigger players. It also converts local, easily correctable problems such as occasional food poisoning into large systemic problems (in the same way as centrally controlled money supply creates systemic problems in the financial sector). The first strengthens the aristocracy of pull. The second creates even more demands for its continued existence.
At the end of the discussion, another colleague with whom I recently had a long discussion about the concept of sacrifice (note the reference to sacrifice above) mentioned that it will take another 50 years for people to reject socialist ideas. Today people look to the government for a solution to every problem. That is true. But socialist ideas will never be rejected until one first rejects their basis – the altruist morality – and discovers the alternative – egoism. The history of the U.S. which is now descending into just the sort of socialism that India is coming out of is proof of this fact.