Isegoria

Thomas Sowell explains how he turned from liberal — Marxist even — to more-or-less conservative:

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 the 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.

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 peoples 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 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. You start thinking in those terms, and you no longer ask, what is the goal of that law, and do I agree with that goal? You start to ask instead: what are the incentives, what are the consequences of those incentives, and do I agree with those?

The interviewer notes that “people often prefer arguing over ideals rather than discussing what might work, or what might make incremental improvements,” and Sowell responds:

Ah, being on the side of the angels. Being for affordable housing, for instance. But I don’t know of anybody who wants housing to be unaffordable. Liberals tend to describe what they want in terms of goals rather than process, and not to be overly concerned with the observable consequences. The observable consequences in New York are just scary.
[...]
A figure I ran across recently that struck me as illustrating the moral bankruptcy of rent control is this: the number of boarded-up housing units in New York City is four times the number of homeless people on the streets. To think of that! On winter nights there are people sleeping on the cold pavement and dying of exposure, when there are these buildings that are boarded-up as a consequence of economic protectionism.

Bryan Caplan explains the Special-Interest Secret:

Behind every policy that does more harm than good, there’s a special interest that favors it anyway. The steel tariff was bad for consumers, steel-using industries and foreign steel producers, but the steel lobby still pushed for it. Farm subsidies are bad for both taxpayers and unsubsidized farmers, but in 2002 the American farm lobby got a 70% increase in government support. The minimum wage is bad for consumers, employers and low-skill workers who get priced out of their jobs, but unions are hard at work to raise it again.

When special interests talk, politicians listen and the rest of us suffer. But why do politicians listen? Social scientists’ favorite explanation is that special interests pay close attention to their pet issues and the rest of us do not. So when politicians decide where to stand, the safer path is to satisfy knowledgeable insiders at the expense of the oblivious public.

This explanation is appealing, but it neglects one glaring fact. “Special-interest” legislation is popular.

(Emphasis mine.)

Some examples:

Keeping foreign products out is popular. Since 1976, the Worldviews survey has always found that Americans who “sympathize more with those who want to eliminate tariffs” are seriously outnumbered by “those who think such tariffs are necessary.” Handouts for farmers are popular. A 2004 PIPA-Knowledge Networks Poll found that 58% agree that “government needs to subsidize farming to make sure there will always be a good supply of food.” In 2006, the Pew Research Center found that over 80% of Americans want to raise the minimum wage. It is safe to assume, then, that few people want to abolish it. These results are not isolated. It is hard to find any “special interest” policies that most Americans oppose.

Why? The public suffers from anti-market bias:

The principles of economics are intellectually compelling; but emotionally, they fall flat. It feels better to believe that greedy intentions imply bad consequences, that foreigners destroy our prosperity and that price controls are a harmless way to transfer income. Given these economic prejudices, we should expect policies like steel tariffs, farm subsidies and the minimum wage to be popular.

None of this means that special interests don’t matter, but it does put their activities in a new light. Special interests do not have to sneak behind the majority’s back; they just need to ask for the right favor in the right way. The steel lobby could have demanded a big handout from the federal government. But that would have struck many voters as welfare for the rich; steel-makers can’t expect the same treatment as farmers, can they? Instead, the steel lobby took the crowd-pleasing route of blaming foreigners and asking for tariffs. Tariffs were less direct than a naked subsidy from Washington, but they enriched the steel industry without alienating the majority.

Bryan Caplan explains the Special-Interest Secret:

Behind every policy that does more harm than good, there’s a special interest that favors it anyway. The steel tariff was bad for consumers, steel-using industries and foreign steel producers, but the steel lobby still pushed for it. Farm subsidies are bad for both taxpayers and unsubsidized farmers, but in 2002 the American farm lobby got a 70% increase in government support. The minimum wage is bad for consumers, employers and low-skill workers who get priced out of their jobs, but unions are hard at work to raise it again.

When special interests talk, politicians listen and the rest of us suffer. But why do politicians listen? Social scientists’ favorite explanation is that special interests pay close attention to their pet issues and the rest of us do not. So when politicians decide where to stand, the safer path is to satisfy knowledgeable insiders at the expense of the oblivious public.

This explanation is appealing, but it neglects one glaring fact. “Special-interest” legislation is popular.

(Emphasis mine.)

Some examples:

Keeping foreign products out is popular. Since 1976, the Worldviews survey has always found that Americans who “sympathize more with those who want to eliminate tariffs” are seriously outnumbered by “those who think such tariffs are necessary.” Handouts for farmers are popular. A 2004 PIPA-Knowledge Networks Poll found that 58% agree that “government needs to subsidize farming to make sure there will always be a good supply of food.” In 2006, the Pew Research Center found that over 80% of Americans want to raise the minimum wage. It is safe to assume, then, that few people want to abolish it. These results are not isolated. It is hard to find any “special interest” policies that most Americans oppose.

Why? The public suffers from anti-market bias:

The principles of economics are intellectually compelling; but emotionally, they fall flat. It feels better to believe that greedy intentions imply bad consequences, that foreigners destroy our prosperity and that price controls are a harmless way to transfer income. Given these economic prejudices, we should expect policies like steel tariffs, farm subsidies and the minimum wage to be popular.

None of this means that special interests don’t matter, but it does put their activities in a new light. Special interests do not have to sneak behind the majority’s back; they just need to ask for the right favor in the right way. The steel lobby could have demanded a big handout from the federal government. But that would have struck many voters as welfare for the rich; steel-makers can’t expect the same treatment as farmers, can they? Instead, the steel lobby took the crowd-pleasing route of blaming foreigners and asking for tariffs. Tariffs were less direct than a naked subsidy from Washington, but they enriched the steel industry without alienating the majority.