The Problem of Status Quo Bias

This is the most important and cogent commentary from Jonah Goldberg that I have ever read:

And now let us recall the "Fable of the Shoes."

In his 1973 "Libertarian Manifesto," the late Murray Rothbard argued that the biggest obstacle in the road out of serfdom was "status quo bias." In society, we're accustomed to rapid change. "New products, new life styles, new ideas are often embraced eagerly." Not so with government. When it comes to police or firefighting or sanitation, government must do those things because that's what government has (allegedly) always done.

"So identified has the State become in the public mind with the provision of these services," Rothbard laments, "that an attack on State financing appears to many people as an attack on the service itself." The libertarian who wants to get the government out of a certain business is "treated in the same way as he would be if the government had, for various reasons, been supplying shoes as a tax financed monopoly from time immemorial."

If everyone had always gotten their shoes from the government, writes Rothbard, the proponent of shoe privatization would be greeted as a kind of lunatic. "How could you?" defenders of the status quo would squeal. "You are opposed to the public, and to poor people, wearing shoes! And who would supply shoes … if the government got out of the business? Tell us that! Be constructive! It's easy to be negative and smart-alecky about government; but tell us who would supply shoes? Which people? How many shoe stores would be available in each city and town? … What material would they use? … Suppose a poor person didn't have the money to buy a pair?"

It's worth keeping this fable in mind as the reaction to last week's CNN-Tea Party Express debate hardens into popular myth. Moderator Wolf Blitzer had asked Rep. Ron Paul (R-Texas) what should happen if a man refuses to get health insurance and then has a medical crisis. Paul — a disciple of Rothbard — explained that freedom is about taking risks. "But, congressman, are you saying that society should just let him die?"

At this point, a few boneheads in the audience shouted "yeah!" and clapped, though liberal pundits and activists imagine they saw an outpouring of support.

Paul calmly replied that he's not in favor of letting the man die. A physician who practiced before Medicare and Medicaid were enacted, Paul noted that hospitals were never in the practice of turning away patients in need. "We've given up on this whole concept that we might take care of ourselves and assume responsibility for ourselves," he observed. "Our neighbors, our friends, our churches would do it."

Both Mitt Romney and Rick Perry have condemned the response from the Paulistas in the audience and endorsed a more active role in government in healthcare.

Still, it's amazing how quickly status quo bias kicks in. Since the 1960s, it has become a given not only that the government should be more involved in areas like healthcare and poverty but that these problems remain intractable because the government has not gotten more involved. That's the premise behind so many of the anti-libertarian questions at the GOP debates. Any rejection of the assumption is derided as a right-wing effort to "turn back the clock."

Charles Murray, my colleague at the American Enterprise Institute, notes that the most remarkable drop in the poverty rate didn't come after President Lyndon B. Johnson declared war on poverty but when President Eisenhower ignored it. Over a mere 12 years, from 1949 to 1961, the poverty rate was cut in half. Similarly the biggest gains in health coverage came when government was less involved in healthcare, i.e. before the passage of Medicare and Medicaid in 1966. Duke University Professor Christopher Conover notes that in 1940, 90% of Americans were uninsured, but by 1960, that number was down to 25%.

Blitzer's specific error was to use "society" and "government" as interchangeable terms. People need shoes. But that doesn't require the government to provide shoes for everyone. Similarly, poverty rates should go down. But does that mean it's the government's responsibility?

Maybe the answer is yes. But if it is, the burden of proof should fall on those who, in effect, want the government to win the future by "investing" in shoes — rather than on those of us who are open to the idea of turning back the clock.

Just yesterday I was having a discussion over healthcare and poverty with a lawyer, who suffered from a typical case of status quo bias. I said to him that I thought that Americans were a charitable lot and that without government in the charity business, private charity would boom (I mean really boom) and that the sector would attract very bright and very creative people. This doesn't occur today because, wrongly, most people now think that charity must be provided by the government, and they can't see how it could otherwise be. So now instead of creativity entering the field of charity, food stamps and small checks are tossed at the poor. I have no idea how a private sector in charity would evolve, just like I don't know how cell phones or the internet will evolve, but I just know that it would become an exciting field with great innovations. Yes, great innovations. They don't occur now because charity is one big government/bureaucratic mess designed to do nothing but buy blocks of votes and funnel money to the crony suppliers of government designated charity products and services.

It's time to move beyond the status quo in charity. Charity should be returned to the private sector, where it can truly bloom and help those that need help. It is a total scam for government leaders to claim that charity must be forced out of the hands of Americans via the government. Government charity does nothing, as should be obvious, but cement the down trodden in a wretched life.