Tuesday, December 3, 2013

Governments Can't Count The Costs

By, Chris Rossini

Cass (I'm gonna "nudge" you to do it my way) Sunstein decides to trudge down the 'government as business' road. This road has been travelled many times before by the planners; and always to no avail. The economic law vultures eat them up every time, and are subsequently fat, happy and well fed.

Sunstein writes:
In 1981, President Ronald Reagan instructed federal agencies that they could issue regulations only after demonstrating that their benefits justified their costs. With modest changes, Reagan’s successors, both Republican and Democratic, have continued to impose this requirement on agencies...

But a crucial question remains: Can the government’s numbers be trusted, or are they just a lot of hot air?
Reagan made a terrible mistake. His job should have been to go in and cut, slash, shut down, and abolish. (Lew Rockwell explained long ago how to do it right). Once you get into "justifying the benefits to the costs" you're dead meat. Take a look at what has happened during Reagan's administration, and ever since!

Sunstein continues:
Within the Republican Party, not to mention the business community and conservative policy groups, many people share a single view: Government agencies are far too optimistic, even self-serving. Many Republicans think agencies systematically inflate benefits and deflate costs, cooking the numbers to make their rules appear far better than they actually are.

Within the Democratic Party, not to mention progressive organizations and liberal research groups, many intelligent people hold precisely the opposite belief. They insist that agencies systematically underestimate benefits and exaggerate costs. They think that in the real world, rules will impose only a small fraction of the costs that agencies project.
Sunstein is correct about the Democrats. However, it's important not to fall for the Republican BS. When out of power, they'll play the role of good cop. But once in power, they'll rip your eye-teeth out as viciously (and oftentimes even more viciously) than the Democrats.
It turns out that neither side is right.
Yes. Sunstein is correct. Neither side can possibly demonstrate that regulation benefits justify their costs. But we'll drop Sunstein off right here. You won't find out the reasons why from someone like him.

To begin with, we must start at the very beginning with voluntary exchanges and prices. In order to calculate accurately, these ingredients are a must. Fortunately, both occur in the marketplace at every second of the day. Businesses constantly strive to provide consumers with what they want, and at a price that they're willing to pay. McDonald's can't drag you off the street and into their restaurant. Businesses cannot force you to exchange with them.

Government operates on a totally different playing field. They take your money by force. If you do not give it to them, they can (and will) use violence against you.

So right away, it should be evident that the relationship between consumer and business versus that of consumer and government are very very different.

This dichotomy is extremely important. You see, businesses must obtain their funds from voluntary transactions and then they allocate their resources accordingly. They use the resources that they have. With every move, they have to "count the cost". Also with every move, they're risking their own funds. McDonald's does not have access to Burger King's piggy bank.

Government (sadly) is different. If they want more money, they'll raise our taxes. If that's not enough, they have their very own printing press called The Federal Reserve that will take care of the rest. In other words, their ability to rip each of us off is unlimited. "Count the cost" is not in the lexicon. Afghanistan and Iraq alone have cost about $2 Trillion. You think anyone is losing sleep?

It should now be clear as to who has the incentives to satisfy consumer demands and at an efficient cost. These incentives are also reflected in the attitudes that consumers receive when dealing with businesses vs. government. Walk into a business, and you're courted immediately. Your satisfaction is very important. Otherwise, if you're not happy, the possibility exists for no sale. You hold the ultimate economic power.

Walk into a government operation? Your very existence is a nuisance to the bureaucrat. You're an unwelcome intruder whose satisfaction is immaterial. You must obey and pay, or else.

Ron Paul said it best: “A central planning bureaucrat cannot be a substitute for the law of supply and demand.” Government does not operate under the laws of supply and demand. They literally cannot demonstrate that their actions justify the costs.

This isn't a Republican or Democrat thing. The very DNA of government prohibits it. Only private property owners, who make exchanges voluntarily, and who only have access to resources that they own, are able to calculate and make rational decisions. Every edict that comes from the thieving bureaucrats only serve to mess up the beautiful dynamics of the marketplace.

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  1. All states (govt's) exist by stealing. They are all immoral criminals. Why don't all the supposed moral preachers ever mention this? Are almost all of the people so indoctrinated by state schools that they don't see this? Even when it's pointed out to them?

  2. The Seattle city council can count to 15.

  3. Chris, the title of your post "Government Can't Count the Costs" encapsulates Austrian anarcho-capitalism in 5 words. Without a feedback mechanism- aka the market prices- the government is always buying, selling and trading blind.

    Great post.