Seven Principles of Sound Public Policy

WE HAVE LEARNED A FEW THINGS over the centuries. It’s not uninformed bias that prompts us without debate to accept the notion that the sun comes up in the East. It isn’t blind ideology that tells us that a representative republic is superior to dictatorship or monarchy.

In my public policy experience, I have come to appreciate seven critical fundamentals that I view as the pillars of a free economy. They are not original with me. I’ve simply collected them in one place. But, I believe they are settled truths – seven bedrock concepts by which we would be a much stronger, much freer, more prosperous and far better governed people.

Principle 1: Free people are not equal, and equal people are not free.

By this I do not mean equality before the law. I am referring to “equalness” in relation to income and material wealth – that which is earned and acquired in the marketplace of commerce, work and exchange. This economic equality can be looked at in two halves.

Free people are not equal. When people are free to be themselves, to be masters of their own destinies, and to improve their well-being, the resulting outcomes will not be equal. People will earn vastly different levels of income and accumulate vastly different levels of wealth. We differ in terms of industriousness, too. Some work harder, longer, and smarter, making for great variations in how others value what we do and how much they may pay for it.

Likewise, we differ in terms of our savings. I would argue, that if all of us were made equal in terms of income and wealth at this very minute, we would be unequal again by this time tomorrow because some of us would save and some of us would spend our newfound riches.

Equal people are not free. The only way in which you could have even the remotest chance of equalizing income and wealth across society is to put a gun to everyone’s head. Backed up by the guillotine, the hangman’s noose, or the bullet, you would have to give orders: Don’t excel. Don’t work harder or smarter than the next guy. Don’t save more wisely. Don’t be there first with a new product. Don’t provide a service that people might prefer to your competitor’s.

What’s the message of this first principle? Don’t get hung up on differences in income when they result from people being themselves. If they result from artificial political barriers, then get rid of those barriers. But don’t try to take unequal people and compress them into some homogenous heap. You’ll never get there, and you’ll wreak havoc trying.

Principle 2: What belongs to you, you tend to take care of; what belongs to no one or everyone tends to fall into disrepair.

This principle illuminates the magic of private property and explains so much about the failure of socialized economies the world over.

In the old Soviet Empire, the superiority of central planning and state ownership was proclaimed. The government sought to abolish or at least minimize the selfish and counterproductive idea of private ownership. Resources, it was argued, would be utilized for everyone’s benefit if government were in charge. What was once the farmer’s food became “the people’s food,” and the people went hungry. What was once the entrepreneur’s factory became “the people’s factory.” and the people made do with goods so shoddy there was no market for them beyond the borders.

Similarly, if you think you’re so good at taking care of property, go live in someone else’s house or drive their car for a month. I guarantee you neither their house nor their car will look the same as yours after the same period of time.

To trash the scarce resources of society, all you need to do is take them away from the people who created or earned them, hand them over to some central authority to manage, and, in one fell swoop, everything will be in ruins.

Principle 3: Sound policy requires that we consider long-run effects and all people, not short-run effects and a few people.

In cranking up the Great Society, it was thought that some people would benefit today from a welfare check. In the long-term, federal welfare entitlements encouraged idleness, broke up families, produced intergenerational dependency and hopelessness, cost a fortune, and yielded harmful cultural pathologies that will take generations to undo. Likewise, policies of deficit spending and government growth, while enriching a few at the start, have eaten at the vitals of the nation’s economy and moral fiber for decades.

This principle calls for us to be thorough in our thinking. We shouldn’t be superficial in our judgments. Say a thief, goes from bank to bank, stealing all the cash he can carry, and, then, he spends it all at the local shopping mall. You would not be thorough in your thinking if all you did was survey the storeowners to conclude that this guy stimulated the economy.

We should remember that today is the tomorrow that yesterday’s poor policy makers told us we could ignore.

Principle 4: If you encourage something, you get more of it; if you discourage something, you get less of it.

As human beings we are creatures of incentives and disincentives. We respond to them. Our behavior is affected by them, sometimes very powerfully. Policy makers who forget this will do dumb things.

For example, in the summer of 1990, Congress dramatically boosted taxes on boats, aircraft and jewelry. Since rich people buy such things, we should let them have it with higher taxes it was reasoned. On those three things, $31 million in new revenue was expected in the first year from the new taxes. We now know that the actual tax collections were just $16 million. More importantly, $24 million in additional unemployment benefits was spent as a result of the people thrown out of work in those industries because of higher taxes. As they say, only in Washington, where too often lawmakers forget the importance of incentives, can you aim for 31, get only 16, spend 24 to get it, and think that somehow you’ve done some good.

Want to break up families? Offer a bigger welfare check if the father splits. Want to reduce savings and investment? Double-tax such earnings, and pile a nice, high capital gains tax on top of it. Want to get less work? Impose such high tax penalties on it that people decide it’s not worth the effort.

Principle 5: Nobody spends somebody else’s money as carefully as he spends his own.

Economist Milton Friedman elaborated on this when he pointed out that there are only four ways to spend money. First, when you spend your own money on yourself, you make occasional mistakes, but they’re few and far between. The connection between the earner, the spender, and the one reaping the final benefit is pretty strong. Second, when you use your money to buy someone else a gift, you have some incentive to get your money’s worth whether or not you end up with something the intended recipient really needs or values. Third, when you use somebody else’s money to buy something for yourself, such as lunch on an expense account, you have some incentive to get the right thing but little reason to economize. And, finally, when you spend other people’s money to buy something for someone else, the connection between the earner, the spender and the recipient is the most remote – and the potential for mischief and waste is the greatest.

Think about it – somebody spending somebody else’s money on yet somebody else – that’s what government – and not just the government alone – does all the time. Nobody – repeat, nobody – spends someone else’s money as carefully as he spends his own.

Principle 6: Government has nothing to give anybody except what it first takes from somebody, and a government that’s big enough to give you everything you want is big enough to take away everything you’ve got.

George Washington once said, “Government is not reason. It is not eloquence. It is force. Like fire, it can be a dangerous servant or a fearful master.”

Reflect on that for a moment. Washington was saying that even if government is no bigger than he wanted it to be, and even if it does its work so well that it indeed is a servant to the people, it’s still a dangerous one! As Groucho once said of Harpo, “He’s honest, but you’ve got to watch him.” Jefferson warned us rightly that the natural tendency is for government to grow and liberty to retreat. And, it was Alexander Hamilton who wisely told us that “Control of a man’s subsistence is control of his will.”

A free and independent people do not look to government for their sustenance. They see government not as a fountain of “free” goodies, but rather as a protector of their liberties, confined to certain minimal functions that revolve around keeping the peace, maximizing everyone’s opportunities, and otherwise leaving us alone. There is a deadly trade-off to reliance upon government, as civilizations at least as far back as ancient Rome have painfully learned.

Principle 7: Liberty makes all the difference in the world.

In case my first six principles didn’t make the point clearly enough, liberty isn’t just a luxury or a nice idea. It’s much more than a happy circumstance or a defensible concept. It makes just about everything else happen. Without it, life is a bore at best. At worst, there is no life at all.

Public policy that dismisses liberty or doesn’t preserve or strengthen it should be immediately suspect in the minds of a vigilant people. They should be asking, “What are we getting in return if we’re being asked to give up some of our freedom?” Hopefully, it’s not just some short-term handout or other “mess of pottage.” Ben Franklin went so far as to advise us that “He who gives up essential liberty for a little temporary security deserves neither liberty nor security.”

Today, government at all levels consumes more than 42 percent of all that we produce – compared to about 6 or 7 percent in 1900. Yet, few people seem interested in asking the advocates of still more government such cogent questions as “Why isn’t 42 percent enough?,” “How much more do you want?,” or “To what degree do you think a person is entitled to the fruits of his labor?”

Our past devotion to these seven principles, in one form or another, explains how and why Americans fed, clothed, and housed more people at higher levels than any other people in the history of the planet. And putting them into common practice is key to preserving that crucial element of life we call liberty.

Mr. Reed is President of the Mackinac Center for Public Policy in Midland, Michigan.