Keep Your Mistakes to Yourself

By John Hood

We all make mistakes. We err as individuals and as members of groups. All businesses commit errors. All churches, charities, and voluntary associations stumble. All governments screw up.

Of course, none of us only makes mistakes. We also get things right. Over time, in fact, our mistakes should lead us to learn what not to do, and by implication what to do, to improve our performance. Errors reveal truths and add to the stock of knowledge.

From this admittedly pedestrian observation comes an invaluable argument in the case for freedom: the exercise of governmental power should be limited, both in intensity and scope.

When public officials use government fiscal or regulatory policies to try to shield private citizens from the consequences of their own decisions, their intentions might well be commendable. But even in the best-case scenario, such interventions interfere with the indispensable process of learning from mistakes. If businesses invest in what proves to be the wrong technology, or consumers buy what proves to be an inferior product, the costs they incur are instructive — not only for themselves but also for everyone else who invests in technology or buys consumer goods. Over time, success stories get replicated and failures don’t. But if government bails out the unsuccessful business or tries to regulate the inferior product out of existence, it interferes with this learning process, leading to less efficient businesses and less savvy consumers.

Remember that this is the best-case scenario, one in which the costs of intervening with private experimentation might in theory be offset by the benefits of actually protecting people from harm. The problem with that best-case scenario is that public officials are human beings prone to error, as well. A single business that makes an error might cost its owners, employees, or customers a lot, but other businesses that don’t commit the same error tend not to bear much or any cost (and, of course, might actually gain). Similarly, when a single consumer mistakenly buys a product that doesn’t really meet his needs, or that doesn’t function the way he expected, widespread calamity rarely ensues. He learns not to buy that product again, and do others who may learn from his mistake.

But what if government enacts a tax or regulation on the basis of assumptions or information that turns out to be wrong? By definition, people don’t get to choose whether to follow the government’s lead here. Whether they agree with a given spending program or not, they are compelled to pay taxes to fund it. Whether they agree with the regulator’s judgment or not, they are compelled to obey the regulation on pain of fines or imprisonment.

The problem occurs at every level of government. But as the scope of government grows, the costs are compounded. A city that issues a foolish regulation harms its businesses, households, or visitors, but not necessarily those of a neighboring city. If state or federal government issues an erroneous regulation, however, the costs are much greater.

That public officials make errors with widespread negative consequences is not a theoretical proposition. It happens all the time. During the 1940s, 1950s, and 1960s, residents, congressman, and central-bank authorities applied flawed Keynesian concepts about how the economy works. For a while, the American economy grew rapidly anyway, for a variety of reasons that included the devastating effects of World War II on the country’s major competitors. But by the 1970s, the contradictions and confusions of Keynesianism had produced stagflation and malaise.

You can find clearer examples of the problem in the area of consumer-product regulation. The sciences of nutrition, pathology, and risk management are in a constant state of change. What one generation of researchers takes as gospel gets overturned by the next generation, who in turn write their own gospels that future researchers question and test.

In Reason magazine, science correspondent Ron Bailey recently described five health scares that turned out to be phony – but not before some local, or state, or federal regulator took action to remedy them. These include:

• The purported health risks of eating more than 1,500 milligrams of sodium a day.

• The purported link between vaccines and autism.

• The purported link between cell phone use and cancer.

• The purported link between high fructose corn syrup and obesity.

• The purported link rise in cancers attributable to the proliferation of synthetic chemicals.

In a free society, consumers can choose to avoid salt, vaccines, cell phones, or anything else they like, for whatever reason they want. If they are mistaken, no big deal. But when regulators are mistaken, everyone pays the price in lost income, convenience, or freedom. None of which is to say that government shouldn’t exist and intervene to thwart obvious threats to public safety, particularly when they occur in the commons (air and water) where the actions of one firm or consumer really can impose direct, significant costs on everyone else.

This is not an argument for anarchism. It is an argument for limited government. You can call it the “keep your mistakes to yourself” argument.

John Hood is President of the John Locke Foundation