Increasingly, in my discussions about public policy matters, I find myself advancing the apparently novel notion that:
You tend to get more of what you reward, and less of what you punish.
When discussing my views with devotees of various social welfare schemes, this idea is met with reactions ranging from blank incomprehension to spitting rage at my cold-heartedness. Yet, to me, it seems the most self-evident common sense.
Most social welfare schemes reward certain behaviors, and almost invariably result in an increase in those behaviors.
Two examples (more can doubtless be supplied by the commentariat):
- One of the centerpieces of the expansion of the welfare state was payments to single mothers, often on a piecework basis (the more babies, the more bucks). Lo and behold, an enormous increase in single motherhood ensued.
- Wisconsin recently adopted a new health insurance scheme for the uninsured working poor. As a result, many employers have dropped their insurance benefits, reasoning that their employees can get coverage from the state, so why should they pay for it? Effectively, the new scheme removes the competitive disadvantage of employers who did not offer insurance, thus rewarding such employers and increasing their number.
Yet proponents of these social welfare schemes never cease to be amazed that their schemes do not seem to be alleviating the “problem” they are supposed to address, and indeed the problem often grows worse! Leading to a demand for more of the subsidies that feed the problem, of course.
On the flip side, I recently saw how the punishment meted out by the regulatory state gives predictable results. The regulatory state, of course, punishes economic activity by adding to its cost and by adding the risk of enforcement action.
The repair and service department at the Subaru dealership in downtown Madison is incredibly decrepit and run down, even though Subarus sell like hotcakes in Madison and the place is always busy. I mentioned this to the manager, and he told me that they had not done any work on the place in many years, even though it cost them business and made it hard to keep good workers. Reason was, any renovation would trigger a raft of regulations that would require environmental testing, remediation, handicap access, sound reduction, etc. ad nauseum, which would cost more than the dealership is worth.
Taxation, of course, is another punishment meted out by the state, again with predictable results. It is not unusual to hear young people say that one of the reasons they don’t get married is because, under the US tax code, their tax burden will go up if they do. Examples, I am sure, can be multiplied ad infinitum.
The odd thing is, through the regulatory and welfare states, we seem to be subsidizing the behaviors that we don’t want, and punishing the behaviors we do want. The increase in (subsidized) irresponsibility, and the decrease in (penalized) productivity, may be unintended, but are hardly unforeseeable, and indeed are inevitable.