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Reward and Punish

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):

  1. 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.

  2. 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.

19 comments to Reward and Punish

  • Dan

    I’ve said it for years and it remains true. Want more unemployment? Pay the unemployed. Want less? Kill that whole idea. Let people self-insure if they want (which, of course, was the original plan before it got “improved.”)

    Want less poverty? Stop giving the poor what it takes to live. If individuals want to help out in individual cases, that’s fine. (I’ve seen families with dependent children in their 40s because Mom never stopped paying the “kids’” bills when they got in over their heads.)

    “Kinder, gentler,” seems to mean, “let some people get away with not paying their own way.” If we let them, they will. If we say “no,” they will find a way to earn a living.

    Responsibility is not kind. Independence is not gentle.

  • “But we HAVE to help those poor people!”

  • Julian Morrison

    Private charity is the solution to this compassion paradox. Specifically private charity which helps those who are both needy and deserving as judged on a case by case rather than bureaucratic-rules basis. It is very easy to deliberately become “needy” but very hard to become “deserving” – so therefore people can be helped, without making the problem worse.

  • Doug Collins

    The historian William McNeill has an interesting idea that is the theme of his book, Plagues and Peoples. He looks at history as a study of human ecology. (Ecology used in the older classic sense of food chains and interrelationships, symbiosis and predation – not radical tree hugging). Much of the book is on epidemics and sickness, but the part germane to this discussion is the idea that man, like any other creature, is preyed upon by microparasites/predators and macroparasites/predators. The micros are obviously germs, fleas, worms etc. The macro parasites and predators used to be wolves, lions, Huns and cannibals. Any guesses as to who they are in our more advanced enlightened age?

    Any payments or work you do voluntarily is symbiosis or at least commensalism. The money or work that is taken involuntarily is parasitism or predation.

    Looked at this way, the fact that ‘solutions’ make the problem worse is not too surprising. We don’t encourage beef cattle to wander from the feedlot and live independently and longer. Why be surprised when the bureaucrats want unwed teenagers to procreate more statist voters. I suspect a farmer who has just been accosted by a PETA nutcake might very well react with a spitting rage too.

    Our problem is that we are depending on our predators to look out for our welfare. They will do that, but only up to a minimum level. For example when the economy falls to a point where tax revenues are unavoidably reduced, then the powers that be will develop a sincere interest in enterprenuerism and lassez faire economics. This will last exactly long enough to get tax revenues back up, then it will be back to blood-sucking-as-usual.

  • Shaun Bourke

    The road to hell is paved with good intentions !!

  • Sage

    I had a discussion recently in a low-level political science class about the subject of socialized medicine. The foaming-at-the-mouth hysteria that ensued on the part of the pro-welfare crowd–which accounted for everyone but one other student (a finance major) and me–was a sight to behold.

    The unthinking emotionalism and puerile sentimentality of their arguments, devoid of any considerations of practical or economic realities, came as no surprise. It was a depressing reminder, though.

  • Michael Hiteshew

    This is where you get to the distinction between a social safety net and a hammock. ;)

  • – 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. –

    I’m about to suggest something that might not have occurred to the dealership’s proprietors:

    What would happen if you were to ignore the local authorities completely and just perform the renovation without notifying them or asking their permission?

    This is not always a viable tactic. There are places where the local thugs are too vicious and too determined to wield their power for a citizen to try ignoring them. But when confronted with a situation such as the one described here, the route of simply acting like a free man, master of that which is rightfully his own, instead of like a villein, who needs the nobleman’s permission to rethatch the roof of his hovel, ought to be considered at least for a moment.

    The power of the “authorities” is often a matter of what their subjects allow them to get away with.

  • Francis Porretto offers a tempting solution except that most regulatory matters are legally an outgrowth of the “police power” — and they mean that precisely. Here in Seattle, if a Building Inspector finds that work is being done in violation of the thousands of strictures, you can be “Red Tagged” and there can be serious penalties, even in theory jail time.

    Btw, my own comments at here on this matter should not be read as doubt that regulation is in fact a drag on the economy. No question, it can be. But in most highly-regulated but largely non-corrupt locales (Seattle, for example, and Madison Iwould surmize, too) stuff does get done. Little stuff may not get done but then “little” is a matter of perspective. I would think that keeping good employees would elevate an issue far more than trivial.

    Bottom line: Regulation is a drag but not — even in Seattle — a killer.

  • Cydonia

    David Sucher

    I think you under-rate both the costs of regulation and the implications for liberty. I have not seen any analysis of the costs, but I would be suprised if they were any less than the direct tax burden, and quite possibly more. Increasingly, statism and socialism are being manifested not as direct theft but by means of regulatory control.

    And as you rightly say, regulatory breaches can result in fines or even imprisonment.

  • triticale

    And why hasn’t the Subaru dealership simply shut down the Madison location and moved to Sun Prairie or even Lake Mills?

    For any readers who happen not to be familiar with the area, Sun Prairie is just outside Madison and Lake Mills is the first town across the county line along the expressway from Madison toward Milwaukee. Both appear to this casual observer (my job entails a lot of driving around communities on their major roads) to be enjoying much better economic conditions than Madison.

  • R C Dean

    And why hasn’t the Subaru dealership simply shut down the Madison location and moved to Sun Prairie or even Lake Mills?

    I can offer a couple of speculations. One is that their current location a few blocks from the very center of town is too good to give up, at least so far.

    However, they cannot simply move out to another town without unloading their current property. Property taxes are far too high for them to simply carry it on their books, so I would think they would have to seel it.

    If they sell it, or possibly if they even just change its use (I’d have to check), then they trigger a whole raft of environmental cleanup regulations, which would also be horrendously expensive. God only knows what is in their soil – that block has probably been in some kind of industrial use for over 100 years.

    I think the potential regulatory and tax consequences of pulling up sticks and moving are pretty considerable, unfortunately.

    And Francis – have no doubt that the anti-business petty tyrants of the Peoples’ Republic of Madison would not hesitate to shut the whole place down.

  • RC Dean,

    I don’t believe that sale or even permitting would per se trigger clean-up but mere refinancing might very well. The way the system is set-up, practically speaking, it is left to lenders to police everything except really seriously poluuted sites. “No report showing the site is clean? Sorry, no money.”

    That’s the usual rule in my experience.

    But that’s just an aside.

    The real issue is who should clean-up. Our US laws have left it with the property owners, since they have benefited from dispoiling the property in the past and since they are in the best position to ensure that future operations are clean.

    I admit that society as a whole benefited from lax pollution standards and that assigning responsibility now for past customs which may have been illegal but customary seems a bit harsh, but how else would we do it?

    With ownership goes responsibility.

  • Madison (together with its sister city Ann Arbor in Michigan) is known as Berkeley, Midwest.

    All the eco-nonsense and overweening statism is Q.E.D. from that point on.

    Remember the Gospel According to Frank J.: “Every time you punch a hippie, Baby Jesus smiles.”

  • Bryan C

    Sorry, David, I can’t be quite that content. The problem with the current state of affairs is that it simply doesn’t work well on any level. I’m not completely opposed to some regulatory oversight. But the measure of any law or regulation is whether it’s accomplishing the desired result. If they’re not working to the desired purpose then they have no reason to exist.

    Is the desired result to prevent needed renovations that would be good for the customer, employees, owners, and neighboring businesses? No? Then I guess they’re doing the wrong thing. And they should stop it because they’re just making things worse. What should they do instead? Maybe nothing at all.

  • triticale

    [T]he property owners [...] have benefited from dispoiling the property in the past…

    The various property owners, over the 150 years Madison has been settled, have benefited from the use of the property. Running a livery stable, or blacksmith shop, or automobile dealership, is no more despoiling than building a house. In all probability, the Subaru dealer is not the same entity which owned the Studabaker or Rambler dealer which had the property before. The Subaru dealer has, in all probability, obeyed all environmental regulations currently in effect. Back when the property was a Kissel dealership or whatever, it didn’t occur to anyone that there was any reason not to pour out used motor oil on the ground out back, but the Subaru dealership would be subject to remediation costs and penalties if oil residue is found in the ground.

  • Let’s put aside the comparative disturbance made by a house and a blacksmith shop — I think they can be quite different — and assume Triticale is largely correct about the non-responsibility of the dealership for the pollution itself. Under those circumstances it might seem like a harsh result in some ways: Dealership did nothing wrong but must still pay for remediation.

    (Well first of all that is not absolutely correct; dealership can force prior owners to share in clean-up costs.)

    And more importantly, so? How else would you do it?

    Assuming you agree that society has an interest in cleaning up polluted sites (and you might not agree) how would you arrange the responsibility?

  • I’d say the dealership should ignore the regulation and see if the wrath they fear ever comes. I don’t think it would.

  • triticale

    I am guessing that driverdave does not live in a community which is both a college town and a state capital.