The Problem of Authority

If you can keep your head when all about you are losing theirs ….
it probably means you don’t understand the seriousness of the situation!

A local council has to decide whether to have a byelaw to prohibit blackberrying i.e. to make it an offence for members of the public to pick fruit from hedges in local authority parks and roadsideverges.

There is common agreement: it’s fine for the public to graze – for parents and children to pick as they pass or as a family activity on weekend afternoons. But the fear is that failure to prohibit opens the way for professional (and ‘black economy’) pickers to descend and strip the bushes. In other words, picking is acceptable in moderation and provided those doing it behave with consideration towards others but is unacceptable when ruthlessly exploited.

The debate is surprisingly fierce albeit good-natured. It hinges upon whether you demonstrate trust – one might say trust in human nature – or whether you have to protect the blackberries with a prohibition which seems draconian.

The example may appear trivial but the underlying dilemma goes to the heart of a whole series of problems facing governments in modern democracies. This paper is about these problems and their implications, the way governments choose to address them and the consequences which follow.

Two principles need to be established at the outset.

The first is that stopping people making choices they wish to make always has costs. These costs, which can be very high, come in the form of both direct financial costs, the costs of enforcement, and in behavioural consequences – what people choose to do and not do as a result of the prohibition.

The second is that all activity has an opportunity cost – the possibilities lost through a particular use of time, effort and resources. Individuals (often sub-consciously) and private sector organisations generally recognise the importance of opportunity cost because they are constantly aware that they are making choices. Public authorities by contrast usually show less awareness of it. They either fail to recognise that resources devoted to one thing actually stops them being used elsewher or realise it only to discount it.

Sledgehammers and nuts

Comparable to blackberrying are many motoring offences. For most states, the starting point is the entirely reasonable one that roadworthy vehicles should drive at reasonable but not excessive speed paying adequate attentionto other road users and taking account of road conditions. When parked, they should not unacceptably inconvenience others.

The result is the vast panoply of motoring and traffic law.

There is a popular perception that when it comes to vehicles and driving, ‘they can always get you for something’. The belief is held with good reason.

Vehicles are subject to the most detailed and precise road-worthiness requirements. A police officer can inspect a vehicle and, unless it is either new or has just come from a properly conducted test (and perhaps not even then), there will almost always be some technical infringement.

In other words what began as an apparently reasonable requirement becomes an ‘open sesame’ for representatives of public authorities to act against the individual whenever and however they wish.

It can, of course, be argued that the requirements are ones with which those who choose to be motorists should comply. But are the costs of compliance proportionate and are the state’s motives reputable and transparent?

In Japan, the equivalent of the MOT is deliberately made so demanding that it becomes economically rational for most Japanese to scrap and buy new. The vehicles are of course perfectly roadworthy and many are not scrapped but sold on elsewhere. There is a thriving second-hand vehicle export trade arising from a government policy which has been deliberately engineered to serve the economic objectives of the Japanese consumer economy with its massive motor vehicle production.

This divorce between the stated purpose of a policy and its actual purpose is both clear and dishonest. It represents a form of abuse of authority.

When a vehicle moves, a similar but even more pernicious process operates.

Speed limits raise the same issues. A case in point is the divisive outcry about the number of speeding fines and the ease with which drivers can accumulate points which lead to a driving ban for low-grade offences none of which in themselves are either serious or important.

The state’s motives are suspect. Are revenue-raising and a desire to make driving as difficult and expensive as possible now the real goals with safety the excuse used to try to justify the policy?

In reality, for most of the public, the law is really only acceptable as a function of it being at best only sporadically enforced. The public think that the state should stop and punish boy-racers who endanger life but do not believe small infractions should remove from the road basically law-abiding citizens who drive above the limit – perhaps even well above it – but on relatively empty roads in good conditions and in proper control of the vehicle.

Such ‘harmless’ traffic violations on the empty, open highways of the USA are so regularly portrayed in the films of Hollywood as to now be both a cliché and an invaluable plot device. The way they are portrayed demonstrates both that the ‘crime’ is generally considered unimportant and that it is the consequences of enforcement which are significant rather than the crime itself.

Yet the Germans manage to drive on their motorways without any general upper speed limit at all. If the correlation between speed and safety was precise then Germany should have the highest accident rate in the developed world – a higher accident rate than that of any nation where speed limits are imposed. They do not, far from it.

The OECD Road Traffic and Accident Database gives deaths per 100,000 for 30 nations. The German figure is 8.3.Greece is worst at 19.3 with Portugal next at 16.1. Twenty two other countries record higher figures, including Belgium14.5, France 12.9, USA 14.9. In short, the absence of an upper limit on German motorways is not the killer which it should be if controls elsewhere were justified by the reality.

The figures also show the complete absence of a correlation between death and limits on alcohol consumption whilst driving. The Czech and Slovak Republics and Hungary allow no alcohol in the bloodstream when driving. Polandallows just 0.02% whereas much of Europe allows 0.05% and some countries including the UK 0.08%. Yet the death rates: Czech Republic14.0, Slovakia 11.3, Hungary 14.0 and Poland 16.1% are on the middle to high side, substantially higher than those for countries which allow more alcohol in the blood. So, again, the figures show that legislation is not based on the data. Despite the UK’s relatively high blood/alcohol limit of 0.08%, at 6.1 deaths per 100,000, the UKfigure is amongst the best.

Road safety arguments are not intellectually rigorous. This is implicit in the whole debate about speeding fines and answers our earlier question about the state’s motives. The state is using speed limits in ways which are not solely about road safety. And they are catching vast numbers of people who are behaving in ways which are essentially harmless by rigorously applying regulations which are draconian in order to cater for the extreme case.

The practical consequences of the way those in authority have started operating the system means that the law is acting in ways which are disproportionate and excessive in relation to the problem being solved – a sledgehammer is being used to crack a nut.

What will already be clear is that, whatever the motives which were the starting point, the use of law, especially draconian laws passed to try to cope with the extreme case, have consequences which are not those intended.

Unintended consequences

‘A thinker has to compute not just the direct effects
of an action but the side effects as well.’
Steven Pinker

In some local authorities, the requirement to park within lines of the bays is enforceable and vehicles can be ticketed for failure to do so.

The consequences can be perverse. Across a series of bays, it can cause a bay to be left empty because the tolerances of vehicle positioning have all worked in the same direction to the point where a space has to be left unused if the regulations are not to be broken and a potential penalty incurred.

The response, which therefore leaves the bay empty, is entirely rational in the context of the behavioural framework which has been created – and wastes usable parking spaces as a result.

In a similar way, restricting parking spaces in an attempt to cut traffic can have the perverse effect of generating extra traffic in the form of motorists driving around searching for one of the limited numbers of empty spaces.

Measures taken with regard to moving traffic have similar effects. It is a predictable and logical response for drivers to slow before speed cameras and then accelerate away as soon as the risk of being caught is passed. Not only does this slow/accelerate form of movement potentially increase accident risk, it also causes ripple effects across a volume of traffic which increase emissions and slow journey times. In other words driver behaviour can mean that the safety device reduces safety, increases pollution and makes all journeys take longer.

The impact of speed humps can be equally perverse. They exacerbate pollution and thus impede a key goal of government road traffic policy.

The Vienna Technical Institute produced work ten years ago, and duplicated by the UK’s Transport Research Laboratory which shows what happens.

Drivers slow down for speed humps to avoid damaging the vehicle and speed up between them. Emission pollution rises in a geometric rather than an arithmetic progression as a function of braking and accelerating by comparison with moving at a constant speed.

This means that all those measures put in by local authorities to frustrate traffic flow have the side effect of increasing the very pollution which it is another of their key objectives to reduce.

Such petty regulation effectively throws public officials open to the constant temptation of corruption.

The reason is simple. Where a regulation penalises behaviour without adverse consequences and the crime therefore victimless – speeding on a dry, clear road for example – the potential consequences are disproportionate to the offence. Both offender and law-officer recognise this. Indeed they may both go further and actually believe that the regulation matters little.

Officer and offender may agree a ‘private penalty’. The difficulty in so far as there is one is communication. As both attempting to bribe a police officer and accepting bribes are themselves offences, the problem for both parties is to establish the open-ness of the other to such an approach – without incurring the risk of adding a further offence.

A system of ‘on the spot fines’ can positively facilitate this. The penalty may not even be a lesser one. For example, in France there have been regular reports of the traffic police imposing the fine but filling in no paperwork and pocketing the money.

Alternatively, the officer may let the offender off, the decision whether or not to do so being a function of mood or liking or antagonism for the individual in front of them. Such reactions are the perfect opportunity for prejudices and stereotypes to flourish: black young men being far less likely to be let off than middle class white women whether young and engaging or more elderly and helpless-looking. (Though this can work the other way as was told me by a young very attractive white female banker stopped in her expensive company sports car who was told sotto voce by the young policewoman who nicked her, ‘I so enjoy doing rich, stuck-up bitches like you!’)

The way all this works has long since become a cinematic cliché – which can only be the case because it is recognisable and believable, it matches reality!

Zero Tolerance

The implications of all this should be clear in the context of ‘zero-tolerance’.

Going back to our starting point: anyone caught picking a single berry should be met with the full force of the law. That was not, of course, the intention of the councillors or at least of most of them but they have opened the way for zealous officialdom to pursue and punish, even persecute, in ways quite disproportionate to either the offence or any damage to the public good.

It’s happening may seem unlikely, at least in a civilised and liberal country like the UK. But if you have such a bye-law and it is not enforced then the concept of ‘zero-tolerance’ has immediately been compromised. The concept is by definition an absolute. Just as something cannot be almost unique or a bit unique so if zero tolerance is not an absolute then it has become selective and the tolerance is greater than zero.

Many advocates of zero-tolerance probably do not understand the implications of what they preach. Anybody driving just one mile an hour over the limit or dropping a single piece of litter – or whose children do – should think very clearly about the consequences of the doctrine they endorse.

One suspects that for many what they really mean is ‘we want the forces of law and order to crack down on certain groups or in certain areas because they are lawless but we don’t really expect the same to apply to ourselves.
(In the words of one left-leaning political activist, ‘I believe in zero-tolerance for those who believe in it themselves’.)

This raises the issue of severity of punishment.

‘Being hung for a sheep as a lamb’

Most users of the time-honoured phrase probably give little thought to its real meaning. It should be interpreted literally. Eighteenth century English law set out the same punishment – public execution – for both crimes. With meat and value in a sheep far exceeding that of a lamb, one might as well go for the more valuable option as the two carry the same penalty.

Then, as now, the imposition of disproportionate punishment has at least two perverse consequences.

The first is expressed by the saying. Excessive punishment for minor offences removes any incentive not to behave in a worse fashion. If the penalty for a greater offence is the same as for a lesser, then the offender has no incentive not to commit much more serious crimes. In our eighteenth century example, the thief has no incentive not to murder anyone trying to apprehend him for public execution is the punishment for this as well.

That the thief might in practice nonetheless take a different view is the result of the second perverse consequence – as valid today as it was in the eighteenth century though perhaps having more application to Anglo-Saxon rather than Napoleonic/European judicial systems.

Faced with excessive penalties, at least some jurors become reluctant to convict. If this is not the case, then the juror either lacks any sense of fairness and proportion or, more likely, is operating in terms of those same prejudices and stereotypes which we have already come across in relation to both pursuing unimportant offences and zero-tolerance: we wouldn’t be prepared to convict a friend in this way but we will here because it’s a …… bastard – the gap being filled with race, class, gender, age, appearance or occupation according to taste.

This illustrates the concept of the tipping point. Both analyses and systems build one thing upon another in a logical linear sequence and because no single step appears very different from the one immediately before they fail to recognise that one has come a distance sufficiently far removed from the starting point that the differences are fundamental.

This issue was recognised well over 2000 years ago by, amongst others, Zeno but has very real political consequences. It was for example exactly the technique employed by the Nazis to terrorise the Jews. Regulations began initially by excluding the Jews from public life. Thereafter they were progressively tightened from 1933 on but it was only 9 years later in 1942 that the so-called ‘final solution’ was adopted.
As Max Frisch’s play, The Fire-raisers hauntingly demonstrates, spotting when differences of degree become ones of kind is far from clear-cut and, in consequence, identifying the point at which it is essential to act is often exceedingly difficult.

Passporting disbenefits

Most state welfare systems operate the concept of passporting benefits. Those on one form of welfare, usually some form of basic income, then automatically become eligible for a whole package of other entitlements
– free dental care, free school meals for their children, local tax exemption
etc – each of which is given as a function of the first.

Less frequently realised is that the law functions as a disincentive system operating in the same way to reverse effect. It particularly effects those on welfare benefits but it is simpler, initially, to use motoring to illustrate the process.

For entirely justified, actuarial reasons, insurance is extremely expensive for young people, especially young men when they first start driving.

In the UK, to tax your vehicle, you have to show valid certificates of both insurance and road-worthiness (the MOT). If you are without one it is impossible to obtain the others. It is therefore unsurprising and very frequent for those who come before the courts to do so for a whole string of inter-related offences: driving a defective vehicle without license, tax or insurance.

The term ‘motoring underclass’ has been coined to describe such people.

For them we again see perverse incentives – not only for them but also for the traffic policeman who stops them. If he stops a legitimate driver for speeding, going through a red light or similar, then conviction and punishment is generally relatively straightforward.

But make the offences multiple ones as described earlier, then the paperwork and time demands rise exponentially; to the point, it has been reported, where unless the incident is serious, the policeman can be motivated to let of the multiply offending driver where he would not do so those committing a single, simple offence.

Perverse Incentives

Having set out the concept, it is easy to identify far more serious examples within the welfare system.

Let’s imagine a single mother without educational qualifications living on state benefit in social housing.

Arguably it is perverse incentives which have helped to get her there in the first place. She will have acquired the house as a function of her pregnancy for the way housing eligibility works her children are her ‘passport’ into social housing in the first place. If she has health problems confirmed by a doctor’s certificate even better for all of this adds to the number of points which determine her priority on the housing waiting list.

One decision which would definitely be a mistake is to seek to live with one of the fathers of her children. He will be judged to be contributing to her standard of living and her benefit will be reduced accordingly. Unless he can supply a standard of living significantly higher than that given by the state then she has, at least in purely rational economic terms, no incentive to form a stable two-parent unit and significant incentives not to.

By contrast if through a series of casual relationships she has further children but her and the father avoid commitment, her benefits and housing eligibility will increase.

Those who condemn single mothers living on welfare with children by multiple fathers should rigorously examine whether the mother’s behaviour is not an entirely rational response to the messages and incentives the state conveys through the system it operates.

Any UK local councillor confronted by an unqualified seventeen year old who asks ‘wouldn’t I be better off getting pregnant’ knows that the honest answer in terms of her access to support from the state is ‘yes’.

The perverse incentives suffered by our single mother in terms of her lifestyle choices and attempts to improve her standard of living are legion and passported.

Not only is she incentivised not to live with a man she is also incentivised either not to work or to work in the black economy and probably in the sex industry.

How so?

If she seeks to work legally, her benefit will be reduced at a very high marginal tax rate and passported benefits will disappear. This poverty trap is well known and of longstanding but that does not reduce its impact. The incentive for her to work in the black economy is correspondingly large – to the point where few will be able to resist.

Not only can she enjoy the full benefits of her labour but it also probably offers flexibility, she can – and in the context of childcare it is important for her to be able to – fit the work to the hours convenient to her. In these circumstances, the most attractive jobs are those offering the highest pay for the least work in the most flexible working conditions. For an unqualified women, if she is still passingly attractive that tends to mean the sex industry: lap-dancing, prostitution etc.

Moreover the state has also disincentivised the very lifestyle, living in a committed relationship with a partner, which might militate against such an approach. However, let me stress that this is not some kind of argument for a return to Victorian moral values with their intolerance, hypocrisy and double standards. What it is saying is that a rather more perceptive approach needs to be taken recognising the implications of the system the state creates.

Our single mother is now working in the sex industry but she is now exposed to a new set of problems which come as a direct result of the passporting of disincentives.

She is now operating in a context comparable to that of the underclass motorist. Like him, she has effectively put herself where she is without the protection of the law.

It is not the fact that she is a prostitute or lap-dancer that is the problem (neither is itself illegal) but the inter-action between her working in the black market and the operation of the tax and benefit system.

It is difficult for her to seek or enjoy the protection of the police – more or less whatever may be done to her including both domestic violence or physical abuse from elsewhere – because she herself is operating at best on the edge of the law and in an occupation most consider shameful.

The act of failing to declare earnings takes one into a black market world of potentially invidious choices where any form of legitimacy becomes impossible as a consequence of the single original decision. It is the world of the underclass who from a single decision are excluded from an entire world of services, options and opportunities which the middle classes simply take for granted. And precisely because to be a senior government official or politician is to be a member of that middle class world, their solutions and the administrative complexity they create demonstrates little understanding of the choices with which the underclass is confronted.

The middle class does gain some perception of this through their attempts at tax avoidance (legal, of course, by contrast with evasion which is the same activity but done sufficiently carelessly as to break the law) and issues which arise from the bringing up of children.

‘Middle class’ perverse incentives

The manipulation of the tax regime is a gigantic and vastly expensive game played between taxpayers and the state. Like an arms race, ever-growing complexity and great ingenuity are constantly displayed as each side seeks an advantage which can by definition be only temporary.

Precisely because the ground has been so well covered, it is unnecessary to repeat it here except to highlight one particularly recent British escalation as a perfect example of the process.

Traditionally, those with two homes enjoyed a 50% discount from their council tax (the British local tax) on their second property. Recently local authorities were given the power to cut this discount to just 10%.

However, homes lived in by just one adult enjoy a 25% discount.

In these circumstances, what does the economically rational two-home owning couple do to minimise (quite legally) their tax liability? Each opts for one as their residence and moves out of, i.e. comes off the electoral roll for, the other. Now, although it has an effect on where they can vote, they have replaced one 10% discount with two of 25% which depending upon exact tax rates should restore them to or may even be a marginal improvement upon the position they were in to start with.

It may even have a further unintended advantage when their children apply to university. As the UK university application system is developing, coming from a troubled background is a positive advantage. If a child uses the tax development to argue on his/her personal statement that (s)he has been through the trauma of parental separation then universities may take this into account in deciding whether to offer a place! The child merely has to have the temerity to sustain the argument should it come up but that is precisely where the registration of a single individual at each of two homes is of help – the child merely says that one parent lives at one, the other at the other.

The impact of the substantial reduction in state support for higher education and the expectation that its completion will involve substantial debt for all but those with the wealthiest of parents has further unintended consequences. Like the single mother described above, the attractive female student is faced with a situation where she wishes to earn as much as possible with the minimum of time and effort. The sex industry again offers this for all the same reasons. The incentive is the same.

Other aspects of parenthood might not immediately seem to fit the argument. They do, as is shown by setting out some of the dilemmas of modern parenthood. It highlights how the same underlying issues occur again and again – with clumsy state solutions creating the problem rather than solving it.

The law sets age limits for a whole series of activities which the vast majority of young people will naturally want to try – and continues to make some completely illegal – what might be termed sex n’ drugs n’ rock n’ roll.

Faced with the child’s requests and behaviour, the parent has a whole series of complex decisions to take. Should the parent introduce the child to alcohol on the grounds that it is sufficiently ubiquitous that consumption and at least some experience of over-indulgence are virtually inevitable? At what age?
As dope is available at virtually every school in the country, should its consumption be allowed at home where the child is safest, the effects can be explained and some control be exercised? What about under-age sex, bearing in mind that relative maturity and age bear limited correlation – but again allowing it at home and offering condoms may be the safest option?

Far from offering solutions, the law can exacerbate the problem by making the parent an indirect party to an offence – as property owner or supplier.

Different countries adopt different ages to allow certain activities.

It is interesting therefore to apply the same logic as we have done with the issue of speed limits and their absence on German motorways.

If higher age limits are in fact needed to protect young people, then those countries and societies which adopt the lowest limits, i.e. permit the activity at a younger age, should have the greatest problems.

So for instance, a lower age of sexual consent might be expected to lead to higher levels of teenage pregnancy. Those countries which allow cannabis consumption should have higher rates of juvenile schizophrenia etc etc.

To put it simply such correlations do not in practice turn out to be the reality. The case for the greater restriction – and the perverse incentives to which they give rise – are seldom rationally proven by international comparisons, an inconvenient fact seldom acknowledged by those who would restrict liberty.

The result of the greater restriction is generally to preclude desirable options. For instance, the strictness of American juvenile alcohol laws now standardised on consent as late as 21 preclude the more traditional European approach of educating children to consume alcohol by giving them a glass of wine or beer with the family meal.

This principle has wide application. Do societies with liberal pornography laws have a higher incidence of rape and sexual abuse? Do societies which decide to lift restrictions see a sudden increase? The statistical correlation should be there if the case for restriction is valid. However, as the UK’s quiet liberalisation of pornography laws demonstrates, it does not work like that.

Governments should apply this international comparative logic. They do not because the results inconveniently fail to justify the restrictions.

Solutions will be looked at later but it is important to set out here that attempts to regulate one’s way out simply do not work because their complexity is self-defeating. As detail, provisos, exclusions, recognition of marginal cases etc …. are added, one simply adds to the possibilities for further perverse incentives, injustice, draconian overkill, invitations to corruption of police and officialdom, thus exacerbating the very problems one is seeking to solve.

A generalised problem of advanced societies

The operation of the international market in illegal drugs illustrates the globalisation of these problems of perverse and damaging incentives arising from the operation of the law.

Although activity may be criminal, it is a useful, when it involves the supply of a commodity society has chosen to declare illegal, to consider how it operates as a market.

To analyse the global market in drugs is both to identify one of the most perverse of the incentives which government offers and why the so-called ‘war on drugs’ is by definition unwinnable, as currently pursued.

In any market, provided there is demand, price is a function of supply: the more product that is available the lower the price and vice versa.

It follows that reductions in supply increase the price and, in the jargon of the economist, incentivise market entry. In other words, the higher the price and the greater the profit, the more people will try to supply the product.

It follows that every destruction of cannabis plant or poppy field, every customs seizure of processed product or police operation to take out a major dealer is actually incentivising the dealers – existing dealers to try to increase their supply and new dealers to enter the now more profitable market. Government action to restrict supply is self-defeating because perversely it stimulates the market by driving up the price.

Whilst demand continues, nothing can change this and governments have, for many years now, shown little or no capacity to reduce drug demand. They may influence it – incentivising and popularising one product at the expense of another but they are quite incapable of stopping demand.

Led by the USA, governments’ attempts to reduce drug consumption are a shocking example of perverse incentives in operation. Until governments realise this they will waste billions of dollars and generate substantial human misery in a set of policies which by their very nature are doomed to fail.

Viewed as a global market, the situation is even worse and the policy interactions even more perverse when set in a wider policy context.

Most drugs are cash crops grown by small farmers – a form of entrepreneur – in developing countries. The tariff walls erected by developed countries to protect their domestic agricultural production from lower cost rivals in exactly those developing countries mean that the illegal drug is the most lucrative cash crop which the developing country farmer can grow.

UNCTAD estimated in it’s Least Developed Countries report in 1999 that poor countries lose nearly $2billion per day, over $700 billion per year, because of unjust trade rules – which is 14 times what they receive in aid.

In other words, developed country agricultural policies pursued by all of Japan, the European Union and the Unites States of America further incentivise illegal drug production by removing the market for alternative and legal cash crops!

Cures worse than diseases

It is important at this point to retrace the logic of the argument. Government action is not only failing to achieve the policy objective, it is actually incentivising either the very opposite or something equally undesirable.

Faced with this policy failure, the reaction of most governments is not to step back and ask the logical questions about why the policy is failing, whether the goals have been properly thought through and how the perverse incentives can be removed. Instead, stimulated by frustration at their failure, they seek to pursue ever more rigorously the very policies which are failing.

This quest to turn failure into success is itself subject to all the failings we have identified:
• sledgehammers are used to crack nuts
• punishments are excessively draconian
• the consequences are not those intended
• complexity and behavioural micro-management increases
• disbenefits both multiply and are passported, and
• new and or more perverse incentives are created
in a spiral of failure which makes society a less pleasant place to live.

And because the voting public generally lacks the understanding that this is what is happening, and are told by the popular press that any attempt at a rethink is a sign of weakness, they continue to back and governments to reinforce failure.

This is true of such important issues as global drugs policy, and tax and benefit policies but also of those things which have rather less serious but actually rather irritating consequences such as motoring or local bye-laws.

The opportunity cost of such policies is even greater. Time and resources committed to one thing preclude societies from doing another. Police in many contexts, customs and soldiers fighting the drug war, accountants manipulating the tax system (whether for the revenue or the taxpayer) are using resources which might be better deployed in other ways if society understood the waste and failure built into current activity.

All this expenditure on failure and misery is nonetheless recorded as an increase in Gross Domestic Product by standard measures of wealth – which helps to explain the intractability of identifying clear correlations between wealth and spending on the one hand and quality of life and happiness on the other.
The failure of historic solutions

Although it may appear as a diversion from the main thrust of the argument, I want briefly to allude to an important consequence of social change which has tended to exacerbate all these problems.

Most governments operate by a combination of force and consent and a crucial form of social cement which lay at the cusp between force and consent was the existence of deference.

It is perhaps particularly English – reflected in the social control of Squire and Parson in the heyday of a traditional English landed society – but exported (to a greater or lesser degree and with local variants) around the globe by the British Empire and also evident at least to a degree in the class systems of mainland European societies as well.

The importance of deference is that it helps to reinforce the ability of governments and elites to persuade the majority simply not to behave in certain ways which are the logic of the system as they have created it but undesirable in their consequences.

Deference traditionally helped to mitigate policy consequences of the kind I have outlined. And in most advanced countries, deference is now dead!

A fresh approach

The starting point to the solution is simply to recognise that what is happening is happening and, as a result, to define what will not work in order to help work out what will.

The problems we have identified arise from specific and identifiable characteristics:

• the attempt to stop people doing what we know in advance at least some are going to want to do – and in sufficient numbers to have a significant impact

• failure to understand that, over time and if the numbers affected are large enough, people will react in the ways which are entirely rational in relation to the interaction of the parameters created by the system and their own desires and goals whatever, in a moral sense, we think of the latter

• failure to treat what constitutes a market as a market and thus to analyse the incentives and disincentives which will inevitably arise from what is being done

• working on the basis of the extreme case and therefore regulating to cope with this as if it constitutes the ‘norm’

• failure to make valid (international) comparisons as to whether the evidence supports the cause and effect relationship which supposedly underpins the regulation or prohibition

• inability to recognise failure for what it is and to return to the fundamental issues rather than reinforcing the existing failure with ever more extreme measures.

Each of these leads to its own broad policy conclusion:

• the prohibition of activity which has no direct, identifiable victims is generally counter-productive

• minimise regulation and, in particular, keep prohibitions to a minimum

• markets operate for any product or activity which can command a price, whether legal or illegal, desirable or undesirable. Therefore, provided the demand is there, the more you restrict supply, the higher you drive the price and therefore the more your attempts to stop it in fact make it happen.

• legislation needs its own version of ‘Ockham’s razor’: the more complex, detailed and opaque it is the less likely it is to work – and vice versa: the simpler, more comprehensible and transparent it is the better

• the diversity of detailed solutions adopted by different societies across the globe is such that you can bench-mark and learn from the experience of others without needing to repeat their mistakes

• if over a reasonable period of time, a policy has failed to achieve its objectives then the chances are it is not going to – ever!

Tony Brown
July 2009

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