Good Government Fails Better

By Robert H.

Arnold Kling, channeling Megan McArdle, says that large firms need to fail gracefully:

A large, established firm needs to fail gracefully. Be able to kill the project without killing the company. You might think of Coca-Cola’s recovery from New Coke, but the real graceful failures are the ones we never even hear about. A large firm that fails ungracefully is denying that it is in trouble (Megan uses the example of Dan Rather and Mary Mapes of CBS News, who put out a story based on a forged document and just refused to back down from the story.)

But that government sucks at this:

Government cannot do any of these things well. Think of Obamacare... Graceful failure? No, it is a big, ugly failure.

Maybe I'm missing something, but it seems like Kling wants large firms to fail gracefully because it insulates the successful part of the company from the dumb new venture, allowing the company to continue.  They have to "kill the project without killing the company."  If that's the standard, our government seems to be really, really good at failing well.   After all, if it's a survival game then America has reached a ripe old age.  The number of two century old private firms is not large.  America's killed a lot of bad ideas (and millions of their proponents!) without killing "the company."

More broadly, Kling acknowledges that different firms need to fail in different ways (for example, he thinks startups need to fail quickly so everyone can move on to new ideas), but rather then figure out how government needs to fail, he insists on judging it by the standard of corporations.  He doesn't explore how government's *should* fail, he just says government isn't good at failing the way good firms do.  I think that's a mistake.  Here's how I would complete kling's list:

An individual needs to fail with a fallback position. 

A small startup firm needs to fail quickly.

A large, established firm needs to fail gracefully. 

A government needs to fail non-catastrophically.  Bad governance can ruin economies, enslave millions, and, these days, kill billions.  Catastrophic failure of a government program must be avoided at all cost.  As a good rule of thumb, any failure members of the next generation only know about if they are particularly literate or into history is a good failure (barring significant propaganda). 

There is a great deal of ruin in a nation, and governments can do much that is merely bad.  The goal is to keep the bad to a minimum.  A small program with minimal effects can drag on, failing for decades, and that will, in the big scheme of things, not have a damned thing to do with whether a government is relatively successful or relatively terrible.  Good government often wallows in mere failure, what it avoids is catastrophic failure.

P.S. There's another blog post to be had unpacking Kling's assumption that Obamacare will "fail."

Libertarian Foot Fetish

By Robert H.

Ilya Somin has a post up arguing for the relative advantages of foot voting vs. ballot box voting.  The argument is drawn from his latest book, so see that for more.  I have two bones to pick with it.

1. Somin is missing, I think, the major critique of foot voting.  He says "I cover several standard objections to foot voting, the problem of moving costs, the danger of  'races to the bottom,' and the likelihood that political decentralization might harm unpopular racial and ethnic minorities."  But he misses the biggest problem with foot voting: it's hard to know what the hell people are voting for.

If a polity elects a politician, it's pretty clear that that happened because of what kind of politician she is.  Special interests or ignorant voters or wise crowds or whoever sat down and said, "this gal's going to a better job than the other guy," or at the very least "this gal belongs to the political team I belong to, and voting for her flatters my team pride."  Whatever the reasoning, the outcome is mainly a reflection of the selectorate's political calculations, political prejudices, political signaling, political whatever.   

But if I move to California, who the hell knows why I did it?  Maybe there's a gold rush.  Maybe I love the ocean.  Maybe I figure it's my last, best chance to be cast in a star trek film (these are presented from least to most likely).  But one thing is for dang sure, we can't know it's related to political anything. 

You can see this in demographics: our most populous states are New York (generally liberal government), Texas (generally conservative government), and California (generally incompetent government).  If good political policies determined foot voting, why are people voting for totally different political policies?  Or maybe your affinity for local politics, not political outcomes, determines foot voting.  In that case, why do huge minorities of republicans live in NYC or democrats live in Texas?  Or maybe Texas is attracting tons of migrants because of its good policies, and New York and California only retain large populations because some sort of population stickiness makes people stay in place.  Ok, but then won't population stickiness undermine the whole "we will get good policy when people vote with their feet" thing?  People won't vote with their feet, they'll just hang around where they live now.  Or maybe this only happens because the federal government is so much more important than state government that it fudges the outcome.  Ok, then, why haven't most Greeks moved to Germany?  

So all this adds up to a big problem.  If people move for lots of non-political reasons, relying on people moving as a way to determine political outcomes has problems.  The best policies in the world could fail to attract migrants for exogenous reasons, and the worst (ok, maybe not the worst) could take advantage of, say, a resource boom to attract lots of folks.  

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2. Here and elsewhere, I think Somin has been too down on voting voting.  Yes, voters are ignorant.  Yes, they are rationally ignorant, since their vote will normally never matter.  Yes, the heuristics voters could be using ("reward incumbents when things are good" being a classical one) don't really get you to great government.

No, that does not mean democracy is useless.  High praise time: despite those and other political economy constraints, democracy is pretty good at keeping politicians from passing policies that are disastrous for most people.  For example, I'm pretty confident that a party running on an "enslave most of the voters" platform would not win.  Under a rationally ignorant voter model, if the Enslave Everyone party ever comes close to winning then the relative gains from paying attention and voting would go up and lots of voters would stop being ignorant.  Under a median voter model, the median voter would not want to be enslaved.  I could keep going through different models, but come on.  People will rarely vote themselves into slavery. 

That may seem like a really low bar, but it is not!  Human government has just been incredibly freaking awful over the centuries, ranging from the genocidal to the overly bellicose to the (and this is most common) widely extractive.  Governments *have* enslaved most of their people.  At the very least, almost all governments have made women second class citizens.  Any system of government that can avoid that stuff and routinely churn out merely bad policy is doing great.  A few special interests shaving off some GDP and GDP growth?  Possible national debt crisis in 20 years?  Weird predilection for subsidizing the old rather than the poor?  Yes please!  So much better than being a serf!

Point being, the least bad governments have gotten there through representative democracy, and there are theoretical reasons for functioning democracies to give us not-terrible policies, despite voter ignorance. Foot voting, on the other hand, has not been used as often to reach good political outcomes, and doubts about the ability of good policy to attract migrants seriously undermine the theoretical case for relying on foot voting.  

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As I final point, I just want to be clear, if it is not obvious, that relying on voting and relying on foot voting are in tension.  For example, let's say you make American states autonomous power centers that can set their own policy because you want to create a world where people can move between them and foot vote.  Well, by necessity you just stripped folks of their ability to vote vote for a range of federal policies, namely those that would cut into state power.