Max R. P. Grossmann

Max R. P. Grossmann

On the difficulty of policy

Posted: 2024-03-03 · Last updated: 2024-03-03

I was recently walking on a sidewalk in Buckingham when I saw an exhausted bee trying to crawl towards some pebbles at the boundary of the sidewalk. I felt sad, as I was currently in a hurry to reach my next engagement. When I returned, the bee was still there. I determined to help it. Bees are important elements of local ecosystems. “Hold on, little buddy,” I thought to myself.

When I got back to my room, I immediately prepared a sugary solution. But then, a problem appeared. How am I to deliver this elixir to my little friend? In the old days, one would simply have screwed off a cap from a bottle, put the solution in there and handed it to the bee. But pretty much all caps on plastic bottles are now tethered to the bottle to “reduce marine plastic litter.”

I did eventually find a glass bottle whose cap I could use. Clearly, a cap from a plastic bottle would have been preferable as they are more shallow and thus safer for small animals. I then used a small piece of paper to move the bee away from danger and to the pebbles. I put the bee near the cap and it immediately leaned in, chugging down my elixir. I had to go somewhere else, but when I returned just minutes later, the bee had evidently recovered and flown off.

This story—which to many may seem trivial—highlights a tremendous challenge of policymakers. I am confident that no-one who passed the law on tethered caps ever considered me trying to help an exhausted bee. Did they consider that generally, people do such things? It's possible.

Clearly, tethering caps to bottles makes such rescues much more difficult and thus less likely. It is difficult—indeed, impossible—to foresee all the consequences of policy. Tethered caps are thought to cause less pollution in the seas. Did policymakers foresee the costs to manufacturers? The challenges that consumers will have to enjoy? The suffering of exhausted bees? That this regulation disproportionately impacts small manufacturers of beverages and thus leads to concentration in the market? Likely not. Salience matters.

Property rights effectuate local constraints to decision-making. These constraints should be contrasted with the unbounded nature of governmental policies. Where constraints are absent, the effects of actions are by definition unbounded.

The vast complexity of reality is difficult to overstate. Private property is often thought to create an incentive structure that results in the efficient shepherding of resources. But is also creates a bounded space for experimentation. For example, if two plots of land are assigned to two different owners, then property rights provide a limit on what harms owner A can inflict on owner B. Even if A believes that B is out to hurt him, B's ability to do just that is restricted. Property rights are, in a maximin sense, robust. Very few assumptions are needed on the motivations, abilities and knowledge of others to participate in a system of private propety. Property rights are a good deal not because they create efficiency (whatever that is, am I right?) but because they give substantial guarantees to all participants.

But the motivations, abilities and knowledge of policymakers matter profoundly. Not only is the feedback provided to politicians absolutely minimal (incentives for performance are almost absent), but there are few bounds provided on their actions. It is essential to the idea of policy that it is able to override some people's choices. This stark contrast makes it important to create constitutional-level bounds on what policy is allowed to do. The totalizing nature of policy, however, ensures that even entirely well-intentioned but ill-conceived policies can do profound harm. Harm, that is, that accrues not to those who created the policy, but to others. Government policy that does not pass unanimously inevitably creates externalities.

What then, about these motivations, abilities and the knowledge of policymakers?

Policymaking, in the most abstract sense, works as follows: (1) A policymaker imagines the current state of affairs, $S_0$. (2) A candidate policy leads the policymaker to imagine an alternative state of affairs, $S_c$. (3) The policymaker ranks $S_0$ and $S_c$. If and only if the state thought possible through the candidate policy ranks higher than $S_0$, (4) the candidate policy is implemented.

This “theory” of policymaking is so general that it only presents the roughest scaffolding for more complex analysis. Indeed, the “theory” is compatible with utilitarian welfare maximization, public choice, lobbying, absolute monarchy, nepotism and any other idea of governance. However, it is clear from the description that beliefs about counterfactuals are important, not actually achieved or achievable outcomes. Whether policymakers are optimistic or pessimistic about policy, whether they are able to correctly understand reality and how all of these assessments are combined with normative judgments to result in observable policy choices is important to understand governance and its pathologies.

For this reason, it is imperative to study the mental models of policymakers. It is very possible that what we perceive as “ideologies” are in fact expressions of inherent individual psychological variance that prevail in other areas of behavior.