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Progressives support of government on behalf of the public interest

27 Mar 2018

I have always been puzzled by progressives unyielding faith in government as the solution to social problems, and indeed, almost always the federal government.  In my mind, the repeated and demonstrable failures of government to solve problems that are unrelated to its constitutional (or better yet, Biblical) roles should give everyone pause.  Yet progressives do not lose faith.  “If we just had the right people, then it would work.”  Part of this deep support of government is the inverse of their deep hostility towards the private sector dealing with social problems.  The private sector is motivated by private interest, whereas the public sector is motivated by the public interest.

The whole economic field of public choice arose precisely to test this hypothesis, and repeated empirical works demonstrate the validity of the idea that while there may be, in some abstract sense, a public interest out there, we cannot expect acting agents within the public sector to act against their personal self-interest.  Further, as I repeatedly claim, there really is no such thing as the public interest in the sense of possibly getting unanimous support of it.  It is precisely because there are competing views within a society that make its resolution within the public sector necessary.  At the end of the day, only the public sector has the monopoly of force to implement a “public interest” solution over the objections of those less politically powerful.  Is something in the public interest if it agrees with my values?  What if it commands 51% of the vote?  What objective standard could we apply to determine if something was in the public interest?  I’m in favor of a Biblical standard, of course, but many would reject that.  Or they would reject my interpretation of the Biblical standard and seek to submit their own.  There is always an underlying morality driving each of our views on what the public interest is, but unfortunately we don’t always share the same values.

As a nice illustration of the conundrum of the so-called public interest, consider this discussion in the Wall Street Journal (gated) today discussing Mr. Trump’s nomination of the final financial regulator:

Jelena McWilliams, the top lawyer at Cincinnati-based Fifth Third Bancorp, is set to succeed Obama-appointee Martin Gruenberg as head of the Federal Deposit Insurance Corp. as early as April.  When that happens, the FDIC, the Federal Reserve and Office of the Comptroller of the Currency will be able to move ahead on a number of the Trump administration’s policy priorities, such as adjusting capital and liquidity requirements, easing restrictions on short-term consumer loans and relaxing the 2010 Dodd-Frank financial law’s proprietary trading ban, the Volcker rule.

The problem with this Trumpian agenda, even if you are kind enough to consider a deregulatory agenda as in the public interest, is that we have multiple agencies that have their own particular view of what the public interest is, and not surprisingly, it has a lot to do with their official responsibilities (and likely their own personal proclivities).  As the saying so often goes, “where you stand depends on where you sit.”

“With Congress likely to pass the only financial deregulatory bill for the near future, it will be the alphabet soup of new regulators who decide the tone and tenor of the new deregulatory agenda,” said Isaac Boltansky, policy research director at Compass Point Research & Trading LLC.  While the overall pace of regulatory change is expected to pick up, having a full cast of Trump-appointed officials doesn’t mean they will necessarily be in sync on every issue.  “Different agencies have different perspectives,” said Aaron Klein, a policy director at the Brookings Institution. Mr. Klein said, for instance, that the FDIC tends to be more conservative on safety and soundness matters because when an institution fails, the agency “is left holding the bag.”

There is no such thing as a monolithic “government” anymore than there is a single “public interest.”  The reality is that there are many competing interest groups trying to shape public policy in ways that they believe would make the world a better place.  And indeed, some of them may actually be right!  But let’s not kid ourselves that there is a single public interest out there that if only we had the right people pursuing it, we could get there.  As long as there are competing values in a society, there will be competing visions of the public interest.