PUBLIC POLICY AND THE QUALITY OF LIFE: MARKET INCENTIVES VERSUS GOVERNMENT PLANNING
Randall G. Holcombe
Greenwood Press, 1995, 190 pp.
Randall Holcombe identifies a paradoxical feature of much
public argument about economic issues. Socialism has collapsed.
The Workers Paradise is no more, and even professed socialists
rush to proclaim their allegiance to the market. (A socialist
market, they say, will work better than a capitalist one.)
Only a market economy, then, can produce goods and services
efficiently, conventional wisdom admits--except in one area. The
"quality of life," and its associated problems, has in
recent years assumed center stage. Questions of the environment,
land use planning, public health, regulation of drugs, etc.,
cannot be escaped. These "aspects of the quality of life
must be created collectively" (p. 8).
What is to be done about this sort of problem? Given the
failure of socialism, one might expect a headlong rush to place
all in the markets hands. Why not try what succeeds, rather than
seek solace in futile schemes of governmental planning everywhere
But the expected has not happened, and here lies the paradox
to which Holcombe calls attention. Increasingly, the call is
heard for more government. The market, it is alleged, cannot cope
with collective goods of this sort; bring on the state!
As Holcombe notes, to call in the government, though socialism
has collapsed, by itself generates no contradiction. Just because
less government would have been desirable in socialist countries
it does not follow that more government would be undesirable in
market-oriented economies. Nevertheless, why not use what has
worked, rather than what has not?
Holcombe makes clear the powerful considerations that militate
against the success of political solutions to quality of life
problems. Government employees do not face the exacting test of
profit and loss; instead, success in government often consists in
expanding the budget of ones agency. Further, once ensconced in a
job, a bureaucrat is difficult to oust. He is free to go about
his business in sovereign indifference to the consumer.
And if the government hireling does deign to notice anything
outside his office, it is unlikely to be the public. Meanwhile,
the public has little incentive to monitor closely the regulation
of, say, trucking or electrical power. By contrast,
special-interest groups usually have a great deal at stake when
an agency directly affects them. Regulatory agencies thus often
end up as impediments to the public interest.
And suppose the government somehow did attempt to serve the
public, however unlikely that is. Our difficulties would not be
over. What does the public want? Every important issue involves
constant conflict as persons with diverse goals press for
advantage. Absent clear property title for resources in dispute,
no decision is ever final. The dissatisfied constantly aim to
upset the status quo, and confusion reigns.
Professor Holcombe makes an overwhelming case that the state
cannot be relied upon to improve the quality of life. But can the
free market do better? Under a market system with clearly
delineated property titles, owners of resources will tend to use
them in a way likely to bring joy to the hearts of those wishing
a better quality of life.
Holcombe makes his case theoretically and applies it to a
number of key areas, including the environment, growth management
and land use, housing and homelessness, health care, and the drug
problem. Again and again, he makes illuminating remarks that
reflect extensive scholarship and careful thought.
In the work of contemporary moral philosophers such as Rawls
and Nagel, "future generations" operates as a
never-failing means to berate the market. Holcombe clears up the
confusion about the markets alleged inability to consider the
interests of the unborn with a simple statement. "When
markets for valuable resources exist, people do not need to
consume the resources they own to benefit from them. If they
preserve the value of the resources, they can sell them, so there
is an incentive to conserve any resources that will have value to
future generations" (p. 32).
"Pollution rights," however, do not seem the unmixed
blessing that Holcombe imagines. No doubt he is correct that the
holders of such rights will use them efficiently. But it does not
follow, as Holcombe thinks, that pollution rights will lead to
less pollution than regulation. This depends on the quantity of
rights made available for sale.
This is a minor matter in what is on the whole a convincing
book. The book is free of jargon, and the theory that he deploys
can readily be grasped by lay readers. Holcombe does not locate
the key to the mysteries of economics in the arcana of
Gadamer, Croce, St. Anselm, or the Maharal of Prague. He instead
goes about his work quietly, unpretentiously, and efficiently.
His use of common-sense reasoning is a model of how applied
economics ought to be done.