Think Freely Media presents Common Sense with Paul Jacob

Something called “behavioral economics” has arisen in recent decades, testing and probing many of the assumptions-cum-postulates of basic microeconomics. Researchers have discovered that human beings are prone to biases, cognitive errors, and a whole bevy of choice glitches. We are not perfectly rational.

Shocking, I know.

Some people draw an odd moral from this: Since people are such fools, they require the help of government to regulate them from utter folly and ruin.

Economist David Henderson quotes one of his Facebook friends, TV creative director John Papola, as supplying the “most succinct criticism” of this tack: “Why in the world do behavioral economists who study our flaws and irrational quirks advocate centralized power in the hands of a small group of flawed overlords? If people are irrational, so are government regulators, only they have corrupting monopoly power.”

You’ve seen this kind of argument before, in political theory. James Madison famously noted that

If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.

Just so: Were we entirely rational, no regulation would be necessary — no laws would. But, given universal human limitations, the regulators themselves require regulation, and a (non-existent) supply of non-biased, error-resistant rationality, to boot.

Forget vast reams of regulations and huge teams of bureaucrats. Instead, perfect the basic rule of law, regulating markets by a well-conceived basic set of rules.

And expect some imperfection.

This is Common Sense. I’m Paul Jacob.

By: Redactor

5 Comments

  1. Dagney says:

    Great big picture article! Would that this could become again the rule in real U.S. life. Making about 90% of our federal government unemployed, starting with the FCC, will be the only way it will happen. However, when we have bureaucrats, like Barack (“I think when you spread the wealth around, it’s good for everybody”) Obama, Charlie (“I don’t deal in average American citizens”) Rangel, Nancy (“Are you kidding me???”) Pelosi employed by us and who actually believe they have mental capacity well ABOVE James Madison, well…. what can we all expect?

  2. A. Mark Hunt says:

    You were doing so well right up until the end where you contradict yourself: “…, regulating markets by a well-conceived basic set of rules.
    And expect some imperfection. ”

    The whole point is that your notion or my notion or anybody else’s notion of how to regulate a market, any market, is just as prone to these same kinds of aberrations. So the thing we must always fear is letting any large entity (ake government) manipulate the market. I think it best to let the market regulate itself. Let law concern itself with capturing and punishing those who use force or fraud to take advantage of others — just as Frederic Bastiat pointer out long ago.
    -mark-

  3. Drik says:

    The purity of progressivism.

    “One of the distinguishing marks of the new progressivism at whose head Obama stands is the determination to conceal the gap between what majorities want and what progressive leaders want to enact in their name while insisting proudly on the purity of their democratic credentials.”

    “The paradox of progressivism – how to reconcile a professed commitment to greater democracy with a powerful conviction, in conflict with the preferences of the people, that justice requires more centralized government and more elite rule.”

    Peter Berkowitz-RealClearPolitics

    It’s governing people based on the choices that people WOULD make, if they weren’t so stupid.

  4. Werner says:

    Actually people act VERY rationally. They make decisions based on their own perceptions and, more importantly, in their own self interest. THAT’S why unfettered gov’t officials & regulators are so scary. The decisions and directives they make reflect what’s best for THEM.

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