The Illusion of Common Cause
Pasour, E.C. Jr.
"The Illusion of Common Cause" "I will not cater to special interests but will serve the people." MOST CANDIDATES running for public office would subscribe to this campaign motto. Today, it is the "in thing" to be against...
...Thus, the self-interest motive appears likely to continue as a good predictor of individual behavior in the private and public sectors...
...One should expect individuals and groups to attempt to use the coercive power of government to enhance their own self-interest whether social, political, or economic...
...Since some people lose and some gain as a result of almost every public policy we have no way to compare these gains and losses objectively...
...Another effect of much consumer legislation, often ignored, is the decrease in freedom of any individual to select the amount of risk (and associated cost) which he deems most desirable...
...Most people undoubtedly feel that some groups are more deserving of public support than other groups...
...By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to 'promote it...
...Recently made aware of the harmful side effects of chemical fertilizers in the form of stream pollution, an individual farmer decides to restrict (or discontinue) his use of these fertilizer materials...
...and licensing of lawyers, barbers, and many other groups...
...Virtually every action taken by government benefits some people and harms others...
...Since there is no "common cause" but instead a multitude of competing special interests, an individual has no way to divine the public interest unilaterally...
...Recent "consumer legislation" such as "Truth-in-Lending," "Unit-Pricing," and auto safety devices, is slightly different in that it has been championed by third-party activists instead of by the industry being regulated...
...A second reason why attempts to convince individuals to act in the "public interest" are not likely to be successful arises from the fact that most individuals, as revealed by their actions, aremotivated to a great extent by self-interest, That is, most of us (except within our families) are motivated largely by fairly narrow selfish goals...
...It appears extremely unlikely that individuals or groups will abandon self-interest as a dominant motive even when faced with a large amount of exhortation to do so...
...Even then, the only way to determine whether a proposed policy is in the public interest is through the collective choice process...
...At the same time, the producers who were granted the initial production rights received a windfall gain...
...Thus, we are left with the conclusion that governmental decisions must be assessed in terms of the extent to which the collective choice process reflects individual preferences and desires in some aggregative form...
...oil import quotas, welfare programs, and tax laws...
...the Interstate Commerce Commission...
...Indeed such desire is not even sufficient to ensure that a particular policy will have the outcome visualized by its proponents...
...If a public policy has an effect which is antithetical to that desired by the people, one can quite unequivocally call it a bad public policy at least to the extent that the goal of the collective choice process is to reflect aggregative preferences and desires...
...In the examples cited above (and in others discussed below), a public policy may actually aggravate the condition it was proposed to alleviate...
...What is a common cause...
...Providing additional information or reducing risk to the consumer, though beneficial, can only be achieved at an increase in cost...
...In the case of occupational licensing, too, the pressure to "protect the public," almost always comes from members of the industry for which licensing is proposed...
...The system of rewards and incentives must not be inconsistent with the outcome desired...
...Many people, for example, will prefer the lower cost of a smaller car even though the risk of bodily injury is higher...
...In one sense, at least, selfish acts freely exercised will lead to public benefits, This is the "Invisible Hand" doctrine of Adam Smith...
...The reaction to the cutbacks was virtually the same whether the cutbacks were in subsidies for agriculture, REA loans, housing, research, or welfare programs...
...From a practical standpoint, then, we can forget the common causes...
...Such policies may be (and often are) sold under the guise of a common cause, i.e., as being in the interest of the public-at-large...
...The "common cause" touchstone provides little help in assessing the desirability of alternative policies...
...Thus, the desirability of any public policy must be determined through the collective choice process...
...This point was graphically illustrated in January 1973 from the losers' standpoint when budget cutbacks were proposed in a number of government programs...
...The effect of using organic fertilizers results in increased costs (and perhaps lower yields...
...In conclusion, one should not expect any particular government policy to benefit the public-at-large, i.e., to be a "common cause...
...First, as illustrated by the previous example...
...It does mean that if an individual attempts to sacrifice his own interests to some higher social responsibility, the result may well be different from that anticipated...
...In the case of changes in any of these programs, some people gain while others lose...
...Thus, since the consumer ultimately pays the bill, the costs of -consumerism" as weighed by the consumer will outweigh the benefits for many consumers...
...But this does not vitiate the basic motive of either group, viz., to enhance its own self-interest...
...There is even now a national organization to lobby for common causes...
...This appears to be a fairly clear-cut example of a failure of the collective choice process...
...The categorization of selfish acts depending upon whether such acts are or are not consistent with the "Invisible Hand" doctrine appears to be a fruitful area for further study...
...This does not mean, of course, that people should be motivated solely by selfish interests...
...This is as true for the government bureaucrat as it is for any other citizen...
...In such cases, the implication for governmental policy is straightforward...
...some people lose and some people gain when such programs are instituted or abolished or changed significantly...
...Today, it is the "in thing" to be against actions which favor special interests and to favor actions which promote the common good...
...When one considers equity, however, no such clear-cut answer is likely to appear...
...oil import quotas...
...What should motivate the behavior of the individual...
...As a latter day follower of Adam Smith has stated, if wishes were horses, we would all be wise to own stock in a harness factory...
...Unless the actions and ideas of people are constrained and influenced by morality and religion, self-realization of these preferences may well be incompatible with the preservation of a free society...
...Consider federal policies such as agricultural programs, minimum wage legislation...
...One can evaluate particular policies from the standpoint of efficiency and in many cases determine the most efficient course of action to follow (in terms of dollar cost...
...The desire or hope of the sponsor of a particular policy even if altruisitic instead ofvenal, however, is not sufficient to ensure that the cause is common, i.e., that everyone will benefit...
...First, if a particular individual or group attempts to subordinate self-interest and follow the public interest, the individual or group would seldom know the appropriate action to take...
...The more relevant question in assessing the desirability of any policy is to determine: (1) which groups will be affected by the policy, and (2) what the effects on different groups are likely to be...
...Thus, clearly not all selfish acts lead to public benefits or are consistent with the "Invisible Hand" doctrine referred to above...
...Indeed, the accommodation of conflicting interests is an inherent role of government at any level...
...The impact of the agricultural programs, minimum wage legislation, and various regulatory agencies has often been much different from that envisaged by the framers of the legislation...
...All important government policies benefit some individuals and groups while harming others...
...One implication is that there is no way to determine what actions are in "the public interest- except through the collective choice process...
...This sounds good until the statement is subjected to closer scrutiny...
...Thus, the effect of his attempting to follow what he conceives as his "social responsibility" results in a large decrease in net returns, a loss in his competitive position and, for the marginal producer, bankruptcy...
...There are few, if any, "common causes...
...In many cases, the actual impact of a particular policy (as indicated above) is greatly different from that predicted when the legislation was enacted...
...What is the policy implication of the viewpoint that self-interest is a good predictor of behavior...
...However, neither the market nor the collective choice process can be relied upon to assure that people's aspirations are noble...
...The reaction to government budget cutbacks in virtually any area stems from the use of government by special interest groups to further their own interests...
...In addition, if the participants by their actions do not accurately reflect their own wishes, the market loses its ability to transmit accurate signals from consumers to producers...
...Policies should be formulated with the expectation that individuals or groups will promote policies with their own self-interest in mind...
...In cases such as the example just illustrated, where one producer or consumer (under competitive conditions) unilaterally attempts to follow his "social responsibility" rather than his private interest, neither public nor private interest is likely to be served...
...In view of past experiences with regulatory agencies to promote the interests of the "publicat-large," one certainly has ample grounds for viewing new legislation of a similar kind with a critical eye...
...All public policy,issues involve the twin welfare concepts of efficiency and equity...
...However, this is an understandable and a predictable outcome when the major support for a regulatory agency comes from the particular industry being regulated...
...It is not surprising under these conditions that the clientele supposedly being protected by the legislation, eventually winds up paying more because of the legislation...
...Second, the impact of the program cannot necessarily be determined by reading the statute or enabling legislation...
...At best, both the market and the political process can help people achieve self-realization of their preferences...
...The tragedy is that such consumer legislation is often sold to the public by claiming either that the costs are negligible or that "big business" will be forced to pay the bill...
...The view expressed here does not mean that ideals and values held by people are unimportant...
...In the case of agricultural price support programs involving production controls, for example, an initial effect of these programs was to increase the cost of food to the consumer...
...This approach, however, often tends to be self-defeating...
...The dominant view of conventional wisdom appears to be that some groups (e.g., public school teachers) promoting policies to enhance their own self-interests are justified in doing so while other groups (e.g., the oil industry) are not justified...
...Recent work suggests that this has been the case for the Federal Aviation Authority...
...The obvious answer would appear to be that it is any action which benefits everyone in society...
...In the case of regulatory agencies, for example...
...There is no way to compare these gains and losses objectively...
...The termination of these programs would impose losses on current holders of production rights and reduce the cost of food to consumers, Two points in connection with such programs should be made...
...The idealistic view is that any individual or special interest group should act in the "public interest" rather than to enhance its own self-interest...
...The amount of resources we are willing to devote to charitable causes is much less than the amount we spend to achieve selfish goals...
...One farmer's output will not affect product price...
...In illustrating this point, consider the example of a farmer using chemical fertilizers...
...George Stigler has demonstrated that regulatory bodies in general tend to be subservient to the industry being regulated...
...Persons concerned with maintaining a stable free society must be concerned about the effect of selfish acts freely exercised by individuals who hold nihilistic destructive preferences which would subvert or abolish that kind of society...
Vol. 8 • October 1974 • No. 1
