Contributor Post Created with Sketch. Recommended by Ricochet Members Created with Sketch. Quote of the Day: Costs and Benefits

 

“Weighing benefits against costs is the way most people make decisions – and the way most businesses make decisions, if they want to stay in business. Only in government is any benefit, however small, considered to be worth any cost, however large.” – Thomas Sowell

As a nod towards Dr. Bastiat (@drbastiat) and his post “A Brief Excursion into Hero Worship,” I thought it fitting to provide some Sowell food with today’s quote of the day. Rummaging through my collection of unused Thomas Sowell quotes, I decided this one best fits the events of 2020, since so many are driven by the government’s pursuit of benefits at whatever cost, however large.

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  1. Richard Fulmer Member

    Seawriter: Only in government is any benefit, however small, considered to be worth any cost, however large.

    There is a lot behind this simple statement. If I’m spending other people’s money for the benefit of other people, neither the cost nor the benefit directly impact me. But I may indirectly benefit by helping a few influential people a lot at the cost of hurting a great many people only a little. A special interest group can send votes or campaign funds my way in return for government-granted privileges. The group can reap huge rewards at the cost of only a dollar or two to each consumer. Fighting for the privilege is worth a lot to the group, while fighting against it isn’t worth the time or effort of any consumer.

    The Left’s solution to this problem is to increase government’s coercive power, which, in turn, increases the benefits to special interest groups of subverting that power to advance their own ideas and fortunes.

    • #1
    • August 8, 2020, at 7:53 AM PDT
    • 6 likes
  2. Songwriter Inactive
    Songwriter Joined in the first year of Ricochet Ricochet Charter Member

    If Ricochet had a QotD post dedicated only to Sowell, it could run for 100 years with gems like this and never repeat itself.

    • #2
    • August 8, 2020, at 8:22 AM PDT
    • 16 likes
  3. Goldgeller Member

    Great post. I think getting people to see that costs and benefits matter is important. I am surprised that people don’t think that trade-offs apply when they are discussing their pet issue. Further refining this, I like to ask people I discuss policy with to consider the marginal cost. What should a person or a society pay for “one more” unit of anything they want to increase or reduce? It is a powerful question and well and I’m surprised that people don’t consider the marginal principal more (h/t to Justin Wolfers for bringing that to my attention). 

    I guess… I will be difficult here and make a fuss. Some of it is because Ricochet is a great place to post, and some of it is because I’m tired and willing to go for it. I like Sowell a lot but his quote is dangerously close to only being superficially correct, or correct only at a high level of aggregation, assuming that there is a “governor.” It isn’t really in any of the empirical or formal work on the bureaucracy or auctions. Costs and benefits are considered all the time at all stages. One school says well organized minorities tend towards offering politicians attractive vote outcomes compared to weakly organized majorities. Another school says everyone has to get a piece of the action for anything to get done. Both predict externalities and economic losses, but neither route suggests government doesn’t take into account costs and benefits. Sowell would need to show how to minimize economic losses. 

    I criticize Sowell on the idea that “government” can consider something. But I guess a rejoinder would be that Congress is so parochial that on average it washes out and policymaking still behaves as if the marginal principal doesn’t matter. That argument feels contingent to me but it is one avenue. 

    • #3
    • August 8, 2020, at 8:37 AM PDT
    • 1 like
  4. Richard Fulmer Member

    Goldgeller (View Comment):
    Costs and benefits are considered all the time at all stages.

    I think that the fundamental questions are:

    1. Who pays the costs?
    2. Who benefits?
    3. Who decides?

    If we’re talking about the marketplace, the answer to all three questions is generally one entity: An entrepreneur or a corporation. That entity risks it’s own resources, benefits if the project is successful, and loses if it fails. That entity has local knowledge and skin in the game.

    If we’re talking about “government,” the answers to the questions are:

    1. Taxpayers
    2. Possibly the general public, though more likely some subset of the public, and possibly one or more legislators
    3. Possibly legislators or possibly the bureaucrats within one or more executive-branch agencies

    The costs are often paid by people who don’t receive any benefits. And the decisions are made by people with no skin in the game and no local knowledge.

    In which case – private vs government – are scarce resources that have alternative uses more likely to be allocated wisely? Or, to put it another way, in which case are benefits more likely to exceed costs? 

    • #4
    • August 8, 2020, at 8:54 AM PDT
    • 1 like
  5. SkipSul Coolidge
    SkipSul Joined in the first year of Ricochet Ricochet Charter Member

    I have long posited that for the hard Left, they often operate under an inversion, which is why they don’t give a damn about costs. You see, the costs are the actual point, the results do not matter in the slightest. It matters not if a regulation actually succeeds in its stated ends, so long as the right people are hurt by it.

    In short, for the heavy handed regulators, the means justify the ends.

    • #5
    • August 8, 2020, at 9:06 AM PDT
    • 2 likes
  6. Arahant Member

    Songwriter (View Comment):

    If Ricochet had a QotD post dedicated only to Sowell, it could run for 100 years with gems like this and never repeat itself.

    Amen to that.


    But this is a more general Quote of the Day, where you can quote anyone at all. If you have a favorite quotation from Dr. Sowell that you’d like to share, you can sign up. If you have a favorite quotation from somebody else that you’d like to share, you can sign up for that, too. 

    • #6
    • August 8, 2020, at 9:21 AM PDT
    • 1 like
  7. Goldgeller Member

    Richard Fulmer (View Comment):

    Goldgeller (View Comment):
    Costs and benefits are considered all the time at all stages.

    I think that the fundamental questions are:

    1. Who pays the costs?
    2. Who benefits?
    3. Who decides?

    If we’re talking about the marketplace, the answer to all three questions is generally one entity: An entrepreneur or a corporation. That entity risks it’s own resources, benefits if the project is successful, and loses if it fails. That entity has local knowledge and skin in the game.

    If we’re talking about “government,” the answers to the questions are:

    1. Taxpayers
    2. Possibly the general public, though more likely some subset of the public, and possibly one or more legislators
    3. Possibly legislators or possibly the bureaucrats within one or more executive-branch agencies

    The costs are often paid by people who don’t receive any benefits. And the decisions are made by people with no skin in the game and no local knowledge.

    In which case – private vs government – are scarce resources that have alternative uses more likely to be allocated wisely? Or, to put it another way, in which case are benefits more likely to exceed costs?

    Thanks for the reply. I don’t want to come off as flippant or glib. Your arguments and points have been internalized by people who look at markets for regulations and policy change. That was baked into my response. In your post– those the right questions, and the response more or less include the right actors and payoffs. I’d like to focus on integrating how the actors respond to each other, which is what I was (hopefully?) getting at in my post. That’s what is crucial and that is where Sowell seems (given my caveats) wrong. Regulations have markets. There are costs and benefits in these markets. The next question: do these generate externalities? (Answer: Sure! It’s a thing in all markets!) 

    I like Sowell a lot. A whole lot. This particular quote is interesting but “problematic” in the absensce of other arguments.

    • #7
    • August 8, 2020, at 9:39 AM PDT
    • Like
  8. Richard Fulmer Member

    Goldgeller (View Comment):
    I’d like to focus on integrating how the actors respond to each other, which is what I was (hopefully?) getting at in my post. That’s what is crucial and that is where Sowell seems (given my caveats) wrong. Regulations have markets. There are costs and benefits in these markets. The next question: do these generate externalities? (Answer: Sure! It’s a thing in all markets!) 

    I co-authored the FEE article, Regulatory Failure by the Numbers, about 10 years ago. Is this the kind of thing you’re thinking of?

    • #8
    • August 8, 2020, at 11:18 AM PDT
    • Like
  9. Jim McConnell Member
    Jim McConnell Joined in the first year of Ricochet Ricochet Charter Member

    Goldgeller (View Comment):

    Great post. I think getting people to see that costs and benefits matter is important. I am surprised that people don’t think that trade-offs apply when they are discussing their pet issue. Further refining this, I like to ask people I discuss policy with to consider the marginal cost. What should a person or a society pay for “one more” unit of anything they want to increase or reduce? It is a powerful question and well and I’m surprised that people don’t consider the marginal principal more (h/t to Justin Wolfers for bringing that to my attention).

    I guess… I will be difficult here and make a fuss. Some of it is because Ricochet is a great place to post, and some of it is because I’m tired and willing to go for it. I like Sowell a lot but his quote is dangerously close to only being superficially correct, or correct only at a high level of aggregation, assuming that there is a “governor.” It isn’t really in any of the empirical or formal work on the bureaucracy or auctions. Costs and benefits are considered all the time at all stages. One school says well organized minorities tend towards offering politicians attractive vote outcomes compared to weakly organized majorities. Another school says everyone has to get a piece of the action for anything to get done. Both predict externalities and economic losses, but neither route suggests government doesn’t take into account costs and benefits. Sowell would need to show how to minimize economic losses.

    I criticize Sowell on the idea that “government” can consider something. But I guess a rejoinder would be that Congress is so parochial that on average it washes out and policymaking still behaves as if the marginal principal doesn’t matter. That argument feels contingent to me but it is one avenue.

    Have you considered the fact that Sowell may well have been using “government” as a sort of shorthand for “the collective?”

    • #9
    • August 8, 2020, at 11:38 AM PDT
    • 2 likes
  10. TreeRat Member

    Goldgeller (View Comment):
    Regulations have markets. There are costs and benefits in these markets.

    If the costs and benefits used for analysis are those that most directly affect the decision-maker, they may bear no resemblance to the stated benefits of the regulation. If the person writing/approving the regulation is evaluated somehow on the effectiveness of the regulation as regards the stated purpose, then perhaps the bureaucratic model can work. If, however, there are rewards (immediate or eventual) for favoring a party … regulatory capture. The latter appears to dominate, in my limited observation.

    • #10
    • August 8, 2020, at 12:38 PM PDT
    • 2 likes
  11. CACrabtree Coolidge

    Songwriter (View Comment):

    If Ricochet had a QotD post dedicated only to Sowell, it could run for 100 years with gems like this and never repeat itself.

    My favorite (among many) is:

    “It is usually futile to try to talk facts and analysis to people who are enjoying a sense of moral superiority in their ignorance.”

    I liked it so much that I put it at the bottom of my signature block for my emails (during my working days). I was always amazed when I would (occcasionally) get back a response of “What do you mean by that?”

    • #11
    • August 8, 2020, at 2:05 PM PDT
    • 2 likes
  12. Goldgeller Member

    Jim McConnell (View Comment):

    Goldgeller (View Comment):

    Have you considered the fact that Sowell may well have been using “government” as a sort of shorthand for “the collective?”

    I don’t know what that would mean. As in the post, if there is a “governor.” at least as an abstraction or simplification, Sowell, has some some point, somewhere. And that could be fair. We often talk about “Congress” or “The Presidency.” But I don’t know what function a “collective” would serve, at least as presented here. Be happy to think through how relaxing constraints on what he means would go beyond my statement on the conditions where his quote is correct. 

    TreeRat (View Comment):

    Goldgeller (View Comment):
    Regulations have markets. There are costs and benefits in these markets.

    If the costs and benefits used for analysis are those that most directly affect the decision-maker, they may bear no resemblance to the stated benefits of the regulation. If the person writing/approving the regulation is evaluated somehow on the effectiveness of the regulation as regards the stated purpose, then perhaps the bureaucratic model can work. If, however, there are rewards (immediate or eventual) for favoring a party … regulatory capture. The latter appears to dominate, in my limited observation.

    Overall I think I’m in agreement with you. These are great points. When you say decision-maker do you mean bureau or regulator? (I assume you do). Are we in agreement that regulators do consider costs and benefits but the incentive for saying what a cost is and what a benefit is can and may often/frequently be slanted?

    When I wrote that Congress was parochial, I was using the Moe & Howell language because they are motivating a similar consequence of our institutional policymaking (at a national level). At an actual bureaucratic level, the answer is still, “it depends.” Street level bureaucracy is different from other types of bureaucracy, for example.

    • #12
    • August 8, 2020, at 2:13 PM PDT
    • Like
  13. TreeRat Member

    Goldgeller (View Comment):

    Jim McConnell (View Comment):

    Goldgeller (View Comment):

    Have you considered the fact that Sowell may well have been using “government” as a sort of shorthand for “the collective?”

    I don’t know what that would mean. As in the post, if there is a “governor.” at least as an abstraction or simplification, Sowell, has some some point, somewhere. And that could be fair. We often talk about “Congress” or “The Presidency.” But I don’t know what function a “collective” would serve, at least as presented here. Be happy to think through how relaxing constraints on what he means would go beyond my statement on the conditions where his quote is correct.

    TreeRat (View Comment):

    Goldgeller (View Comment):
    Regulations have markets. There are costs and benefits in these markets.

    If the costs and benefits used for analysis are those that most directly affect the decision-maker, they may bear no resemblance to the stated benefits of the regulation. If the person writing/approving the regulation is evaluated somehow on the effectiveness of the regulation as regards the stated purpose, then perhaps the bureaucratic model can work. If, however, there are rewards (immediate or eventual) for favoring a party … regulatory capture. The latter appears to dominate, in my limited observation.

    Overall I think I’m in agreement with you. These are great points. When you say decision-maker do you mean bureau or regulator? (I assume you do). Are we in agreement that regulators do consider costs and benefits but the incentive for saying what a cost is and what a benefit is can and may often/frequently be slanted?

    When I wrote that Congress was parochial, I was using the Moe & Howell language because they are motivating a similar consequence of our institutional policymaking (at a national level). At an actual bureaucratic level, the answer is still, “it depends.” Street level bureaucracy is different from other types of bureaucracy, for example.

    Yes and yes. Public Choice theory, I have heard it called, the idea that rational actors in a power position (regulator or official) will act rationally as regards their own welfare, not that of the community they profess to serve. Not that different from observing that people act not-in-accordance with their stated principles in the face of the ‘right’ incentives.

    • #13
    • August 8, 2020, at 4:45 PM PDT
    • 2 likes
  14. Goldgeller Member

    TreeRat (View Comment):

    Goldgeller (View Comment):

    Jim McConnell (View Comment):

    Goldgeller (View Comment):

    Have you considered the fact that Sowell may well have been using “government” as a sort of shorthand for “the collective?”

    I don’t know what that would mean. As in the post, if there is a “governor.” at least as an abstraction or simplification, Sowell, has some some point, somewhere. And that could be fair. We often talk about “Congress” or “The Presidency.” But I don’t know what function a “collective” would serve, at least as presented here. Be happy to think through how relaxing constraints on what he means would go beyond my statement on the conditions where his quote is correct.

    TreeRat (View Comment):

    Goldgeller (View Comment):
    Regulations have markets. There are costs and benefits in these markets.

    If the costs and benefits used for analysis are those that most directly affect the decision-maker, they may bear no resemblance to the stated benefits of the regulation. If the person writing/approving the regulation is evaluated somehow on the effectiveness of the regulation as regards the stated purpose, then perhaps the bureaucratic model can work. If, however, there are rewards (immediate or eventual) for favoring a party … regulatory capture. The latter appears to dominate, in my limited observation.

    Overall I think I’m in agreement with you. These are great points. When you say decision-maker do you mean bureau or regulator? (I assume you do). Are we in agreement that regulators do consider costs and benefits but the incentive for saying what a cost is and what a benefit is can and may often/frequently be slanted?

    When I wrote that Congress was parochial, I was using the Moe & Howell language because they are motivating a similar consequence of our institutional policymaking (at a national level). At an actual bureaucratic level, the answer is still, “it depends.” Street level bureaucracy is different from other types of bureaucracy, for example.

    Yes and yes. Public Choice theory, I have heard it called, the idea that rational actors in a power position (regulator or official) will act rationally as regards their own welfare, not that of the community they profess to serve. Not that different from observing that people act not-in-accordance with their stated principles in the face of the ‘right’ incentives.

    Generally, that feels about right regarding public choice. I wish I were more read on public choice as public choicers would recognize it. I wish it were more discussed more in the bureaucracy lit. but I think to some extent it is minimized because it is seen as “gateway conservativism” but also– and more importantly– because you can arrive at many of the observationally equivalent features without engaging with many of the controversial aspects of public choice theory (Olson is on every decent syllabus). I keep saying I will read some Buchanan but then I just don’t. Darn.

    • #14
    • August 8, 2020, at 5:04 PM PDT
    • Like
  15. Jim McConnell Member
    Jim McConnell Joined in the first year of Ricochet Ricochet Charter Member

    Gee, and I have always thought that Thomas Sowell did a pretty good job of expressing his thoughts.

    • #15
    • August 8, 2020, at 5:26 PM PDT
    • 2 likes