Diagnostics and Therapeutics in Political Economy
By Robert Higgs • Thursday October 15, 2009 4:27 PM PDT • 41 Comments
Since the early 1980s, I have been lecturing on the growth of government to a wide variety of audiences. In academic seminars and workshops, professors typically ask questions about my explanatory framework, my evidence, alternative explanations, possible counterexamples, and so forth. But when I speak to a friendly lay audience, the first question is typically something along the lines of, “What can we do to turn this thing around?” Academic people, who are accustomed to discussing all sorts of political and economic developments, many of which are none too savory, usually have the ability to distance themselves from any revulsion they may feel about the matters under discussion and to concentrate on how one might best explain the events in question. In social science, “value freedom” is upheld as a standard for the analyst. Market-friendly nonacademic people, in contrast, are often surprised, and appalled, to discover how much the government has grown and many of the means by which political actors have enlarged it, and their immediate orientation is toward action to reverse what they perceive to be a pernicious development. Thus, they bring normative and programmatic concerns directly to the fore. Like Lenin, they demand to know, “What is to be done?”
Because I am often introduced as an authority on government growth, the lay audiences seem shocked and disappointed when I answer the query about how we can stop further government growth by saying that I don’t know or, worse, by saying that I don’t think we ― which is to say, those of us in the room and all other likeminded people ― can do anything significant to deflect the trend toward larger, more tyrannical government.
I often receive similar reactions when I post commentaries on the Internet. Thus, I recently posted a short essay called “Partisan Politics ― A Fool’s Game for the Masses,” and in response, one man wrote: “Quit whining and figure out something better if you’re so damn smart.” Another wrote: “Okay, Higgs. So what can one do to protect one’s person and family and aid in the country’s survival?” I commonly hear from people who find my description or analysis beside the point unless I have “an answer” or “a solution” to the problem under discussion. Higgs, they conclude, is “not constructive,” and therefore he does not deserve anyone’s time and attention.
Although I would be the last to assert that I have a claim on anyone’s time or attention, I believe that the solution-demanding response to my commentaries (or anyone else’s) betrays a confusion between diagnostics and therapeutics in political economy. The former focuses on finding the causes of a condition or development, the latter on prescribing measures by which the condition can be lessened or eliminated. This distinction is common in the medical profession, where some practitioners specialize in diagnosis and others in various kinds of therapy. In political economy, however, the two activities are often combined. In professional economics journals, countless articles have been published in which the author first lays out his “model,” sometimes presents empirical “tests” of some of its implications, and finally draws “policy conclusions” ― that is, unsolicited advice to government functionaries as to how they should employ their powers.
Lay people and professionals alike, however, need to appreciate two critical points. First, in social and economic affairs, one man’s problem may be another man’s solution. The growth of government belongs to this category. Many people are pleased when the government grows, whereas others are outraged. Still others, of course, have no concern one way or the other, so long as their personal ox is not being gored deeply. In short, the normative evaluation of a socioeconomic condition or development may vary greatly among the people involved in it.
Second, even if everyone agrees that a certain condition constitutes a problem, it still may have no generally acceptable solution. Because of the diversity of beliefs, values, and interests in the populace, whatever is done to create a “public good” ― that is, a condition that, if established at all, applies equally to everyone ― will displease some people. For example, everyone may value “national security” in the abstract, but if in its pursuit some people want the government to go to war against country X, whereas others want the government to steer clear of war with country X, then some people are bound to be dissatisfied, no matter what the government does. Issues of this kind have no generally acceptable solution, owing to uncertainties about the “production function” for certain public goods. One might imagine, of course, that one side persuades the other to change its beliefs, values, or preferences, but unless unanimous agreement is achieved ― an extremely unlikely eventuality ― a certain number of problems whose solutions are contentious will necessarily always remain.
Since the Great Depression, the American public has generally approved of an active, interventionist federal government. In a perceived crisis, most people want the government to “do something.” Of course, most politicians and government functionaries, for perfectly understandable self-serving reasons, are quite pleased to respond to such public demands for action ― after all, taking such action promises to butter their bread more thickly. Franklin D. Roosevelt enthusiastically supported an approach whereby the government would “take a method and try it; if it fails, admit it frankly and try another. But above all, try something.” Likewise, more recently, despite the great confusion that prevailed about the current recession’s causes and about the best means of moderating or reversing it, Barack Obama, soon after taking office, declared, “The time for talk is over. The time for action is now.” In both instances the president was presuming that successful therapy can be administered without a sound diagnosis. This presumption is foolish, however, if one’s interest lies not in mollifying a bewildered electorate, but in implementing a genuine remedy for the perceived problem.
Furthermore, in dealing with a “problem” such as the relentless growth of government, we must recognize that unlike the automobile mechanic who undertakes to repair a sputtering engine, we are attempting to alter the workings of a socio-economic process that has hundreds of millions of moving parts, each one with a mind of its own! It is hubristic ― a Hayekian “fatal conceit” ― to suppose that anyone can control this process in fine detail. The “man of system,” Adam Smith sagely observed, “is apt to be very wise in his own conceit.”
He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it.
I am not a “man of system” in the Smithian sense. For me to propose a “magic bullet” to stop the growth of government, as an oncologist might prescribe a certain drug to cure a particular type of cancer, would be ridiculous. Just as one may know a great deal about the origin and development of a particular type of tumor without knowing how to cure it, one may know a great deal about the growth of government without knowing how to stop it. Indeed, curing a cancer is a much simpler task.
Yet, one thing we do know: Many Americans now believe many things about their government that are false, and they expect much from the government that the rulers cannot provide. The public at large embraces myths about what the government can do, what it actually does, and how it goes about doing it. Only people enamored of such myths can support, for example, a gigantically expensive health-care “reform” at a time when the present value of the government’s promised future Social Security and Medicare benefits alone amounts to several times the current GDP. (I am disregarding here the interested parties who expect to reap short-run pillage from an intrinsically doomed system.) Until more people come to a more realistic, fact-based understanding of the government and the economy, little hope exists of tearing them away from their quasi-religious attachment to a government they view with misplaced reverence and unrealistic hopes. Lacking a true religious faith yet craving one, many Americans have turned to the state as a substitute god, endowed with the divine omnipotence required to shower the public with something for nothing in every department – free health care, free retirement security, free protection from hazardous consumer products and workplace accidents, free protection from the Islamic maniacs the U.S. government stirs up with its misadventures in the Muslim world, and so forth. If you take the government to be Santa Claus, you naturally want every day to be Christmas; and the bigger the Santa, the bigger his sack of goodies. This prevailing ideology constitutes probably the most critical obstacle to reductions in the government’s size, scope, and power. Getting rid of this ideology will be diabolically difficult, if possible at all.
Analysts of the political economy, such as yours truly, may have some capacity to open people’s eyes with regard to the government’s true nature and its actual operation. Such diagnostic work is a full-time job, however, so consumers of this analysis should not be surprised if a diagnostician cannot prescribe a sure-fire cure whenever he identifies, describes, or analyzes a problem. Moreover, consumers of opinion and analysis in political economy would be well served by developing a healthy skepticism toward all those who propose a simple cure for the growth of government ― flat tax, term limits, constitutional amendment, abolition of the Fed, you name it. The doctor with a panacea just might be a quack.
Tags: Education, Free Market, Presidential Power 
Well said, Dr. Higgs. A friend and I talk often about goings on in the U.S. today and the direction in which we’ve been headed for at least the last 100 plus years. Neither of us has been so bold as to even venture guesses as to how to slow, much less stop, the incremental slide into, I think you called it “particpatory fascism”.
We are classical liberal dinosaurs – soon to be buried by historical sediments. It’s a shame. The American experiment, however poorly adhered to, was a noble one.
RickC | Oct 15, 2009 | Reply
I believe, more hopefully, that classical liberalism is a bigger strain in American culture than in a very long time.
Anthony Gregory | Oct 15, 2009 | Reply
Dr. Higgs,
I’m not sure if you remember the comment of one of the sponsors of Cato University 2009, which I think applies to this blog entry. He said that as much as intellectuals such as yourself do to study and uncover a problem, the fact of the matter is that intellectuals are not the best people to reach out to the masses. The politician, in this regard, is probably most apt in being able to catalyze a quick-paced change.
Unfortunately, as we all know, no matter what side of the spectrum few politicians are willing to shrink the size of government, given that they benefit directly from growth (well, what sense would it make to bite the hand that feeds you?).
Maybe I am being a bit optimistic, but hopefully Ron Paul can turn things around (and whatever politicians follow in his footsteps, such as his son).
Ultimately, I think you name the single most important asset in the fight for liberty: “Market-friendly nonacademic people”. Intellectuals should be pushing this crowd to write blogs, to write their politicians and to advance ideas on how they think we should change our government. In the long-run, this is probably the only consistent way to work towards a solution to limit the growth of government, and hopefully even shrink it in size. That is, to spread the word to the point where what is a marginalized school of thought turns into the mainstream.
I do not think it’s impossible (if it was, there would have been no revolution against the British crown [don't get me wrong, I am not supporting any type of armed revolt against the U.S. Government]). But, I think it’s the only long-term solution.
Jonathan Finegold Catalán | Oct 15, 2009 | Reply
Yes, so much social doctoring is iatrogenic.
Tullock (JPE 1971, Rand/Bell 1975) is great on this: “But I don’t have a way out.”
But in some respects I have some reservations about the way Bob develops it. Diagnostics and therapeutics are ultimately of a piece, and we should be wary of tendencies to see them as separable.
Part of my variation would be to expand the notion of therapeutics so as to include individual reformation of own attitudes. It may not change policy, but it may society that much better. Bob, after all, is a therapist.
Daniel Klein | Oct 16, 2009 | Reply
Thanks for a beautifully written post, Dr. Higgs.
As a citizen of a much more statist country than the US (Russia), I am still dismayed at the direction in which the US people is going.
I think that only a huge economic and political crisis may (but not necessarily will) reverse the statist trend. Maybe, that moment will come when the US Social Security system, Medicare and Medicaid finally go bankrupt.
But miracles happen sometimes. One bright spot in the world is Georgia, a small country in the Caucasus that is on the verge of an unprecedented move in human history. It is on the verge of constitutionally protecting economic freedom to fix the enormous economic liberalization that has taken place since 2004. See here.
Daniil Gorbatenko | Oct 16, 2009 | Reply
Until more people come to a more realistic, fact-based understanding of the government and the economy, little hope exists of tearing them away from their quasi-religious attachment to a free market with less public investment that they view with misplaced reverence and unrealistic hopes.
Mike | Oct 16, 2009 | Reply
While I agree with you that no single cure is a fix-all, I must object to your marginalization of the idea of abolishing the Federal Reserve.
Removing the power to print money at will also removes the ability to expand the government at breakneck paces. Abolishing the Fed would probably be like removing the game-ending piece in the Jenga tower. Everything would come crashing down and the government would be forced to turn back to its citizens for revenue instead of to the printing press.
If the citizens are outraged enough by current policy, they can demand policy changes before acquiescing in turning over their hard-earned property. That is, if the income tax is abolished at the same time, and replaced by a simplified tax system that doesn’t deduct directly from payrolls.
But hey, I’m just another “market-friendly nonacademic person”. So what do I know?
By the way, your quip about the doctor with a panacea reeks of a thinly veiled insult directed at Congressman Ron Paul.
Ryan Marshall | Oct 17, 2009 | Reply
The distinct roles of diagnosticians and those developing therapies is simply an example of the division of labor. Those with comparative advantages in analyzing the problems of the current political economy should focus on this effort, while those with comparative advantages in developing methods of addressing the problems, such as political organization and action, should focus on those efforts. Both efforts are needed. The latter, however, rely on the former. Correct knowledge of the nature of a problem is a necessary condition for developing potential successful methods of ameliorating the problem. I much prefer having Dr. Higgs spreading knowledge of the problems facing us through his diagnostic efforts. We would be much poorer without it.
Eric | Oct 17, 2009 | Reply
The public’s “quasi-religious attachment to a free market”? If only that were true.
Marlow | Oct 17, 2009 | Reply
The former USSR eventually collapsed; these United Socialist States of America will also soon face a legitimacy crisis. At that point, many people will propose solutions, and some amalgamation of those solutions will become “the new normal.”
I’d push for as complete an isolation of government and the economy as possible. I’d like no government at all, but whether that is feasible or not, a severely limited government might pass muster. Big-government “solutions” are rapidly losing credibility among many; for instance, the bailout of the financial system drew a huge outcry. I hope we can encourage further disbelief of government nostrums and remedies.
terrymac | Oct 17, 2009 | Reply
If you reject democracy, the best you could do is not going out to vote.
Well, this won’t solve the problem.
I’ll suggest having more people forming more influential parties so that the one that serves the people best will be there.
When people know more about the evils of big government, the people would demand for change.
So what Higgs is doing is correct.
Chee Heong QUAH | Oct 17, 2009 | Reply
I think what Higgs and other libertarians doing are right.
Educate the people. Only through education the problem might be solved.
Education is already part of the cure!
Chee Heong QUAH | Oct 17, 2009 | Reply
We know that hurting or killing people is wrong but everyday someone is being hurt or killed. So there is no solution too.
But we can educate the young so that it can be brought to the minimum.
The same applies to the big government problem.
Chee Heong QUAH | Oct 17, 2009 | Reply
It appears to me that you have read Albert J. Nock. As a Health Care Professional I see first hand the effect of government intervention. One overriding problem to any sensible solution is the public perception of what they are entitled to. Without the general public understanding the problem, no solution is possible. Health care will have to break down completely before it can be “fixed”. Thank you for your analysis.
J. Jones | Oct 18, 2009 | Reply
I am sure that if Dr. Higgs did offer radical solutions (e.g. end foreign intervention altogether or end the Fed – though I don’t know if he would endorse these particular positions), then the same critics would proclaim that he was not being “realistic”. Essentially, we are in the position that we are being held hostage by others who often times have very destructive agendas. Is the solution for these hostage-takers to see the error of their ways and lay down their arms? I am afraid that the only force powerful enough to overcome the prevailing modus operandi is economic reality, aka national bankruptcy, which will one day force the state to retrench. If we educate well, the retrenchment will move us in the direction of a less tyrannical society.
D. Saul Weiner | Oct 18, 2009 | Reply
Ah, how I wish I could write as well as Bob Higgs.
If you believe as I do that it’s not just big government, but coercive government in general that’s the source of most human misery, you may also agree that the critics who demand solutions should be directed to the most radical libertarian and free market economics websites, the ones with the huge libraries of free books and articles. I’m referring of course to sites like lewrockwell.com and mises.org. (This is not meant to disparage this website, which is another vital resource). There the critic will find the works of the very best and brightest diagnosticians and therapists, many of whom have spelled out in inspiring detail how the nonviolent revolution that is the solution can be carried out.
Of course, you can lead a horse to water, etc. But I do believe in the concept of intellectual critical mass, the point where an idea takes hold and sweeps away the competition. The internet has provided the means to accelerate the process. The revolution grows stronger with every statist blunder. Keep the faith.
Glen Litsinger | Oct 18, 2009 | Reply
Higgs must be speaking with tongue in cheek, for a man of his intellect simply must have a few solutions at the least. I see the reform to be so big as to be mind boggling: and, where to start? End the fiat money, and return to gold? Amend the constitution to ensure the fundamentals can never be coerced again? End state sponsored education, to ensure the end of dogma? Like others, I fear only a major breakdown will be the catalyst for change, and heaven help us all.
alzurzin | Oct 19, 2009 | Reply
Prof. Higgs: In your previous post you state, “From my vantage point on the outside, peering in...” Perhaps this illusion is what troubles you so much– it is certainly not “growth of government”: Santa Claus, forsooth. What is “government” to you?
M. Drago | Oct 19, 2009 | Reply
Dr. Higgs,
You have stated, more eloquently than I ever could, what I have felt about our predicament for some time. Particularly, the greatest impediment to prosperity in America is the American people. You are quite correct that there is no solution to the growth of Government until the people themselves take a more mature view of what government is, its origins and how it functions (or should function). Perhaps this itself is the solution, since any necessary reforms will necessarily follow from such a realization.
Matt McWilliams | Oct 19, 2009 | Reply
Dr. Higgs,
While I have the greatest respect for your work, I strenuously disagree with your assertion that one “would be well served by developing a healthy skepticism toward all those who propose a simple cure for the growth of government.”
Let those passionate about the elements you delineated pursue their goals—with active encouragement from the rest of us, please! These are all pieces of the puzzle. After all, government didn’t become so large in one giant leap therefore it’s deconstruction need not be one gigantic and calamitous wreck.
Moreover, the widely revealed worth of these aims, once accomplished, will increase awareness of our systemic problems in the general public exponentially.
Win/win. :)
Sonic Ninja Kitty | Oct 19, 2009 | Reply
@ M. Drago – What else is government besides a coercive monopoly over a certain geographical area?
Robby | Oct 20, 2009 | Reply
Once you realize the truth about what government really is and no longer sanction it, as Dr. Higgs has presumably done, it loses it’s legitimacy. It is then, as Dr Higgs states, that you are “on the outside, peering in.”
Robby | Oct 20, 2009 | Reply
I think it is perfectly natural and logical for listeners to feel disappointed when one diagnoses a problem (the growth of big government, in Bob’s case) and then declares that one doesn’t have a hint about its solution. Adam Smith, whose warning about the man of system Bob appropriately quotes, did not stop short of prescribing changes to the mercantilist policies he criticized.
Prescribing appropriate therapy is a difficult task, but worth doing. That’s why it’s a bit disappointing when Bob writes as if people should avoid doing so—because no one knows enough? I share Dan Klein’s point about the closeness of diagnostics and therapeutics.
James C.W. Ahiakpor | Oct 20, 2009 | Reply
The intellectuals control the schools. They have made a compact with the government to stuff their pockets at the expense of critical thinking and truth.
jorod | Oct 27, 2009 | Reply
The prescriptive answer is to elect another Calvin Coolidge. But that would require a consensus and electoral majority who favor non-interventionist and smaller government. America has collectively decided to forego freedom in favor of increasing government size and tyranny. America no longer values freedom or its founding. Madisonian government is the answer America does not want to hear.
Kent Lyon | Oct 28, 2009 | Reply
Dr. Higgs is absolutely correct. Even at the local level, the ridiculous notion of economic development has achieved widespread acceptance. No matter how many rural towns and counties have the failure of central planning staring them in the face in the form of abandoned industrial parks, they continue to believe that one person or a small group of people can create prosperity and growth. Hardly anyone believes in freedom or free markets any more, in spite of what they might say.
Aggie | Oct 30, 2009 | Reply
Whoa! I have already been browsing bing all day due to this and i lastly thought it was listed here!
Wilson Tinoco | Nov 7, 2010 | Reply