03 Feb 2011

Do I Unfairly Pick on the Government?

All Posts 23 Comments

Someone sent me the below email (reprinted with permission):

I am in the middle of chapter 3 Lessons for the Young Economist. So far I think it is a fantastic piece of work. The arguments are presented in a clear, unassailable manner that promotes true insight and understanding. I love the way it boils down to base principles and then bubbles up to useful insights and observations. I do have a suggestion for improvement, though: go easier on the ideological introduction. Working from “first principles” makes it very tough for opponents and skeptics to raise objections. If your principles about group actions are true, they should hold for corporations as well as governments. Spread around the examples.


“After reading the lessons in this book, you will realize that there are perfectly sensible reasons for the actions of government officials. Their actions often don’t make any sense when compared to the official justifications given for the actions, but there’s a simple explanation for that too: government officials routinely lie. (Notice that lying is itself a purposeful action.)”

Replace ‘government’ with ‘corporate’ and the conclusions still hold. I think your piece would be more effective as a “wolf in sheep’s clothing” in this way. I use ‘wolf’ very tongue-in-cheek here, because I believe Austrian economics is the best explanation. It’s more like, positive meme injection. Put the medicine in a capsule that won’t be immediately rejected.

And it’s also just about intellectual honesty. Hold only principles sacred. Don’t pick winners.

I totally understand what he is saying, but I must confess that it doesn’t sound nearly as compelling to me to say, “Corporate officials routinely lie” as to say “Government officials routinely lie.”

Don’t get me wrong, I understand that on any given day, there are corporate officials who are lying to the public. But by the same token, on any given day there are dentists and high school principals who are lying to the public. So when we say “such-and-such routinely lie” I think it implies something stronger, that it is part of their job description as it were.

What do you guys think? Is this just showing my bias as a corporate shill (or as an anti-government zealot)?

23 Responses to “Do I Unfairly Pick on the Government?”

  1. Daniel Kuehn says:

    I’m not sure if I’ll way in on the larger question, but you could frame it differently.

    Your whole point there is that the government is a collection of individuals. What you don’t say, but what I don’t think is controversial, is that this collection of individuals is at least partially interested in representing and responding to an even wider collection of individuals (to what extent that is a motivation is an open question perhaps).

    So why say “government officials lie” in relation to this tobacco subsidy/anti-smoking ad point (which was the context for this statement in your book)? Isn’t the more relevant point that there is no single hive-mind of government, that certain people in the government are interested in serving the interests of agriculture and exports, while other people in the government are interested in serving the interest of public health – and that neither of them are necessarily lying?

    Certainly government officials lie just like all people lie. There may be good reason to believe that governments lie more often. But I think even this single example shows that there are probably better ways of putting the point (that, as a by-product, make you appear less instinctively anti-government, whether or not you actually are).

  2. Captain_Freedom says:

    A corporation can survive without lying.

    A government cannot survive without lying.

    The statement “Governments routinely lie” refers to a necessary attribute of government. If government exists, it must be lying.

    The statement “Corporation owners routinely lie” refers to a testable, hypothetical attribute of corporations.

    The converse statement of “corporation owners routinely lie” is “corporation owners do not routinely lie”. The latter statement is not on its face absurd or nonsensical, since corporation owners do not necessarily have to lie in order to act, “to be”, corporation owners. Thus, the statements are empirical, and a matter of historical events. It could be one or the other at any time, and nothing else would follow.

    The converse statement of “governments routinely lie” is “governments do not routinely lie”. The latter statement I would say is on its face absurd and nonsensical, since governments do necessarily have to lie in order to act, “to be”, government. A government that did not lie would have to explicitly communicate to the citizenry that they are going to take their money and claim to be the sole provider of security and protection for everyone in the territory, and if anyone disagrees with their demands, they are going to send armed thugs to their homes to kidnap them and then throw them into a cage, where they will probably be abused relentlessly, psychologically and sexually. They would then have to say that part of the money they intend to take from everyone by force, they will use to finance the torture and/or murder of innocent civilians overseas, and in a growing number of cases, at home as well.

    Can you imagine if President Obama spoke honestly like this on national television during his state of the union address? His administration would collapse the next day. And the next administration, if there will be one, would also have to tell the truth, which means they would collapse as well. Ultimately, it would become clear that nobody could declare themselves as government, for the people would reject it on the basis of the truth of what governments actually do. They use violence. That’s it. Corporations produce things that people want.

    So one could propose a praxeological based identification of the necessary attributes of government and corporations. Governments, by their actions, MUST lie, or else they could not act. Corporations, while they COULD lie, it is not necessary in their actions that they must lie.

    The only weakness I can think of in this explanation is it doesn’t rule out the possibility of most people wanting to be ignorant, misled, lied to, and not know the specifics, in which case even if governments told the truth, they could still survive since most people would not want, or find themselves unable and powerless, to do anything about it. Kind of like battered person syndrome. I’ve only met some people like this, and they usually defend the government by saying things like “Violence is a part of human nature, so you will never have a peaceful world, so just pay your taxes, obey, and shut up”.

    • scineram says:

      Why couldn’t the Suiss government survive without lying?

  3. Blackadder says:

    Isn’t the point that we tend to credit government officials with more sincerity than we do corporate officials? If a corporate CEO says he is doing something for the good of humanity all sorts of red flags go up, but if a politician says something similar lots of people will take him at face value.

    • Daniel Hewitt says:

      Yes, that is the point. Furthermore, corporations are creations of the government, and cannot externalize their costs without the government providing the means to do so.

  4. socrates says:

    I personally do not feel like you unfairly pick on the Govt…I beg to differ with the complaint raised above. Just because corporations lie as well…does that mean that we should excuse our publicly elected officials slightly more. I don’t think Murphy would defend corporations as always upholding the truth, rather we all accept it as a fact that some or most corporations will at one point or another lie or exaggerate about it products. You’ll be hard pressed to find any one who wouldn’t agree with that statement ….in other words it’s nothing new!!! We see it everyday in the media, press, etc.

    It is because most people accept everything the govt says as the complete truth and always believe that public officials are looking out for their best interests….so when we do notice the contradictions within policy of the subsidy policy raised above or do notice lies emanating from our public officials….it definitely takes on a different ring to it! Why?… because we pay for their salaries ….and it is rather easy to disengage oneself from a corporation when one finds out about their lies…its quite another thing to expect one to move.

    Murphy’s examples might pick govt policies just as mainsteam text books might pick on corporations in their examples, its just a different perspective on things, that’s all. If anything, i could argue Murphy’s examples serve to remove the overall bias that we all grow up with concerning our corporations and public officials and thus it balances our views and demonstrates that “lies are not reserved for our corporations alone but rather our elected officials as well.” That’s all.

  5. Aristos says:

    The accusations leveled upon government are important because of governments’ usurpation of economic matters. There are people who say that government can and should manage the economy. Pro-government types never seem to notice that the “evil corporation” theme only holds when coroporations are granted monopolistic privileges or supported/subsidized in other ways.

    Corporations do not threaten a free society, but governments do always. If you don’t like Walmart, don’t give them your money and find an alternative that suits your tastes. There is no such alternative when dealing with government. I don’t like our government, but I have to surrender my property to it nevertheless.

  6. Yancey Ward says:

    If a corporation lies to me, or a businessman, or my next door neighbor, I don’t have to transact with them in the future. That is the natural restraint on lying (and other forms of corruption). The liar suffers short term gain at the expense of long term personal loss in regards to me. Now, over time, it may be that some liars in the private sphere will benefit from being liars (the short term gain outweighs the long term loss), but I really don’t see how that works for the majority of people. As to government officials, liars have the exact same short term incentives to do so, but the natural long term constraint doesn’t exist since I can be coerced into transacting with the liars. Of course, private sectors liars often find it convenient to buy government coercion to lessen that constraint on themselves. This is why you should always limit the amount of power granted to governments, but vigilance can never be lowered.

  7. Email Author says:

    Hi, I am the author of the email. I fear my point is getting lost, and I may have chosen a weak example to illustrate it.

    The premise of Dr. Murphy’s “Lessons” is that it is an academic textbook. I think it is a fantastic way to get good ideas into the minds of young and old alike. However, axe-grinding on the evils of government (something I tend to do, myself) violates this premise and harms the effort.

    I am not saying Dr. Murphy’s point is invalid — rather that it is out of place. Furthermore, applying the same razor-sharp analysis to the things we hold dear gives us credibility, and, best of all, someone who reads Krugman because he is in the NY Times may be nodding their head through the first half of the text before realizing what he actually thinks and agrees with. We want to encourage these light-bulb moments for people who have lost the way.

    Positive meme injection. Put the medicine in a capsule that won’t be immediately rejected.

    • Daniel Kuehn says:

      Although presumably Krugman will nod his head to the bulk of the text.

      I skimmed through the contents after seeing it this morning – most is fairly non-controversial, broadly accepted stuff.

  8. Nico says:

    I understand his point of view.

    If I recommend the book to friends as an introduction to sound economics (which I think it is), they might ask me if the book is biased toward an ideology, or even “biased” in any sense of the word.

    Because of the clear and logical arguments, I think the reader will be critical of interventionism even though sentences like “government officials lie” are omitted. That’s why I’d point my intelligent layman friend to Principles rather than a Mises Daily on legalizing drunk driving. Of course, people are different, but Principles is a book on _economics_. For the hypocrisy and evil of government I point them to other texts. I don’t like it when people tell me they distrust the Austrians and call the school of thought “purely ideological”.

    But, I DO agree that “government officials lie”. And replacing “government” with “corporate” is a bad idea IMO. I think it’ll miss the point.

  9. socrates says:

    I totally get where the author of the email is coming from but at the same time ….people always want honest examples from real life that support the principles being advanced in the text book. I cannot explain to my students the harm that price controls entail without giving an example of when and who implemented it and its effects. I might not mention the specific public official responsible for its implementation, but saying the city of New York did such and such and what the effects were should not dawn on any reasonable person or student as pushing a certain agenda.
    It is as neutral as one can be without attaching ideology to the text but at the same time it does not evade the importance of providing a realistic example of a certain principle and its effects. Economics does not pick sides, does not care for the left nor the right, but it stands on its own unless the govt seeks to distort its meaning.

    While i totally understand the author of the email’s standpoint and his good intentions, I fear that if that approach is taken for every example that one has to give, then we end up short-changing the text and dumbing down the text for fear of appeasing everyone’s feelings. As long as derogatory language is not used, people appreciate the truth as long as you make a good case for it whether it is against a corporation or a govt policy.You and I both know how the govt does their best to justify their every policy through the media, in the class rooms, in the text books, and supposedly “demonize” corporations. I see it only fitting for the populace to get another narration of events albeit in a polite and socially acceptable format. We don’t make policy and laws, corporations do not either (at least directly), our public representatives do. So i think we owe it to the public to at least present our narrative without dumbing down our examples and hence bring up a more informed citizenry. Otherwise, it just ends up being another of those boring textbooks of the dismal science.

  10. David says:

    When corporations are caught lying in some bad way they often go under or suffer harsh consequences in the market. When governments lie there is no consequence, as by definition they hold a monopoly on force, and are not in a position where market forces apply. Governments also are in a position to put out huge amounts of propaganda to swing the gullible public into pro-government viewpoints, even while they cheat the public.

    That said, the answer depends on what you’re trying to do. If you’re simply trying to tell the truth as an honest academic, then it’s not ‘unfair’ at all to ‘pick on’ government – simply blast away and tell the ugly truth.

    If you’re trying to “convert” people, however, then sometimes you have to ease them more gently into a viewpoint. A viewpoint too much in contradiction to their comfortable worldview might be regarded as extreme or biased and rejected, even if true (e.g. anti-government viewpoint). Someone who has been brainwashed by the system by the usual propaganda that government is wonderful and corporations are evil all their life (which describes most people), is not going to take you seriously if you suddenly tell them the truth; they need to be almost ‘played’ psychologically and slowly, taken step by step to see where their own worldview is incorrect, one piece at a time, until they can finally see the truth. That’s diplomacy.

    This is difficult when you’re writing a general text that is aimed at different people at different levels of their ‘conversion’.

    A true academic is supposed to hold to the ideal of simply telling the truth. But because of human psychology, if you actually want to *convince* people, you have to re-frame things in ways that are at odds with the truth – in effect, at odds with the pure academic ideal.

    There is another factor to consider, and that’s that different pro-government people are that way for different reasons. Some are just well-intentioned but naive or stupid. Others are ill-intentioned and lie, for money or power. Some are both stupid and ill-intentioned. Others are well-intentioned and smart but misguided. I think Krugman for example is stupid but well-intentioned – I think he believes in his policy recommendations as some kind of force for good. Bernanke on the other hand, who appears ideologically similar on the surface, is more likely purposely disingenuous; his job is to be the front man and re-frame knowingly corrupt decisions as though they’re for the good of the people.

    All these different people, require different strategies if you want to actually effect change.

    • Daniel Kuehn says:

      I hope that second to last paragraph doesn’t exhaust the possibilities for your reaction to people that disagree with you. I hope, in fact, that it represents only a very small minority of your reactions to people who disagree with you.

      But if Krugman is stupid and Bernanke is disingenuous I’m afraid to think of what you think of everybody else! I’ve always thought of Bernanke as a remarkably straightforward guy, and it’s rare to come across people who wouldn’t concede Krugman is smart. How do you react to mere mortals like the rest of us if this is how you think of these guys! I doubt I could make the cut if Krugman is stupid and Bernanke is disingenuous!

      • Daniel Hewitt says:

        Regarding Krugman and Bernanke, Brad DeLong uses a clever term from time, trained incapacity. Krugman and Bernanke are extremely well trained 🙂

        • Daniel Kuehn says:

          Hmmm… that still sounds like naivete.

          I hope there are more options than (1.) disingenuous, (2.) stupid, and (3.) naive.

      • David says:

        The world has elevated Krugman to a status above his actual intellect; I think you over-judge him based on his reputation. His grasp of economics is over-simplified.

        As for Bernanke, his is a political “PR” position. His job is simply and purely to sugarcoat the Fed’s decisions and be the public face at which the rotten eggs are thrown, so that public attention remains focused away from the folks making the major decisions. He isn’t hired for his super-duper economic advice; he is hired precisely to be the public face of the decision-makers whose decisions are based on what benefits their friends in a corrupt structure. It thus wouldn’t matter if Bernanke secretly agreed with the Austrians in the dark of night. His position is more akin to politician than economist. He must toe the party line or he is out of a job, and the party line is Keynesian economics. That is what I mean by ‘disingenuous’.

      • David says:

        “But if Krugman is stupid”

        Just to clarify, I mean this in a purely relative way; I think you may have gotten the wrong perception there. Compared to the average man on the street, of course he is very intelligent. Certainly his intellect probably places him amongst probably the top 1% of people. But, I believe, at the lower end thereof, and this is borne out if you study his views in detail.

  11. Scott says:

    I think you should be cautious of taking a good thing and messing with it.

    It sounds like sound advice, but on the other hand, you never really know why people are reading your book. A lot of times this superobjectivity BS makes things so droll and boring that nobody bothers to read what you say. There is a reason people like fiction and sci-fi but hate textbooks — fiction usually has fewer pretenses and is actually interesting to read. Many of the great writers of history were pompous ax-grinders — Machievelli and Edward Gibbon leap to mind — but the only one I can think of who approaches the modern superobjective pietist standard is Robert Thomas Malthus, and he pretty much gets mocked and ridiculed 90% of the time. Not very persuasive.

    I don’t know exactly what causes people to change their ideology, but I’m pretty sure that boring textbooks that nobody reads don’t top the list. If you want maybe a supercool-sarcastic objective style, maybe Albert J. Nock would be a good model. But if you could write like that, you probably wouldn’t seek our advice.

    I say stick with what works for you.

    • David says:

      “A lot of times this superobjectivity BS makes things so droll and boring that nobody bothers to read what you say.”

      Yeah; requests to focus on super-objectivity are often really just pushes not to criticize things that really oughta actually be criticized. It’s a logical fallacy in that it effectively attempts to falsely re-frame a criticism as bias.

      I suppose one does want to avoid ending up just preaching to the converted. It could be circumvented by starting a book with a neutral position, e.g. ‘is a government policy X good or bad’, and then showing the reasoning to arrive at the conclusion.

      Again though, I haven’t read the text in question.

  12. Ryan says:

    I don’t have any context for the example, because I haven’t read the book. (No slight against Murphy – my understanding is that this is a principles text.) But to me it seems like a profound truth that only looks like a libertarian meme at first glace.

    I think that’s what Murphy’s getting at in his blog post here. That the government lies isn’t about choosing sides between statists and anarchists. No, it’s a bold and profound truism: Lying is the way government works. If governments didn’t lie, they wouldn’t work.

    The same cannot be said of corporations-or-whatever.

  13. Kevin Carson says:

    The actions of corporate management are built on lies, by the nature of things. To put it in Jensenian terms, they must pretend that they represent shareholders and that their incentives are aligned with those of shareholders. But this is about as much of a lie, in most cases, as the claims of the nomenklatura in the Soviet industrial bureaucracy to represent “the people” or “the workers.”

    Management is, in reality, as much beyond the control of shareholders as Soviet managers were beyond the control of workers. Proxy fights almost always lose. And so what if shareholders sell their stock — that’s like me controlling GM by selling my used car. Hostile takeovers only worked for a brief period in the 80s, in the main, before management changed the rules to prevent them.

    Attempts to align management incentives with those of shareholders by such means as bonuses and stock options have had perverse effects, causing managers to promote their interests in ways that actually destroy long-term profitability. Managers gut human capital, strip assets, and hollow out long term productive capabilities in order to massage the quarterly numbers, so they can game their bonuses and options. Then the next guy who takes over the hollow shell takes the blame. It’s a lot like the incentive structure for Ottoman tax farmers.

    Management self-aggrandizement is promoted by the standard management accounting system, as described by the lean manufacturing consultants William Waddell and Norman Bodek in “The Rebirth of American Industry.” Labor is virtually the only thing that counts as a direct cost, while capital expenditures and management salaries are treated as fixed costs that go to general overhead. And through the miracle of overhead absorption, all those general overhead costs are simply added to the markup on the internal transfer price of goods “sold” to inventory. (Inventory is considered a liquid asset under Sloanist accounting). So standard management accounting, like the accounting system used to calculate GDP and the accounting system used by Gosplan, treats the expenditure of inputs by definition as the creation of value. Hopefully management will move on before the useless inventory has to be liquidated and written off.

    (Internal transfer prices, BTW, are analogous in many ways to the system of price determination in the Lange-Schumpeter model of “market socialism” that Mises denounced as “playing at markets.” Many such transfer prices are for unique, product-specific intermediate goods for which no external market exists, which presents the same calculation problems the Soviets faced in establishing prices indirectly based on data from foreign markets.)

    So management has every incentive to downsize, poring over direct labor hours with a microscope trying to shave off every spare second, while they pour money into irrational capital spending projects like water down a rathole and engage in mutual logrolling with Directors to give themselves godlike salaries. Even though the downsizing destroys the whole network of human capital and tacit knowledge that Hayek described.

    If all else fails, management maintains a lot of hidden assets unrelated to the business’s core competency, like real estate investments, to “smooth out” the rough spots and conceal losses to shareholders.

    So pretty much every word management says in its mission statement about “customer service” and “shareholder value,” and in its glossy handouts at shareholder meetings, is a Big Lie on the same pattern as the Soviet ruling class.

    Large corporations — essentially private centrally planned economies — are able to survive despite such calculational problems and irrationality because they function within state-cartelized oligopoly markets with other firms sharing the same pathological culture.