Tibor R. Machan

There have been plenty of studies, economic analyses and investigations and related work showing that government regulation is harmful, stifling, inefficient, and otherwise destructive. Despite this, the actual regulatory onslaught continues full force, and more is to be expected. Why is this so?
The research has shown that the regulation rarely achieves the goals set for it by Congress. Studies indicate that it has undermined productivity and competition and increased political favoritism and corruption. Market failures or imperfections, so called, have not been eliminated by way of government regulation. Why do millions still continue to believe in the desirability of this discredited system?
Even those few prominent individuals who have come to doubt that regulation is useful consider it a proper function of government where it can achieve its goals. Many more believe that even where government regulation has proven to be ineffective and harmful, the task is simply to muster up greater effort, to “clean up” the agencies, to tighten regulatory specifications—never to abandon the task. In an article in Commentary Magazine several years ago, Paul H. Weaver points out that Americans overwhelmingly support “the full range of present-day public programs to which [the New Deal] has given birth. Indeed, something like half the population would like to see the government provide even more benefits and intervene in more areas of social life than it already does…. Yet by almost equally large margins, Americans also say that the institutions responsible for creating and running the New Deal state are currently in the hands of liars, cheats, frauds, and profligates.” Never mind that economists and social scientists have produced an enormous body of evidence that discredits the very activity of regulating!

Why More Regulation?
Some solutions have been offered to the resulting puzzle about the persistent belief in regulation’s desirability. Since it is mostly economists who study regulatory activity, they are also the ones interested in why their studies fail to alter policy. The explanation usually offered is that regulation has not been discontinued because the legislators and regulatory bureaucrats are like all other people- they work to benefit themselves. It’s self-interest that accounts for the continuation of regulatory activities.
This explanation, however, is vacuous. We can’t get anything from it, any more than we can from an explanation of animal behavior by reference to instincts. It doesn’t explain anything. Why do cats swim in water? Well, they have the instinct to swim in water. What does that mean? It means simply that if you throw them in water they will swim. Why do regulators continue with regulation? Well, because they carry out their regulatory schemes. This is not at all enlightening.
Of course, this misrepresents the complexity of the theory that underlies such explanations. But instead of dwelling on this here, let’s consider an alternative explanation.
People often act as they do because they are guided by certain ideas and ideals. Ideas have consequences! And many of the central ideas guiding people in their personal conduct are moral or ethical ideas. Ralph Nader, for example, often makes reference to justice. He insists that it is unjust not to prevent product failures. He insists that certain people are being victimized. He argues that certain kinds of corporate activities are evil. Freely using these concepts to explain political and economic affairs, he reflects the views of many in our culture.
These kinds of ideas and ideals are powerful guidelines and motivators of human action. And there is something distinctive about moral or ethical ideals–as opposed to, say, scientific, technological, or legal ideas–as principles of human action.
A moral idea (and idea and ideal are interchangeable here) is one that provides guidelines to human beings simply as human beings. Why should I be honest? Because by their very nature human beings as such ought to be honest. Why should I be just? Because human beings as such should be just; if an action, policy, or entire institution recommends itself on the grounds that it is just, any human being in the community should support it.

Moral Reasons
This is very different from offering an economic explanation for what I do. “It paid well” is not comparable to “It was the just thing to do.” Nor is it the same as referring to my preferences. Why did I select that ice cream) Well, I prefer it. That I selected it or that I prefer it does not imply that everyone should do the same thing.
Why then is government regulatory activity continued? Because, despite what economists and many others have demonstrated, people believe that the goals that regulation aims to accomplish are just goals; they are morally justifiable goals to strive for. A person who believes that to defend his community or to educate his children is a matter of justice is not likely to be moved- and, if his belief is correct, he shouldn’t be moved- by the fact that these will be very expensive. He will say: “I’m sorry. Those sacrifices are justified because this is a moral goal; it is one’s duty to do it.
We can talk endlessly to Mr. Nader and Co. about how costly and inefficient government regulation is. If he believes that the goals are morally superior to the other goals that have to be sacrificed so as to pursue them, he will insist that economic concerns can be discounted. This view has been voiced by David Ferber, solicitor with the SEC, in a reply to free market economist Henry Manne, both writing in the Vanderbilt Law Review. Commenting on the regulations imposed by the SEC, Ferber observed, “Since I believe Congress was attempting to improve the morality of the marketplace, I think that the economic effect is largely irrelevant.” Edwin M. Zimmerman, assistant attorney general with the antitrust division of the Justice Department, made the same point in his essay in Promoting Competition, a Brookings Institution volume. He denies that economic efficiency was ever the impetus for regulatory laws.
Plainly put, many who support regulation believe this to be the correct way to try to achieve valued goals. They are dead serious about this. And if they are right, they are also on target when they counter that objection based on inefficiency and high cost are trivial, if not outright callus.
So moral ideas are important in this area, so important that there are some who even feign moral reasons for supporting government regulation. When lobbyists and corporate executives appear before Congress and ask for handouts or subsidies or tariffs, often the bottom line is that these would be in the public interest, the public good, rhe national destiny- or for God and country, as the old saying goes. Those are usually ornaments for shortcuts on the marketplace. But unless people took such ideas seriously, those asking for favors would not bother even to mention them. These are crucial moral terms that count. There are enough people everywhere motivated by just such moral ideas.
Can anyone doubt, then, that deregulatory policies would also require moral support? It’s not enough to say, “Well, regulation costs too much and it’s inefficient.” An alternative moral perspective is needed to conclusively establish the propriety of deregulation. Economic arguments alone do not suffice. But is there anything in the way of ethics that might support deregulation?
If we look at prominent and widely articulated beliefs about what is right and wrong, we find that altruism is pervasive. Altruism literally means “otherorientedness.” This morality is a sort of grab bag for all the various moral systems the bottom line of which is that one’s life must be led so as to secure the welfare of others, either today or tomorrow. It is the view that every person’s prime purpose is to live for others—humanity, one’s country, and one’s race. There are variations on this view, but they all come to this.

Just Helping Out
When made to apply to political policy, the altruist ethic implies that government must try at all costs to achieve the goal of helping people, however bungling, inefficient, or otherwise objectionable such efforts might be. In a debate in an old issue of Analog magazine (April I975), we find this attitude well illustrated in the words of Alan E. Nourse, a fervent defender of national health insurance. He tells us that it is “not a new concept nor is it a particularly efficient concept as far as health care delivery is concerned, because many many precious dollars will be dribbled away to administration.”
Does this suffice to dissuade Mr. Nourse? Do such economic considerations lead to the conclusion that national health insurance is a bad idea? No, counters Nourse, because “‘it is a concept that might—repeat might—meet some of the desperate health care needs that exist today.” If the primary responsibility of government is to engage in helping other people, then trying, even in the face of evidence that it will not do any good, is quite justifiable. People who share those values will simply continue in the face of disastrous performance records.
But we need to consider whether altruism is really the system that should guide us in our lives. The question is not whether certain of our virtues are other-oriented, nor whether in certain circumstances we are obligated to look out for others. The question is whether we are to live our lives primarily for other people.
In a few paragraphs, all the issues involved cannot be covered. There is one interesting point to be raised against altruism, however. Why is it that everyone deserves this prime consideration from others, but not from themselves? Why is it supposed to be this daisy chain of my doing benefit to you, your doing benefit to him, his doing benefit to her, etc.? It clearly engenders meddlesomeness in human affairs. It invites more rigorous attention to other people’s circumstances than to one’s own; because if one is first morally obligated to benefit other people, then their circumstances, their needs, their aspirations, and their wishes must be known. One must obtain the maximum amount of information about those people, and one must do everything possible to find out what will indeed benefit them.
This explains why there is such widespread government information-intrusion in people’s lives. Government, too, must know about others in order to help others. It must be able to walk into private homes, for example, to make sure that welfare recipients get the right care. It is its obligation, according to altruism.
Although altruism claims that individuals should live their lives so as to benefit others but not primarily to benefit themselves, they would, just on the face of it, seem to know much more about themselves to start with. So if people do deserve a lot, why is it that others should do it for them as opposed to their doing it for themselves? This is a puzzle, and it’s worth considering. But let’s leave aside the full criticism that could be offered against altruism and take up as an alternative moral theory that, not surprisingly, is going to be called ethical egoism.

Self-Help
Now ethical egoism—in ancient Greek moral philosophy known as eudemonism—is not egotism which is an excessive concern with one’s image or at least with one’s reputation or power. Ethical egoism, in contrast, is a rational concern with one’s own bona fide happiness. It holds that every human being’s prime moral purpose in living is to achieve happiness in life- the fulfillment, throughout one’s life, of one’s potential as a human being. Happiness is the result of excellence at being human. Here, a person’s primary responsibility is not to do good for others, although it may still be true that on many occasions human beings should do what is good for others. The primary moral responsibility of individuals is to achieve their own happiness in life.
So we have an alternative ethics. Is it possible, in terms of this ethics, that in the process of regulating our commercial and many other activities, government is violating certain moral and political principles?
Government regulation usually involves the following. Some activity by some commercial agents, manufacturers, or industrialists might be of harm to someone who is going to buy their product. If it is possible- just barely possible—that these activities will produce some harm to others, the activity is prohibited or regulated. As Senator Javits once put it in a personal communication on the subject of vitamin C, the government must protect citizens against potential possible hazard.
Now watch those qualifiers: potential, possible hazards. Even a hazard is only a possible harm. A hazard doesn’t guarantee harm. A lot of people have hazardous jobs, meaning that the likelihood of getting hurt in those jobs is considerable. Now imagine a possible hazard. What then is a potentially possible hazard? To be safe in life from “potentially possible hazards,” one must be protected in everything.
If, however, one’s primary obligation in life is to achieve happiness, and if one shares this obligation with other people- so that they should achieve their happiness- then, what must first of all be protected and preserved in a social context are the conditions that make it possible for people to strive for or to pursue their happiness. For example, the Declaration of Independence refers to the protection and preservation of rights we have as human beings—the rights to life, liberty, and the pursuit of happiness.
If these were indeed rights that we have and that ought to be protected, then in the pursuit of our happiness, someone else’s interference would be wrong, morally wrong. Not just inefficient and very costly, but morally wrong—wrong because human beings should not act that way. In most of the criminal law this point is observed carefnlly, even if not fully consistently. The burden of proof rests with the prosecution-those who believe they have reason to impose burdens on citizens. Unfortunately, the same principle goes by the wayside when it comes to administering government regulations. If members of an industry, profession, or trade engage in “potentially possible hazardous” activities, there are now legal grounds for placing heavy burdens upon them.

A Risky Business
The most persuasive argument in support of this practice involves what Ralph Nader never tires of citing the famous thalidomide case. Many European women took the drug during pregnancy but the FDA barred its distribution in the United States. It had tragic results in Europe; but in America, almost no one was hurt from the drug. Nader constantly remarks this upon, in his numerous talks and essays in support of federal regulation of the food and drug industry.
Now it is clear that if guaranteed safety is the highest value we should aim for in life, then Mr. Nader and Co. are on the right track. If it is our prime duty to make certain that other people are safe, then we should never profit from nor allow others to profit from selling them some goods or services that just might be hazardous. But if freedom to seek our own well-being, the political and economic liberty to make our own way in life, is the highest political good, then even the tragic events associated with the thalidomide case do not suffice to give support to government regulation.
Life is undoubtedly a risky business. Those who want to accept risks may not be prevented from doing so regardless of how convinced we are that they are foolish to take these risks. We may not prevent mountain climbers, auto racers, horseback riders, firefighters, and even plain, ordinary consumers of voluntarily acquired drugs and foods from doing what they have chosen to do. Nor may we gather into majorities and legislate these wise prohibitions for them.
We can, however, point out how life can be made safer! Hazards can be overcome in a free society, even when other people pose them by their sloppiness, negligence, greed, or stupidity. Government regulations preempt a crucial human virtue: the willingness of industrialists, manufacturers, professionals, to do well at whatthey have promised themselves to do well-their jobs. By usurping the field of morality, by forbidding the risky business of people’s developing themselves and getting on in society through mutual self-development, government regulation is a gross denigration of human dignity itself.
Altruism is the main moral game in town. The only place it is not advocated very much is in psychotherapy sessions and books on self-help therapy, because in these areas people have come to face up to the debilitating consequences of living by such a moral point of view. Entire political institutions, however, are built on the doctrine of altruism. Among these, governmental regulation of people’s productive, trading, or consuming activities is just one. Others include all the victimless crime laws, “blue laws,” involuntary mental hospitalization statutes; and the list could go on.
But altruism is a view that does not prepare one for coping with life on earth. It stifles personal growth, ambition, self-development; and it encourages deceit. We must claim that everything we want to do will be good for others, just so we can “get away with doing it.” And it also gives perfect excuses for our failures- “I did it for you. I lied, killed, maimed, stole, and cheated only because I meant well for you.”

Stopping Meddling
Without affirming, with utmost confidence, the alternative moral position—so that each person can realize that the prime moral goal in life is to excel as a person, to become the best one can become in life, given one’s human nature and one’s personal potentials as an individual human being-the case for stopping all this meddling in people’s lives cannot be made conclusively. Sure, governmental regulation is inefficient, devours our income, breeds corruption, centralizes enormous power, stifles production, leaves people overburdened with bureaucratic trivia; but if its goals are morally superior to others, so what? We must be heroic; we must sacrifice for the great good that we might- “repeat might”—achieve. We must toss aside this materialist concern for efficiency, thrift, and prudence. We must march on the noble trail of doing good for our fellow human beings, whether they want it or not.
If, however, we should aspire to our own happiness, if this is our primary moral task, then others should abstain from interfering with us; then regulation is not just uneconomic, but wrong. Government regulation violates our rights—period. And we have those rights because it is we, individually and in voluntary cooperation, who should strive to live, produce, trade, and consume, Only by realizing that this is a matter of profound moral truth- not merely of convenience, efficiency, cost, or pleasure (although not without rewards in these respects)—can we overcome the intellectual and basic moral force of the case for regulation.
That will not lead to instant deregulation. But it will have robbed the meddlers of their most potent weapon—the appeal to people’s frequent, even if not fully consistent, concern for doing what is right in personal and political matters. Even the famous Nobel Laureate (Princeton University) economist and columnist for The New York Times has come to see that the case for interventionism needs moral backing, so he has gone out of his way—in The New York Times (January 14, 2011)—to present what he takes to be such backing. (That he doesn’t succeed because no moral case can rely on coercion—men and women must freely choose to do the right thing for it to have moral significance.**)

Notes:

* This essay is based on Tibor R. Machan, “Deregulation is a Moral Issue,” in Ellen F. Paul and Philip A. Russo, Jr., Public Policy, Issues, Analysis, and Ideology (Chatham, NJ: Chatham House Publishers, Inc., 1982)
**See my discussion of this point at http://tibormachan rationalreview.com/2011/01/column-on-krugmans-incoherent-moral-stance/

Tibor R. Machan

Nearly every time Alan Greenspan is written about in the media, his early association with Ayn Rand is remarked upon. The impression is often left that Greenspan holds the same views as Rand did, especially about the ethics of egoism or selfishness.

Some will no doubt remember that Ayn Rand wrote a little book, The Virtue of Selfishness, A New Concept of Egoism, in which she defended the idea that everyone has a moral responsibility to strive to live successfully, to achieve happiness in life. (Not all that different from Aristotle’s eudaimonism.) This does include one’s economic flourishing but is by no means confined to it. And one implication of Randian egoism is that everyone must first discover what would make him or her happy as a human being and then seek to attain that goal.

When economists talk of self-interest—the way Alan Greenspan spoke of it in his testimony on October 23rd to the House Committee on Oversight and Government Reform—they have something very different in mind. What most mean by self-interest is a supposed inner drive we all have to seek to further what we like, what pleases us, including, of course, our prosperity. From this view they derive many of their conclusions regarding the way people conduct themselves in the market place. So, for example, Greenspan said that “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.” To Representative Henry Waxman’s question of whether his ideology pushed him to flawed thinking that has contributed to the current financial fiasco, Greenspan replied “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”

What exactly is the ideology that Waxman had in mind that supposedly “pushed [Greenspan] to make decisions that you wish you hadn’t made”? It was not made clear either by Waxman, Greenspan, or those who reported the exchange in The New York Times. But it is fairly evident from the context that they had in mind the standard neo-classical economic notion that everyone always, automatically, pursues his or her self-interest which has a substantial economic component to it. And this is supposed to be especially so with Wall Street firms, including “lending institutions.”

In a less unnatural language the idea Greenspan gave voice to means roughly that those who work in the lending industry would be motivated by their professional responsibility to serve their clients properly, not unlike it is expected that doctors, attorneys, psychiatrists or other professionals do. But it is not part of this language that professionals are driven to serve their clients competently, conscientiously. No, outside of the social science of economics it is pretty much understood that professionals can carry on properly, ethically, or fail to do so. Indeed, their self-interest as professionals may well be neglected and they may yield to the temptation to promote other objectives, some of them at times induced by various political pressures and contingencies.

For example, if politicians establish regulations that violate the laws of sound economics, this can promote irresponsible conduct on the part of professionals in lending institutions and throughout the widely integrated market place. And this possibility was not at all touched upon by Greenspan and others at the hearings although it was raised at an earlier time and has received some coverage since.

It is true that the professional interests or objectives of lenders would tend, in the main, to coincide with the best interest of their clients, as this is true in other professional-client relationships (doctors/patients, teachers/students), except when various bureaucratic and political objectives interfere. But when President Clinton and many others in Washington, D.C., insisted that lenders ignore the standards of proper lending because adherence to them would leave out a pretty sizable segment of the voting population from among those who would receive loans to purchase homes, this changed the economic dynamics considerably. It created incentives for both lenders and buyers to act imprudently, rashly, wildly even, and the overall effect of it all came to be the current fiasco just as had been forecast at the time (and reported by, you guessed it, The New York Times—see Stephen A. Holmes’ report on September 30, 1999, for example).

The ideology that Greenspan seems to have embraced is not what Ayn Rand taught. Rand advised that we be prudent, strive for success, including in our economic lives. She didn’t believe, as Greenspan and others seem to have, that people, including “lending institutions,” will necessarily pursue their self-interest. Had market agents followed Rand’s advice, this fiasco would have been avoided. Greenspan himself should have studied Rand more carefully.

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Machan is the author of Ayn Rand (Peter Lang, 2001) and teaches at Chapman University, Orange, CA 92866. He also wrote, among other works, A Primer on Ethics (U. of Oklahoma Press, 1990).