Intellectual Consistency #1

The number 1 in the title of this post is there because I foresee writing many future posts about the same topic. The idea of intellectual consistency is about applying similar standards to similar situations. It seems very straight-forward but as this future series of posts will demonstrate, it isn't always straight forward.

The first example I would like to give about intellectual consistency pertains to the regulatory reform being proposed in response to the financial crisis. The specifics of the reform is actually irrelevant here. The idea I would like to put forward should really not be very earth shattering: if individuals in the private sector have agendas based on their personal biases, incentives, and goals, the individuals in the public sector face the exact same thing.

What all the reform proposals are asking people to do, is assume that while individuals in the private sector have a set of pursuits called X, the individuals in the public sector have a set of pursuits called Y. Though the private sector is motivated by gain, the public sector is motivated by altruism. I am sure there have been many books written about the corruption in government so I won't bother to rehash it here. While the salary for a public official is, strictly speaking, not always the best (although in many instances public sector salaries are better than private sector salaries, though I would imagine for highly specialized jobs the private sector trumps the government sector), there are plenty of other benefits to working in the public sector. Power. Financial compensation "on the side." Power. Fully-paid-for invitations to fancy gatherings with other public officials. And power. Don't tell me for a second those are just minor harmless altruistic perks.

If those who propose regulatory reform want us to believe that a bunch of wildcat bankers went over the top which caused the economy to end up where it is now, then that automatically should trigger in everyone's mind the fact that politicians can also go over the top and cause our economy to end up in a very similar place. There can be no double standard. The wildcat bankers are human and so are the politicians. They are either both susceptible to doing bad things, or neither is susceptible to doing bad things. By the way, here is one of those altruistic things that the public sector does.

What I consider most important to address here though is how the results of these potentially bad actions from the private sector and public sector are actually dealt with. In general, if someone in the private sector makes a mistake, he has to pay for it in some way. CEOs that generate poor performance for a company are fired. Traders who make a wrong bet lose money. The random individual who falls asleep at his job gets fired. I am obviously ignoring failures that would take place in the private sector, but don't, because the public sector chooses to bail them out; just don't forget it is the public sector that protected that failure.

How does the public sector compare? When the government failed in preventing the financial crisis in any way, it asked for more oversight. When the government fails to efficiently use the only resources it promised it needed for a program like [insert literally any government program here], it asks the people for more money. The public sector apparently is the only institution that deserves to thrive on failure.

We need to start applying intellectual consistency to both the public and private sectors. This means recognizing that all the faults in the private sector are replicated in the public sector. The only difference is that the private sector is constantly (and properly) being made to pay for mistakes so they don't happen again, while the public sector, as a matter of policy, gets rewarded every time it screws up.