Quote of the Day

Today’s Quote of the Day comes from page 73 of my GMU professor Chris Coyne’s 2013 book Doing Bad By Doing Good: Why Humanitarian Action Fails:

Indeed, foreign assistance is often presented in terms of contributing to countrywide economic progress…but in reality the best it can accomplish, owning to the planner’s problem, is to increase predetermined outputs.

Dr Coyne’s point is not limited to just foreign aid.  Indeed, it applies to all top-down economic plans.  By focusing on a predetermined output, all one is guaranteeing is increasing that output, not addressing the underlying problem.  For example, Obamacare’s focus (the predetermined output) was increasing the number of people insured.  By using both a carrot (subsidies) and stick (uninsured fines), it was able to accomplish this goal.  However, Obamacare has not addressed the underlying issues in medical care.  Indeed, by some measures, health care has gotten worse in the US because of Obamacare.

I used Obamacare as an example, but there are many others: education (higher test scores but no change necessarily in the quality of graduates), trade (higher exports but no change necessarily in the quality of living), and so on.  Whenever any kind of growth plan (or “national industrial policy” to use the more modern jargon) is implemented, it is easy to achieve growth in the variable(s) measured.  Achieving true economic growth (as opposed to a series of bubbles) is another thing all together.

3 thoughts on “Quote of the Day

  1. A more graphic example is the Cuban Revolution. Their goals, were universal education, and healthcare. They got those, but the assumption that when those improve, all else will get better too, was way wrong.

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  2. Obamacare is an excellent example. It is also very easy to hit those targeted goals like increasing the number of people who have health insurance coverage by imposing a big tax penalty if you do not pay for such coverage. Duh.

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