Monday, July 1, 2013

Reynolds' Law

Politicians of all stripes are too often persuaded that helping people is good for them. They forget that the Law of Unintended Consequences is always lurking in the shadows, eager to convert the best intentions into worse outcomes. Reynolds' Law helps explain why this is so. From Mark Perry, whose blog is an endless source of free market facts and common sense, comes this gem:

In 2010, Philo of Alexandria coined the term Reynolds’ Law: “Subsidizing the markers of status doesn’t produce the character traits that result in that status; it undermines them.”

Reynolds’ Law was based on this remark by Instapundit’s Glenn Reynolds:

The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle-class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle-class people. But homeownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits — self-discipline, the ability to defer gratification, etc. — that let you enter, and stay, in the middle class. Subsidizing the markers doesn’t produce the traits; if anything, it undermines them.
Read the whole thing.


Public Library said...

Then we should abolish the Federal Reserve because it subsidizes and misallocates capital on a grandiose scale. With the carnage and morally bankrupt banking system to prove it.

Gloeschi said...

"Yep, don't help anyone. It's the right thing to do."

Ayn Rand well and alive in this blog. Wonderful!

Benjamin said...

Perhaps someone should point out---who is going to eliminate the home mortgage interest tax deduction, the biggest boon the middle-class house buying? (And a huge boon to those with large incomes and in higher tax brackets---they are all but forced to buy houses).

The feds also subsidize flood insurance for homeowners. I wonder why Reynolds did not mention that?

The National Flood Insurance Program (NFIP) is a program created by the Congress of the United States in 1968 through the National Flood Insurance Act of 1968 (P.L. 90-448). The program enables property owners in participating communities to purchase insurance protection from the government against losses from flooding. This insurance is designed to provide an insurance alternative to disaster assistance to meet the escalating costs of repairing damage to buildings and their contents caused by floods.[1] As of April 2010, the program insured about 5.5 million homes, the majority of which were in Texas and Florida.[2]

Joseph Constable said...

Gloeschi, where would you draw the line? Thirty percent of Egypt's government is subsidies for food and fuel. Is that a good amount? Is it helping out represented by having millions of college grads with inappropriate skills for the work force? And starting out on their careers with oppressive levels of debt? Is having a massive foreclosures a feature of policy and not a bug as Barney Frank said?

Benjamin, NFIP, after hurricane Sandy, was part of nearly 100 billion dollars of bail out and pork legislation and resulted in Christy and Obama becoming best man friends. The photos of them was enough to make you want to eliminate government entirely if this is what happens.

Gloeschi said...

With "anyone" I meant poor people, not fat cats or corporations.

To put things into perspective:
Cost of food stamp program in 2012: $75bn. Try living off $134 of food per month.

Unemployment benefit outlays by all US states in 2012: $64bn.

US defense budget 2013: %858bn.

For a country that has 2 friendly neighbors and whose border is too long for any other army to successfully penetrate... that is a lot of dough.