Improving Government Interventions (L5 - L7)

The people identify strongly with their society, and so should their governments—most do. Nations are often referred to as the «fatherland», «motherland» or «homeland», all of which are kinship terms. Political leaders are known to deliberately project themselves as parental figures. Even when they do not, they are often perceived and labelled as such by the populace.

People have a love of tradition, a pride in their country and a distrust of outsiders. Distress in a society easily activates kinship demands—people wish for help and guidance, and more: they want special attention and resources to relieve their woes. As a result, kinship-centred principles provide the most immediate psychosocial influence on L4-interventions.

Global flows of capital and capable people mean that other nations are often seen as competitors. Certain industries may become strategically significant for security or economic reasons, and governments want to nurture and protect these. When this happens, two kinship-centred phenomena emerge:

• The Government is expected to discriminate in favour of its own people and domestic industries. This may be no more than an internal transfer from taxpayers to a sector, and it may be self-damaging overall in the longer term. Harm to foreign firms and alien peoples is viewed as irrelevant to the decision, unless they have an ability to retaliate powerfully.
• Government leaders pay attention to public sentiment because it is widely claimed to be highly important. As a result, they give continual attention to the citizenry-electorate: they report, review, explain, encourage, challenge, mollify, appeal, blame and urge. Jawboning—using veiled threats—may at times attempt to shape specific behaviours of market players.

See more on what determines political choices.

The government’s aim is to handle fears inherent in difficult times, and foster the energies needed to make stressful or risky economic choices.

Certainly, nothing much can be achieved in a society when people are depressed, apathetic or riven with guilt and shame.

Commonly-used kinship techniques include:

● appeals to national pride
● morale-boosting speeches,
● denunciation of foreigners,
● finding scapegoats in alien groups or alien behaviours.

• Impartial objective evaluations of situations and policy options can both appreciate what might be done and check effects of an L4-intervention. However this work is often most evident through its absence, its distortion or its rejection.
• Most of the follies of government intervention relate to a failure to perform Hazlitt's type of systematic impartial and dispassionate evaluation.
• Statistical work is not primarily theoretical. However, collecting, publishing and analysing statistics does require the use of assumptions and concepts. When statistics do not show the government in a good light, these assumptions may be altered.
• Sophisticated inquirers are very aware of the complexity of the economic system and the proclivities of government officials to manipulate statistics.

Analyses deal with the past. Economic forecasts are typically correct when unimportant and incorrect when a sea-change or disaster strikes. But the reasons for these errors are rarely understood and acknowledged—which is why they keep repeating.

Hard facts and narrow theories do not capture the deep forces that shape the world’s economies and precipitate discontinuities. Discontinuities are the norm, while continuity is usually the emotional and academic preference.

Intelligent predictions require a broad scope of attention, lateral thinking, penetrating insight, historical understanding and an awareness of what is happening to local and global industries. In addition, a feel for public opinion and attitudes of powerful people is required. This takes us to the next and final Level …

• There is a wide variety of disparate forces that drive or affect economic activity.
• It is impossible for a government to do «just one thing»—because any action has a wide range of results, many unintended.
• Simplistic causality i.e. «A-causes-B», does not apply. Society is a system and so «all things being equal» only occurs as a concept in academic texts.
• Interventions supporting natural wealth creation—like minimal but sufficient regulation, and citizen responsibility—tend to enhance individual freedom at the expense of powerful elites in the political classes.

Economic activity is also affected by largely uncontrollable and apparently non-economic things to which governments must, by and large, submit.

These include:

● Natural disasters
● Climate extremes
● Social mood
● Man-made catastrophes
● Demographic trends
● Technological innovation
● Global turmoil
● Social conflicts.

All too often, when governments are helpless or responses seem to demand too much of people, officials look the other way.