There are many imperfections in our economy and society. It is natural to want governments to put them right. The common assumption is that governments should legislate to do that.
But should we judge our governments by the quantity of the legislation they present? Or to be more precise, should we judge them favourably in proportion to the weight of their legislation?
Ludwig von Mises pointed out that the success of public administration (such as police departments) cannot be checked by accountancy methods (Bureaucracy, p.46). Are more arrests or convictions a sign that public order is healthy or strained? How do we know whether the deployment of more police justifies its cost in terms of crime prevented or other unquantifiable benefits (such as a sense of security)? Does a reduction in reported crime mean that crime has reduced because of law enforcement measures or because of other factors (e.g. investment in deterrence measures) that might be the result of a lack of confidence in law enforcement, or might it indicate a reduction in reporting rather than a reduction in crime?
The same problem applies to general government measures. Legislation is implemented to address perceived failings in the existing institutional framework. If a government has an ambitious legislative programme, should we be grateful that they are intending to put so much right, or worried that they think there are so many problems that need fixing?
One might give an incoming government the benefit of the doubt that it is correcting what it perceives as the failures of its predecessors. But if a government maintains a high volume of legislation over several years, the later legislation is presumably an admission either that issues have been ignored for years or that the government’s earlier measures had failed to tackle (or even exacerbated) the issues. The modern urge to legislate to deal with the unintended consequences of earlier legislation often seems like a DIY-er attempting to level a wobbly table by repeatedly cutting off slivers of first one leg and then another, until all that is left is a useless tabletop on the floor. Our elephantine tax code is a case in point.
Should we judge a mature government positively or negatively if the legislation it presents becomes gradually less substantial? Have they become complacent and run out of steam, as those who feed on upheaval (such as the media) will no doubt conclude, or are they recognising that continuous change for change’s sake can do more harm than good?
Robert Higgs coined the term “regime uncertainty” to describe the effect on investment, growth and employment during the Great Depression of the uncertainty on returns to investment created by interventionist government policy. Higgs has identified the high levels of regime uncertainty since the Crash as a cause of the slow recovery.
As he notes, many senior economists have drawn similar conclusions. For instance, the IEA’s 2014 Hayek lecturer, Prof. John Taylor notes that the theory that policy uncertainty has been a key factor in the weak recovery “looks better and better as the facts roll in”. Occasional IEA contributor, Prof Steve Hanke has warned repeatedly (e.g. in Forbes Magazine last month) about the impact of regime uncertainty on the economy since the Crash. Prof Steven Horwitz’s IEA Discussion Paper “Causes and cures of the Great Recession” identified the impact of policy as a major cause and impediment to recovery. Prof Roger Koppl’s IEA monograph “From Crisis to Confidence: Macroeconomics after the Crash” provides detailed analysis of this and Koppl’s related Big Players effect, and connects it to phenomena like the productivity puzzle.
They are not talking only about government policy. Uncertainty over monetary policy is a major concern. There is a wide body of economic opinion that advocates a reduction in the discretionary nature of monetary policy, and a move to a stricter rules-based approach (though there is less agreement about the rules that should be applied). But outside the monetary sphere, policy is inevitably discretionary and therefore unstable and unpredictable. A political philosophy that regards the density of legislation as a useful metric, with no concept of diminishing marginal returns as the volume of legislation increases, is likely (ceteris paribus) to be more destabilising than one of more limited ambition.
Advocates of ambitious legislation will point to the failings of the current system and argue that major changes are necessary. But the choice they offer is illusory. They imply that the alternatives are (a) the imperfection that we are presented with, and (b) the perfection that we would like to have. Perfection is not attainable.
It is perfectly possible that an ambitious programme will do more good than an unambitious one. Indeed, significant change is unlikely to be achieved without ambition. But the scale of the ambition tells us nothing about its credibility. It does tell us something about the scale of the risk. We might judge that the specifics of a programme justify the risk, but never that its ambition is a virtue in its own right.
This is not an argument against change. But no change is better than a bad change. A minimalist government that fails to make improvements is better than an activist government that increases complexity. We only want change if it is change for the better.
Activist government measures can often have unintended consequences whose perverse outcomes outweigh the intended benefits. In this case, the reverse may apply. The Conservatives may not have intended to present such a limited programme, but the unintended consequence of their political failure may be the positive benefit of reduced regime uncertainty, if little policy of any significance outside the Brexit essentials can be put through with such a fragile parliamentary position.
There are reasons to be critical of the Queen’s Speech. Insufficient legislative heft is not one of them.
As Maurice Chevalier said of old age, thin gruel isn’t so bad when you consider the alternative.