Take the religion out of regulation

Last month, President Trump garnered attention when he gave a thumbs up on Twitter to states’ efforts to introduce Bible literacy classes in public schools. The tweet, and the state legislation that Trump was alluding to, made some commentators squeamish. It raised questions as to whether government and religion are too cozy. 

Reasonable people can disagree about the appropriate degree of separation between church and state. But there is one way faith seems to be creeping uncomfortably close to policy. It has nothing to do with evolution, the Pledge of Allegiance, or Bibles in public schools.

Instead, it’s the idea — common among our leaders in Washington and elsewhere — that a mysterious singular being called “society” exists, and the goal of our government is to maximize His welfare.

Society is, of course, a useful and valid concept that binds us together. We work toward common goals while keeping an eye on the welfare of our neighbors. But society is also a limiting concept when crafting policies that are more accurately described as trying to help hundreds of millions of distinct individuals.

The economist F.A. Hayek warned about a human tendency to conflate the characteristics of individuals with the characteristics of society as a whole. Hayek argued that when we do this, we can turn the sometimes-useful word “social” into a “weasel word,” stripping whatever language follows it of content and meaning. The phrase “social justice,” for example, means important things to plenty of people, but it’s an opaque term and makes for opaque arguments.

Consider cost-benefit analysis, a technocratic tool government regulators use to analyze the good and bad outcomes that result from their regulations. Cost-benefit analysis is underpinned by a mathematical “social” welfare function, supposedly telling us, in one handy equation, how a policy will impact the wellbeing of “society.” This society has characteristics like a person: He is impatient, doesn’t like risk, and tries to maintain a relatively comfortable level of consumption.

Here again, we find the word “social” leading to confusion. Exactly whose welfare are cost-benefit analysts concerned with? You might think everyone in society, but economists often talk about this social welfare function as if it describes the preferences of a benevolent social planner organizing our economy. It is his welfare they are trying to maximize.

This social planner looks a lot like a religious symbol, and he has a particularly devoted group of believers among economists and regulators. 

What makes all this idolatry so especially strange is that it’s entirely unnecessary. First, a basic tenet of economics is that under reasonable assumptions there is no social welfare function that corresponds with the preferences of everyone in society. Oddly, economists proceed with using one regardless.

Second, since the late 1930s, economists have known about a convenient way to avoid the trappings that accompany the search for a single mathematical equation that captures all of society’s preferences — they can simply measure wealth.

Note that economists’ notion of wealth is much broader than your stock portfolio. It includes any form of capital that generates “utility” for citizens. Your savings account obviously generates utility, but so does the natural environment, as does your education and knowledge.

Importantly, measuring America’s wealth doesn’t preclude us from being concerned for the least well-off. Wealth can be tracked across all people — be they rich, middle class, or poor — since we should also care how it’s distributed. 

So whether or not you worry about President Trump’s close relationship with Jerry Falwell Jr., remember that even those coldly rational economists have their own hang ups when it comes to the relationship between religion and government. Worst of all, they conceal their faith deep within technocratic reports that at first glance look a lot like science, but upon closer inspection are more like Scientology. Journalists uncritically recite statistics from these reports in news articles without thinking twice.

Expert analysis like cost-benefit analysis really does have the potential to be a constructive part of policymaking. But it shouldn’t be based on some otherworldly social welfare function. Instead, economists should stick to what they know best, wealth creation, and leave the religion out of their regulatory analysis.

James Broughel is a senior research fellow with the Mercatus Center at George Mason University. Follow him on Twitter @JamesBroughel.