Transparency is Overrated—and So Is Government Regulation

 In most cases the only effective way we can hope to get a handle on that which plagues our public life is if our representatives choose to either ban the problematic behavior (e.g., smoking in public) or regulate it (e.g., ensuring Wall Street will not again take risks that will lead to taxpayer bailouts)—which is to say that these problems cannot be solved by merely releasing information and leaving it to the public to take action. 

 There are situations in which mere transparency can help … but most times we need the real thing: positive government action in the form of regulation. 

These words are taken from an article in The Atlantic written by Amitai Etzioni, a professor at George Washington University. Etzioni, among other things, founded a “movement” called communitarianism that sought to show that all we really need to be virtuous is to devote ourselves to big government and programs of political correctness. I haven’t followed his work lately, but a friend who likes to cause me intellectual and spiritual pain emailed me The Atlantic article and it seems worthy of comment for its embodiment of standard liberal thinking.

I suppose I should begin by expressing such agreement as I have with Etzioni on this issue: the idea that if only we force companies (or the government for that matter) to air all their dirty linen in public they will suddenly behave like angels is hopelessly naïve. Etzioni is, of course, condescending in telling us that people are too busy watching television and “nursing their six-packs” to pay attention to all this information. But people are, in fact, too busy with other things (some virtuous, some not) to spend all their time sifting through public disclosures, even if we could trust those disclosures to be full and honest. And I would add to this that demands for transparency carry very real costs. Some of those costs are monetary, and others have to do with people’s privacy and what is left of our right to not have government bureaucrats going through our files telling us what is important and what isn’t. Lest we forget, a public policy of “transparency” means imposing government disclosure rules and, of course, monitoring and enforcing them.

 

This brings us to the fatal element in Etzioni’s “solution” to all our public ills, namely, regulation. Banning smoking in public is a solution to precisely what “problematic behavior”? Smoking in public? I don’t smoke, but I happen to think we’ve already gone more than a bit far in dealing with the problem of smoking, if by that we mean the dangers of secondhand smoke to innocent bystanders. But then, draconian regulations like banning all smoking in public are not aimed at specific dangers, they are aimed at holistic solutions to perceived flaws in human nature and behavior. That is, they seek to force people to change by reconstructing their environment (and, of course “enlightening them” through various programs of “public education”). They, for example, treat all smokers as bad people who are giving bad examples to others and so must be ostracized and shunned.

And how, exactly, will regulation ensure that “Wall Street will not again take risks that will lead to taxpayer bailouts”? Many of the risks taken in the housing bubble were positively required by Congressional legislation aimed at “making home ownership affordable” to people who couldn’t possibly afford it. The housing bubble was in large measure a classic case of government regulation gone predictably awry—an example of what Milton Friedman called “the Invisible Foot.” Barney Frank and his allies attempted to “fix” home ownership. As good “public servants” (i.e. people with political power) they figured they could pass a law to “give” people home ownership with the stroke of a pen, by forcing those bad bankers to give out more home loans. What they actually did, of course, was force banks to make bad loans. They also opened the door to abuse by corrupt, greedy bankers and clever (corrupt and greedy) financiers to make a mint by mislabeling collections of bad loans as “mortgage backed securities.” Only the hopelessly naïve would think our friends the bankers didn’t manipulate the markets for their own short-term ends, but then they’ll do the same with the next set of regulations as well.

This brings us to the crux of the problem: the pseudo-religious faith in regulation and, in particular, the ability of “experts” to design rules that will change human nature and make society safe for all good liberals. Apparently, while the average citizen is nursing his six-pack, we can count on government employees to design programs to improve our public life. Sure, “positive government action in the form of regulation” will prevent greedy bankers from taking excessive risks in a nation now so committed to the safety of its hyper-regulated industries that a subsequent bailout is universally known to be guaranteed. Sure.

Most telling here is the choice Etzioni, like most liberals it seems, believes faces us all: trust the lazy, ignorant masses or trust the government. The choice between “Joe six pack” and “your public servants” is clear, as is the rationalization that “Joe” may be a good guy, but needs professional help so that he won’t be taken advantage of by the evil smart folks in the private sector who, after all, will do anything for a buck. The unasked questions: who keeps the public servants honest, and who checks to see if the regulations actually work. The liberal answer is, of course, more public servants. The role of the people in this version of representative democracy is to cast a vote every now and then, preferably for the good (left) party. Any other problems? Well, we’ll let the ombudsman (sorry, “ombudsperson”) take their complaints and submit them for possible consideration.

The next step for Joe, of course, is to get him into a 12 step program to get him off the sauce. In fact, maybe we should have some positive government regulation to see to that, along with smoking, school lunches we don’t like, and some other things….

Maybe I need a beer.

This column first appeared February 2, 2014 in Imaginative Conservative and is reprinted with permission.

Bruce Frohnen

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Bruce Frohnen is Professor of Law at the Ohio Northern University College of Law. He is also a senior fellow at the Russell Kirk Center and author of many books including The New Communitarians and the Crisis of Modern Liberalism, and the editor of Rethinking Rights (with Ken Grasso), and The American Republic: Primary Source. His most recent book (with the late George Carey) is Constitutional Morality and the Rise of Quasi-Law (Harvard, 2016).

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