David R. Henderson  

Sidney Winter's Case for Government Intervention

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Married couple economists Sidney Winter and Alice Rivlin came to the Naval Postgraduate School today and gave a joint talk. I'll blog on Rivlin's talk tomorrow. Today I want to focus on a true story that Winter told to make his case for government lending a helping hand to people who need help, and on the question I asked him about the story.

Decades ago, with his first wife, Winter had a kid (I think he said a son) in 3rd grade. His son had a lot of difficulty with two teachers who were backed by the principal. Winter and his wife decided that it would be good for the son if they didn't intervene and just let the son deal with the situation. Later, the two teachers were fired for cause and the principal was sent to a mental institution. That's when he and his wife realized that they should have intervened much earlier. Similarly, said Winter, we often need government to intervene to help those who need help.

In the Q&A, I asked him if that was a true story about his son. He said it was. So I said:

Look at the circumstances in that case. You knew a lot about your son. You knew something about the teacher. You seem like a nice man and so I'm going to guess that you and your first wife loved your son. [He nodded his head yes.] And yet you still made a mistake. And on the basis of that experience, you advocate giving the government power to make decisions about millions of people. Those government officials will typically have less information than you have. And they're virtually certain not to love the strangers they're making decisions for. So how can you have any confidence that they'll do a better job than you did for your son?

I wish I could tell you his answer. He said something but I'm not even sure he got my point. I think he basically said that people need help and other people in government should have the resources available to help them. But he didn't deal with the information problem or the incentive (lack of love) problem.

Francois Melese followed up afterward by asking him whether the kid was in a private school or a government school. It was a government school. When I started to tell my wife the story and the conclusion Winter drew from it, my wife cut to the core: "He wants government officials to step in and do something, but it was government officials who did do something: that's why his son had the problem."

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COMMENTS (17 to date)

He might be assuming that the amount of government is approximately constant. That means if a government helps people, that will take away from the government hurting people.

MikeP writes:

He might be assuming that the amount of government is approximately constant. That means if a government helps people, that will take away from the government hurting people.

That will be news to the 18-year-old janitor who pays for the Social Security and Medicare of millionaires.

John Goodman writes:

I believe there is a collectivist gene that undermines rational thought. It sounds like Sidney Winter has the gene.

Daniel Kuehn writes:

It probably wasn't the best example, precisely because the incentive problem should be at the heart of thinking about what government should do and what it shouldn't do. As Keynes wrote: "The important thing for government is not to do things which individuals are doing already, and to do them a little better or a little worse; but to do those things which at present are not done at all."

Egalitarianism/compassion may be an important component of what the government does, but the incentive question has to be at the center. Government is not disciplined by incentives the way the market is. It will always lose on those tests. So you better be sure the government is entering the field where market incentives break down, otherwise it's almost certainly not the best way of doing things.

Devil's Advocate writes:

Prof H.

Concerning the information: Clear think is defined by Rudolf Flesch as the application of past experiences. When a collection of many people address a problem, then many past experiences are brought to the surface. This is an argument for government action--many people working toward a solution.

Concerning the love: Love does not make matters more clear or drive us to the correct action. If anything, it is something that gets in the way of clear thinking. Sometimes, a cold-caluated approach drives us to a better way ahead. Mr. Winter's love (or tough love) could have been part of the problem.

I am not defending Mr. Winter, just trying to assist him in forming a better answer to the question. Ultimaltely, he should have used a decision tree to sort out his situation with his Son.

Ted Levy writes:

This story is appalling.

A child has difficulty in a school which he is forced to attend by government truancy laws and other government mandates.

This child is bothered by abusive teachers and a principal in need, allegedly, of mental therapy. They are nonetheless kept on long after these problems are evident because of the well-known difficulties of removing people in government institutions due to public union rules, anti-discrimination legislation, etc.

And on the basis of THAT, a professional economist thinks he has made the case for giving the government MORE power? David, are you sure this wasn't some sort of bizarre joke?

It's even worse. I don't know my economists as well as I should perhaps, and haven't heard of Sidney Winter. But even I have heard of Alice Rivlin. If the husband is even half as famous as the wife, this means you can become a FAMOUS and POWERFUL economist and still present intellectual drivel. It seems your colleague Bryan has one more piece of evidence that schooling is about signaling because it certainly isn't about achieving intellectual proficiency.

Sadly, I suspect the good John Goodman is all too right...

John V writes:

"But he didn't deal with the information problem or the incentive (lack of love) problem."

So what did he do to become an economist if the basic notion of incentive and information problems went right over his head?

Ken B writes:

The most sympathetic reading I can make is this, Winter is arguing a need for countervailing alternate sources of authority and oversight. This is not quite the same as just 'more government power', it is more like 'distributed government power'. This to handle such things as out of control teachers having all the power.

Of course the market supplies that naturally. He's missing the role compulsion and monopoly played in creating the problem.

soonerliberty writes:

Ted's got it. The government provided the school. That was intervention. I don't even want to know how hard it was to fire these people. The government failed to intervene earlier. Most of this stems from the realization that we can't do much about public school teachers. In a private school, it is much easier to get someone removed. His experience with the principal is the same as with any politician or bureaucrat. They all have interests that are most likely counter to those of the ones pleading for help. The information problem is also a key point, which DA mentioned.

soonerliberty writes:

A propos to my comments above: teacher inappropriately promoting Obama in class. Also, DH not *DA.

Hasdrubal writes:

I think you can look at the information problem from two sides: The parents' side who knows their child best, but also the government side who understands the system best.

In this case, despite knowing their child very well, the parents were unable to make the best decision because they didn't know the system very well. The outcome might have been much better had the person making the decisions known the system very well, even if they didn't have as much knowledge of the child and as much incentive as his parents to get the best outcomes.

Just like regulators rely on industry insiders because they know the system best, government insiders know their system best and might be able to provide better outcomes in relation to the government system even if their incentives aren't aligned with each individual. The best example here are lawyers: They thoroughly understand the legal system and are pretty much required for an outsider to navigate it with any chance of success. Outcomes might well be improved if we had equivalents for other parts of the system. Or, if we had government provided "lawyers" to help us navigate private, market systems.

Of course, there are still incentive problems, it's hard to tell when an insider has the best course of action or the individual knowledge is more important, insiders are constrained by the system (would a school counselor under the authority of that principal have been able to help?) and it might be suicide to increase the complexity of every government function to the level of the legal system.

But, if you think knowledge of the system is more important for outcomes than knowledge of the individual, then advocating for government intervention in the form of experts on the system is reasonable. (And, there certainly are plenty of times where it is true that knowledge of the system is more important. Most government institutions are shining examples, but the legal system would be the gold standard.)

Seth writes:

I liked your point about him making a mistake.

So, in Kling-o, this is a case of "Government and Markets Fail, Use Government."

fmb writes:

This is how I interpret Winter:

"I made a mistake as a result of my bias against intervention. In retrospect, this was a slam dunk situation to intervene, even on an ex ante basis. We should not allow reluctance to intervene to lead us to miss slam dunks like my reluctance led me to miss this one. [And Govt has such slam dunks available.]"

In particular, he was not blaming govt's error in this story, he was blaming his own. The last sentence of your response leaves it very ambiguous whether you understood this.

The fact that the context in which he made his mistake involved govt was distracting from his point, but it is still possible to see through that haze if you're willing to look, and it does illustrate his point well. Given that it was his example, it seems very understandable that if you implicitly re-frame it askew from his framing he might not pick up on it instantly.

Absolutely information & incentive problems may reduce govt (or anyone's) ability to effectively seize the slam dunks in front of them, or to take a bunch of really bad shots, too. And his story can be repurposed to illustrate that to some degree.

But that's different from his main points that opportunities for productive intervention (like with his son) *exist*, and that reluctance to intervene as a general rule may lead to missing such opportunities. Possibly a more productive interaction might have been had if it either directly took issue with the existence of slam dunk opportunities, or acknowledged their existence before moving on to your point.

soonerliberty writes:

I'm amazed by the posts here that government intervention is possible because of experts, etc. Which part of government? Government is not some god. It is not omniscient or even omnipotent, no matter what conspiracy theorists claim. It consists of factions and interest groups and even individuals with their own interests. Just because there is an opportunity or even a need for intervention doesn't mean that the government even knows where to intervene or how or that it could even help. Too many times we relate to government as a be-all, end-all entity, but it is anything but. Sure, there may be market failure, but can we not see government failure abounds? We are talking about an organization that can't even count the votes correctly. How on earth could we ascribe such powers of insight to it? I will not go into how the experts in the Soviet Union failed or how the Nazis claimed that if the Germans couldn't plan society, then no one could.

Roger Magyar writes:

I assume that your wife does not possess a PhD. That may account for the clarity of her thinking.

David R. Henderson writes:

@Roger Magyar,
I just read your comment to my wife. She got a good laugh. She’s got “just” a Master’s.

David R. Henderson writes:

That’s an interesting and sympathetic statement about what Professor Winter was saying. I think there’s a high probability that you’re right. So I think what I said loses some of its force, but not most of it. I extracted more learning from his experience than he was willing to.
I’ve noticed this generally when people see a problem. They want some kind of government intervention without ever addressing the information and incentive issues.

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