Applying Product Design Methods to Government Policy Design

By Kevin Meyer

The opinion and letters section of the Wall Street Journal is always one of my favorite reads as it makes you realize, again, just how smart the commonfolk are.  Although admittedly readers of the WSJ generally have a tad more education than most and far more smarts than our government nannies.

Today's letters were a step above even the usual norm.

First off, Rosh Rash of Winfield, Kansas compared complex equipment design to "regulatory design."

Fly-by-wire and
drive-by-wire systems are examples of the complexity and consequences
of centralizing the control of any function to the point where it
precludes timely override by individuals.

Centralized control
requires that the designers/legislators consider and allow for any and
all possible conditions of normal operation by both the machine and the
operator, as well as all possible conditions resulting from failure or
malfunction of any component in the system, including the operator. In
the case of military aircraft with multibillion dollar development and
production costs spread over a dozen years, it is feasible to balance
all the untested possibilities against the costs in dollars and lives.

In the case of highly
centralized control by governments there is no evidence that any
thought is ever given to a possibility of a malfunction in the
legislation. The best we can hope for is hospice care for the
survivors. Where is our legislative quality control and failure
analysis? When will we have any of either? How did our entitlement
programs morph from the money-making 1938 Social Security Act to the
Supplemental Security Income and Medicare projected deficits that will
exceed the probable GDP of the nation sometime near the midcentury?

To misquote Thomas Jefferson, "That government is best that misgoverns least."

Brilliant.  High quality design should not be limited to the development of complex electromechanical systems.  Can you imagine an FMEA analysis being applied to the design of new regulations and social programs?  Or especially to ongoing scope creep?  And another critical difference is that electromechanical products can (sometimes with difficulty) be removed from sale… whereas many entitlement programs and regulations are legally required to exist in perpetuity.  Is it possible for a bunch of politicians to actually create complex systems using proven methods for long-term impact analysis?  If not, then what needs to change?

The Citizens United case that allowed groups of people to exercise their right to free speech as an organized entity attracted a bunch of letters, primarily in response to Ralph Nader's recent WSJ editorial.  I'll pick and choose some of the more profound statements, in no particular order and apologizing for not noting each individual author.

It is particularly disingenuous for the authors to imply that the Citizens United v. Federal Election Commission decision will allow "shadowy front groups able to run vicious attack ads without identifying their corporate patrons" when such attack ads run by shadowy front groups are often a tactic of the type of organizations supported by Mr. Nader (e.g., unions and the tort bar).

If a newspaper (a commercial entity, incidentally) can use the bully pulpit of its editorial page to endorse a candidate, should not other corporations have the same right?

While inveighing against "corporate speech," Messrs. Nader and Weissman conveniently neglect to mention that corporations can be taxed, prosecuted, regulated, harassed and sued. Why shouldn't they be able to comment on their treatment?

If, since "corporations are not humans," they "should not be accorded a constitutional right to influence elections or public policies," many other "nonhuman" entities such as labor unions, religious movements, advocacy groups, community organizations, government-sponsored enterprises, or Mr. Weissman's "Public Citizen" for that matter, shouldn't either. At the end of the day, for-profit and nonprofit organizations are trying to do exactly the same: support candidates that can advance their agendas and influence public opinion.

They conveniently leave out the fact that there's never been a limit on corporate lobbying expenditures, a practice they both profit a great deal from. This decision brings corporate campaign spending out into the open where at least we can tell who is being bought by whom.

That last statement is probably the best.  Lower the water level to expose the rocks.  Shine a light so that ideas and information can be analyzed properly.

And finally, we've railed against "flights of knowledge and capital" in the past, and an editorial once again shows some direct evidence.

Announcing the freeze on $1.6 billion of unspent money, Mr. Christie
was blunt: "Today, we come to terms with the fact that we cannot spend
money on everything we want. Today, the days of Alice in Wonderland
budgeting in Trenton end." Not a day too soon, judging from the striking data that a
just-released study reveals about the number of residents of the Garden
State fleeing to greener pastures.

The state Chamber of Commerce commissioned the study with the Community
Foundation, and Chamber Chairman Dennis Bone says it is "crystal clear
that the state's tax policies are resulting in a significant decline in
the state's wealth."

This has a large effect on charitable giving. "Statistically the
relationship between the value of assets and the amount of charitable
giving is roughly seven times stronger than the relationship between
the level of income and the amount of charitable contributions," Mr.
Havens writes.

The nearby table shows the upward march in taxation in New Jersey,
which was once a fast-growing state but has now joined California and
New York as high-tax, high-debt states with budget crises. As Jim
Hughes, dean of the Edward J. Bloustein School of Planning and Public
Policy at Rutgers, told NJ.com recently, until the tax picture is
improved, "we'll probably see a continuation of the trend, until there
are no more high-wealth individuals left."

It is really interesting to compare the states with increasing tax rates to the inflow or outflow of high income earners, and then the perfect correlation to the increasingly negative budget situation of those same states.  The same correlation exists to compare net consumers of federal welfare dollars to net providers.  Taxes are raised instead of waste being cut, wealth and income leaves, taxes are raised more to try to fill the gap, but more wealth leaves, and more outside federal dollars are then required to support the larger and larger percentage of lower income people.  Until someone has the guts to change the vicious downward spiral.

So returning to our original point, perhaps this is an argument for "tax policy design"?  Does anyone think out more than the next budget cycle to look at long term impact on the underlying revenue sources?  Where's the FMEA?

People, and their wealth and knowledge, are increasingly mobile.  Not just across state lines, but more and more across national and geographic boundaries.  Did anyone notice the interesting market blip last week when Chinese military leaders suggested their government should sell some of their increasingly massive holdings of U.S. treasuries in response to the U.S. selling arms to Taiwan?  

Which countries will be the banana republics of the future?  Who will be the puppets and the puppeteers?