|Peter Boettke|

It seems to be important to stress in the contemporary policy discussions that intentions do not always equal results. Seems strange to have to point out this basic point, but our current intellectual climate seems to encourage a counterproductive two-step -- to assume one side is good and the other evil, and that it is the evil side that is preventing the good side from achieving all that they promise for a better world if only you followed their policy prescriptions. This "knaves, fools, and me" mentality is a block to genuine discourse in a democratic society, not really a part of it --- as it asserts a privileged position for the self-anoited expert in that discourse. It is a conversation stopper, and a demand that one party be the granted to position of speaker and the other that of only listener. No discourse required.

But an open discourse is fundamentally what is required at this juncture in our society with so many critical issues at stake in the democratic decision-making process concerning climate, race, gender, community, education, work, and commerce. We would be wise as a society to think about the fundamental issues concerning democratic discourse raised in works such as Frank Knight's Intelligence and Democratic Action and Vincent Ostrom's The Intellectual Crisis in American Public Administration. And we would do well to remember the fundamental lesson of basic economics.

Policy makers may very well intend to do good, but the policies they choose may be inconsistent with that goal due to incentive incompatibilities and insurmountable knowledge problems. The best intentioned policy makers and the most motivated policy makers may still not be able to know what the best course of action is in any given circumstance let alone how to learn through experience about to accurately adjust given an initial frustration in plans. There truly is problem with the best laid plans of mice and men going astray.

So the #1 rule of economic policy should be "wishing it so doesn't make it so". Political philosophy might be aspirational, but economic analysis cannot be. We live in a world of scarcity, scarcity implies trade-offs, those trade-offs must be negotiated, in order to negotate the trade-offs individually and collectively there must be an alignment of incentives, a flow of information, and feedback mechanisms that aid in the correction of the inevitable errors that result from the fact that we are dealing with fallible but capable human actors. In other words, as analysts we have to (a) recognize that reality is not optional, and (b) that we must examining the coping mechanisms that imperfect beings utilize in an imperfect world to stumble their way through in a way to improvement in the human condition rather than worsen the situation.

Perhaps if we could rely on pixie dust, politicians would be much happier and their acts of promisory politics would not have unintended and undesirable consequences. It sure would be nice if we were all smarter, friendlier, healthier, and wealthier. But our ability to achieve these desired ends as a society is a function of public policies not pixie dust, and those public policies must be grounded in a recognition of the refractory reality within which human beings exist. Both sides of the aisle prefer pixie dust policy to serious economic analysis of public policies and that is our problem. "Wishing," from the right or from the left, "doesn't make it so."

It doesn't matter whether we are talking about discrimination, income inequality, or the wealth and poverty of nations, what matters for public policy discussions should be incentive compatibility and knowledge processes. The intellectual strategy of the analyst must be to critically examine the effectiveness of chosen policy means to achieve stated ends sought and do so through an examination of the systemic incentives, informational requirements, and feedback processes that would guide adjustment. The strategy of the reformer must be to first and foremost identify incentive compatible policy shifts, and then device incentive compatible strategies for implementation. In both cases, it is the recognition of the refractory reality that grounds the analyst and the reformer from engaging in free floating abstractions.