Why we debate the unimportant issues By Scott Sumner

Alex Tabarrok has a post discussing the laws protecting auto dealers from competition. One thing I notice is that when I discuss this sort of crazy law in the faculty dining room, many non-economists will tell me that they have never even heard of the regulation. On the other hand the non-economists do tend to be familiar with other ongoing policy debates, say the minimum wage issue or the Keystone pipeline. Off the top of my head here are a few other examples of nutty regulations that people tend to be unaware of:

1. Federal coastal flood insurance.

2. Zoning laws forcing the construction of parking lots

3. Restrictions on taxi medallions

4. Quotas on sugar imports

5. Huge urban/rural water price differentials

6. Restrictions of the ability of foreign air carriers to serve US markets

7. Occupational licensing restrictions where there is no public policy purpose

There must be 1000s of nutty regulations like the ones cited above. Many people don’t know about these regulations, even well educated people. Why not?

In my view the basic problem is that the regulations are so obviously nutty that you can’t find any respectably pundit to defend them. Who would defend the auto dealer cartel except the auto dealers themselves? (Alex says the NYT does, but let’s assume that was temporary insanity on their part.) Because they are regulations, you might expect support on the left. But as a general rule even people on the left don’t support government regulations that have neither an efficiency nor an equity justification.

OK, so perhaps the issues don’t get discussed because they are non-controversial. But that still doesn’t explain why they are more important than the issues that are debated by pundits. First let’s define “important.” Because I am a utilitarian, I believe important issues are those where the expected effect of a change in policy on the public’s well-being is especially large. And in general, that will occur in cases where the issue is relatively uncontroversial. If it’s a slam dunk that a crazy policy should be abandoned, then there are clear gains to the public in doing so.

In contrast, consider controversial policy initiatives like the minimum wage, ObamaCare, and Keystone. Ask why are they controversial? Clearly it’s because you can find lots of really smart pundits on each side of the issue. But that means there must be really good arguments on each side of the issue. For instance, proponents of the minimum wage point to the gains for low income people, and studies casting doubt on the employment effects. Those on the other side (including me) point to other studies, and the basic presumption in economics that making a resource more costly will reduce the quantity demanded of that resource.

The carbon tax is supported by lots of people on both the left and the right, but gets much less news coverage than Keystone, or fracking, or other issues that are closer calls. Because the average educated non-economist gets their information from the media, which covers controversial issues, they have no idea that occupational licensing laws are a much bigger deal than the low minimum wage. Or that the relaxation of zoning rules is much more effective than rent controls. Or that carbon taxes are far better than recycling laws, anti-fracking rules, CAFE standards, and all the rest of the command and control apparatus.

When I talk to people about the proposed hike in the minimum wage I sometimes mention wage subsidies as an alternative. Once again, many people have never heard of the idea, even though proposals like Morgan Warstler’s wage subsidy proposal has support from pundits on both sides of the minimum wage debate. They’ve never heard of occupational restrictions that keep poor unemployed people from using their car as a cab, or setting up a beauty shop in their home, or parking a food truck next to a busy office. So the public is fully informed about dubious policy initiatives like the minimum wage, and kept completely in the dark about much more promising approaches. That doesn’t seem very smart.

So far I’ve talked about pundits. But what about politicians? It turns out that they tend to agree just as much as the pundits. Where the pundits are divided, the politicians are divided. But here’s something exceedingly strange. Where the pundits agree, the politicians also agree, but on the exact opposite policy view! They support all those crazy regulations, both the Democrats and the GOP.

Now here’s a question: Is the media corrupt to play along with this game? Should the media ridicule politicians who support policies that are clearly evil just as much as they ridicule politicians who say nutty things about rape, or race? Should they try to make America more like Scandinavia, where corruption is not socially accepted? I don’t know the answer; I’m simply throwing it out as a question.

One possibility is that the media is just as clueless as the average highly educated person. The NYT’s support for the nutty auto dealer cartel suggests that may be true. In which case things are even more hopeless than I feared.