Does Government Regulation Crowd Out Private Responsibility? An Economic, Philosophic, and Theological Investigation

0:00So it is my humble opinion that in the garden, in that state of grace, there was a good deal of frolicking. Let's see, I've got to work this out here. Here we go. So does government regulation crowd out private responsibility? Yes. Thank you very much. This is an economic, philosophic and theological investigation. In the debates between control and liberty, whether in economics, philosophy, or theology, people often don't ask questions about coercion and volition. They don't ask questions about must and should. We ask these questions in this paper and we show the good fruit of freedom and the hazard of Society Outsourcing Private Responsibility to the Coercive State in Three Areas, Charity, Economics and Religion.

1:02We show what happens to people when they don't ask themselves, is it right? But instead ask, is it legal? So first, beliefs and practices about government and private responsibility in the American and Tradition. As we all know, the Founding Fathers well understood limited government as the only context in which man could seek out his desire for self-determination. However, however, they also understood that man needed a strong moral code provided largely through religious beliefs to ensure social order required to result in optimal liberty for all.

1:49Well, the many associations that Americans formed, to use Tocqueville's phrase, uniquely tempered American individualism. The pervasive ethos at the time was that a man was first responsible for himself and The State's role in what used to be called charity is so huge that people assume, wrongly, But if the government didn't provide a safety net, the poor would plummet to oblivion.

2:38Today the debates aren't about the size of the welfare state, rather, today the debates are about the size of the welfare state, not whether there should be a welfare state or not. The general populace seems to believe that before the progressives and before the New New Deal in the Great Society, all those self-interested American individualists did nothing for their neighbors. Well, that, of course, is a myth. Now, in our paper, we tell the story about how American culture shifts from liberty towards control from charity as the provenance of individuals and voluntary associations, clubs, churches, synagogues to the government.

3:25And the driving impetus is unsurprisingly the same ideas at play in economics and philosophy and in theology. And the premises of individualism and individual responsibility were challenged by both secular and religious philosophies emerging in the 19th century. We have religious universalists and secular Marxists coming out in the 1840s and following. The Universalists believe that all human beings are inherently good and have a right to eternal salvation regardless of the profession of faith or one's actions, and therefore they also have a right to temporal prosperity.

4:13And as voluntary associations lost moral standing, they were crowded out as the government took over. Well, I'm going to give you an example. As government expenditures rose in the mid-1930s, private charity dropped despite, now here's the kicker, despite charitable giving having risen five-fold, five-fold between 29 and 32. So charity is going up and then the new deal. Well further indication of crowding out is seen as, quote, individual giving as a proportion of personal income dropped 13% between 1960 and 1976 despite rising prosperity.

5:15The proportion of philanthropic giving devoted to social welfare declined from 15% to 16%. And by the mid-1970s, governments spent about ten times as much on social services as non-profit agencies, and non-profit agencies themselves received over one-half their revenues from the government. We'll contrast this with the end of the 19th century, when nearly all poor relief was provided through private associations. But the numbers don't tell the complete story. Individual attitudes towards personal responsibility help us to understand the crowding out effect. And we get this largely from the work of Brooks.

6:04So in 1996, a large sample of Americans was asked to respond to this statement, quote, The government has a responsibility to reduce income inequality. Well here's how people answered. 43% of respondents disagreed with the statement, 33% agreed. When it came to charity, those two groups were radically different. Not only were those who disagreed significantly more likely to give money to charity than those who agreed, they also gave away, on average, four times as much money per year. So with tragic irony, when someone believes it's the government's responsibility to spread the wealth around, his personal giving of money and time decreases.

6:53In 2002, people who stated that they thought the government was spending too little money on Welfare were less likely than those saying the government is spending too much money on welfare to give food or money to a homeless person. Proponents of sharing the wealth through the government are less likely to volunteer their time or even give blood than people who favor voluntary giving. Here's what Brooks writes, this is nothing more than substituting political opinions Opinions for Private Donations Opinions may or may not be sound, but the giving is conspicuously absent To summarize, when coercive government takes over charity, voluntary charity decreases and therefore human dignity and civil society suffer.

7:49There's this idea, of course, that there are just these horrible conservatives who are just so self-interested and they'll never do a nice thing for anybody else, so let's take over the park and play our drums. Are there market forces, market incentives that encourage us to do the right thing? Well, here's a quote from an investment manager. When we have regulators, we outsource our thinking. Austrian economists believe that profit-oriented incentives based on human nature and human action are sufficient to ensure moral behavior over time.

8:34You all know that, so I'm just going to move forward just a little bit. And here's some interesting little experiments that have been tried and played out recently. From David Wessel, he described economic experiments in which market participants routinely acted more generously than mainstream economists predicted. Not only were the results of these experiments counterintuitive to mainstream economists, they were consistent across cultures and societies. The more involved people are in market activities such as working for wages or buying and selling goods to others, the more generous they are.

9:19And a great little example from a recent thing is provided by the History of Investment Trusts, which developed in the mid to late 1800s, and they produced an efficient capital market to fund the Industrial Revolution. These trusts were precursors of the modern investment vehicles known as mutual funds. These capital market innovations were highly dependent on the morality of management. Trust was more than just a word describing the business entity. One of the early financial innovators, Paul Cabot, in 1929 wrote, the honesty and ability of the management are paramount. Free competition is bound to keep this greed down to a reasonable figure. Cabot also noted that the futility of government regulation of security markets, No law can replace the necessity for investors to think intelligently and to investigate a situation before investing their money.

10:38Thousands of pages of financial regulation did not prevent the meltdown of 2008. And Thomas Woods argues that instead it actually led to the meltdown. So government regulation both incentivizes immoral behavior and disincentivizes moral behavior. Government regulation does indeed crowd out personal responsibility. So I've got one minute left, right? Well, I've got religion. I've got one minute to talk about religion. Wow, a minute and a half. That's awesome. I just want to bring up just this one little quick thing here. Maybe some of you have heard of the secularization thesis, and it's basic to sociology.

11:32And the thesis is, as modernity advances, religion decreases. Well, what's the problem with that? Americans. So how do sociologists answer this? Well, Americans are stupid. This is an Austrian answer. If you look at Europe, they still have established churches. Churches where people's taxes pay for the clergy, pay to keep the buildings going. To this day, I've read that in Germany 8% of your income tax goes to churches. I heard about how this works in Italy. I know it works in the Church of England.

12:20I'm an Anglican. That's how it goes. Well, in America you got all these hucksters running around planning churches, trying things, wacky things, these entrepreneurs. Try thinking about those crazy people on TV as entrepreneurs. That's part of the American genius. It's free. It's free. And when it's free, people choose it. So does government intervention crowd out private responsibility? Yes. And I want to leave you with one last thought. And it's been hotly contested of late. Am I not supposed to be my brother's keeper?

13:07No, you're not. You're not supposed to be your brother's keeper. You're supposed to be a neighbor, but not a keeper. God didn't create us to coerce others or to be coerced. He created us to love one another as He loved us. Applause