Economists talk about tradeoffs, say between equity and growth, and everyone seems to assume that every policy has to have a trade-off, or downside, of some sort. But it is possible to find policies that promote two policies at once that don’t have disagreeable results. Larry Summers, now a professor at Harvard, in an article in the Washington Post (February 8th) gives the example of Obamacare, which has expanded insurance coverage while reducing the rate of increase of overall health costs. He cites anti-trust laws that result in both equity and efficiency, and financial regulation, which reduces the incidence of financial crises and improves economic performance (that is, if stringent enough).
The way to stimulate an economy, for instance, is to get cash into the hands of the poorest segment of the population. Why? Because they spend it immediately, whereas the rich, whose money partially “trickles down” through expensive clothes and fancy apartments, in reality save most of their gains in the form of shares and other monetary instruments. Their money is stuck in limbo, benefitting only the finance industry. Epicureans want policies which try to identify virtuous circles, where positive outcomes are self-reinforcing.
I would be very suspicious of anyone who claims that their politicies have absolutely no trade offs at all. Take your two examples. Under Obamacare, the rate of health insurance premium increase has slowed. But how much has it slowed, and to what extent is that caused by Obamacare? I don’t want to engage in counterfactuals here, but I’m not sure if Obamacare has reduced costs. America still has by far the world’s most expensive healthcare system. With anti-trust laws, its undeniable that they level the playing field. But sometimes this goes agaisnt market preferences. If a company becomes dominant, it is normally because it’s products and services are popular, in which case anti trust would be artificially reducing the size of a successful and profitable business- not necessarily a good thing. As for financial regulation, the topic is fiendishly complex, but I highly doubt there are any regulatory programmes that are not without some side effects, even if there are some very specific policies that seem only to do good.
The point is, I’m not opposed to any of the examples you gave- I will probably have a chance to discuss them in future blog posts. But I’m always aware that there are normally losers to any programme, even if they are hard to find and aren’t immediately obvious. The Tough on Crime agenda seemed to have no side effects for a while; its defenders claimed it dramatically reduced crime. But we now know that it has caused incarceration rates to skyrocket, which has disproportionately affected young black men and their families, leading to greater poverty and absent fathers.