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The most regular question I get from students who actually care about their education is why we tend to see so much bad policy, particularly if it is widely understood that messing with (nonexternality) prices is such a bad idea and industrial planning is such a bad idea. I typically stumble saying something to the effect of we know best what NOT to do but that is not as satisfying as positive proscriptions as far as policy goes. People would probably be offended if I said what I actually believed which is that the entire premise of the question is faulty. I’d be accused of “do nothingism” or some version of “extreme conservatism” to which I certainly do not adhere. But in the spirit of providing an answer, I definitely have one single law that should be followed in the construction of good public policy. This law is definitely a necessary condition. Your mileage may vary on whether it is sufficient. That law is:

GOVERNMENT POLICIES AND PROGRAMS SHOULD PROVIDE NO OBVIOUS SOURCE OF PROFIT TO OUTSIDERS IF THE PROJECTS END UP BEING SUCCESSFUL.

Do I believe that such a rule would ever be followed? Of course not. But you’ve asked me, so that’s the best I can offer. Think through the implications for a bit and hopefully we will discuss more in future posts.

And to switch gears mildly to Grubergate, perhaps this new paper is of some relevance (it may also be of use to those who follow the absurdity of the climate change conspiracy debates – google Lewandowsky to learn more):

Do I Think BLS Data are BS? The Consequences of Conspiracy Theories

Katherine Levine Einstein & David Glick
Political Behavior, forthcoming

Abstract:
While the willingness of people to believe unfounded and conspiratorial explanations of events is fascinating and troubling, few have addressed the broader impacts of the dissemination of conspiracy claims. We use survey experiments to assess whether realistic exposure to a conspiracy claim affects conspiracy beliefs and trust in government. These experiments yield interesting and potentially surprising results. We discover that respondents who are asked whether they believe in a conspiracy claim after reading a specific allegation actually report lower beliefs than those not exposed to the specific claim. Turning to trust in government, we find that exposure to a conspiracy claim has a potent negative effect on trust in government services and institutions including those unconnected to the allegations. Moreover, and consistent with our belief experiment, we find that first asking whether people believe in the conspiracy mitigates the negative trust effects. Combining these findings suggests that conspiracy exposure increases conspiracy beliefs and reduces trust, but that asking about beliefs prompts additional thinking about the claims which softens and/or reverses the exposure’s effect on beliefs and trust.

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