Big business, big gov't and the big balancing act

The nation's stock of human capital is not increased when people compete for admission to elite universities and graduate programs by spending ever-increasing amounts of money on consultants and test-preparation courses, or when the schools themselves raise tuitions to finance a self-destructive race to lure the best students, the best athletes and the best teachers.

What good is competition if it drives corporate executives to knowingly engage in increasingly risky behavior simply to boost short-term profits and stock prices even at the expense of long-term value creation?

And what good is innovation that is used to snooker consumers, mislead investors or subvert sensible regulation?

The question is not simply whether innovation will be “stifled,” as the business community likes to suggest, but whether those innovations serve a larger social purpose.

At the same time, just because markets have recently failed us does not excuse giving a free pass to those who argue for tougher regulation or bigger government.

History is replete with examples of well-intentioned regulation that turned out to be easily evaded or resulted in unintended and unwanted consequences. And too much of what passes for vital public expenditure turns out to be nothing more than special interest rent-seeking and economy-distorting subsidies.

Despite repeated efforts at reform, government accountability remains an oxymoron. Simply put, public employees are paid too much just for showing up and too little for outperforming their peers or our expectations.

And while it is now beyond dispute that labor markets today are generating incomes that are increasingly unequal, governments have found it remarkably difficult to come up with cost-effective programs that successfully offset those effects.

“An America that wants to keep its global edge cannot neglect the necessity of innovation and growth, any more than it can ignore the necessity of social cohesion and stability,” Manzi writes at the conclusion of his essay. The political challenge for the next decade is not only to strike the proper balance between them but to perfect the public and private institutions that can deliver on those promises.

Happy New Year.

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