Today's Quote of the Day...
…is from this 1997 Reason Magazine interview with Ronald Coase:
Reason: Can you give us an example of what you consider to be a good regulation and then an example of what you consider to be a not-so-good regulation?
Coase: This is a very interesting question because one can't give an answer to it. When I was editor of The Journal of Law and Economics, we published a whole series of studies of regulation and its effects. Almost all the studies--perhaps all the studies--suggested that the results of regulation had been bad, that the prices were higher, that the product was worse adapted to the needs of consumers, than it otherwise would have been. I was not willing to accept the view that all regulation was bound to produce these results. Therefore, what was my explanation for the results we had? I argued that the most probable explanation was that the government now operates on such a massive scale that it had reached the stage of what economists call negative marginal returns. Anything additional it does, it messes up. But that doesn't mean that if we reduce the size of government considerably, we wouldn't find then that there were some activities it did well. Until we reduce the size of government, we won't know what they are.
JMM: Ronald Coase’s careful study of the data through the lens of theory is important for us to observe. Coase was unwilling to move to the conclusion that, just because the majority (if not all) the government regulation led to undesirable outcomes, it must therefore be true that all government regulation is necessarily harmful. He points out another answer that is contained within the very models used in the analyses: negative marginal returns.
Data cannot “speak for themselves.” Data without theory have no context and thus mislead. The man who looks only at data and ignores theory is not practicing science, but rather scientism.