How to choose the right course of action

Anyone (other than the specialists who get paid to produce them, or pressure groups and politicians who use them to justify intervention in favour of their special interests) who has looked with a critical eye at the Cost-Benefit Analyses, Regulatory Impact Assessments, Environmental Impact Assessments, etc. that accompany voluminously any piece of consultation, legislation or regulation nowadays will know that they are incomprehensible, pseudo-scientific claptrap claiming to predict the unpredictable and usually in practice justifying the unjustifiable.

But surely, the counter-argument goes, it would be irresponsible of the government to proceed without trying its best to assess what might be the results of the policy it is considering. However inaccurate such assessments might be, they are better than no assessment.

I am currently reading The Foundations of Morality by Henry Hazlitt, author of the seminal Economics in One Lesson and, though not widely acknowledged by academia, one of the great thinkers of the twentieth century. I, like Hazlitt and his great mentor Ludwig von Mises, subscribe to the rule-utilitarian approach to moral philosophy. Whilst reading Hazlitt's book, it is becoming more apparent to me what a close connection exists between the alternative moral philosophies and the alternative methods (such as the above bureaucratic approach) by which legislation can be shaped and justified. In Jeremy Bentham's words (that strongly influenced Hazlitt's book), "Legislation is a circle with the same center as moral philosophy, but its circumference is smaller."

For those who believe in a god or gods, the question of morality is an easy one - right and wrong is simply what is specified in the texts. But with the weakening of the moral authority of the church that accompanied the Enlightenment, there was a need for an alternative basis for morality - a method for determining what is right and wrong without dependence on the word of a higher being. The solution developed by a series of great philosophers (most famously David Hume, Jeremy Bentham, and John Stuart Mill) became known by Mill's term: Utilitarianism. In the words of Bentham (with whom the concept is most closely associated): "Morality is the art of maximizing happiness: it gives the code of laws by which that conduct is suggested whose result will, the whole of human existence being taken into account, leave the greatest quantity of felicity."

The above quote, from the posthumous compilation Deontology, expresses a view that is characterised nowadays as rule-utilitarianism. In his earlier works, Bentham had appeared to promote an alternative form, known as act-utilitarianism: "that principle which approves or disapproves of every action whatsoever, according to the tendency which it appears to have to augment or diminish the happiness of the party whose interest is in question....I say of every action whatsoever; and therefore not only of every action of a private individual, but of every measure of government" (from his An Introduction to the Principles of Morals and Legislation). The difference is that act-utilitarianism attempts to judge the impact on total happiness of every action, whereas rule-utilitarianism specifies that the morality of actions should be judged by their conformance with general rules, whose merits have been calculated to promote the maximum happiness if followed by everyone.

Our politicians and civil servants certainly seem, in recent years, to have taken seriously Bentham's instructions to consider, for "every measure of government" the utility of the measures under consideration to "the party whose interest is in question", i.e. "if that party be the community in general, then the happiness of the community". And very worthy it sounds too. But there are problems with this approach, sufficiently intractable that few people would now promote pure act-utilitarianism as a sensible basis for action.

1. What is the measure of the happiness of the community? Happiness is experienced only by individuals, so the happiness of the community must be the sum of happiness of the members of the community. To calculate that sum requires an effective method of hedonistic (or felicific) calculus, which has escaped Bentham and his successors. If an action makes me happier and you less happy, how are we to decide whether the total change in happiness is positive or negative? We cannot even say that the change is positive if it increases the happiness of more people than it decreases. Murray Rothbard (emphatically not a utilitarian) gives the example of 99% of the population deciding to enslave the other 1%. This is the illusion underlying the King of Bhutan's Gross National Happiness index, and David Cameron's replacement of GDP with GWB (General Well-Being) as the guide to public policy. It tends towards governance in the interests of the majority, which can be a very dangerous thing.

2. Even if it were possible to calculate the impact of each action on the combined happiness of all those affected, one cannot live life this way. I should not decide whether to stop at a red light by trying to weigh the time-saving benefit of proceeding against the possible impacts of doing so. We have neither the time nor the ability to weigh all the impacts on all the people who may be affected by all the decisions we take. In most cases, we have to act according to general rules that, if followed, should lead to a good outcome in most instances. In other words, we are all rule-utilitarians, if only by force of necessity.

We know the importance of general rules for our own actions. But modern government, full of the arrogance of power, believes itself not to be subject to these limitations. No longer do we draw up legislation according to the good judgment of intelligent people, following general rules that can be shown to maximise the welfare of society.

Modern government forgets about general principles and instead tries to weigh the consequences of every piece of legislation and regulation for every party affected by the measure under consideration. That is what CBAs, RIAs and EIAs (not to mention focus groups and polls) are for. It is an impossible task. But while they continue to try, our legislation becomes ever more complex, contradictory, unprincipled and counterproductive.

The first step in improving the quality of our legislation (not to mention saving money on the legions of consultants who prepare these useless pieces of paper) must be to scrap the CBAs and go back to governing and legislating according to principle. This will not only improve the legislation, but also restore the battle of ideas to the centre of political discussion. The debates can return to the question of which principles are best to maximise the welfare of society, not who can best micro-manage the economy. That cannot but help alleviate the public disengagement with the political process.