Trust, Traps, and Taxes

Posted by himelfarb on September 17, 2010 · 4 Comments 

A short while back, I posted a piece on why we vote against our own interests which provoked diverse responses including several which insisted that, to the contrary, we do know perfectly well who serves our interests and we vote accordingly. My problem, this argument goes, is that at best I just don’t like the decisions we are making and at worst I am an elitist; people know what they need and I better just get a grip.

None of us likes it when others insist that they know better than we ourselves what we really need. We have seen the horrible consequences when the powerful assume that they know what is best for us and reject our own perceptions as some form of “false consciousness”. This is what is most menacing about extremists  of the left and of the right, about those who justify the big political lie on the basis that we can’t handle the truth, indeed about all who think they own certain truth.

At the same time, the notion that each of us automatically knows perfectly well all we need to know to make our political decisions is equally dangerous and disingenuous. Who among us would deny how often we act against our best interests, for example when we sacrifice the long term for more immediate pleasures, have those extra drinks notwithstanding the certain hangover, that extra piece of cheesecake notwithstanding the guilt that surely follows, and the list goes on?

Even more important to politics and public policy are those instances when we know that cooperating with others will benefit everyone in our group but despite this we choose not to cooperate, prefering instead to go our own way, notwithstanding the costs. So prevalent is this phenomenon that it has earned its own name, “the social trap”.

Bo Rothstein, the Swedish political scientist, has produced one of the best works on the implications of social traps for public policy. As Rothstein describes it, a social trap occurs when we don’t sufficiently trust the others in our group, community or society to cooperate with them. This is not simply because altruism is in short supply. Rather we are trapped because we cannot trust. The idea here is that most of us are ready to do our part but we won’t be taken for a sucker. We don’t want to have our generosity exploited, to be the only one to make a sacrifice or to be taken for a ride. For example, when governments ask us to reduce our electricity (or water) consumption, even temporarily, say during a heat wave, we are less likely to do so if we don’t trust the others to do their part – even when we know that the whole system could crash leaving us all worse off.

Apparently the impetus for Rothstein’s book was a conversation he had with a Russian colleague about social policy and taxes. His colleague was wondering how the kinds of social insurance ideas Rothstein was promoting could ever be funded. How could one ever convince people to pay the levels of taxation required? For Rothstein the question became what was different between, say, Sweden and Russia and, more generally, why were some societies less willing to pay taxes than others even for services that were demonstrably in their interests. Why are some societies socially trapped and how can they extricate themselves?

Today, as we witness more and more communities in the U.S. allowing the dimming of street lights and the deterioration of their public schools and infrastructure rather than subject themselves to the “tyranny of taxes”, the question takes on some urgency. The Tea Party is having a direct influence on American politics and it’s hard to imagine that it isn’t also having a more enduring and pervasive influence on political culture.

Why is this happening? At the heart of the answer is the profound and pervasive decline in trust of government and of one another, perhaps the inevitable result of the extraordinary expansion of government into all aspects of our lives, the diffusion of information, the relative anonymity of urbanization and increased mobility, and all this nurtured in a culture of individualism and consumerism. How does this play out with respect to cooperation and taxes? The most obvious example is tax evasion. Just look at the meltdown in Greece. It seems that in countries of widespread tax evasion, evasion becomes contagious.  As more and more people ask, “Why should I be the only one to pay taxes?” fewer and fewer pay their taxes.

If we believe that the tax system is unfair, that we are being asked to pay more than our fair share, we will find any way we can to limit what we pay. And if we do not trust our governments to use the resources derived from taxes wisely or well, then we will again resist paying if we can, and certainly oppose any attempt to make us pay more. So, for example, if we believe corruption is widespread, we will see taxes as an unjust burden, and this will be the case as well if we believe government is inefficient and wasteful or incompetent, unable to achieve anything of importance.

Of course there is a good deal of room to disagree about which priorities merit our tax dollars and which criteria to use to assess what works. This is what politics is all about. But even among those who value a particular program, say public education or medicare, or agree on the value of particular public investments, say greening the economy, there will be tax reluctance if there is no trust. That’s the perfect social trap. We know what is in our shared interest but we do not have sufficient trust to do what is needed. For example, a recent Canadian study demonstrates how much money could be saved through a national pharmacare program, not to mention the benefits to health, productivity and social justice. Some Canadians will of course react with immediate horror at the very idea but, putting this aside for the moment, would those who do embrace the idea be willing to pay more taxes for it? Some will say, yes to the idea but ask, why me for more taxes, why not those who can most afford it or who derive most benefit from the advantages of Canada’s opportunities or who do most damage for example through pollution. Some will say that too many people will exploit the system, overuse it or worse, and I am not going to pay for that. And some will say government simply cannot deliver the goods. No trust. No taxes. Trapped.

Here, in Canada, no movement equivalent to the Tea Party has taken hold. No great tax revolt seems to be brewing. But the direction seems pretty clear. Who among our politicians would risk proposing a tax increase for whatever reason and from whatever party? How long before a political leader is ready to revisit the idea of a carbon tax?

Indeed, traps abound. Because of distrust we invest more and more of our time and money in scrutiny and oversight, politicians and other public servants are increasingly smothered in layers of rules and controls, increasingly afraid to take risks, and less and less able to perform well and certainly not quickly. Our distrust becomes a self-fulfilling prophecy. Government and corporate failures and abuses feed the distrust and the distrust makes improvement awfully hard. Those committed to anti-state ideologies or who would choose a “security state”over the “welfare state” have an easy time these days and rarely miss an opportunity to feed the beast, yelling corruption and waste at every misstep or misdeed, pointing to every abuse and failure as proof that government is the problem and a problem that cannot be fixed. So the rallying cry becomes, our country is great in spite of government, and all we need to do is to get government out of our lives except to protect us from external threats or from those who would undermine us from within.

And politicians of all stripes and all of us in public life have contributed to this trap because we have failed to make the adjustment to ever greater transparency and a citizenry that is less deferential, and because it is easier to play to the distrust than to undo it. As Aaron Wherry recently put it,

“As far as the fetishization of public scrutiny and accountability, American or otherwise, it is perhaps too late—or at least now futile—to quibble. We are, at this moment, cynical and frustrated and distrustful of our politicians. They have too often squandered our faith in them. They have too often been exposed as duplicitous. So if we are automatically suspicious it is not without some degree of cause. And if we are ever to feel better about the political process, transparency (as, hopefully, both a corrective and reassuring tool) would seem to be key.”

Those who hanker for the days of “blind trust” and deference are on the wrong path, seeking what is neither desirable nor possible. But neither can we build what we need on a foundation of distrust. And those who think that freeing us from government is the foundation for liberty have a very narrow notion of that concept. When we fear government more than the consequences of unregulated greed or unmitigated poverty or the tragedy of the commons, we know that the trap has been sprung.

Still, the majority of Canadians refuse to buy into any of the extreme ideological views, accept neither that government is always the solution nor that it is always the problem. Most want government out of our bedrooms but they still want medicare and a strong education system and action on the environment and poverty. They may want smaller government but they do want government that works. But the distrust is growing. And the costs of distrust are considerable.

Not surprisingly, the research on social traps is much better at explaining how we enter than how we escape. We know from our own experience that it is easier to break trust than to build it, easier to be cynical than trusting. Our memories don’t easily let go of those times when we were deceived or when our trust was abused. And that it seems is the overriding challenge for those who continue to see a positive role for government: how to rebuild sufficient trust to enable cooperation where we need this to shape the future at least as much as it shapes us. Distrust limits our choices and therefore our freedom.

As a starting point, such an agenda will have to include revitalising our democracy, closing the distance between government and civil society, engaging us not as consumers buying the latest political pitch but as informed citizens participating in the moral challenges and choices we face collectively; tax reform so that we have the revenue we need in a way that is green and just and fair across generations; and reinventing government in a way that relies on the best information available to make decisions about how best to achieve our goals, that learns and adapts and brings the outside in, that has credible mechanisms to deal with misdeeds but also frees public service from the layers of micro-control that have nothing to do with accountability and from the culture of blame and fear that inhibits innovation and creativity. For starters.

Instead of a tea party, how about a conversation on escaping the trap? Democracies everywhere are wrestling with these issues. Ideas about how to fix Parliament are sprouting up all over. Maybe we start there.

Filed under Harnessing the global economy, Improving public institutions, Post featured on front page · Tagged with Aaron wherry, Bo Rothstein, Luiza Savage, Paul Krugman, Paul Wells, Scott Payne, social traps, Susan Delacourt, taxes, Tea Party, trust