It has long been the settled observation of political economy that public expenditure, when directed by the sovereign toward the general improvement of the nation — the paving of roads, the endowment of hospitals, the encouragement of natural philosophy — produces its greatest effect when the conditions of its disbursement are plain, stable, and answerable to some legible public purpose. A grant given in confidence, and received in confidence, multiplies its benefit through the society as surely as any division of labour in the pin manufactory. What the present proposal invites us to consider is a rather different arrangement.
The Office of Management and Budget, acting under the direction of its principal officer, has put forward a scheme by which the executive arm of government may withhold monies already appropriated by the legislature from any recipient body deemed insufficiently supportive of the administration’s declared purposes, or found to advance what the proposal designates as “anti-American” values. The fields of health, housing, the sciences, and the conveyance of persons and goods are all comprehended within this reach. The sums in question, distributed annually across thousands of institutions, hospitals, universities, and municipal bodies, run to several hundreds of billions of dollars in the aggregate.
Now, a philosopher who has given some attention to the manner in which incentives shape the conduct of rational agents will note at once that the introduction of a compliance condition of so general and so variable a character does not merely redirect resources — it necessarily alters the behaviour of every body that depends upon such resources. The university that fears the withdrawal of its natural philosophy grants will weigh, before publishing, whether its findings please those who hold the purse. The hospital that receives federal monies for the relief of the labouring poor will consider, before admitting a patient or designing a programme, whether its methods offend the prevailing sentiment in the capital. This is what, in The Theory of Moral Sentiments, I described as the distortion wrought upon the impartial spectator when that spectator is replaced, in the mind of the agent, by a partial and interested one.
The defenders of such a measure will argue that the sovereign retains, in justice, the authority to set terms upon his own disbursements. This is not an argument without force. What it does not answer is the question of efficiency: whether the nation’s stock of knowledge, its capacity to move goods and persons, and the health of its inhabitants are improved or diminished when the criteria by which inquiry is funded become, in the first instance, political rather than productive. The Wealth of Nations devoted considerable attention to the manner in which monopoly, by placing the interests of the dealer above those of the consumer and the commonwealth, contrives to reduce the general plenty. The monopoly here proposed is not of trade, but of opinion — and its effects upon the market for ideas may prove at least as retarding as any bounty or prohibition upon corn.
The proposal remains, at this writing, a proposal. Whether it shall become settled practice is a matter the legislature, the courts, and the several interests affected will in time determine. One observes, with the equanimity that long study of commercial affairs tends to produce, that nations have before now discovered, at some cost, the difference between the sovereign’s interest and the public’s interest — and that the discovery is rarely made cheaply.