Donald Boudreaux: Do business people make better government officials?

Is it better for high-ranking government officials to have experience in the private sector as business owners or executives? Many people answer “yes!” But my answer is that of the economist: It depends.

The characteristic that, above all, is best in a politician is humility. Unlike business executives who must persuade workers to work for them, and persuade consumers to buy from them, government officials can compel countless strangers to act in ways that those strangers would not otherwise act.

If such fearsome power must be entrusted to some individuals, society is safest when those who hold this power are aware of the limits of their own information and understanding, and have no interest in running other people’s lives.

Of course, many business people do have such humility, just as many non-business people don’t. But there’s a danger that someone who has successfully (and admirably) run a business will mistake his or her commercial success as evidence of an executive talent to run an economy as one runs a business.

Even if such a person brings to government deep knowledge of the likes of accounting and finance, anyone who attempts to run an economy is a social menace. The reason is that an economy isn’t akin to a business.

Unlike a business, a market economy has no income statement or balance sheet. Indeed, it doesn’t even have a purpose of the sort that a business has. An economy is an undesigned forum in which countless people pursue their own individual goals. Sometimes this goal-seeking is done in cooperation with others, as when Amazon hires workers. Other times individuals pursue goals in competition with others, as when Amazon competes with Walmart.

But never are individuals the employees of a nation’s economy. A danger of having business people in politics is that they might be prone to treat citizens as subordinates to be directed and managed in the same way that business executives direct and manage private firm’s employees.

The simple reality is that to be skilled at running a business is not necessarily to possess a good economist’s understanding of the logic of the operation of an economy. To assert, as many people do, that successful businessman Donald Trump knows more than do competent economists about how an economy operates makes no more sense than to assert that champion Olympic swimmer Michael Phelps knows more about fluid dynamics than does a physicist specialized in that field.

Just as Phelps swims brilliantly without knowing the first thing about physics, many people succeed brilliantly in business without knowing the first thing about economics.

On the positive side, business people are especially likely to be aware of the downsides of regulations — downsides that elude the typical politician who has no business experience.

The late George McGovern, after retiring from politics, bought a hotel and restaurant in Connecticut. Only then did he learn how challenging it is to comply with many of the regulations and taxes that business people routinely confront.

As McGovern wrote with admirable honesty in a 1992 op-ed for the Wall Street Journal, “I also wish that during the years I was in public office, I had had this firsthand experience about the difficulties business people face every day. That knowledge would have made me a better U.S. senator and a more understanding presidential contender.”

This sort of humility, which comes from real-world experience, is in terribly short supply among politicians.