Christmas is coming, the Graham’s getting fat…
We have moved into the second half of November. The days are short; the temperatures have fallen, as well as a bit of snow against the windowpanes of my 18th Century country home. My fire is lit. Nothing seems more appealing now than comfort food and a blanket, curled up on the couch as I stare into the flames.

Of course, I also know what happens whenever I give in to this caveman temptation. My muscles, honed from a summer of outdoor activity, will quickly grow flabby from lack of use. After all, I am not a caveman. My cupboards are full. There is no evolutionary advantage to redirecting calories from muscle maintenance to the sustenance of biological function. In short, I must hit the gym.
Turn right in 3 metres, swivel, sit on toilet seat. You have reached your destination
What’s true for the body is also true for the mind. For example, some studies show that overreliance on GPS navigation systems can dull your ability to find your way around using your own mental maps. And we know that sudokus and crosswords stave off dementia in the elderly. The concept of honing the mind by hitting the mental gym is as intuitive as the ramifications are horrific, when we consider the growing ubiquity of AI. But that’s a subject for another blogpost.
What I want to talk about is how this principle of ‘mental gym fitness’ might apply to economic efficiency and public policy design. Policymakers know (and sometimes like to forget) that every regulation – however beneficial – has some costs attached to it. On the rare occasions when they do their job properly, they even carry out cost-benefit analysis to make sure that the benefits clearly outweigh the costs.
But what if there were another kind of cost they consistently overlook? What if regulating things that people might be able to sort out for themselves turns out to be, not only annoying and inefficient, but also harmful to our ‘economic gym fitness’?
No pain, no economic gain
Economists tend to think of ‘the rational economic actor’ as a fixed construct. In other words, it is implicitly assumed that we are endowed with a certain level of rationality or otherwise. Some people can decide what is the right level of fluoride to put in their water, but others simply cannot. Some people can make the rational decision to spend more on a car with airbags and a crash cage, but others can’t perform that analysis and, in the absence of safety regulations, will end up buying the ‘wrong’ car.
My hypothesis here is that, while individuals no doubt have innate tendencies when it comes to rational decision-making, we all get better with practice. If you live in a highly regulated society, in which the government decides what food is safe to eat, what cars are safe to drive, what words are safe to say, etc. you forget how to make these kinds of decisions for yourself. Granting freedom of speech doesn’t mean people ‘should’ say anything they like, rather that the State should never use its monopoly on violence to stop them from saying the ‘wrong’ thing. Freedom demands discretion.
Strong states make weak men make hard times
I saw the effects of this first-hand in Bulgaria, when after the collapse of communism public spaces which in Western Europe would be maintained by the community, turned into rubbish heaps and slums. Without a strong State, no one stepped up to fix or clean things. And it has taken recovering communists decades of mental gym work to rebuild that economic muscle mass.
This could be the true cost of the Nanny State: it erodes our capacity to make choices. By taking away our ability to make mistakes, the State also takes away our ability to learn from them. This could have profound effects on the overall efficiency of markets and our economy, while creating a regulatory vicious circle. For example, if consumers believe themselves safe in the knowledge that the State will regulate online shopping monopolies, they won’t feel the need to reflect on whether their one-click purchase from Amazon could have been bought in the local shop instead. Mom-and-Pop Stores die faster and the State needs to step in sooner and harder, with all that that implies: inefficiencies, risk of regulatory capture and exposure to Jeff Bezos’ fiancée’s boobs at the Presidential inauguration.
Hell hath no fury like an overregulated bureaucracy
There is perhaps also a moral dimension to this: If you depart from the premise of Judeo-Christian morality, the ability to do wrong is part-and-parcel of the ability to do right. Theology has it that we are different to the other animals God created not in any superficial anatomical way (opposable thumbs, brain to body mass…) but because we are unique among God’s creatures in having the ability to do wrong – and therefore to do right. The State, by using its monopoly on violence to block our access to the Forbidden Fruit, takes away our ability to make good choices too.
Not even the Devil would do something like that.









