Saturday, June 20, 2009

Why regulation won't work

A few seemingly unrelated posts from tax bloggers got me thinking (which is always scary). The posts are...
  • The Wandering Tax Pro, Robert Flach, discusses the Ethics CPE requirements for Enrolled Agents and CPAs. He writes: "I have been preparing tax returns for about 38 years, without incident. If I do not have ethics by now sitting through 2 hours ain’t going to make me ethical. If I am so inclined to be unethical in my practice listening to a speaker tell me what is wrong is not going to make me 'see the light'."

  • TaxVox: the Tax Policy Center blog, by Jacob Goldin, discusses the proposed tax on junk food, posing the question: "Would a junk food tax really reduce obesity?"

  • Tax Rascal discusses the California tax credit for purchasing a new home, which lenders will be authorized to advance to buyers towards a down payment.
The connection I see is one of the unfortunate but very real facts of life: We cannot change people's motivation for behavior.

We can regulate behavior, but not motivation. We can educate, discuss, persuade, encourage... but when all is said and done, people can only be changed by themselves.

Here's how this relates to the above blog posts...
  • An ethics CPE requirement will not make a person ethical.
  • A tax on junk food will not make a person change their lifestyle.
  • A financial crisis will not stop people from buying things they can't afford.
I don't think bigger government and higher taxes are the answer, but I'm afraid I don't know what the answer is. Ideally, everyone could agree on some clear goals for American citizens, which might include acting ethically, being healthy, and living within our means. But it's impossible to get millions of people to sit around the table and figure it out, so until then we're stuck trying to regulate behavior.

It's not the solution, but I guess it beats complete chaos.

(As a quick post script, a great book about this subject is Leadership and Self-Deception.)

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