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Hong Kong has genuine problems.self storage We have people who are poor, sick and infirm. Housing costs are high. Education systems need to adapt to a changing world. Fears of less opportunity and upward mobility are growing. There is crime and insecurity. There is not a day that passes without pollution being mentioned. It is as well that we also have many people who passionately want to solve these problems. What is disquieting is the knee-jerk answer these people have for most of these problems, i.e. throw public money at them. Politicians and bureaucrats no doubt look good for appearing to address these issues, and no one will turn down a check or give away. Yet the “dismal science” of economics tells us that not only is this often not the best answer, but throwing public money at these problems often make things worse.Take public housing as an example. Government now provides housing for 46.5% of our people. That rises to 58.6% in the New Territories. Going forward, 60% of new housing will be for government schemes rather than private. Does this effectively address our housing issues? Certainly not. It means that the market for lower cost housing is severely constrained. Private developers naturally eschew building housing for that segment of the market that the government had cornered for itself. Given limited land, it also reduces the supply of private housing and drives up the price.We know that countries, cities and districts where private housing is predominant are nicer places to live with more diversity, more commerce, more aesthetically pleasing buildings and more opportunity. We know that privatisation of public housing has from Britain to China been an effective policy to improve the quality of housing, and created an asset for public housing dwellers to improve their circumstances. There is a strong case that Hong Kong’s housing issues are caused by too much, rather than too little, public housing.Look at the cost of living problems of the poor. Will transfer payment from taxpayers help? Transfers reduce the incentive for people to find work or more productive higher paying work. Ironically, transfers often feed right into the c迷利倉st of what the beneficiaries spend on. Incentives for mutual aid and other support are reduced. Transfers do nothing to encourage the education, enterprise and hard work that lead to higher incomes and tend to create “poverty traps” where some are better off in the welfare system than working. Inevitably, higher transfers lead to higher taxation, which reduces the incentives for the taxed to spend, save, invest and employ, thus shrinking the overall size of the pie. Again we know from analysis and experience that those societies with extensive transfer payments and higher taxes have less social mobility, higher unemployment and more of the very problems the transfers are designed to address. Such transfers risk condemning the very people they aim to help to a permanent underclass.Universal government pension schemes do not create comfort and retirement security for those who have worked hard all their life. Instead, they create a massive fiscal burden that puts at risk the solvency of governments, and negative legacy that will have to be paid for by future generations, thus creating insecurity for all.Pointing out these truths is often considered heartless, the mark of the privileged few protecting the rich. Yet time and again these same critics would plead for more spending on their own political interests and ivory towers, oblivious of the ills created by their well-intentioned but poorly thought out policies. By all means let’s restructure the existing welfare system to reduce disincentives and bad economic consequences. Corporate welfare and policies offering some business interests’ privilege seems more objectionable than support for the poor. However, both can damage our freedom and prosperity.Most disturbing about the response to the Chief Executive’s policy address are headlines claiming that the “middle class” or some other interests missed out. Once government policy becomes a bidding war for someone else’s money, the hope of sound policy and responsible governance is lost. Bill Stacey is in his 10th year as a resident of Hong Kong and is Chairman of the Lion Rock Institute.We are now on Facebook .facebook.com/Next2ndOpinion迷你倉