If, as Alexander Pope said, the proper study of mankind is man, then the proper study of Ronald Reagan's Washington is Salem at the time of the witches. Probably not since then has one town been so obsessed with the mythical, the undefinable and the downright fictional. In Washington, policy goes bump in the night.

Congress, for instance, recently forbade the use of federal funds to teach "secular humanism" -- whatever that is. Neither it nor the Department of Education has defined the term, although if you see it, put a burlap bag over it and call Washington -- collect. Like herpes, socialism and Keynesian economics, it might have something to do with evolution.

At the same time, an emerging cornerstone of national defense policy is the "Star Wars" program, which does not -- and may never -- exist. The president praises it, the Cabinet defends it and artists even draw it. It looks like a secular humanism.

Not until you come to the subject of the federal budget, though, is reality truly left behind. The first example of that is the president's insistence on a constitutional amendment that would require a balanced budget -- this from a man whose own budget is more than $200 billion in the red. Probably not since Spiro Agnew toured the country preaching propriety and morality has the country seen anything quite like this performance.

As often as the president asks for his stop-me-before-I-spend-again amendment, he also cites the so-called Grace Commission report, named after J. Peter Grace, the head of W. R. Grace & Co. Grace -- the commission, the report and the man -- claims that just by following 2,478 simple recommendations, the government could eliminate -- trumpets, please -- $424 billion in waste.

If there's one place that claim is taken seriously, it's the White House, where the president cites it about every chance he gets. Along with a stupendous growth in the economy and the elimination of certain (many?) programs, Grace is the third leg of Reagan's tripartite plan to eradicate the deficit. If that's the case, he does not have a leg to stand on.

That's the finding of Steven Kelman, an associate professor at Harvard's Kennedy School, published in The Public Interest -- a neo-conservative journal not known for questioning Reagan administration orthodoxy. After reviewing what the Grace Commission called "Ten Random Examples of Bureaucratic Absurdity," Kelman found the examples themselves absurd. Unfortunately, among the myths demolished by Kelman is the $91 screw, the $110 diode and the $9,609 Allen wrench -- handy tools with which to dismantle the bloated Pentagon budget. He discovered that these prices were mere concoctions -- an accountant's way of assigning overhead.

Kelman learned that what was true for the famous but mythical Allen wrench was true for the other nine "random examples of bureaucratic absurdity": They either did not exist or they were vastly exaggerated. The commission, it turned out, was invariably comparing the vaunted private sector with the much- maligned public sector when the two do different things. It's true, for instance, that private enterprise can construct a nursing home a lot cheaper than the government can. But then its nursing homes don't have to meet government quality standards, don't have to take into account minority participation, and it does not have to build in cramped spaces next to government hospitals. These are policy, not bureaucratic, requirements. In other words, it's what the people, through their elected representatives, want.

Kelman does not say that there's no government waste (there is) or that the Grace Commission is always wrong (it's not), but rather that its proposed savings are not economies at all, but often radical changes in policy. Unless the political consensus changes dramatically, instead of just at the margins, Grace's $424 billion remains yet another example of the Washington myth.

Still, this being Washington in The Time of Reagan, you can bet that the Kelman article will be put on the Presidential Index and no reference will be made to it. Instead, the chief alchemist will use myth, wish and error to turn the deficit into a surplus. If that doesn't work, a secular humanist will be hanged.