| In 1986 the Swedish
Academy of Sciences awarded the Nobel Prize in Economics
to James Buchanan, the father of the public choice school
of economics.
Buchanan's award was remarkable in
that the academy recognized an economist who has spent
his professional career articulating the idea that there
was no “public interest” separate from the interests
of the individual voters who make up the body politic.
This signaled a sea change because, even in the throes
of the Reagan Revolution, the predominant idea was that
the “public interest” somehow represented a
higher value than the “private interest.”
By bestowing the award, the academy
“did something for which the world has been waiting
18 years, ever since the prize was established in 1968.
It did something controversial,” wrote the Boston
Globe's David Warsh. “It threw a slow-ticking
bomb into the domestic politics of Sweden, Europe and
the United States.” Policy analysis has never been
the same.
If markets can fail, so can governments.
If consumers are driven by self-interest so is the iron
triangle of government and its supplicants: activists,
politicians and lobbyists. As one observer noted, the
idea that the consumer becomes a saint in the voting booth
is pure delusion. Or as another noted, “No student
of public choice would feel that the establishment of
a national health service in the US would mean that doctors
would work devotedly to improve the health of the citizens.”
One tangible result of the founding
by Buchanan and others of the public choice school is
the emergence of an intellectually respectable tax limitation
movement at the state level. In fact, the underpinnings
of Proposition 13 in California and Proposition 2 1/2
in Massachusetts were drawn from Buchanan's research.
Today, public choice is also responsible for the renewed
interest in federalism and interstate competition.
Eschewing the mathematical models
of highly technical economists, Buchanan simplified the
analysis and placed at dead center “the rules of
exchange” upon which much policymaking hinges. “The
question of rules that economic societies adopt, the reasons
that they adopt them, and the superiority of some sets
of rules to others: all these are on the table in economics
to stay,” wrote Warsh. All thanks to Buchanan.
Buchanan had the good sense to
discount the romance of democratic politics and apply
methodically the tools of his trade to the political arena.
He traversed not only economics but also political science.
He reintroduced the insight of Thomas Hobbes's Leviathan
and James Madison's mischievous factions. And he followed
Madison to the conclusion that men are not angels, least
of all in government. If the end game of democracy is
over-government without constitutional limits, then, warned
Buchanan, liberty itself is at peril.
It was Adam Smith who in 1776 remarked
“People of the same trade seldom meet together, even
for merriment and diversion, but the conversation ends
in a conspiracy against the public, or in some contrivance
to raise prices.”
Buchanan and public choice economists
view democratic institutions in a similar light. Seldom
does government meet to serve the public interest. Instead
it convenes to expand the dominion of those who make or
understand the rules. It is as if government, as the sole
provider of non-rival public goods, inherently must grow
in size and scope because the demands of thousands of
well-organized rent-seeking producers legislatively prevail
over the unarticulated aspirations of millions of unorganized,
rationally ignorant consumers or voters. The conspiracy
here, if it can be called one, works because it enables
the kind of economic transfers that are well-hidden from
the public eye.
In Government Failure: A Primer
in Public Choice, three authors assembled by the Cato
Institute – Gordon Tullock (Buchanan's longtime collaborator),
Arthur Seldon and Gordon L. Brady – offer a brisk
introduction to public choice. It could not have arrived
at a better time. With faith in capitalism faltering due
to the corporate accounting scandals, a stagnating stock
market and growing unemployment, several economists and
business leaders have been calling for a double-dose of
government re-regulation at a level not called for since
the 1970s. It is as if Buchanan's lessons have once again
been ignored.
The hyperventilated Fourth Estate
would do well to absorb the authors' incisive arguments.
It will not easy.
For journalists to be able to deploy
public choice analysis as a viable tool requires the abandonment
of old beliefs about the democratic process such as the
nicety that “every vote counts” or that individuals
are as informed about their public choices as they are
about their private choices. It is not apathy, the journalists'
favorite hobby-horse, that presents us with a paradox
but poor information. Voters cannot inform themselves
about their choices in the voting booth as effectively
as they inform themselves about their choices in, say,
the neighborhood grocery store. The cost of political
information is simply too high, compared to the benefits
of casting an informed vote.
Politicians adapt in their own
way to this information vacuum. Since the days of the
Roman Empire the trading of votes has been a common feature
of legislatures. It was Seneca who observed wryly that
“You roll my log and I will roll yours.” It
is Congress that has made it an art form.
The authors make clear that the
log-rolling and rent-seeking strategies, from protectionist
policies and agricultural subsidies to the assignment
of Internet domains and universal telecommunications services,
are facilitated by rational ignorance. The end result
is that voters wind up voting for individuals and policies
that are detrimental to their own interests.
A modern example of rent-seeking
concerns universal telephone service. Congress has a policy
of providing the rural poor with access to phone service.
Most economists would solve this problem through the simple
expedient of outright cash grants or “telecommunications
stamps” that could be redeemed for service.
Instead Congress prefers the economically
inefficient method of imposing universal service charges
on all suppliers. This ends up giving cover to the iron
triangle of activists, lobbyists and politicians who jockey
over the magnitude and division of the revenues yielded
by service charges. By controlling the “rules of
exchange” Congress is able to define what exactly
universal service means. Given the rollout of new technologies,
this aspect of Telecommunications Act of 1996 “is
an incentive to lobby and litigate to broaden the set
of services that favored groups will receive.”
Tullock, Seldon and Brady are optimistic
about the future. They see this kind of rent-seeking as
on the decline. “Politicians will have to accept
with humility that their years of dominating life are
passing,” writes Seldon.
If only they were right. Unfortunately,
the tendency for people to believe that “government
ought to do something” in response to an array of
social and economic problems is strong and more likely
on the rise. Whether the voters will face up to the true
costs of over-government remains an open question, as,
therefore, does the practical influence of the public
choice school on public choices.
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