Friedrich Blowhard has discovered public choice economics a la Buchanan and Tullock, and decided that he quite likes it.
What a gas to see a group of smart people take many of my private musings of the past decade and set them out with more clarity than I ever gave them. I actually read a webpage outlining some of the notions of public choice while literally laughing out loud to see that I wasn’t the only lunatic in the insane asylum.
Friedrich is especially impressed with public choice’s description of how government tends to get captured by special interest groups, who gorge themselves at the expense of the public purse. He also suggests that public choice provides some interesting alternatives to the current political system.
Actually, it gives me more than hope, it gives me an idea. Isn’t it time for virtuous people everywhere to start thinking seriously about a system of governance that works better than democracy (or at least how American representative democracy is practiced in 2003?
Specifically, Friedrich points to various market-based or locality based means that are proposed by public choice economists as ways of limiting the redistributive elements of politics.
Now I’ve blogged in the past about my dislike for public choice economics. As far as I can see, the ideology usually drives the economic models, rather than vice versa. There are some exceptions (see below) but public choice usually starts from a bias. As is made clear by Charles Rowley, editor of the flagship journal, Public Choice, who has defined the approach as a “program of scientific endeavor that exposed government failure coupled to a programme of moral philosophy that supported constitutional reform designed to limit government.” But then, Rowley has also claimed that political scientists like myself, who have failed to embrace public choice methodologies, are “scholars who had rendered themselves dependent on the subsidies of big government and whose lucrative careers in many instances were linked to advising … agents of the compound republic.” In plain words, Rowley is claiming that social scientists who disagree have been bought off; we have our snouts stuck into the same trough as the special interest groups.
One could respond to this in an equally ad hominem fashion (a quick glance at Rowley’s resume suggests that he’s not averse himself to hogging out on grants from right wing foundations). But this would distract from the interesting and important questions that Friedrich raises. Does public choice, as propounded by Rowley, Tullock et al., provide a good understanding of how government works? And does it provide an appropriate set of solutions to the problems of majoritarian democracy?
I suggest that the answer to the first question is a qualified yes, and to the second is a more-or-less unqualified no. There’s no doubt that the phenomena described by public choice – rent-seeking, capture of the political process by special interest groups etc – happen, and indeed are endemic to democracy. And the US has a particularly bad case of this, thanks in large part to its lax rules on the financing of politics. It’s also interesting to note that Tullock and his crowd are in perfect agreement with lefties like political scientist, Charles Lindblom, about the corrupting intersection between big business and government. The problems identified by public choice are real ones.
But the proposed solutions propounded by characters like Buchanan,Tullock and Rowley have their own, very considerable flaws. Public choice economists propose that government should be replaced, insofar as is possible, by market-type mechanisms. They argue that the kinds of choice permitted by free markets are inherently superior to the kinds of choice permitted by majoritarian democracy. Some argue, quite simply, that politics is all a horrible mistake, and should be replaced by so-called “incentive compatible mechanisms.” But they don’t have very good grounds for so doing. First of all, proposals for the replacement of politics by economic mechanisms arguably fail on their own terms: economic theory suggests that they remain inescapably politicized.* Second, public choice theory itself suggests that while majoritarian democracy is flawed, so too is any means of aggregating collective choices. Nobel prizewinner Kenneth Arrow showed this in his “Impossibility Theorem,” perhaps the single most important result in social choice and public choice theory. The theorem shows that no means of making social choices – democracy, market or any reasonable alternative to either- can be perfect – they all necessarily involve important tradeoffs.
What this suggests to me (and, indeed to Arrow, who’s a committed social democrat), is that simplistic prescriptions of “all markets, all of the time” don’t work. Majoritarian democracy has its problems; so too do unbridled free markets. Which isn’t to say that there’s no scope for reform. However, economic theory provides pretty well as much support for certain kinds of lefty retrenchment, as it does for the kinds of change that public choice economics (and Friedrich) would like. But that’s a subject for another post.
.* On this, read Miller, Gary J. and Hammond, Thomas. Why Politics is More Fundamental than Economics: Incentive-Compatible Mechanisms are Not Credible. Journal of Theoretical Politics. 1994; 6(1):5-26. Miller’s book, Managerial Dilemmas: The Political Economy of Hierarchy (Cambridge University Press, 1992) provides a slightly different version of this argument, and is also the most accessible introduction to these questions that I know of.