Public Choice and Ideas

by Don Boudreaux on November 17, 2014

in Politics, Reality Is Not Optional

I’m pleased and honored to have written the lead essay for the November / December Cato Policy Report.  It’s entitled “Why Government Fails and Why Ideas Matter.”  Here’s a slice from near the essay’s end:

In private markets, each person who ignores the preferences of buyers or sellers in order to indulge his or her personal ideological interests pays the cost of doing so. For instance, a racist restaurateur who refuses to serve African-Americans forgoes the profits he would earn from such customers. As a result, markets naturally temper ideological actions that are inconsistent with sellers’ efforts to earn profits or with buyers’ efforts to stretch their spending power as far a possible. Matters differ in politics, for two reasons. First, most political decisions are about how to spend other people’s money or resources; and second, no voter truly expects that his or her vote will determine the outcome of any election. Each of these realities means that the bulk of the consequences of every individual political decision falls on people other than the decisionmaker.

Consider a citizen in a voting booth. We’ve already seen one reason why he’ll cast an uninformed vote — namely, because he knows that his vote won’t determine the outcome of the election, the benefit to him of becoming adequately informed is very small. A second, related reason is that he stands to capture only an infinitesimally small share of benefits of casting an informed vote, and to suffer only an infinitesimally small share of the costs of casting an uninformed vote. Because becoming informed is costly, each voter remains rationally ignorant of the detailed facts and issues at play in any election.

Although this rational ignorance initially appears to be an unambiguous cause for despair about the prospects of any good ever coming from politics, it isn’t necessarily so. Precisely because each voter, as such, has no material interest that will be affected by how he, as an individual voter, casts his ballot, he has free rein to vote ideologically — to vote his conscience, if you will. For example, a steelworker in Pittsburgh who supports free trade can safely vote against the candidate who promises higher tariffs on steel imports. Because this steelworker has no hope of determining the election’s outcome, it costs him nothing to express in the voting booth his ideological preference for free trade, even though his material interest would be better served by the protectionist candidate. The upshot is that democratic outcomes are not destined to be determined strictly by special-interest-group politics and other collective-decisionmaking imperfections. Ultimately, voters’ ideas about the proper role of government matter a great deal.

If the public believes that a large and discretionary government will generally intervene productively, then the result will be a large, discretionary government that intervenes. And special-interest groups will then get “cleared” by uninformed and pro-government voters to then determine the actual details of government’s activities. Basic Public Choice economics predicts that these details will be ugly.

….

Far too much modern economics and other social science is unscientific because it ignores the realities highlighted by public choice.  Such ‘science’ – ‘science’ such as whiteboard demonstrations of how, under just the right circumstances, minimum-wage legislation can improve the lot of low-skilled workers, or of how bureaucrats empowered to negate or to modify the contractual terms voluntarily agreed to by private borrowers and private lenders might possibly do genuine good – is in fact more akin to snake-charming than it is akin to genuine, objective science.

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