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Quotation of the Day…

… is from page 402 of the late University of Washington economist Paul Heyne‘s 1982 lecture “What Is the Responsibility of Business Under Democratic Capitalism?” as this lecture appears in the 2008 collection of Heyne’s writings, “Are Economists Basically Immoral?” and Other Essays on Economics, Ethics, and Religion (Geoffrey Brennan and A.M.C. Waterman, eds.):

The basic problem with democracy is that special interests have an enormous advantage in this competition.  People know and care about their own interests.  But they usually don’t pursue them successfully through the political process, because the cost to any one person of exerting influence will typically exceed by a large amount the expected benefit from acting.  Each of us is just one voice and one vote.  So why bother?  Why bear the cost?  Since my action will have an insignificant impact, while imposing considerable costs on me in time and money, it is in my interest to behave like a free rider in the political arena: to do nothing and hope that someone else will defend my interests.

The people for whom the expected benefits exceed the costs are people who form part of a relatively small group with a relatively substantial interest.  The laws that emerge from operation of democratic processes are consequently laws that cater to an endless succession of narrow, special interests.  We are not governed by the will of the majority but by the wills of innumerable minorities.  Special preferences and restrictions multiply, and collectively make all of us ultimately worse off.  Competition in the political arena subverts competition in the economic arena, and thereby subverts the invisible hand that extracts the public advantage from the pursuit of private advantages.

DBx: Combining the above problem with voters’ rational ignorance and rational irrationality reveals beyond any doubt that government is the last institution to be entrusted with the task of correcting market imperfections.