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Quotation of the Day…

… is from pages 333-334 James Buchanan‘s 1986 paper “Can Policy Activism Succeed? A Public-Choice Perspective,” as this paper is reprinted in Vol. 19 (Ideas, Persons, and Events [2001]) of The Collected Works of James M. Buchanan:

The presumption of benevolence on the part of political agents is not, of course, acceptable within a public-choice perspective. It is precisely this presumption that has been a central focus of the overall public-choice critique of the theory of economic policy. Political agents must be presumed to maximize personal utilities in a behavioral model that is invariant, as between public and private roles or capacities. The structure of decision making may, however, affect utility-maximizing behavior through shifts in the effective constraints on choice.

DBx: A pedestrian translation of what Buchanan here says is that, if we wish to credibly assess the merits of government intervention into the market, we must assume that people acting in the state sector have the same underlying motives as do people acting in the market sector. And if this assumption is correct, then any observed differences in the actions of state-sector actors from those of market-sector actors are likely the results of differences in the incentives that each set of actors face.

If, for example, Senator Howucallhim is observed to vote year after year after year for deficit financing of Uncle Sam’s operations, but observed also to be very prudent in his private financial affairs, this difference in his behavior is best explained as arising from the fact that the incentives that Sen. Howucallhim faces when acting in the state sector differ from those that he faces when acting in the market sector. (In the state sector, Sen. Howucallhim puts other people into debt while in the market sector the burden of any debt that the Howucallhim household incurs is borne directly by the Howucallhims.)

It remains an enormous mystery to me why public-choice scholarship remains relatively unused in modern economics and, as a result of this relative unuse of public choice, why the benevolent-despot model of politics remains so prevalent. Economists’ (and non-economists’) failure to take seriously public-choice insights is not only grossly unscientific, it’s also astonishingly unrealistic.

Compounding this mystery is the embrace, especially by those on the political left, of behavioral economics. I’ve not done a head-count, but I’m sure that the number is large of those people who, in one place, insist that economic analysis would be more useful were economists to incorporate more of the findings of behavioral economists, and who, in many other places, ignore public-choice analysis and refuse to incorporate it into their models and to allow it to modify their policy advice.


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