Friday, January 11, 2013

PUBLIC CHOICE THEORY Explains the Behavior of Our Self Interested Government "Public Servants"

Most people are neither familiar with the name James Buchanan nor with his work. That's too bad.

While his work is widely known among economists, unfortunately, not enough of us in the general citizenry are familiar enough with the lessons of "human nature" he tried to share with his fellow citizens about the self-interested mindset of government officals.

James Buchanan died Wednesday at the age of 93. He had been awarded the Nobel Prize in 1986 for his efforts to study the real world effects of economic incentives on government officials.

Earlier in his academic career, he had formulated the then novel concept of what he called public choice theory, which at its base examines and explains the manner in which government bureaucracies and elected officials make decisions. Why they act as they do, in other words.

Buchanan theorized that our "public servants" frequently act in their own self-interest and that they fail to act in the public's interests.

One result of this short term self-interested behavior is that government bureaucracies grow over time as politicians favor new spending and tax cuts, leaving the bills to be paid by future taxpayers. See Economist Who Argued Public Officials Are Ruled by Self-Interest Dies.

At the time Buchanan described public choice and how it works, it was news. Now it's become accepted knowledge.

The real news about public choice today is that We the People still often act like we don't understand the concept, even after all these years and all the evidence before us.

Public choice theory explains why our government leaders don't act in the best interests of We the People and that those in government are making decisions primarily to serve themselves and their allies.

Politics Without Romance contains a short summary of the clear headed point of view held by Mr. Buchanan. He called it "politics without romance:"

"James Buchanan died on Wednesday, at age 93, and the world lost one of its most creative economic thinkers. Though a free-marketeer to his bones, he made his biggest mark and won the Nobel Prize in 1986 for his work studying economic incentives in government.

With Gordon Tullock, Buchanan developed what became known as "public choice theory." Buchanan described it as the application of the profit motive to government: "It presupposes that if there is value to be gained through politics, persons will invest resources in efforts to capture this value."

This may seem obvious after the special-interest tax bonanza that Washington doled out last week while raising taxes on millions of other Americans. But in the early 1960s, the notion that politicians were anything but unselfish public servants was, well, under-appreciated. Public choice, he wrote, was nothing new but "incorporates an understanding of human nature" that prevailed in the 18th century.

In our own times "market failures were set against an idealized politics," Buchanan wrote in 2003. Public choice provided "a set of theories of governmental failures," or as Buchanan called it, "politics without romance."

So, for example, he could explain why bureaucracies had an incentive to expand their turf in order to increase their financial resources and power. Or why politicians keep tax rates high so they can dole out special credits and exemptions for those who would reward those same politicians. Or why pork-barrel politics is the abiding concern of legislators.

Buchanan acknowledged that public-choice analysis had not "dislodged the prevailing socialist mindset in the academies." But he could rightfully claim to be a major influence in helping the public understand why the modern state produces such poor outcomes. His work should be required reading for everyone in a government job."

Summing Up

Most of us now realize that our elected government officials don't act in the long term best interests of We the People.

We also know that these officials have a tendency to treat us as if we are better labeled as We the Minions.

But here's the rub -- too many of us minions believe incorrectly that we'll be advantaged by continuously growing government and seeking government favors than we'll lose by funding as taxpayers the favors granted by government officials to our fellow minions.

But that's not what happens. In fact, the big lobbyists will have much greater influence than an individual citizen can ever hope to have on influencing government favor givers. In other words, heads they win and tails we lose. And we have to pay for all this asymmetric government, too.

The simple fact is that more government equals less freedom and that more OPM spending equals less MOM. And we aren't advantaged by more government no matter what entitlements we're "granted."

There's really nothing difficult about grasping the essence of public choice theory. Government officials are just another player in the game. The problem, however, is that they're playing the game with our money and not theirs. And we pay them well to do so.

But thanks to the good work of James Buchanan, we have every opportunity to fully understand why elected officials often act as they do --- in their own self interest and not in ours.

And that, my fellow Americans, is why politics sucks and why we need to insist on emphasizing self reliance and limited government as the most fundamental of American values.

There are no free lunches, especially from the government.

Thanks. Bob.

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