www.gmu.edu/departments/economics/bcaplan/pubcho2.html
edu/departments/economics/bcaplan Public Choice Outreach Seminar Summer, 1998 Is Democratic Failure a Myth? I Wittman Turns Public Choice on Its Head A The "public interest" view of government remains common even in the e conomics discipline. B Public choice theorists have almost always attacked this view, arguin g that people in government - democratically elected or not - are self-interested like everyone else. C Public choice theorists have further argued that because people in go vernment are self-interested, there are numerous examples of "political failure." D While most critics of public choice object to its "economistic" appro ach, a quite different line of attack has been pioneered by Prof. According to Wittman, the standard tools of microeconomic analysis show that political markets work just as well as economic markets. E As a corollary, Wittman argues that the political failures emphasized in public choice theory are largely imaginary. The results of public choice theory depend on one or more of the following strong, implausible assumptions: 1 Extreme voter stupidity 2 Serious lack of competition 3 Excessively high negotiation/transfer costs How to Think Like Wittman A Principle #1: Voter ignorance is not a serious problem. Voters can si mply ask their preferred experts for information, and they appropriately discount biased information. B Application: Just as I don't need to know anything about heart surger y to get a first-rate bypass operation, I don't need to know anything about current gun control proposals to vote intelligently about gun control. if I don't like guns, I follow the advice of Citizens for Gun Control. C Principle #2: Politics, like the market, is competitive. If one polit ician carries out policies that harm the majority, a competing politician (a "political entrepreneur") will happily campaign on a platform to abolish that policy. Over the longer run, politicians need to maintain their reputation in order to win future elections and advance their careers. If the current crop of politicians is har ming the majority of the public by raising the price of sugar, then this is an obvious opportunity for competing candidates, who will offer the electorate a better deal in order to win. E Principle #3: Political bargaining can eliminate any remaining signif icant inefficiencies. the Coase theorem tells us to expect parties to bargain to the efficient solution. F Application: If a 1000 tenants get a $1 benefit each from rent contro l, but 20 landlords lose $100 each, democracy apparently yields an inefficient outcome. G Advanced Applications 1 Diffuse costs/concentrated benefits is not a problem. A political ent repreneur could easily campaign to eliminate 1000 small impositions on tax-payers (the "omnibus repeal bill").
nequality of political power is no more an argument against efficiency than inequality of economic power." The Weak Link in Wittman: Voters Are Extremely Stupid A Wittman's thesis is, in my view, both extremely well-argued and entir ely mistaken. Simply put, voters are extremely stupid, and Wittman can't get around this problem. B Wittman's theoretical mistake: Political experts are not analogous to medical experts. If I pick a quack doctor, I pay the full burden of my poor choice; In contrast, if I pick a quack political expert, what is the marginal cost to me? In an election with more than a few hundred participants, the chance that I cast the decisive vote is nil, so I might as well ask Bozo the clown as consult a reliable expert. C Wittman's empirical mistake: it is not necessary to simply theorize a priori about voters' information. There is a wealth of empirical evidence, all of which points in one direction: most voters know as much about politics and economics as they do about trigonometry, astronomy, or ancient Egypt. Some fun facts about what voters don't know (from Dye and Zeigler, The Irony of Democracy): 1 About half of adult Americans don't know that each state has two sena tors. Schumpeter, Capitalism, Socialism, and Democracy: "Thus the typical cit izen drops down to a lower level of mental performance as soon as he ent ers the political field. He argues and analyzes in a way which he would readily recognize as infantile within the sphere of his real interests. Why Voters are Extremely Stupid: The Demand for Idiocy A Rational ignorance vs. B While the facts on what voters don't know are clear, the question rem ains: Why would people be rational some of the time, and irrational at other times? C A simple economic explanation: think of irrationality as a good like any other; put the price of irrationality on the y-axis, and the quantity consumed on the x-axis. E g, if you believe that you can do your job perfectly well while intoxicated. Eg, what practical difference does it make if you don't believe in evolution? Thus, far from being inconsistent with economic theory, economists shou ld expect a lot of people to have systematically crazy views about issue s where the marginal cost of being wrong is zero. Political irrationality is not an ad hoc exception: It is just one topi c on a long list that includes not just politics, but religion, philosop hy, a lot of science, etc. While the private cost of voter idiocy is zero , the social cost can be enormous. Public Choice After Wittman A Wittman's contribution is important in spite of its flaws. His critiq ue strongly suggests that some arguments for political failure are mistaken, while other arguments need far more elaboration. B Wittman's work helps to expose the latent schizophrenia of many econo mists, who alternate between "voters are rational" and "voters are idiots" without comment. C Wittman's work also indirectly shows that most of the efficiency argu ments for democracy also hold for dictatorship. This further clarifies our thinking about political economy. D Public Choice after Wittman becomes even more important. The ability of democracy to make government work is much more limited than previously realized.
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