(Not) Disproving Public Choice

Last week, the Blogger Still Known As Publius wrote a nice piece arguing that the potential-to-likely passage of net neutrality, a public health care option, and energy reform disprove, or at least have a strong potential to disprove, public choice theory.  Unfortunately, I must respectfully dissent. 

First, a quick primer on the relevant portions of public choice theory for the uninitiated.  Here, Publius is correct that Conor’s passing remarks provide a good summation:

I wish that progressives would realize that parties with a narrow vested interest in a legislative outcome are always going to enjoy an advantage over the diffuse interests of the populace, and especially that portion of the populace that is without power.  Community organizing is never going to change this basic fact, nor is any campaign finance reform that passes constitutional muster, nor is a bigger Democratic majority in Congress.

Although not all public choice theorists are libertarians, all (or at least almost all) libertarians are public choice theorists.  Indeed, some version of public choice theory, intentionally or unintentionally, lies at the heart of just about any of the myriad strains of modern libertarianism.* So whether public choice theory holds up to scrutiny is pretty important to both vindicating and undermining libertarianism.

Publius’ argument is that, although public choice theory should be taken seriously, the passage of net neutrality, a public health option, and/or energy reform would be inexplicable under public choice theory because the benefits of each would be spread out diffusely, while the costs would be concentrated on a handful of narrow interests. 

Unfortunately, this completely misunderstands public choice theory and also assumes that no narrow interests benefit from the aforementioned agenda, regardless of whether one thinks that agenda is still good policy. 

Publius places particular emphasis on the push for a “public option” in health care in his post, stating “It’s not only good policy, its enactment would vindicate the idea of government.   That is, it would restore some faith in the idea that our institutions can serve the broader populace’s interests in the face of these structural obstacles.”  Leaving aside the question of whether it is indeed “good policy,” a question on which there is honest disagreement, this ignores the context in which this is all occuring (not to mention the fact that it seems increasingly unlikely a public option will actually pass). 

Specifically, health care reform is an issue that has a huge and direct marginal effect on the average voter – this is not an issue of some giant agribusiness getting some tax dollars that it doesn’t deserve.  As such, it is an issue that has over time generated a vocal grassroots movement of voters for whom health care reform is a make-or-break issue.  In other words, it has generated a narrowly focused special interest group whose currency is votes in addition to money – much like the NRA.   I suppose that one could say that the broad-based coalition that has grown up on health care actually represents the “public interest” because of its diversity.  I think that’s debatable, but even if that’s true, it would mean that, in order to overcome narrow special interests, you need to create a passionate and broad-based coalition of many single-issue voters.  Obviously, the number of issues on which this is possible is very few, and it’s kind of the exception that proves the rule – in order to overcome wealthy and narrow interests, you need to create a narrowly focused but broad-based interest group of your own.  And all this says nothing about what the legislative and regulatory details of a public option will look like if it ever gets through Congress.

The Waxman-Markey energy reform bill is even easier to explain with public choice.  First, the bill involves sizable public works projects, always popular with labor unions, not to mention legislators who get to take responsibility for “bringing home the bacon.”  Second, Publius is assuming that no big business interests will benefit from the bill as it is structured and that it will in fact have a significant environmental benefit.  But here’s what Greenpeace and most of the environmental interest groups on climate change had to say about the bill: “While science clearly tells us that only dramatic action can prevent global warming and its catastrophic impacts, this bill has fallen prey to political infighting and industry pressure. We cannot support this bill in its current state.” (My emphasis).  The group also calls the bill “counterproductive” and provides myriad examples of how the bill benefits industry groups, including coal plants.  Pretty much public choice theory in action!

Net neutrality legislation, however, is probably Publius’ strongest case study.  It’s an issue that relatively few voters care about, much less know much about, and has not begun to affect many Americans’ internet service.   But even there, you’re not looking at a simple issue of “the public interest” versus “big business,” at least not unless you don’t consider Microsoft, Google, and Amazon “big business.”  On top of that, we should remember that so far as I can tell, network neutrality is not currently on Congress’ radar – vague pronouncements of support for “network neutrality” give no details about what would hypothetically become law – and the devil is in the details (see, e.g., energy reform bill, above).

And “the devil is in the details” is the most important part of all this.  On many, even most issues, you’re going to have narrow special interests on both sides of the equation, and you’re going to also have broad but mostly disinterested public sympathies on both sides.  After all, the “public interest” is rarely easy to define.  What public choice theory would postulate is that even where legislation broadly fits within one legitimate conception of the “public interest,” the details will most likely specifically benefit the narrow interests that supported the legislation.  They may also be structured to minimize damage to narrow interests that are nominally supposed to be hurt by the legislation.  Of course, all of this says nothing of the issue of regulatory capture once the legislation is enacted. 

This isn’t to say that “good” legislation is impossible, at least not if “good” simply means “better serves a legitimate conception of the public interest than no legislation.”  It is, however, to say that narrow interests will always have an advantage over the broadly defined “public interest” and there is no way to create laws that don’t disproportionately benefit some narrow interest group.  There may be ways to mitigate these interests by giving them less to play for or dispersing their potential gains amongst a wider number of players, but so long as government has power, narrow interests will both seek to protect themselves from that power and use that power as a sword against their rivals, and those interests will always have an advantage over the disinterested public caught in the crossfire.

 

*This is why I don’t remotely understand claims byFreddie and E.D. that libertarianism, like Marxism, is too idealistic to work in the real world.  Setting aside that there is no “one true” libertarianism – compare and contrast, e.g., self-described “libertarians” Glenn Reynolds and Bill Maher – a political philosophy that is rooted in deep cynicism of human nature (with the recognition that those with power are still human) is not remotely idealistic.  Such a philosophy need not require any “purity” to “function” (even if there was such a thing as “pure” libertarianism), only a healthy skepticism of the ability of the powerful to rule in the best interests of their subjects.

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15 thoughts on “(Not) Disproving Public Choice

  1. Re: Asterisk.

    I find it useful to sometimes describe libertarianism as a vector rather than a destination. Are we headed in the direction of more liberty or the direction of more statism?

    Once you get that established, one can then attempt to say that we just need to change the vector and, when we reach an acceptable balance, return to a statist vector if need be.

    For some reason, people get hung up on the whole “you think the vector should be continued until *WHERE*???” is reason enough to not change the vector at all… so, in certain company, I try to discuss only the vector, rather than where that vector would necessarily lead if allowed to continue indefinitely.

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    • But what if you’re talking to someone who considers that a false dichotomy? Who considers “statism” to not have an oppositional relationship to liberty, or at least no more of one than the (oft-tyrannical) Market does ?

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          • Probably. But when I start talking about the corporations colluding with the government and barriers to entry preventing competition, they get all upset and explain that if the right people were in charge, they wouldn’t be colluding with the corporations.

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          • Well, I do indeed see things other than the State as infringing on liberty, as well as seeing any reduction is state power not matched by localized community-based alternatives as inviting external corporations to take on all the coercive power given up by the state. But as you are by far one of the best commenters here, Jaybird, I would never question your character. :)

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  2. Sure, if you weaken public choice theory from a prediction that narrow interests will triumph over broad interests into a prediction that narrow interests can make it more difficult for broad interests to succeed, then Publius doesn’t disprove public choice theory. He does, however, disprove the version of public choice theory that would imply libertarianism. After all, if it’s just a matter of the right thing to do being harder then the wrong thing, then we just need to work harder. That the final legislation will always be to some degree imperfect implies nothing about whether this outcome is better than that the market would have found by itself in the absence of government. At least, it makes no such implication unless public choice theory is combined with some naivete about the likelihood of markets to maximize welfare.

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  3. Well, I think that anyone who really cares about an issue probably believes that there is at least one narrow interest group whose interests align with what they consider to be the public good, and if not than they can create one. So it’s not that public choice theory is wrong, per se, just that it’s irrelevant unless you’re somehow committed to the law not benefiting anyone more than anyone else.

    Which I suppose is just a different way of saying what Consumatopia said.

    And as for libertarianism not being “too idealistic”, I would say that as professed by most it puts far too much faith in a “free market” that is not really free at all but dependent on corporate power structures that inevitably lead to oligarchy and what E.D. referred to as “modal monopolization”.

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  4. This might be orthogonal to libertarian vs. socialism arguments, but I think a more compelling critique of rational choice theory is not that it’s too cynical but that it’s too idealistic–it assumes that people are rational, that people will do what is in their own best interest, so all that is required for an institution to function properly is to see that incentives are arranged properly.

    That’s wrong, and not in the way Publius is talking about, but in the way behavioral economists and psychologists talk about, in the ways you could read about in “Nudge” or “Predictably Irrational”–certain environmental designs will tend to encourage people to behave in certain ways, even if those ways don’t maximize their selfish interest.

    In that way I think your equation of public choice theory with libertarianism is wrong–a behavioral economist could be a libertarian, but they would have difficulty with public choice theory.

    Did anyone see the Adam Curtis documentary “The Trap”?

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    • “In that way I think your equation of public choice theory with libertarianism is wrong–a behavioral economist could be a libertarian, but they would have difficulty with public choice theory.”

      Sorry to reply to myself, but I’ve got an example here. Lord Acton’s famous line “Power corrupts, and absolute power corrupts absolutely”, is consistent with libertarianism and behavioral economics, but it’s not an example of rational choice theory. Rational choice theorists are inclined to favor strong executives over strong legislatures. As long as the executive is ultimately accountable to the voters (or to the shareholders), then it’s in the executive’s interest to do what’s best for the most people.

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    • I think that may be a fair critique of some elements of public choice theory. However, it’s important to note that not all public choice theory is rational choice theory – there is a distinctly Hayekian strain of public choice theory (to which I am particularly sympathetic, as one would expect) that emphasizes the imperfect knowledge of the legislator and/or voter. But the result of this is the same – narrow interest groups wind up dominating policy.

      Even to the extent you’re dealing with rational choice theory, though, I think the general response is that legislators act in their rational self-interest based on the information to which they have ready access.

      Either way, the central insight of public choice theory is just that it is inevitable that narrow interests will have an inherent advantage in the legislative and regulatory process over the public interest. I don’t think public choice theory would deny that occasionally this can be overcome, at least to a certain extent (and assuming that you can objectively identify the “public interest” on an issue in the first place). Rather the issue is that no matter who you have “in charge,” narrow interests are going to dominate on the vast majority of issues.

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    • I think a more compelling critique of rational choice theory is not that it’s too cynical but that it’s too idealistic–it assumes that people are rational, that people will do what is in their own best interest, so all that is required for an institution to function properly is to see that incentives are arranged properly.

      Agreed, wholeheartedly. The skepticism of government that pervades libertarianism is, on balance, a good thing. The problem is the underlying assumption that things would be better without it. As you note, in order to work, libertarianism (and “free market” capitalism more generally) relies on people to behave in ways in which we know they will not.

      So while it’s appropriately cynical about the motives and actions of those in power, it’s nowhere near cynical enough about the ability of the individual to truly look out for his or her own long-term best interests (never mind the dubious presumption that the long-term best interests of the individual are also in the long-term interests of the society at large).

      More transparent, effective, and accountable government is what’s needed, not “less” government.

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  5. I’ve been reading Fernand Braudel’s The Perspective of the World (“Civilization and Capitalism 15th-18th Century”, vol. 3) and its part of his thesis that every center of the European capitalist world-economy, from Venice to Great Britain, involved governmental support of a monopolistic oligarchy rather than an open, competitive market. There was still room for vigorous competition between oligarchs, and in sectors that did not threaten their oligarchy. But government policy included as its goal making the very rich even richer. Most of these systems were quite good at regressive taxation of the poor, too. On the other hand, he implies that these relations were quite useful if not necessary to becoming the center of a world-economy. And for all its shortcomings, being a center, and even being a much-put-upon worker in the center (whose wages were unlikely to keep up with the rise of the cost of living except during a recession), beat Hell out of being in the periphery.

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