A New Wrinkle on Public Choice Theory

PCT asserts three propositions. First, everyone in the political process — voters, politicians, government bureaucrats, special interest groups, and the lobbyists who represent them — are motivated primarily (if not entirely) by self-interest. That is, egoism governs political reality. Second, there is an asymmetry in what participants in the process stand to gain, with special interests often standing to gain a lot while the average taxpayer only a little. And there is a concomitant asymmetry of knowledge. Third, since politicians are not spending their own money, but are using other peoples’ money (OPM), they have no incentive to use resources for the general good.

Most economists are not Hegelians, which needless to say is part of their charm.

The classic use of PCT is to explain why pork-barrel spending is so prevalent among politicians of every party (including those accurately characterized as libertarians, such as Ron Paul), and so hard to control. Suppose I am Congressman Jason (a jarring thought, I grant you), who represents a district dominated by a university. Suppose further that I am approached by a group of people who want me to build a “senior center” in my district, which, being a university-dominated area, has a lower concentration of old people than many other districts. They approach me, pleading their case, and reminding me that they made a large donation to my campaign in the last election. This group will typically include the folks who have the most to gain, such as the old people who will benefit from the project without having to spend a nickel more than taxpayers who won’t be able to use it, and the construction firm that will pocket millions of bucks from it. But the group will give itself a virtuous-sounding name, such as “Citizens for the Elderly” or “Seniors in Solidarity.”

PCT predicts that I, the politician, will reason as follows: “If I put this project in some grand bill, say, a defense spending bill, and it passes, I will get tens of thousands of campaign dollars for my next election. And, hey, money is the mother’s milk of politics. Moreover, voters in my district — especially elderly ones — will see my name on this new center and give me credit for it, even though it was OPM that financed it. Of course, the populace as a whole would be better off if this senior center were built in a district with a higher concentration of old people, but it isn’t my money, so I don’t care.”

PCT also predicts that since some of the old people in my district stand to gain a lot, not to mention the construction company, they will follow the progress of the legislation very closely, write letters on its behalf to my colleagues, call other congresspersons, and so forth. On the other hand, since the average voter only stands to lose perhaps a dollar on this boondoggle — and has other pressing matters to worry about — that voter will have no incentive to follow the legislation. He will be “rationally ignorant,” in the snappy patter of the economists.

via www.libertyunbound.com