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 |  Subject: Gordon Tullock’s Legacy  Wed Jan 14, 2015 2:31 am | |
| In early November, economist Gordon Tullock died at 92. A professor of law and economics at George Mason University, Tullock was best known for his work with the late James Buchanan in developing the public- choice school of economics. Tullock and Buchanan’s thesis was that once people become public servants, whether as bureaucrats or politicians, they continue to pursue their own economic utility rather than maximizing social welfare. Surprisingly, many economists had failed to account for this, and instead assumed that individuals magically shifted their mental and moral gears as they moved between the private and public sectors. Tullock didn’t believe that people always act rationally or that everyone values goods equally. Rather, the economic assumption behind his theory was that individuals confronted with a choice will select what they perceive to be the most valuable option.
The larger government grows, the more applicable the lessons of Tullock’s theory. In a limited government, where laws apply equally to all groups, little incentive exists to use the political process for private gain at the public’s expense. However, when federal government spending accounts for nearly a quarter of GDP, and when special interests can use politics to turn a profit, applying economic theory to government helps explain seemingly inexplicable situations. Why, in a democracy, do a multitude of regulations benefit a select few and increase costs for everyone else? Shouldn’t the majority rule?
As Tullock argued, it makes perfect sense for individuals not to concern themselves with fighting back against special interests. Take, for example, the continued existence of biofuel mandates, which cost taxpayers billions in subsidies and billions more in higher gas prices. The direct annual cost to the millions of Americans harmed by biofuel subsidies is about $20 each. While the actual costs are certainly higher from secondary effects on gas prices, the loss of $20 is not sufficiently painful to inspire a public backlash. It is not rational for individuals to spend more than a few hours learning about and fighting against the special treatment biofuels receive. On the other hand, corporate biofuel producers and farmers reap big bucks from these subsidies. It makes sense for them to spend time and money lobbying legislators to keep the subsidies in place.
The same phenomenon can also be seen in recent attempts to ban disruptive services such as ridesharing. Taxi companies don’t like companies such as Uber and Lyft cutting into their customer base. They make millions in profits because their market is protected against competitors. It makes sense for them to spend time and money maintaining their favored treatment. For most taxi users, however, it doesn’t pay to spend more than a few hours educating themselves on the issue, much less working to end the restrictions. This same logic applies to countless other laws and regulations. Because time is a scarce resource, people can’t afford to fight against everything that raises costs for themselves and confers substantial benefits on a few others.
When organized groups petition the government for special treatment, Tullock showed, the overall economy loses. When the political process is used to gain special treatment at the expense of others, the outcomes become zero-sum—what one gains, another must lose. Writing in the Federalist Papers, James Madison demonstrated that individuals and groups would try to use the political process to further their own interests. This is why he and the other Framers designed the checks and balances that define the American political system. Madison thought that individuals in each of the branches would use their powers to limit the influence of the other branches.
Tullock refused to vote, a decision he adamantly defended. The mathematical chance of a single vote affecting an election was miniscule, and he claimed that he got no enjoyment from going to the polls. Yet voting still matters. As the results of the recent midterm elections showed, strong voter turnout not only influences elections but also sends a clearer policy mandate than do slim margins of victory.
While many people decry government redistribution of income, Tullock convincingly argued that the benefits of redistribution actually flow not from rich to poor, but rather from the politically weak to the politically powerful. The poor fare particularly badly in this arrangement and, as long as the ability to use the political process for private gain remains, benefits will continue to accrue to special interests, not those who need them the most. Overcoming burdensome regulations is difficult. Regulations are often created by strong special-interest groups capable of using political power to protect their favored positions. The distribution of concentrated benefits and dispersed costs creates a perverse system where regulations can work to favor the powerful few. Subsidies that pay dairy farmers not to produce milk, barriers to working in harmless occupations such as interior design, and regulations that create costs primarily borne by small businesses, all protect some while limiting options for everyone else.
It’s unfortunate that Tullock wasn’t chosen to share the 1986 Nobel Prize in economics with Buchanan. Next year, the Nobel Committee should consider awarding him its first posthumous honor.
Jared Meyer is a fellow at Economics21 at the Manhattan Institute for Policy Research.
http://www.city-journal.org/2015/eon0109jm.html#.VLP8iByPpYc.facebook |
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