Econ - Public Choice

sample examples of the many special interest groups

- 90% of Journalists and Union Members are Democrats and their political donations go to the Democratic Party or its candidates - Real estate brokers oppose tax reform that includes eliminating the deduction for interest paid on a home mortgage. - Professional associations support hurdles that must be overcome by new-comers to acquire licenses, thus restricting competition and raising prices and profits of those already in the industry.

2 key points from "The Calculus of Consent, " a classic book in the Economics of Public Choice by James Buchanan & Gordon Tullock

- The authors maintain that a public decision that is truly just (fair, equitable) is one that all voters would support unanimously. - While unanimity is largely unworkable in practice, the book effectively challenges the widespread assumption that majority decisions are inherently fair.

the economics of public choice

- application of economic principles to public-sector decisions - considers that there are both intended and unintended consequences of public-sector actions - is to the Political Process what standard economic analysis is to the Market Process

difference between a "democracy" and a "republic"

- in a republic, a constitution protects certain inalienable (natural) rights that cannot be taken away by the government, even if it has been elected by a majority of voters - in a "pure democracy," the majority is not restrained in this way

Public Choice studies the decisions made by whom?

- voters - politicians - bureaucrats - lobbyists

what does the Median Voter Model predict?

1. Candidates will label their opposition as either "too far left" or "too far right." 2. Candidates will call themselves "middle-of-the-roaders," not "left wing" or "right wing." 3. Candidates will take polls, and if they are not doing well in the polls and their opponent is, they will modify their positions to become more like their opponent(s). 4. Candidates will speak in general, instead of specific, terms.

Imperfections in Democratic/Republic Political Systems

1. Median Voter Model 2. Majority Rule 3. Costs and Benefits of Voting 4. Rational Ignorance 5. Special Interest Groups 6. Shortsightedness Effect 7. Incentives for Efficiency 8. Voting for a Bundle of Choices/Decisions

2 ways that citizens of a democracy/republic participate in the proposal, development, and creation of policies

1. directly (by voting) 2. indirectly (through elected representatives who vote)

government action tends to be biased:

1. in favor of policies that offer immediate and easily identified (seen) current benefits while imposing future costs, i.e., taxes, that are complex and difficult to identify (unseen). 2. against policies that have immediate and easily identified (seen) costs, i.e., taxes, while yielding future benefits that are complex and difficult to identify (unseen).

market process vs. political process

Both have their own imperfections, shortcomings, some say failures. Much of Public Choice is a study of these imperfections/shortcomings in the Political Process.

objection #2 to majority rule

It forces the acceptance of alternatives that many people believe are undesirable examples: - Majority votes to maim and torture those in the minority for their own amusement. - Majority votes to reduce their taxes and raise the taxes of those in those in the minority. - Majority votes to take away weapons used for self-defense from all citizens. - Majority votes for a presidential candidate that is an a socialist.

one of the leading scholars in the economics of public choice

James Buchanan (recipient of a Nobel in Economic Science)

the practice of exchanging favors, especially in politics, by reciprocal voting for each other's proposed legislation.

Logrolling

according to ___________, the better of two alternatives is the one that most people prefer

Majority Rule Majority = 50% + 1 (or more)

objection #1 to majority rule

Majority rule may not provide a coherent basis for choosing where there are three or more possible alternatives/choices.

private choice refers to the ______ Process; public choice refers to the _______ Process

Market; Political

the tendency for candidates for political office to move to a position at the center of the political spectrum because that is where most voters are, and the goal of a candidate for political office is to win the election.

Median Voter Model

the appropriation of government spending for localized projects that are not essential but secured solely or primarily to keep or bring money to a representative's district.

Pork Barrel Legislation

In many elections, federal, state and local, a small percentage of registered voters actually vote: - 9%, - 16%, - 26%, - often less than 50% What explains such low voter turn-outs?

The fact that one person's vote is not likely to change the outcome of an election means that for many people, the benefits of voting are not sufficient to justify the costs of voting. *Consequence: Low voter turn-outs.

economic system vs. political system

U.S. Economic System = Market Process U.S. Political System = Deomcracy/Republic

similarity between a "democracy" and a "republic"

both forms of government tend to use a representative system (i.e. citizens vote to elect politicians to represent their interests)

a form of government in which eligibly citizens have a say in policy decisions, such as laws, regulations, taxes, etc.

democracy/republic

the people who make decisions in the Market Process (Buyers and Sellers) are the same people who make decisions in the Political Process (Politicians, Voters, Bureaucrats, and Lobbyists); however, their behavior is different because of different...

institutional arrangements & incentive structures

objection #4 to majority rule

it does not allow individuals to register the strengths of their preferences. Case: Statue in the Public Square

objection #3 to majority rule

it represents the will of the registered voters who actually vote rather than the will of the population, eligible voters, or registered voters. - Population -- Eligible voters --- Registered voters ---- Registered voters who actually vote

The state of not acquiring information because the costs of acquiring the information are greater than the benefits of the information Consequence: Most voters are largely ignorant about the issues facing the government and about the positions of the people for whom they vote

rational ignorance People often think, read, or hear others say: "Democracy would be better served if the voters would take more of an interest in and become better informed about politics and government. They don't know much about the issues."

politicians will favor programs that generate current visible benefits, even if long-term costs of the project outweigh the benefits; Government actions tend to be short-sighted when better solutions often call for a longer-term perspective.

shortsightedness effect - A potential source of conflict between good economics and good politics. *Policies with net benefits are not undertaken, while inefficient policies are implemented.

Subsets of the population that are in favor of or oppose a particular government policy; support policies in which: - Benefits are concentrated among members of the special-interest group - Costs are diluted (spread) among all citizens, taxpayers, and voters

special-interest groups

an alternative to the Market Process for organizing actions and interactions

the political process (i.e. the government)

what is the result/consequence of the Median Voter Model?

there is less choice in the political process than many would prefer