It seems as if my understanding of the public choice econ critique should be devastating to progressives. I am interested to know why it is not.
My understanding:
In the case of indirect democracy, the playing field is tilted massively in favor of monied interests.
If a company stands to make $1B from regulation X (prohibiting some practice of their competition)...It is strongly inclined to make payments of up to ~$900M to politicians, their families, their friends, their golf games, their mistresses, etc.
While the payment can't be in cash...it can be close enough. $900,000,000 is a lot of money. You can buy a lot of politicians with that much cash.
Since we all know that politicians lie like rugs, we expect that regulation X will be packaged in terms of the latest craze (this month it's health-care). So for instance, Walmart will support (and lobby for) employer mandate for healthcare because the cost to Walmart is much smaller than the cost to it's competitors, thus increasing Walmart's share of business. See bootleggers and baptists.
Doesn't this decimate the case for congress passing laws of any sort?
Do we have to ignore the fact that most of the laws are passed for special interests, and hope that the few laws passed that are not either special interest legislation, or legislation that does not place us in the negatively impacted minority are sufficiently good to make up for the massive cost of living increases created by the other legislation? Is this even a tenable position.
I'm really confused. How do progressives deal with government failure that is apparently endemic and necessary to the system, nearly impossible to fix once enacted (unlike market failure), and many times worse than standard market failure.
Shouldn't this critique (both experimentally and theoretically) have made big-government progressivism a dinosaur by now? No Stalin in the comments.
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I think some people still believe (hope) that govt can or would be a check on corporate power rather than just an enabler.
I wish I had an answer for you, but I'm honestly as puzzled as you are. If you can come up with a good explanation, please share with the rest of the class.
Melanie,
I agree that some people still hope that government can or would be a check on corporate power...but I just don't see it happening. Is it just that there's enough propaganda so as to confuse people, or is there actually some real chance of that happening?
Of course direct democracy can be even worse, consider the initiative process in California.
I think your example assumes a couple of things:
1> That Progressives believe in rational economic decision making. I realize this seems like a slam, but I recently had a long conversation with a hard core liberal who basically said that evaluating a purchasing decision based on what value you're getting for your investment (your example showing what someone should be willing to pay for a particular benefit is the opposite of this) is something they don't think most people are doing. I took this to mean that he didn't know anyone who makes decisions like this, which flabbergasted me.
2> That the public is fully (or at least mostly) informed on situations like this. It's pretty clear that the public is woefully uninformed on issues like this.
So, without an understanding of return on investment, and without a public fully informed and understanding what is really taking place, there is nothing to stop a progressive from pursuing practically anything.
Ok. Fine. New question.
There are an awful lot of economically literate folks (pick 3: Brad DeLong, Paul Krugman, Robert Reich) who fall into a broadly progressive position.
How is it that those folks, who are fully familiar (they better be) with the public choice critique of politics, are still progressive. What do they think or know that I don't follow that makes them stay in the "get government to solve problems" camp?
Just saw Krugman the other day talking about how post depression regulation prevented economic collapse (bubbles,etc.) and that we need to go back to that to avert future catastrophes like the ones we've been having since deregulation. I think that is the lens he is working from. Govt regulation has prevented bubbles and bursts and so therefore govt can (and has) put a break on capitalist greed.
I believe he is right about that. But I also believe that the post WWII military industrial complex has significantly changed the game and that he is somewhat lacking in imagination.
I will agree that Krugman is ideologically committed to the idea that government regulation was a net positive post-depression. I do not think that this is an obvious truth. Indeed, it is arguable that government has only enabled "capitalist greed", and done nothing to diminsh it's effectiveness (indeed, that's a bunch of the public choice argument).
The best lines I've heard about that are discussions of the 1920-21 crash that was (somehow, details escape me) deeper than the 1929 crash, but with ZERO government intervention recovered quickly.
Overall, my points on Macro stand. Falkenstein, supported by Cowen says that Macro basically is clueless, and provides strikingly powerful arguments.
Krugman has priors that want to have government intervention as good. Others have other priors. Still others suggest that the entire fiscal problem of long-lasting crashes is that the government is involved in the economy.
Aside -- Best line on that (forgot who -- Caplan?) was roughly: Why is it that, regardless the existing quantity of regulation, when a big problem occurs, the solution is to regulate more rather than less? Shouldn't unregulated market problems attempt solutions with more regulation, and regulated market problems attempt solutions with less? The financial market is tremendously regulated.
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