Public Choice vs. Gay Politician

Old habits of mind are hard to destroy. Public choice theory entered economics three-quarters of a century ago, but many analysts and journalists barely noticed it. a Financial times column is an example of this (Gillian Tett, “Snickers Wars reveal the enduring perversity of human behavior“, April 4, 224):

First, business competition does not always produce real efficiency; markets can fail. Second, this market failure arises because consumers are not the omniscient rational actors they encounter in economic models. They have cognitive biases that cause them to make poor choices, leaving them ill-equipped to make judgments about inflation.

The intellectual revolution in public choice began with a simple analytical assumption: just as the typical individual typically seeks his own self-interest in private choices, he continues to do the same when he enters the public choice sausage machine as a politician or government bureaucrat. (His voting behavior may be different because he has no influence on the outcome of elections and referendums, so he can be altruistic or otherwise ethical without cost.) The self-interest assumption has proven very useful in explaining how governments actually work, since unlike the adoption of a nirvana government that acts benevolently and with perfect knowledge to correct ‘market failures’. In reality, government failure is generally worse than market failure for most individuals. In short, politicians and government bureaucrats are just ordinary individuals with ordinary incentives – but who are granted enormous coercive power over other ordinary individuals.

That it took 300,000 years – some 3,000 years of intellectual history – for this discovery to be properly formalized is not surprising. For nearly all of these centuries and across virtually the entire surface of the Earth, individuals of the species Homo Sapiens believed that political authorities were part of a superior species of humanity. Such beliefs likely had evolutionary (survival) advantages. As Bertrand de Jouvenel wrote, individuals obey authority because it “has become a habit of the species.”

Typical and boring is the columnist’s solution to ‘market failure’ by governments –gay politician And homo bureaucraticus– more power to control individual and private choices. As if it were clear that a free consumer is less rational than a coercive politician. As if the former’s individual choices would be economically less efficient and more dangerous than what Joe Biden, Donald Trump or Katherine Tai would impose on him.

As for the behavior of voters themselves, public choice theory explains Joseph Schumpeter’s observation in his 1950 book Capitalism, socialism and democracy:

[The private citizen] is a member of an unworkable committee, the committee of the whole nation, and this is why he devotes less disciplined effort to managing a political problem than to a game of bridge.” …

Thus, the average citizen descends to a lower level of mental performance as soon as he enters the political field. He argues and analyzes in a way that he would easily recognize as infantile within the sphere of his own interests. He becomes a primitive again.

Those who already had an ideological preference for collective choices over private choices, for authority over freedom, for control over contracts, would be more likely to revolution in public choice. But later they quickly embraced “behavioral economics,” which ignores the cognitive biases of the individual when entering the political realm. That is the main cognitive bias of behavioral economists, or at least of their admirers.

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DALL-E described the image that I, somewhat tendentiously, instructed him to generate as follows: “Here are the images that depict the stark contrast between the hardships under market failure and the transition to a political country of abundance and happiness, led by a loving political leader.”