The goal of economics should be to accurately describe human action. The point of the supply and demand graphs we pick up in ECON 101 is to demonstrate how prices affect consumption. Economics teaches us about the concepts of marginal cost versus marginal benefit and explains why we are limited in our ability to control the outcomes of society. Much of economics today is about the various policies societies can enact to maximize social welfare and describing ways in which the market fails to function. Public choice is the use of economic tools to deal with traditional problems of political science, especially game theory, with the unit of analysis being individuals.
“Public choice is the use of economic tools to deal with traditional problems of political science, especially game theory, with the unit of analysis being individuals. “
To showcase their preferred policies, many economists are blind to the incentive problems that prevent politicians from keeping good, welfare-enhancing policies. James Buchanan, one of the Nobel Prize winning economists who pioneered public choice said, “Politicians and bureaucrats are no different from the rest of us. They will maximize their incentives just like everybody else.” While it seems like common sense that politicians, like everyone else, are motivated selfishly, this idea is not mainstream in academia. Most discussions about public policy, such as subsidizing healthy food, building solar panels and maintaining subways, fail to consider the human dimension of enacting these policies: human error, selfishness and greed. People who become politicians when they get inaugurated do not suddenly become more virtuous. Politicians are people like everyone else; they consider their own selfish interests while making decisions.
When people advocate policies, even ones that seem to work out theoretically, public choice economists like Bryan Caplan point out “That’s an upper-bound on how well government intervention can work. In the real world, government intervention usually works out much more poorly. Before we claim government intervention passes a cost-benefit test, we can, should and must use past government performance to predict future government performance.” This creates a challenge to people advocating that the government take on another role, as past government interference has been abysmal and policies that end up getting enacted are normally bad.
Public choice, when realized, often neuters the ambitions of people who want to advocate to give the government another avenue of control over people’s lives. During this pandemic, we have seen countless examples of politicians acting in self-serving ways, bureaucracies like the FDA have been rigid and inflexible and hundreds of thousands of lives have been ruined as a result of mainstream dogmatic claims that states would act mostly effectively.
“During this pandemic, we have seen countless examples of politicians acting in self-serving ways, bureaucracies like the FDA have been rigid and inflexible and hundreds of thousands of lives have been ruined as a result of mainstream dogmatic claims that states would act mostly effectively.”
The Food and Drug Administration alongside the Centers for Disease Control are prime examples of government acting contrary to the public interest. Just last year, The CDC originally monopolized test kits. When it turned out the kits they approved were faulty, rather than allowing universities and businesses to conduct and develop tests, the CDC set idiotic criteria for testing, that only those who had symptoms or had recently traveled to Wuhan, China were allowed to be tested. This red-tape led to a complete lack of information about how many people had COVID-19. The FDA also decided during a hand sanitizer shortage that it would be the best time to slow down its production by requiring distilleries who stepped up to pay a heavy fine, and to denature all alcohol within sanitizer.
Without the insights of public choice, economics of government action is impossible to view accurately. Yet unsurprisingly, James Buchanan is on very few syllabuses. Until economists and public policy folks understand the importance of realistic cost-benefit analysis, our society is doomed to waste tons of money, time and lives in efforts to preserve an academic paradigm (the selfless public servant) that everyone knows is wrong.