Interests are More Powerful than Ideas?

December 9, 2012
THE BIG STORY OF SPENDING

THE BIG STORY OF SPENDING

by Mario Rizzo

There is an interesting interview with Ed Feulner, the outgoing president of the Heritage Foundation, in the weekend (Dec. 8-9) Wall Street Journal. The interview got me thinking about the progress made in the pro-economic-liberty cause, not only over the years of Heritage, but since, say, 1960. I choose this year deliberately because it was the year I became aware, as an almost-teenager, of the interconnection between politics (Nixon-Kennedy) and the economy (inflation and  unemployment).  I soon afterwards read Henry Hazlitt’s Economics in One Lesson.

What has changed since 1960 with regard to economic liberty? From an intellectual perspective, so many more people are aware of Ludwig von Mises, Friedrich Hayek and non-Keynesian economic thought. Milton Friedman spread his ideas about market-oriented economic policy. Thanks originally to James Buchanan and Gordon Tullock, we know again about public choice and rent seeking. (Somehow intellectuals had forgotten the lessons taught by James Madison and others.) Most economists are, at long last, convinced that Mises and Hayek were broadly correct about socialist calculation.

And yet government is more involved in more aspects of the economy, by far, than in 1960.

Oh yes, I am aware of the argument (cited by Feulner) that the “pie” has grown larger so although the state’s take is greater we have more absolutely left over. First, the appropriate measure is not taxation – but spending. (As Friedman taught us.) Second, but even by the pie measure federal spending is now about 25% of GDP and total government spending is about 40% of GDP. This is far higher than in 1960. Third, there are also many more interventions – regulations – beyond taxation. Fourth, I do not count my freedom in terms of my command over material goods.

What should we conclude from this? There is a wedge between what economists understand about the world and what policymakers do. Furthermore, when we ask whether “ideas matter” we are not being precise.  Ideas about what? Policymakers do not have a prima facie incentive to pursue the “general interest.” Policymakers do respond to ideas – ideas about what will benefit their particular constituencies. The general interest has few representatives.

To make a long story short: I believe that intellectuals (including economists) need to be more ideological, not less. They ought to convince the general public to think in terms of big issues and big decisions. The idea of evaluating each issue on its own merits is profoundly unscientific as Herbert Spencer taught. Slippery slope mechanisms are all around us. When people begin to think of specific, narrow policies they cannot help but think in terms of their own particular interests.

It is not enough to win the battle for ideas among intellectuals. We must win in a way that makes a practical difference. Showing the limitations of case-by-case analysis of policy is important. The special interests do not care about the damage done to the general welfare. We must instruct the public that policies that benefit their own particular interests do and will generate policies that hurt them. There truly is no free lunch.

17 Responses to “Interests are More Powerful than Ideas?”

  1. Bill Stepp Says:

    Madison wanted to replace the Articles of Confederation with the Constitution, he favored the monopoly known as “intellectual property,” and he was for the Louisiana Purchase, which started the U.S. on the road to manifest destiny. (The LP makes TJ a top-five worst prexy IMO.)
    Libetarians should just say no to Madison.

  2. Mario Rizzo Says:

    I do not share your opposition to “intellectual property.” But I am not going into that now.

  3. Jim Rose Says:

    Stigler contended that economists exert a minor and scarcely detectable influence on the societies in which they live.

    As is well know, Stigler in the 1970s toasted Milton Friedman at a dinner in his honour by saying: “Milton, if you hadn’t been born, it wouldn’t have made any difference.”

    Stigler argued that if Richard Cobden had spoken only Yiddish, and with a stammer, and Robert Peel had been a narrow, stupid man, England would have repealed the corn laws to allow free trade in grain as its agricultural classes declined and its manufacturing and commercial classes grew in the 1840s,

    As Stigler frequently noted,

    • the ideas behind reform had been around for a long time.
    • To affect public policy, ideas must find a market among the groups influencing change.
    • when their day comes, economists seem to be leaders of public opinion.
    • But when the views of economists are not so congenial to the current requirements of interest groups and median voter, these economists are left to be the writers of letters to the editor in provincial newspapers.

    These days they would run an angry blog.

  4. Richard Ebeling Says:

    In response to Jim Rose’s comment, above, it seems to me that George Stigler often ended up sounding like a free market “materiialist” (the mirror reflection of Marx’s materialism).

    Just “follow the money” and you’ll understand what guides everything that people do, and why history (including public policy) plays out the way it does.

    If this was true, I think one would have a hard time explaining many of the professional choices and actions of free market economists (especially, though not exclusively, the “Austrians.”)

    This is not to downplay or assign little or no relevance to the standard “public choce” emphasis on self-interested political decisions, the “concentration of benefits and diffusion of burdens” that shows the reason behind much of government interventionist policy.

    But the fact is, ideas do matter. People bare their chests at barricades not to save 50 cents on an imported good, but for “liberty,” “justice,” “morality.”

    These people who are frequently blowing themselves up in the Middle East may be guded by values and views very different from mine, but they are motived by ideas (in this case religious and political ideas), and not just some after-life orgy with a bunch of “virgins” (though in itself, that might not be too bad!! — but I digress).

    Or why would Joseph Goebbels and his wife, Magda, poison their own children in Hitler’s bunker before killing themselves, if not for the fact that they just could not imagine anything worse than their children living in a world without “National Socialism.”!!

    Or why would the current occupant of the White House say in an interview awhile back that even if raising taxes on the rich caused slower recovery and growth, it was a matter of “fairness”?

    Do “ideas” often serve as ideological “cover” for people’s “interests”? Most certainly, and following the money often can explain a lot of things. But not all.

    In matters of the “big” issues that can motivate and guide people, “interests” are sometimes “sacrificed” for ideas that have the power to move people.

    Stigler’s comment about Friedman, that it would not have mattered if he had not lived and written the things he did, is that mirror reflection of Marxian materialism, in that Individuals do not matter; it is the historical forces of circumstance that determine the course of events.

    I would argue that it has mattered that Mises, Hayek, Friedman lived and wrote what they did, because it did influence the course of events. And Adam Smith long before them.

    If Stigler really believed in what he said, then why did he bother to writer about the nature of special interest politiking? Unless it was for his own amusement, and not to influence how people understood and thought about the political process?

    I believe that like Pareto long before him, Stilger was a emotionally committed advocate of liberty who became disillusioned and frustrated with the seemingly unsuccess of getting people to see what was going on in terms of the logic of the economic and political systems, and change the trend of policy.

    So, instead, he became cynical (like Pareto before him) and tried to transform his cynicism into a “scientific” rationalization for why the world did not seem to accept and follow his pearls of policy wisdom, and those of like-minded individuals.

    Richard Ebeling


  5. [...] Continue reading the original article here>> [...]

  6. Peter Lewin Says:

    Indeed Mario. Hear hear!

  7. Mario Rizzo Says:

    To clarify my comments in view of those of Richard Ebeling: Unlike Stigler, I believe that ideas about the general interest *can* matter. It is just that people need to be pursuaded to think in terms of the big issues. Once people have been persuaded to look at each issue on its own merits the door has been opened to the partial view — the viewpoint of special interests. I believe that the public’s perspective has been narrowed by this emphasis in our politics, and indeed, by thinktanks in their response.


  8. Hayek’s strictures on Principles and Expediency in Law, Legislation and Liberty, Vol. 1 are relevat here.

    “That freedom can be preserved only if it is treated as a supreme principle which must not be sacrificed for particular advantages was fully understood by the leading liberal thinkers of the nineteenth century, one of whom even described liberalism as ‘the system of principles.’ Such is the chief burden of their warnings concerning ‘What is seen and what is not seen in political economy’ and about the ‘pragmatism that contrary to the intentions of its representatives inexorably leads to socialism'” (57).

    (Authors quoted are Benjamin Constant; Federic Bastiat and Carl Menger.)

  9. Richard Ebeling Says:

    Hayek goes on in this chapter in “Law, Legislation and Liberty,” to point out that when public policy issues are not analyzed in terms of underlying principles, but instead on the basis of the specific circumstances of the individual case, freedom will always lose.

    Because the concrete benefits from intervention, regulation, of redistribution will appear so much clearer and “obvious” than some uncertain and non-specific cost in terms of “What is Not Seen,” (as Bastiat brilliantly demonstrated).

    This is the road to socialism (all-round planning, regulation, redistribution) on a piece-meal basis, with the reference at this point to Menger’s “Investigations” where this is exactly the danger warned about by the founder of the Austrian School.

    While on the one hand, the advent of modern cost-benefit analysis forced many interventionists to face the issue that there are no free lunches; on the other hand, it has been one of the influences in focusing attention away from underlying principles and institutional orders, and on the “merits” of individual cases for intervention and regulation.

    Thus, not focusing on “principles” and institutional system alternatives has appeared more “scientific” and relevant to public policy debate. And the defender of “principles” has appeared as one the “philosophical” types not dealing with “reality” and the “facts” of actual circumstances that must be analyzed and decided upon in the “here and now.”

    Richard Ebeling

  10. Roger McKinney Says:

    I think the role Hayek gave for religion in ‘Fatal Conceit’ is important here. Essentially, he wrote that religion gave people motivation to follow principles for which they could see no immediate personal benefit. At the most basic level, traditional Christianity restrained envy. With the loss of that restraint, socialism promotes envy. Animal instincts like envy have far more power than abstractions.

    I would add that most voters are intellectually incapable of understanding sound economics even if they were interested, but by far the majority are not interested and have nothing but fear and loathing for the field. At the same time, people they respect, such as university professors and religious leaders tell them that economics is a sham and a cover for the wealthy to keep their stuff.
    Most people are stuck in medieval economics that says no one can grow richer except at the expense of others
    .
    Keep in mind the huge audience for professional wrestling: those people vote and few can understand even the basics of economics. Good economics is about taking the long term view of life. These people are very short term oriented. Until there is a revival of traditional Christianity I don’t see much hope for changing the minds of those voters.

  11. Troy Camplin Says:

    Don’t just follow the money. Follow reputation as well.

  12. Some Links Says:

    [...] More from Mario – a slice: [...]


  13. [...] More from Mario – a slice: [...]


  14. [...] Read the blog post and comments. [...]


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