by Chidem Kurdas
Attempts to rein in government spending necessarily have unpleasant side effects. Thus the Dutch government collapsed amid budget talks to control the deficit. And British national output appears to be shrinking.
Keynesians and advocates of the Obama administration’s colossal budget see this as vindication for unrestrained government spending. But in fact what we see in Europe is a very unfortunate consequence of past unrestrained spending. Continue reading
by Chidem Kurdas
My previous post about government restrictions on oil and gasoline transportation drew comments saying prices are set in a world market and the effect of United States policy is negligible. Numerous economic and geopolitical forces influence the price of oil, no question. That does not Continue reading
by Chidem Kurdas
In 1930, John Maynard Keynes dashed off an amazing prophecy. Extrapolating from the productivity gains of the past centuries, he came to the bold conclusion that the fundamental economic problem of scarcity would fade away in 100 years or so. Thanks to technological innovation and the accumulation of capital, the ancient condition of limited resources to satisfy competing wants would give way to a new age of plenty. Human beings would then face a very different quandary, namely what to do with themselves once they no longer have to work in order to survive.
Eighty-one years into the timeline Keynes suggested in his article, “Economic Possibilities for Our Grandchildren,” scarcity shows no sign of disappearing. Where did he go wrong? Continue reading
by Chidem Kurdas
I just read The Politics of Bureaucracy by Gordon Tullock, one of the best books written on the behavior of bureaucrats. Although originally published in 1965, it remains very much relevant today, especially as the debt deal currently in Congress could bring spending caps on programs administered by numerous bureaucracies. These entities implement policy changes, yet efforts to rein in government spending or impose new regulation typically pay little or no attention to their behavior.
Professor Tullock derives his insights from the basic observation that when embedded in an administrative hierarchy that is supposed to serve some – typically vague – public interest, people remain individuals; they still have their own preferences and interests. This is nicely expressed in the foreword by James Buchanan, who paraphrases Adam Smith’s well-known dictum about the butcher, the brewer or the baker. I will further paraphrase his take on Smith: “It is not from the benevolence of the bureaucrats that we expect our budget savings and better rules, but from their regard to their own interest.” Continue reading
by Chidem Kurdas
The Wall Street Journal reports that the biggest campaign spender of 2010 is a public sector union, the American Federation of State, County and Municipal Employees, which lavished $87.5 million on helping Democrats. This single union outspent the US Chamber of Commerce, which came second with $75 million.
Reading the WSJ article by Brody Mullins and John D. McKinnon, I thought that AFSCME is giving taxpayer money to politicians who will help it further pick my pocket. Whereas had I confined myself to reading the New York Times’ front-page piece on the same topic, I would have had no such concern, because there is no mention of AFSCME. The NYT campaign finance story focuses entirely on the US Chamber of Commerce and says not a word about the public union. Continue reading
by Chidem Kurdas
Law and government should treat people equally. This old principle may seem obvious and firmly in place, but in fact it’s much violated. Instead, the focus is on income distribution. Thus Robert H Frank in the NYT points to the bad effects of income inequality – like people spending too much money to emulate the rich – and suggests we “try to do something about it.”
His column about the costs of income differences shows no awareness of the costs of equity-promoting policies.
Attempts to create income equality erode equality before the law, as F. A. Hayek made clear. The Road to Serfdom – the historic experience as well as the title of Hayek’s book – is paved with egalitarian good intentions. If you feel “serfdom” is too extreme a word, the operative term here is “the road”. Continue reading
By Chidem Kurdas and Thomas McQuade
In our previous post, Thomas argued that voter feedback is weak in constraining the exercise of legislative power. Chidem countered that the other fundamental constraint, the constitution, is therefore all-important. Commentators were divided, with cogent arguments pro and con. We continue this discussion.
Chidem: Constitutionalism is the idea of subjecting political power to rules that stand above that power. The concept took a long time to develop and became effective only in some societies. Its roots go back to the Magna Carta of 1215 in which King John of England accepted limits to his authority and an earlier Charter of Liberties. Today’s struggles about the US Constitution are but another chapter in this long history.
Public choice pioneer and Nobel-prize winner James Buchanan powerfully made the constitutionalist case. Geoffrey Brennan and Buchanan offer this definition in The Reason of Rules (1985): “the essence of the constitutionalist approach is that political action (including the making of laws) be conducted according to certain rules (or meta-rules).”
In the alternative view, majority voting is the ultimate source of morally legitimate political power and there should be no constraints on it. Buchanan and Roger Congleton (Politics by Principle, Not Interest, 1998) argue that in the absence of meta-rules politics devolves into majority-seeking deals where some benefit at the expense of others. Continue reading
by Chidem Kurdas
A presentation at this week’s NYU Colloquium by Ralph Raico, professor of history at the State University of New York Buffalo, generated a thought-provoking discussion. His paper traces the early-to-mid 19th century development of the classical liberal theory of class conflict—which long predated Marx and is different from class conflict in the Marxian sense.
Marx and his followers identified class conflict as something that happens in the market economy, where the owners of capital appropriate value produced by workers. This market-based notion of class still dominates public discussion, with the state regarded either as a capitalist tool or possibly a mediator between capital and labor.
By contrast, from the classical liberal perspective the state and the groups that control it are the central players. Using the power to tax and regulate, the governing class appropriates society’s wealth, spends it ways to benefit itself and doles it out to political supporters. It is this old concept that makes sense of today’s economic conflicts, from riots in Greece to the rise of Tea Partiers in America. Continue reading
| by Jerry O’Driscoll
At the Coordination Problem, Pete Boettke drew our attention to James M. Buchanan’s paper, “Economists Have No Clothes”. It’s a short piece, chock full of insights. I want to draw on some not raised by Pete. Buchanan observes that protagonists are prone to claim “that ‘the market’ (or ‘capitalism’) either works or does not work without constraints, a claim that is demonstrably unsupportable…” He reminds us that Adam Smith’s “whole effort” was aimed at identifying the right laws and institutions, so that self-interested behavior would lead to outcomes that were generally beneficial. Continue reading |
by Gene Callahan
In Chapter 5, “Organization of Human Activity,” Buchanan and Tullock discuss what constitutes a “rational” choice concerning social arrangements. They write, “We have assumed that the rational individual, when confronted with constitutional choice, will act so as to minimize his expected costs of social interdependence, which is equivalent to saying that he will act so as to maximize his expected ‘utility from social interdependence’.”
They then create three categories of costs, “(1) purely individualistic behavior, a; (2) private, voluntary, but jointly organized behavior, b; and (3) collective or governmental action, g.”
They then analyze all possible orderings of a, b, and g. This is all well and good, but it strikes me as rather empty of oomph. If these “costs” are defined narrowly, then the analysis is plainly false — I may use method b to organize my BBQ because I like socializing, despite the fact it would be far “cheaper” to just cook dinner for myself. But if one defines the costs broadly enough, so that we include the “cost” of not having friends around, the analysis becomes vacuous — all that is being said is that people pick the things they prefer, and all of the ordering business becomes pointless. Continue reading
by Gene Callahan
I have a confession to make: I’m currently reading The Calculus of Consent for the first time. I thought it might be interesting and useful to post some of my thoughts on the book here. (And, please note, I’m posting to a blog, not writing a research paper — I am not doing a literature review to see if someone else has noted similar thoughts at some point.) First of all, consider this passage:
“For individual decisions on constitutional questions to be combined, some rules must be laid down; but, if so, who chooses these rules? And so on. Continue reading
by Chidem Kurdas
James Galbraith puts a dramatic spin on recent history in his new book, “The Predator State.” He argues that the American government was used to plunder public resources for private gain. That certainly rings true, one obvious new example being the pork projects added by Congress to the financial bailout bill. You might think Mr. Galbraith favors limits on the state.
No such thing. He calls for more government with nary a mention of restraint. The twist is that he attributes the looting of the Republic almost exclusively to Republicans.
“Today, in the great policy house of the conservatives, there are only lobbyists and the politicians who do their bidding. There are slogans and sloganeers. There are cronies and careerists,” he writes. Continue reading
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