No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Fourteen: Decision-making in Democracy: Public Choice 332 an intermediary in the sale (say a clerk in the store), she knows that her salary is paid because you like the product and thus she has an incentive to serve you. Multiple customer complaints to management can be hazardous to one’s vocational health! Market transactions tend to be efficient because the same person who pays the cost receives the benefit. They subjectively perform a cost/benefit analysis and only choose those exchanges which, on balance, provide an increase in their personal utility. Contrast this with the provision of public sector services. Let’s use the issue of drunk driving as an example. Some voters have a desire to ensure that drunk drivers don’t kill kids, so they vote for politicians who pass laws against drunk driving. Those laws are enforced by different parts of the government (police officers). If the voters believe that the police are too lax or too tough in enforcing drunk driving, the voters can’t vote against the police officers; in fact, there is almost nothing an average citizen can do to influence the policeman’s behavior. This is especially true as the level of government increases. A city policeman is going to be a lot more responsive to citizens than a state policeman, since if he upsets a few voters he may actually get some grief from his supervisor. A state officer is more removed from voter retribution, and federal officers are basically untouchable in the sense of being influenced by voter concerns. The voter may want a particular public good, but only has a small influence (a single vote) to affect a politician, who passes laws that direct other bureaucrats to meet the needs of the voter. If the voter doesn’t like the end product, he or she will still pay the taxes to support it, unlike a market transaction. There is no direct market feedback that the political process got it right—only an indirect election that will assess a whole basket of programs and issues. One can imagine a case where the political process might lead to a result that 99% of voters oppose. If a majority of politicians support the policy, and the relative importance of that one political position is small to voters, it can nonetheless pass and the politicians will be re-elected. BUNDLING 2 Let’s expand on the complexity of voting for a particular politician. We started this section by noting that if you wanted a particular good and service, you went into the store and bought it. In collective decision-making, this is not possible; you are forced to choose a bundle of goods. Imagine that you are in the supermarket, and you want to choose a “pro-life” product, mixed in with a “strong defense” product, and maybe a “low tax” product. You cannot go to the shelf and pull off each of these products and put each of them in your collective market basket. Instead, you look down the aisle and there are two baskets, chock full of products. Some of the products you can’t see because they’re hidden below others on the top of the basket. One basket clearly has a “pro-life” product, and also “low tax,” but has a “gut defense product.” And oh, by the way, it also has a “global warming carbon tax” hidden in the middle that you can’t see, along with “funding for National Endowment for the Arts.” The two hidden items in the basket you