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

Chapter Fourteen: Decision-making in Democracy: Public Choice 333 strongly dislike, but you hadn’t really thought about purchasing them when you went into the store. Further, you won’t even know they were in the basket until well after you get home with the basket. It’s as if someone unloads your basket at home and it might be two years from now that you’ll reach deep in the pantry and find the “global warming carbon tax” behind the sugar. The other basket has “strong defense” clearly on the top of it, but it also has “higher taxes on the rich” and “Universal Basic Income” in the basket. It has hidden items such as “tariffs on Chinese products” and “increased Pell grants,” which you may or may not like. So which of the two baskets do you choose? If you bought a regular product like Pepsi in the store, we could be very confident that you valued Pepsi more than your money. If you “buy” a bundle of political positions with your vote (including many that you cannot know), neither we (or the politician) can tell whether you are actually in favor of any politician’s particular position. Even aside from the rational ignorance problem (which suggests you won’t have a strong incentive to find out positions of politicians), many positions will be hidden and will not manifest themselves until much later. All we can say is that based on the two baskets of positions, which rational ignorance assures will only be a limited subset of the basket’s content, you prefer one basket to the other based on the limited knowledge you have. Unfortunately, the problem only gets worse. Because of rational ignorance, you have no incentive to actually dig deep into the politician’s behavior over time. Even when he or she reveals a position that you strongly oppose, you will likely never know unless you are a political junkie (in which case rational ignorance doesn’t apply). And of course, congressional committee structures and the “sausage making” process of creating a law allows many particularly egregious outcomes, with no attribution possible since it’s hard to positively assign blame. Many Americans will happily continue voting for a particular politician based on a very limited subset of information (such as political party), even when the politician acts against their broader interests. How many people do you know that vote for Republicans simply because they are supposedly in favor of limited government, or in favor of Democrats because they say they look out for the little guy? What can we conclude? The private sector has more effective incentives than the public sector to ensure responsiveness to specific consumer demands. Private markets respond to customers’ desires specifically (each transaction must add value), while political markets respond to desires generally (the total of all political projects may have general public support, while individual projects may be highly unpopular). Private markets tend to provide prompt feedback as to consumer satisfaction, while political markets provide very little (and delayed) feedback as to how a political choice meets voters’ desires.