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

Chapter Fourteen: Decision-making in Democracy: Public Choice 346 George Will offers a short video to explain the illogic of campaign finance reform here, please watch: Seemingly fair limitations thus lock in place the institutional advantages favoring incumbents, while impeding challengers’ ability to compete. But just as market players’ attempts to put barriers to entry in place are usually not successful over time, so too do political entrepreneurs find other ways to work around the barriers that incumbents may put in place, such as the recent rise of “527” groups making independent expenditures. Modern social networking and communication technologies are one example that is revolutionizing how political competition takes place. Ron Paul was aided in his 2008 anti-establishment presidential campaign by so called “money bombs. ” These small Internet contributions were bundled together on a specific day to give small donors the opportunity to be part of something bigger, and tended to shock the political establishment. President Obama excelled at using social media to promote his 2012 re-election campaign. Donald Trump’s use of Twitter was likewise recognized as a key factor in his 2016 electoral win. Whether in political or economic markets, barriers to entry are seldom permanent. APPLICATION IN PUBLIC CHOICE: THE NATIONAL DEBT “We shall not grow wiser before we learn that much that we have done was very foolish.” -F.A. Hayek, The Road to Serfdo m 3 We have illustrated how government becomes increasingly large ( Figure 14.1 , earlier) and why special interest politics tends to increase spending on wasteful projects (wasteful from a social point of view). The legacy of the expansion of government past its constitutionally designated functions in the 20th century has created an enormous problem going forward: our national debt is greater than our GDP . Even worse, if you include the cost of promised future programs (like our promises for social security and medicare), our national debt would be at least five times GDP. If you include the debts and promises of the state and local governments, it gets much worse: Gross domestic product (GDP): the monetary value of all final goods and services produced domestically within a given time period. Money in Politics: What’s the Problem?