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

Chapter Fourteen: Decision-making in Democracy: Public Choice 352 REASONS FOR ENCOURAGEMENT “You can always count on Americans to do the right thing - after they’ve tried everything else.” -Winston Churchill 5 I think we’ve tried about everything else. Maybe now we’ll do the right thing. Nobel Laureate James Buchanan said, “I am an optimist if I look backward, and I am a pessimist if I look forward.” Professor Buchanan implied that he was daunted when he looked at the challenges we face—certainly our debt problem looks insurmountable. But when you look back at all the problems we’ve overcome, then you can have confidence that we’ll figure this one out too. And if you are a believer, you can have confidence that whatever happens to the budget, your heavenly Father has you covered (Matthew 6:25-27 ). IT’S A WRAP! This chapter provided an introduction to how collective choice decisions are made, using a public choice framework. Economics studies the choices of individuals in the world we actually live in, not necessarily the world we’d like to live in. While none of the preceding analysis should be used as a rationale to say the government cannot improve on a market outcome, it does provide a compelling argument to show that any potential government solution needs to be made from a full political economy perspective—how will any government action actually be made? If a policy proposal is only likely to be successful with individuals pursuing the “public interest,” there may be significant unintended consequences. One area where collective choice decisions often intersect with markets is in international trade. Indeed, political economy arose as a field of study in part to address fallacious economic reasoning in foreign trade, a philosophy known as mercantilism. We’ll learn about this in the next chapter.