Tag: government

Intellectual Property and Incentives

The standard theory behind support for creating a legal monopoly for certain ideas, processes, and inventions is that absent such promise of monopoly there would be far less innovation.

It has a surface level logic to it.  People respond to incentives.  Legal monopoly means more money for the one who has it.  People tend to like the money incentive.  Therefore, more people will innovate because they have the incentive to capture greater rewards by securing a monopoly on the production or sale of their invention.

The weird thing is it doesn’t play out like this in the real world.  Something is missing.

Inventions typically spring from technicians and masters at a craft.  These are the types who are driven by a passion for what they do.  They want to solve problems, discover things, build things, and create things.  So they do.  If they seek a legal monopoly on their invention this happens after the fact.  It is hard to imagine many innovators saying, “Oh wow!  Think of possibility of solving this chemistry problem and discovering an entirely new way to do X!  Wait…get a lawyer in the lab before I go any further.  I refuse to make any discoveries without proof that I’ll be protected from competition once I do.”

And innovation doesn’t look like that.  You can see this by observing areas without the ability to get legal monopolies on their inventions.  Fashion, food, and football are a few of my favorites.  You can copy, borrow, and imitate fashion designs, recipes, and defensive schemes with abandon.  Many people do.  Yet each of these fields is as dynamic as any industry, constantly evolving and introducing new things.  Apparently the innovative offensive coordinator, cook, and designer don’t require the promise of monopoly to entice them to innovate.

People do respond to incentives.  This is a fact of life and one that need not be overturned to overturn the belief that IP laws are required for innovation.  Any good economist will tell you that incentives are many, and value is subjective.  The innovators are certainly responsive to money incentives, but 1) legal monopoly is not the only or best way to earn money for inventions and, 2) money isn’t the only incentive driving invention.

As for number one, consider how many people are typically working on a similar innovation simultaneously.  With the current IP regime, only one can get the monopoly.  If we want to take incentives seriously, what kind of incentive does this create for all the others?  Furthermore, the one most likely to get the monopoly is the one with all the lawyers and accountants and resources and willingness to take others to court, not the one with the greatest contribution to the discovery.  This would seem to drive upstart innovators away from the task for fear of being sued by the big guys as much or more than it would drive them to innovate for the possible promise of securing a patent.

As for number two, while the promise of monopoly may be the dominant incentive for lawyers and R&D departments, it’s not the dominant incentive for inventors.  They innovate first, driven by a passion for the task, the desire to solve a problem, create their dream, help a colleague, or improve their own daily life with some small innovation.  Yes, they want and seek money for the invention once successful, but the absence of a promise of monopoly does not stop them from creating.

Understanding incentives is crucial to really understanding how the world works and how to change it.  But an elementary look at incentives that examines only dollars and cents and only their intended, not actual, beneficiaries will not get you very far.

For more on the problems with intellectual property laws, check out “Against Intellectual Monopoly“.  It’s excellent.

Four Options When Government Gets in the Way of Your Dreams

Four Options When Government Gets in the Way

Illustration by Matthew Drake

 

This article is adapted from a presentation given at FEE and SFL seminars.  Co-authored with James Walpole for The Freeman.

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We all want to live free, but we have a problem: governments don’t always want us to.

From seemingly mundane rules (like banning raw milk sales) to the truly horrific (like taking your house from you or throwing you in jail), the state is probably going to mess with you at some point in your life. It will throw taxes and fees and fines and rules at you and erect roadblocks and regulations inhibiting your progress — especially if you’re trying to do something new and innovative.

What can you do?

You do have options. Grave as the stakes may sometimes be, you must first accept this outlook: it’s all a game. If you treat it that way, you’re more likely to find a way forward rather than simply cowering in fear or trembling with anger.

Here, then, are four options when you’re faced with the game of government interference.

1. Play the Game

This is the strategy you’re probably most familiar with. It’s what we’re all encouraged to do. Whether through voting, lobbying, or holding office, you can try to take on the state while playing by its rules. You can try to change it from the inside. This is a strategy we cannot recommend.

In business, this strategy leads to the phenomenon economists call “regulatory capture.” Many companies become involved in lobbying and political action to prevent hostile regulations. It’s understandable. They spend hundreds of thousands of dollars on campaign donations and dinners trying to sway politicians and regulators to delay a vote, join coalitions, or carve out exceptions.

It’s a tough, slow process, one that involves endless compromise of principle and decency, and the few who succeed end up with political power and the ability to gain more. They end up using that power not just to expand their own freedom but to crush the freedom of competitors.

But any changes you make will be temporary. Laws passed in one decade are easily repealed in the next, especially if they limit state power. The bigger loss is a personal one. If you play the game long enough, the game ends up playing you. You become a part of the power structure you were trying to fight.

2. Defy the Game

When the state crushes your dreams, you can fight back. History is full of people who stopped taking oppression for granted and started resisting. Look at the civil rights movement in the United States, the Hungarian revolt against Communist rule, or even Uber’s commercial rebellion.

Today, the ridesharing company is operating illegally in dozens of cities, and it’s already paid hundreds of millions of dollars in fines for its drivers who are caught violating local laws. The company is growing fast enough to absorb the damage, and while governments don’t like Uber, customers love it. In Uber-hostile cities like New York, riders are standing up for their favorite way to get around. The “rebellion” has been a huge success.

But rebellion plays out in more desperate ways in the rest of the political world. For people and companies without the money and reputation of Uber, successfully defying the game is hard. While you can get tremendous satisfaction from sticking it to the man, you might end up in jail. You might be killed. In other words, playing this way means you might run into the real power of the state in its rawest form.

3. Change the Game

Changing the game is about recognizing the incentive structures and putting external pressure on the government to bend. Often, all you need to do to win is to hold the state to its own rules.

But it’s not as easy as it sounds, and the people who try to change the game in this way have to be heroic, if not martyrs. They’re taking the longest route. Game-changers lower the cost of information to the public while raising the cost for government to break its own rules or be thuggish. This group includes lawyers, journalists, public intellectuals, and everyday citizens.

Look at the case of occupational licensing. Municipal and state governments throughout the United States require entrepreneurs to give up money and time to comply with regulations. Many would-be entrepreneurs are stopped dead in their tracks by competition-killing regulations.

Before the Institute for Justice (IJ) challenged the regulation, eyebrow threaders in Texas were required to train for 750 hours before they could set up shop. Before another IJ case in 2011, Texas required bakers wanting to sell cookies to the public to rent commercial kitchen space and obtain food-handling permits.

Changing the game isn’t limited to the courtroom. Governments will break their own rules if they can get away with it. Both IJ cases included concerted efforts to raise public awareness about the unfair consequences of the regulations while simultaneously challenging them in court. These efforts raised the stakes for any judge who wanted to rule for the status quo. It also resulted in politicians jockeying to change the law before the court case was even settled so that they could take credit and benefit from the positive PR. Think about the state lawmakers who jumped at the chance to restrict eminent domain after theKelo outrage.

This is one of the biggest pros of changing the game: if you’re successful, you’ve kept your own integrity, and you’ve helped to protect others from the dream crushers in government.

The problem is that you may not win. You can spend years of your life fighting the battle to change the game and lose — plenty of people have, from the Dred Scott case to the Kelo decision. Even if you do win, the victory is too often short-lived: as soon as public awareness and scrutiny abate, courts will “reinterpret” hard-fought constitutional changes put in place to restrict government.

4. Ignore the Game

Entrepreneurs in the last decade have made international-trade and immigration restrictions less and less important. Today, anyone can telecommute to work in the United States from a call center in India, an Internet cafe in Bangladesh, or a personal laptop in Mexico. These innovations allow labor to move freely, and the inventors never needed to lobby politicians.

You can quit, exit, and opt out of the games government uses to stop you. You can move. You can pull your kids out of school. You can alter your business plan. You can quietly sidestep the obstacles placed before you.

There are major benefits to ignoring the game. For one thing, you don’t have to think about politics. Psychologists and philosophers have long told us to not worry about things not under our control. By ignoring the game, you can be politically ignorant and much happier. You don’t have to fight court battles or Internet comment threads. You can focus on creating, not protesting.

Ignoring the game isn’t always as satisfying as defying it, but ignoring the game offers an immediate sense of personal freedom. It allows you to create a freer life for yourself while providing an example that others can learn from. Over time, if enough people ignore the game, it begins to wane in importance and power.

How Will You Respond?

If your goal is to live free, first understand the game and know the rules. The way you respond to the game is then up to you. The strategy you choose will have more influence over your quality of life than any near-term victory or defeat will.

You may respond to the government in many different ways throughout your life, but if you treat it like a game, it will be less likely to ruin you.

A Tale of Two Cities Part 2: Why People are Dumb at the Ballot Box

This is the sequel to a post about the two spheres we all dwell in – the political and the civil – and how each affect our behavior.

Originally published in The Freeman.

Why do so many San Franciscans want to curb Airbnb’s innovative business model?

Proposition F would have restricted the number of nights owners could list their homes and which types of rooms could be listed; it would also have required a litany of paperwork and reporting to a city department. Listings that did not meet city standards would have incurred fines of up to $1,000 per day. The details are many, but the thrust is obvious: this proposal was to make Airbnb far less successful at creating value for customers and investors.

The proposal ultimately failed, but it wasn’t a landslide. Forty-four percent of voters supported it. Nearly half of the voters in a city that owes its recent prosperity and identity to this kind of innovative company wanted to strangle one of the geese on whose eggs they are feasting.

Most political action is signaling.

The simplest explanation is that proponents of this proposal were the minority of businesses and individuals who are in direct competition with Airbnb — hotels and those working or investing with them. True, but something deeper is at work. A surprising number of investors, entrepreneurs, and everyday residents of the city who are not involved with competing businesses voiced their support for the proposal. Some supporters were even Airbnb investors.

How could this be?

Here are five reasons (by no means an exhaustive list) why people behave so badly in the political realm.

1. Other People’s Problems

Milton Friedman famously described the four ways to spend money. You can spend your own money on yourself, your own money on someone else, someone else’s money on yourself, or someone else’s money on someone else. It’s clear that you’ll be most judicious in the first scenario, and less so in each that follows.

All political issues are a case of the fourth scenario, even when money is not directly involved. You’re voting on the use of resources that aren’t yours — the pool of taxpayer dollars that fund government bureaucracy — to solve someone else’s problem, in this case hoteliers threatened by competition and San Francisco residents supposedly being pushed out of affordable housing.

Ballot initiatives tell us that some people, somewhere, are having some kind of problem — and that we can vote to make it better. It’ll cost you nothing (at least nothing you can see at the moment), so why not?

Not only voters, but also the regulators, enforcers, and drafters of such propositions are so far removed from the issue at hand and have no personal stake in the outcome that it is impossible for them to make decisions or draft policies without unintended consequences.

2. Information Issues

Proposition F is ridiculously complex. To cast a fully informed vote on the Prop F, one would need to begin by reading all 21 pages of legal text. What’s more, the costs of obtaining the information far exceed the probability that your informed vote will be decisive. The result is what economists call “rational ignorance.”

Customers, employees, managers, and investors of Airbnb are best suited to optimize the service. Even the company’s competitors are in an excellent position to curb it or force it to improve if they channel their efforts where the information matters, namely in the markets where they stand to lose or gain.

3. Signaling for Survival

Most political action is signaling. It’s not so much that people want to buy American or recycle everything — we know this because when their own money is on the line in the real world of trade-offs, they mostly don’t. But people want to be seen as the kind of person who buys American or supports recycling. There is tremendous pressure in the political sphere to prove to everyone that you support all the right things — especially things that come at a direct personal cost to you. This proves you care about that abstraction called “society.”

Once control by force is an option, a great deal of otherwise productive energy and otherwise creative people are drawn into the crooked craft of politics.

The best thing a rich person can do in the political sphere is vote for higher taxes on the rich. The best thing an Airbnb investor can do is claim to support regulations that restrict Airbnb. You’ll get lots of cheap signal points, even if what you support would actually be bad for everyone.

4. Binary Choices

Voting is a yes or no affair. The political sphere is incapable of genuine pluralism. Imagine if markets worked the same way. What if your local grocery store sent out a survey asking you to vote on which kind of wine you wanted them to stock, or how much, or at what price (with any losses to be made up by adjusting other prices)?

Can Airbnb be improved? Of course. Can a bunch of people with no control over the outcome and little skin in the game be given an up or down vote on a single policy proposal and make it better? Don’t be silly.

The adaptability, nuance, and diversity of options, offerings, and solutions in a market are the greatest strength and the very stuff on which the startup scene was built. Cramming broad society-wide solutions into binary choices is absurd.

5. The Problem of Power

The infamous Stanford prison experiment didn’t go horribly wrong because the wrong batch of subjects was chosen: it was a case of dangerous institutions and incentives. When rules are enforced by raw power, the person who wields that power has more control than any human being can responsibly handle.

Contrary to Thomas Hobbes, it is not the “state of nature” that is a war of all against all; it is Leviathan that rewards force over cooperation and cultivates the worst traits. Once control by force is an option, a great deal of otherwise productive energy and otherwise creative people are drawn into the crooked craft of politics.

F.A. Hayek wrote at length in The Road to Serfdom about why, in the political sphere, the worst get on top. It’s a predictable outcome of a powerful state.

Democracy doesn’t keep this tendency in check so much as it directs the power toward those who are best able to appeal to the desire of rationally ignorant voters to signal the trendy positions on the latest issues.

Focus on Freedom

The innovative startup founders on the San Francisco scene are an amazing force for good when they are pursuing their own interests within the incentive structure of civil society. Not one of them would remain a positive influence if they were granted monopoly power through the ballot box. Nor would their customers: even the most forward-thinking minds in the most innovative city in the world become petty and stagnant when operating within the confines of the political sphere.

When you act as a consumer and choose which kind of vacation housing to purchase, your action sends information and incentives rippling through the market price system, helping entrepreneurs guide resources to their highest valued use. When you act as a voter to support or reject a policy, you create losers and enemies, and your vote generates a host of destructive effects.

If you want a freer, better world, you’ve got to build it in the private sphere.

Four Ideas I Don’t Think Are Crazy (but you probably do)

I think these ideas are so straightforward and unscary that the world wouldn’t even look that different tomorrow if we did this today.  Shortly after tomorrow, the world would look significantly better.

  • Stop funding the Post Office and replace it with nothing.
  • End the TSA and let airlines do security however they wish.
  • End the FDA and replace it with nothing.
  • Scrap criminal law and let civil law handle everything.

How Change Happens – Higher Ed. Edition

The current higher education model is flawed.  If we’re serious about changing it, first we need to get serious about understanding how social change happens.  Intentions and action are not enough to bring about desired ends.  We need an understanding of the causal relationships involved in order to effectively bring about change.

The great truth that flies in the face of civics textbooks and popular myth is that politics is not the source of social change.  It’s more like the last in a line of indicators of cultural shifts that have already occurred.  Politicians and the policies they create only change after the new approach is sufficiently beneficial to the right interests, and sufficiently tolerable to the public at large to help, or at least not harm, political careers.  Of course some politicians guess wrong and suffer accordingly, but by and large the political marketplace tends toward preservation of the status quo until a new direction is imperative for survival.

An entire, and entirely fascinating, branch of political economy called Public Choice Theory examines the incentives at work in the political marketplace in depth, and I highly encourage anyone attracted to political action to gain a working knowledge of this field.  It reveals, in short, that incentives baked into the democratic system create and perpetuate policies that are bad for the public at large, and good for particular concentrated interests.  What Public Choice has a difficult time accounting for is the role of changing beliefs.  There are countless policies that, based purely on the incentives of various interests, ought to be in place but are not, or vice versa.  Some things are simply out of bounds, no matter how much a particular group might benefit and be willing to lobby, because the general public finds them unacceptable.

Contrary to the seemingly ironclad rule of interest driven politics, public beliefs can and do change, and dramatically sometimes, putting parameters around the area within which political actors can ply their trade.  Slavery is a striking example.  At one point, it would’ve been hard to get elected, at least in some areas, if you publicly supported abolition.  Not too many decades later, it’s unthinkable to get elected anywhere if you’ve ever even joked about supporting slavery.  There is certainly a complex relationship between changing economic incentives and public beliefs, but it is undeniable that the about-face on the ethics of slavery was more than a mere shift in power among competing interests.  What most of the public found tolerable they now find reprehensible.

Our institutions are formed by incentives, and incentives are constrained by beliefs.  That makes the beliefs of the public the ultimate key to change.  Smaller changes might occur within the window of things already publicly acceptable, but major change requires a shift in that window.  How to change those beliefs?  There are two primary drivers, both of which feed each other; ideas and experiences.

Ideas are the raw data that form beliefs.  If you accept the idea that minimum wage laws make lower skilled individuals less employable, and you accept the idea that a society with fewer unemployed persons is desirable, then you will have the belief that minimum wage laws are bad.  If, on the other hand, you’ve never really thought about the economics behind minimum wage at all, but your low skilled neighbor lost his job when minimum wage increased, that experience might also cause you to believe minimum wage laws are bad.

I spent a good part of my life focusing entirely on disseminating ideas as a way of changing belief.  It was fulfilling and, I think, valuable work.  But it wasn’t until relatively recently that I began to understand the immense value of experience as a vital second prong when it comes to changing beliefs and the world.

Consider the difficulty of convincing your mother that the New York City taxi cartel is inefficient or immoral.  It requires a great deal of economic theory or philosophizing about rights and coercion.  Your mom might have other things she enjoys more than reading books on these subjects.  Even if you convince her, her newfound belief will probably barely register among things she cares about.  Sure, taxis aren’t the greatest.  So what?  She’s never had that bad an experience.  Even if a policy change to end the cartel were possible, your mom mighn’t pay any attention, or she may be concerned about what the new world without cartels would look like in practice.

Now consider recommending your mom use Uber on her next trip in to Manhattan.  She uses it, likes it, and becomes a regular customer.  She may be completely ignorant of the current cab cartel and the problems with it, but she’s now a believer in an alternative system.  If Uber comes under attack from vested interests, she’ll defend it.  If the chance to end the cartel comes up, she won’t fear because she already knows what the world looks like without it.  She can’t easily be convinced out of her experience.

It is for this reason that dictatorial countries not only ban literature that propagates new ideas, but also goods and services that compete with government monopolies and let people experience something better.  The Soviet Union feared blue jeans, jazz, and Marlboro cigarettes as much as free market textbooks.

If we want to break out of the educational rut it requires new ideas and new experiences.  We mustn’t only talk about new approaches, we must build alternatives.  The best part is, you don’t have to wait on anyone.  You can take your own path right now, and by so doing not only improve your life, but serve as an example to others of what’s possible outside the status quo.  Educational entrepreneurs, not just intellectuals, will change the hidebound approach to education.  It’s already happening.

While policymakers, pundits, professors, and provosts squabble about the future of higher education and jockey to secure their position, entrepreneurs are busy creating and delivering alternatives across the globe.  The educational consumer is enjoying new experiences and getting new ideas about education in the process.  The old guard can argue any which way they like, but at the end of the day they’ll have to prove more valuable to the learner than the myriad new options.  All the protections and advantages in the world can’t stop competition now.  Technology has helped break it wide open.

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Excerpted from The Future of School.

The Final Enforcer of Contracts?

Think about construction projects.  Which projects have the highest likelihood of being over budget, under expectation, and past schedule?  If you’ve ever built or remodeled a house you might say all of them, but there is one organization that consistently sees cost overruns, quality problems, and time delays more than any other.  Government.

Government projects are notorious for shady contracts in the first place, broken promises during the project, and lackluster results after, including continuous repair and maintenance far exceeding what was originally planned.  Government is a bad general contractor and project manager.

This is particularly interesting when you consider one of the major justifications given for the existence of coercive states.  We need, the argument goes, some entity with complete monopoly power to be the final arbiter and enforcer of contracts.  Yet we have this entity right now and it is consistently worse at making and enforcing contracts for its own projects than almost any private company or individual.

When will we stop believing that the incentives magically improve in the absence of competitive pressure?  When will we look around and notice that all the order we see and experience every day is being maintained by a complex web of emergent beliefs, norms, and institutions within a constant give and take marketplace?

Why Pool Attendants Are Better Than Bureaucrats

Originally published in the Freeman, and there is also a mini podcast version below.

“We’re not checking IDs today,” the pool attendant told me.

We have a nice pool for the neighborhood, maintained with HOA dues. The homeowners association has tried different methods of monitoring who comes in to keep nonresidents from filling up the pool and squeezing out dues-paying members. A few times last summer, this was a problem. This year, a new company was hired to issue IDs and ensure that only residents use the pool. But not today.

Today the water was a bit cold and the pool wasn’t busy. The attendant realized this and didn’t hassle swimmers and sunbathers with an ID check. When he uttered those words it hit me in a flash just how profound it was. The ease with which he used common sense to bend the rules was a beautiful moment. Maybe you think I’m being dramatic, but let me offer a contrast.

A few years, ago I was in the security line at the airport with my wife. She removed her plastic baggy of size-approved liquids and gels and placed it in the container. The TSA agent picked it up and grunted, “Uh-uh.” Bewildered, I asked what the problem was. She said my wife needed to remove an item from the bag. I objected that every item was within the approved size and the bag was a recommended part of the procedure. The agent said that, according to regulations, the items are supposed to fit “comfortably” in the bag. They were pushing against the sides, ever so slightly stretching the plastic. We had to remove one. I asked her which individual item was a threat to security. She told us it didn’t matter which item was removed. The absurdity of the situation was beyond parody. There is no conceivable world in which a too-snug plastic bag of harmless toiletries could pose any possible threat to security. But it was the rule. Every bureaucrat knows rules must be followed without question.

If you’ve ever gotten a speeding ticket, as I have, for going 10 over at 3:00 a.m. on a five-lane road with no traffic, or for running a red light in a sleepy town with no cars for miles, you’ve felt the same. It’s clear that the reason for the rule — to keep drivers and pedestrians safe — is no possible explanation for its enforcement in these situations. Indeed, enforcement itself makes roads less safe due to police vehicles sticking out into the road and blocking other potential drivers. Meter maids handing out tickets for 2 minutes over in a lot surrounded by empty spaces is just as crazy. Parking meters and tickets are there to ensure spaces are available in high-demand times. What’s the point of ticketing when ample parking is available? Carding geriatrics for buying alcohol and so very many other examples of this silliness abound.

I posted a complaint to Facebook after the TSA incident. One of the commenters said, “Sure, following the letter of arbitrary laws in bad contexts is a pain, but would you rather have those agents doing whatever they want and using their own discretion on the spot?” The question becomes more poignant when you consider not just the bureaucrats armed with bad attitudes like those at the DMV but the ones armed with guns on the police force. Rule following is paramount in a bureaucracy because the alternative is also frightening.

It’s easy in the public sphere to get caught up in such debates. Is it more practical and just for government agents to use discretion in the moment when applying regulations, or for across-the-board universal application? It seems vexing: a problem without a solution. Whatever side of the debate you take feels uncomfortable. The letter of the law is oppressive and in some cases downright crazy, certainly counterproductive with respect to the law’s intended purpose; but discretion is a scary proposition as well, as many cases of selectively enforced law attest.

Outside of government, however, this is a nonproblem. When something is moved from the private, voluntary sphere to the public, coercive sphere, debates and division arise where none previously existed. The real problem is not rule following or flexibility; it’s monopoly. The absence of competition in the government sphere and all the attendant incentive problems create this unnecessary quandary.

It’s not that the police officers and TSA agents are worse people than my pool attendant; it’s that they face worse incentives. There is no metric for them to determine customer satisfaction or the value of their actions, because there is no profit-and-loss signal and no fear of losing our business. We are legally obliged to pay for and receive their service (or disservice.)

The pool attendant can be flexible with the rules when applying them strictly would annoy customers. He can become stringent when things get busy and residents complain about freeloaders. His company knows that at any time, they could lose the contract, and the only reason they are hired is to make residents happy and solve a problem. It’s the outcome that matters, and all procedures, policies, and rules are measured against that. This leaves ample room for experimentation and adaptation, with immediate feedback and accountability.

The public sector has no such flexibility because it faces no competition. The political sphere can make social and economic problems that have already been solved with incredible nuance seem unsolvable. It offers only yes-or-no, either/or, once-and-for-all-and-everywhere solutions, applied and enforced by people with almost limitless job security. It is a blunt tool, and incredibly unresponsive. It is unconcerned with outcomes and measures effectiveness only by inputs, intentions, and actions — not results.

Whether the letter of the law or individual discretion is preferable is the wrong question. Both are to be feared with state monopolized services. Neither is to be feared in competition because the choice is no longer binary but an ongoing dance of pluralistic discovery.

We’re not checking IDs today. Those five simple words reveal the beauty, complexity, and humanity of the voluntary market order.

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I recorded an audio version of this first, live on-the-spot at the pool using my iPhone.  I’m experimenting with some mini podcast episodes like this.

Three Unpopular Beliefs

I have a number of beliefs that are outside the mainstream.  Probably the three most controversial are listed below.  These beliefs were hard to arrive at.  None of them came naturally or intuitively, and all of them are a fairly significant departure from what I once believed.  In many ways it would be easier if I did not believe these things.  Still, these three unpopular beliefs play defining roles in what I do, and how and why I do it.

  1. The deliberate instruction of children is a net-negative. (Unless they seek and choose it themselves.)
  2. Government is unnecessary.
  3. Efforts to improve your own life do more good for the world than efforts to do good for the world.

The Burden of Proof

Violence is the least civilized and most extreme reaction to any problem or situation.  Even if you believe it warranted in some cases, it is universally seen as a last resort when all other methods have failed.  Even then there had better be a really good reason to use violence.  A mere, “Because I wanted something and couldn’t think of a better way to get it”, or, “Because she wouldn’t do what I said”, or, “Because I’ve done it that way before” don’t pass moral muster.

The one distinguishing feature of all governments is the use of force.  Every other function and activity governments engage in are not unique to governments.  Only the formal monopoly on the initiation of violence sets governments apart.  There is nothing a government does that is not backed by force.  Government is force.  Whatever ones belief about the necessity or goodness of government, this definition is not controversial.

Given our two premises above, a very simple conclusion follows:  Any government action ought to be viewed with extreme caution, skepticism, and as a last resort for the most pressing and important problems.  The burden of proof should always be on advocates of government action to prove it superior to any and all other scenarios.  And that should be a weighty burden.

This burden of proof is important not only because is government action is at bottom violent action, but especially when we consider that government has worse incentives than other institutions to get and keep things right.  (See Public Choice Theory).  Everything we know about the history of government plans and programs and laws, and everything we know about politicians, bureaucrats, and the political process ought to add to our caution and skepticism.

Note that this is not an ideological argument.  I am making no claims about the number of things that warrant government action.  You may believe it is a great many things while I believe it is nothing at all.  The only case I’m making here is about where the burden of proof should be when discussing any government law, regulation, tax, expenditure, or action of any kind.

We see the opposite more often than not.  A new regulatory apparatus or war or program is proposed and who is placed immediately on the defensive?  Nine times in ten the burden of proof is placed on those who oppose the action.  Surely this is an illogical and dangerous default.

I’ve been particularly surprised to see this in the case of proposed ‘Net Neutrality’ regulations.  This is a special case indeed, because it is a solution for a mostly nonexistent problem.  It’s not a time of crisis where people are so scared and desperate for any action that they suspend skepticism and gobble up whatever is proposed.  Internet users aren’t experiencing some kind of widespread horrors that have them storming the gates demanding change.  The proposed body of regulation would do nothing for consumers in any way easy to identify, and doesn’t even pretend to solve any kind of major, commonly felt problem.  It’s inside baseball among tech companies jockeying for position and running to that state to do it.  It will without question make the internet less dynamic and slow innovation, but even if it only did what advocates claim it would still not be any wonderful change from the status quo.  Surely this is a case where the public at large would respond with, “What is this new set of government activities and regulations being proposed and why should we listen?”  Surely the burden of proof is on those proposing this vague and confusing web of regulations.  Apparently not.

The conversation seems to have taken on a decisive tone.  Everyone knows NN is needed and warranted.  Any objectors must make an airtight case and must be highly credible persons.  Only then, maybe, can we discuss it being tweaked or slowed, or possibly stopped.  There is an air of inevitability about it, as with many major government actions, and skepticism isn’t aimed at the policy, but of anyone who doubts it.  Be skeptical of the skeptics, not the proposed action.

Worse, the skeptics themselves seem to accept the burden of proof as rightly belonging to them.  Those who best understand problems with government and are most skeptical of it are busy policing each other, trying to ensure everyone makes the best possible case.  They have to be sure not to offend.  They have to be sure to address every possible angle.  They can’t have a single weakness in their argument or thinking.  They can’t afford lazy logic.  But if we stop and consider what’s being proposed – an increase in government action (by definition violent action) – why should skeptics have to prove themselves?  The burden of proof ought to be entirely, squarely on advocates of the action.

Notice that I am not advocating for status quo bias.  I don’t think anything new or different in society ought to be treated more skeptically than the status quo.  It’s not about the newness of ideas or actions.  It’s about the type of action proposed.  When a raw exercise of force is the solution those advocating it ought to have the burden of proof.  This goes for existing instances of force-backed solutions as well as new ones proposed.

What reasonable person would say that force should be the first resort, or that action backed by it needn’t be considered or scrutinized more than any other?

We Already Have the Solution: It’s Called Freedom

Milton Friedman once said of the political system,

“I do not believe that the solution to our problem is simply to elect the right people. The important thing is to establish a political climate of opinion which will make it politically profitable for the wrong people to do the right thing.”

There already exists an institution that ensures people, be they right or wrong, do the right thing.  It’s called the market.

Any wish to constrain government, or keep political interests behaving in the interest of the general public, is a wish that government behave more like a market; and that the political class behave more like individuals must behave to succeed in a market.  All reform efforts aimed at making the state smaller, less oppressive, more accountable, more efficient in it’s various activities, and less arbitrary are efforts to make it completely unlike itself, and completely like the market.

What I mean by the market is the entire realm of voluntary exchange and coordination.  Politics, like all institutions, is a type of market, but not the type I mean.  It has two unique feature that no other institution has, it produces a host of things unthinkable under other institutions.

The first unique feature is coercion.  The transactions in the political system are not voluntary.  This dramatically alters the incentives and signals in all the exchanges.  “Customers” tolerate what they hate, because it’s not worth being jailed for.  The second unique feature is near universal moral approval.  Though the coercion is real and known by all, it is not only accepted, but praised and condoned.  No other institution enjoys this kind of unskeptical reception and sanction.  Without these two features, there is no state.

It is easy to see why governments produce so much of what we hate, and destroy so much value.  Any market entity that attempted to engage in a single activity the way government does would cease to become profitable and receive universal scorn.  On the market, people think it immoral and tasteless to say you’ll provide a free soft drink with a sandwich and not make good.  That kind of behavior from a corner deli wouldn’t last a week.  On the political market, people think little of a politician who promises to stop sending young people to kill others across the globe, but then sends more instead.  That kind of behavior might get you another four years.

If we wish for the wrong people to do the right things, we can engage in the monumental task of altering public belief and preferences enough that they are willing to pay the price for resisting the state.  We can work to continually alter the incentives faced by politicians on every single issue, fighting back against every incentive built into government.  Of course, the state itself resists this by its very nature, and always will.

The real solution is not the state at all, but the market.  It’s not changing the state, it’s letting it fade into irrelevancy as markets grow up around it, carrying out all the activities states try so jealously to monopolize.  Markets don’t require perfect consumers or producers.  They put bad people in the position where they must do good to succeed.

Friedman was right.  The easiest way to do it is to force political entrepreneurs out of government, and into the realm where they’ll have to be market entrepreneurs.

The Myth of Self-Regulation

No business, product, service or industry can self-regulate. All must and will be regulated by some external entity. The question is who or what?

In a market, regulation is inescapable. Firms are regulated by wholesalers, retailers, capitalists, workers, packagers, shippers, competitors, consumers, shareholders and public opinion. These myriad regulators are exacting. They apply pressure from every angle, on every aspect of business. Get sloppy with your purchasing practices and wholesalers make better deals with your competitors. Overlook product safety and consumers and public opinion slap you down. Make frivolous expenditures and your source of capital and shareholders head for the hills. Drive too hard a bargain with employees and productivity declines or they leave you for another firm.

Firms have room for experimentation and risk-taking, but they have full responsibility to all of these market regulators for the outcome. No firm is a “price-maker” in a market. No firm is a compensation, safety, or policy-maker in the market either. All the parties to which they answer set the terms. Oh sure, firms can do what they want; unless they seek profit. Profit demands that they obey the regulators that fill the market across the whole production chain. It’s not easy.

Firms that have become successful and large tend to get tired of the constant regulation. They want a reprieve from the demands of stakeholders. To gain freedom from the regulating market, firms seek the comfort and stability of government regulation.

Government regulation is nothing like market regulation. It’s yoke is easy for the well-connected and deep pocketed, but often unbearable for the shoestring upstart. Market regulation is blind to size, wealth, political affiliation, slickness, religion or creed. Government regulation is built upon them.

Market regulation keeps an open invitation to anyone who wants to join the ranks of regulators; though promises no one their opinions will have a final say unless they prove worthy across the market. Government regulation is strictly closed off to anyone except those long-loyal to the party in power, and promises that the elite cadre of regulators’ opinion is final and binding. Market regulation is nimble, swift, constantly adapting, inescapable and unrelenting. Government regulation is ham-handed, slow, hidebound, avoided with a little craftiness, and backs off for a favored few with the right mix of political moves.

Market regulation is created and enforced by parties that stand to gain or lose by the actions of the regulated; parties who gain real-world expertise on the regulations effects. Government regulation is created and enforced by parties with no connection to the regulated actions or items, except the few politically connected firms that agitate for it. Market regulation draws on the dispersed knowledge of millions across the globe, from experts to anonymous users. Government regulation pretends a handful of elites can outthink the millions.

Market regulation seeks only the betterment of all market participants, regardless of which firms offer it. Government regulation seeks to destroy some firms for the benefit of others, regardless of what they offer market participants. Market regulation is by the many, for the many. Government regulation is by the few, for the few.

Self-regulation is not an option. The question is who’s a better regulator, markets or government?

The Worst Protection

You feel safe in your neighborhood, but worry about the small chance of a break-in or act of vandalism. To protect yourself from these risks, you pay a security company to look after your house. It costs a little more than you’d like, but you determine it’s worth it.

They put an unarmed guard in front of your house at night, just to keep an eye out. It seems a bit unnecessary, but you rest easier knowing he might deter would be thieves. The guards start coming earlier and staying longer. It seems silly to have them there before sundown, but you ignore it. Soon, they’ve got someone there almost around the clock. Then they send you a bill with a new higher rate for their services. You suggest going back to night only guards, but they assure you this is necessary to protect you, and also tell you the neighborhood is getting a bit more dangerous. You pay.

The next week, not only do they have a guard around the clock, but he’s armed. Then there’s two or three patrolling at a time. Rates go up again. You’ve been hearing more stories about how dangerous the neighborhood is, so you pay. Before long, they have a constant cadre of armed guards patrolling not just your sidewalk, but the whole neighborhood. They start randomly knocking on your neighbors’ doors and searching their houses for anything they might use against you. They set up permanent stations throughout the area, manned 24/7. Guards constantly patrol and conduct random searches, without permission, and occasionally they cage or kill someone. They assure you; there was reason to believe these neighbors had it in for you. It’s a jungle out there. They raise their rates.

Some of your neighbors object. Some devise ways to protect from being searched or bullied. All become suspicious of you, and a little angry. After all, the guards are invoking your name when they do this. The more the neighbors resist or lash out at the guards, the more the company explains just how unsafe you are unless you purchase the latest upgrade. You do. They deploy more street walkers. They pre-emptively kill and cage more neighbors. It seems a fight breaks out every day. Bands of neighbors form for the sole purpose of combatting you and your security team. Their children grow up afraid of you and they hate you, and your children, for it.

The company says more is needed; threats can come from anywhere. Now guards are groping your guests and your children each day before they enter or exit your house. They search your house on occasion, just to be sure your conspiring neighbors don’t have an inside man. They treat you like a suspect on your own property. You pay the new fee with the only credit card you haven’t yet maxed out.

Every day you wake up scared of your neighbors, suspicious of your guests, leery of your own children, and irritated by the guards who may or may not rummage through your belongings. You juggle money around just to keep the lights on, meanwhile the guards roll around in tanks, thanks to your borrowed money. You remind yourself that they’re here to protect you from an increasingly dangerous neighborhood. It’s worth it. Sure, they could cut some costs, but it’s a struggle to convince them of anything, and it’s a little intimidating to try. Besides, what’s a few dollars overspent compared to the imminent danger you’d face if they scaled back too far?

One day it hits you: you’re not safer. You’re paying a lot of money, not to insure you against unlikely violence, but to stir it up. You’re paying to create enemies, not defend against vandalism. You’re paying to be treated not like a customer, but a criminal in your own home. You’ve been ripped off. You have fewer options when it comes to social circles, since you’ve made a lot of enemies. You can’t travel down certain streets, because there your name has become a byword. You’ve learned to fear your neighbors and you’re not really sure why, or what threat they pose except to the guards that harass them.

You fire the company and begin the long task of putting your life back together.

Unfortunately, it’s not that easy in the real world. You can’t fire those that provide supposed security. You have to pay, and you have to obey, or else. Don’t be mistaken: just because it’s done on a grander scale and wrapped in a lot of fuzzy feelings and national myths, doesn’t make it different from the neighborhood story above. States are supposed to provide protection; instead they poke people with sticks and incite them to violence.

The United States has enemies. I do not have enemies. There is no one in a far flung place in the world looking at a map and saying, “Here, on the Atlantic coast where the Cooper and Wando rivers come together. The people who have chosen to live on this bit of land are terrible. Let’s invade them. Let’s kill them.” Every international threat to me is a threat to me because I am associated, whether I like it or not, with the United States government.

Acts of terrorism and war are strategic acts. They are intended to pressure the state into changing its policies, or to make it pay for previous policies. Attackers know that the state ultimately responds to the views of its people and the interests that form around it. They attack civilians because they believe it creates impetus for the state to do what they want. We are the pawns in the game of states. We are at risk because we are seen as leverage with which to manipulate the political class.

The state is often defended as necessary to secure individuals against foreign aggression. Yet foreign aggression has no target if there is no state. The state does not make us safer, it makes us less safe. It kills in our name, with our money. It harasses us in our own country in the name of protecting us. It makes us suspicious of people we’d otherwise never know, or know only through Tweets or peaceful commercial interactions. It makes us hated.

The sooner we can forge an identity separate from the states that claim to protect us, the safer we will be. If the state is a kind of security provider, or insurance against international aggression, it’s the worst form of protection I can imagine. You wouldn’t stand for a company that marauded through the neighborhood in your name; you shouldn’t stand for a nation that does either.

Why Government Fails – Public Choice for Everyone

There are innumerable arguments about the legitimacy and morality of government and its proper scope, all of which are worth exploring.  Public Choice Theory examines an entirely different question than what government ought to do.  It asks what government actually does.

Public Choice is the study of the operations of government using the analytical tools of economics.  In short, the same assumptions about human interests and actions are applied to the political market as the market for economic goods.

The real power in this theory is its ability to reveal how poorly government works in practice.  It does not address lofty notions of the ideal state, or the right and wrong of state action, but rather examines the actual operations of states to see if they are effective at achieving their stated goals.

Public Choice theory by that name is relatively new among schools of economic thought, but the application of economic insights to political institutions is not new.

This is a basic overview of the core insights of Public Choice Theory.

Why government?

The need for government is typically justified by the claim that there are certain “public goods” which cannot be supplied by the voluntary forces of the market, but are nonetheless beneficial to all members of society.

The standard analysis describes goods like roads, for example, and spends a great deal of time analyzing the incentives in the market to explain why roads will not be sufficiently provided.  It is supposed that everyone would benefit from a road and it would be “non-excludable”.  That is, once constructed, it would be too costly to prevent members of society from using the road whether they paid for it or not.  Because of this non-excludability, rationally self-interested individuals would be unwilling to contribute to a voluntary fund for the maintenance of the road.  Each individual knows that their contribution is small relative to the entire road fund, and furthermore that without their contribution, they will still enjoy use of the road.  With these incentives facing everyone, no one will contribute and the road will decay.  It is in no one’s individual interest to pay for road maintenance, but everyone would be better off if each person contributed.

You may substitute any number of “public goods” for roads, but the standard analysis is the same.  It looks closely at the incentives in the market, deems them unfit to provide the good in question, and concludes that the good must be provided by the state.

Let’s grant, for the sake of argument, that the analysis of the market is correct.  (There is ample evidence to the contrary of course: Nearly any “public good” you can imagine has at some point been, or is even today, provided by the private sector, even though theorists sometimes fail to imagine how.)  If we accept the inability of the market to sufficiently provide the good, there’s still something missing in the standard story.

All the time is spent analyzing what would happen in a market of rationally self-interested individuals and what the incentive structure would produce.  When deemed insufficient, no time is spent analyzing what happens when government attempts to provide the good.  (This is what Art Carden has colorfully dubbed the political economy of the Underpants Gnomes.) What happens if we use the same assumptions and analytical rigor when examining government provision of public goods as we do for the market?

Political self-interest

In order for government to solve public goods problems it would require selfless politicians.  The political actors who use tax dollars to maintain the road would have to be counted on to discharge this duty rather than, say, spend the money on something else or give it to a subpar contractor who happens to be their friend.  But if we are consistent in our analysis, we must treat politicians as rationally self-interested people too.  They have every incentive to act to their own benefit at the expense of the taxpayer.

How can the self-interest of the political class be kept in check?  The textbook answer is democracy.

Democracy as a restraint

Does democracy ensure that the political class will pursue the interest of the public, rather than their own?  The answer is a resounding ‘no’.  The reason is because voters are also self-interested.

It is well known that, statistically, an individual vote in a state or national election is meaningless.  The odds of one vote changing the outcome of a national election are worse than the odds of winning the lottery.  The odds of getting in a car accident on the way to the polls are greater than the odds of an individual vote making a difference.  In other words, the possibility of an individual vote resulting in measurable benefits to that individual is almost nonexistent.

In order for democracy to keep the self-interest of politicians in check, voters need to have an understanding of what they’re voting on and what policies are good for the whole of society.  This would take a tremendous amount of time and effort.  A single bill may be several hundred pages of technical legalese, and most elected officials vote on hundreds of bills in each term.  For a citizen to be informed enough to know what policies are good for society vs. good only for the politicians is incredibly costly.  Yet the individual vote of a citizen has almost no chance of changing the outcome or conferring any benefit.  The rational response is to be ignorant of policies, because the cost of being informed is so much greater than the chance of benefiting from being informed.  A dedicated, informed voter has one vote that is cancelled out by just one ignorant voter.

The result is what economists call “rational ignorance”.  Voters are ignorant of policies and positions because to be otherwise is a burden with no reward.  But there are some people for whom knowledge of policies is beneficial; namely, the small groups that are directly affected by those policies.

A bill to give a $100 million subsidy to Acme co. is worth a great deal to that company.  They would not be foolish to spend $99 million lobbying for its passage, as they would still come out $1 million ahead.  Voters, on the other hand, have no incentive to lobby against the bill because spread out across taxpayers it might cost each just a few dollars, while active opposition – even just a letter to a Congressperson – might take hours of time that could be spent doing something worth more than a few dollars.  This is why democracy results in concentrated benefits and dispersed or diffused costs.  The rationale of politics is to provide benefits to concentrated interests and spread the costs as far and wide as possible – including into the future by way of borrowing or inflating to pay for it.

The obvious result is a myriad of special interests seeking benefits at the expense of the broader public.  In the end, everyone is worse off, but every group has the incentive to continue to seek privileges, if for no other reason than to offset the costs they are bearing for the privileges lavished on every other group.  This is why Frederic Bastiat described the state as, “That great fiction by which everyone tries to live at the expense of everyone else.”  It has been described elsewhere as a game where people stand in a circle and the state takes a penny from each person, then awards five pennies to one of them at the end of the round (the other five being kept by the state).  The game is repeated until each person has been the “winner” of five pennies at least once.  They all begrudge the loss of a single penny each round, but all eagerly expect to be the winner in another round, not realizing that at the end of the game every single person in the circle has less than they started with.

The incentives in a democratic system lead to special interests lobbying for and receiving privileges at the expense of society.  Far from keeping the self-interest of politicians in check, instead democracy promotes and rewards it, so long as those politicians also provide benefits to every imaginable minority and hand the majority the bill.

But let’s ignore all that…

Let’s assume away rational ignorance on the part of voters.  Let’s pretend that voters will expend every effort to become knowledgeable and constrain the self-interest of politicians.  Let’s say the “will of the voters” can keep officials in check.

But what is “the will of the voters”?  It is not an easy question to answer.  Let’s walk through the selection of a preferred policy through the democratic process.  The policy in question is what to do with troops in Iraq.

Option A: Keep troop levels the same

Option B: Increase troop levels

Option C: Remove all troops

Now let’s look at the preferences of three different voters.

Voter 1: A>B>C – Prefer to keep the same level of troops, but if any change is going to occur would rather increase troops and “get the job done” than to pull out.

Voter 2: B>C>A – Prefer to increase troops to “get the job done”, but if that’s not going to happen better to pull out entirely than keep the same level of troops.

Voter 3: C>A>B – Prefer to remove all troops, but short of that, better to leave the same number of troops there than to add more.

Whether or not you agree with the preferences of these voters, it is clear that each of them has a rational sequence of preferences among the given policy options.  You probably have met people who hold each of these views.  To determine the “will of the voters”, let’s put these options to a vote and see what policy the elected officials should follow…

In a vote between policy A and B, policy A would win.  Two of the voters prefer A to B.  If we put policy B and C to a vote, policy B would win.  Finally, if we put policy A and C to a vote, policy C would win.

So what is the will of the voters?  According to the votes, they prefer A>B, B>C, and C>A.  In practical terms, it means the “will of the voters” is to have the same level of troops instead of more, more troops instead of none, and no troops instead of the same number.  That would be like a person saying that, between Snickers, Baby Ruth and Heath bars, they prefer Snickers above all, followed by Baby Ruth, followed by Heath, which they prefer to Snickers.  This is a non-transitive set of preferences, and is one of the definitions of a mentally impaired person.  The will of the voters is a logical impossibility. This is called vote cycling, or Arrow’s Impossibility Theorem.

You can see how, based on the structure of the voting process, entirely different preferences can emerge.  This means that even if the voters were well informed, democracy would fail to provide a clear “will of the voters” for politicians to be accountable to.  Take this simple example of three clear policies and substitute a number of politicians each with positions on dozens of different policies and it is utterly impossible to know what the “will of the voters” is based on the results of elections.

Okay, let’s also ignore all that…

Let’s go a step further.  Let’s pretend that voters are not only informed, but that by some magic the “will of the voters” is clear as day and easily ascertainable through the democratic process.  If we grant these two monumental assumptions surely democracy will serve to protect the interest of the public at large from those of politicians and special interests…right?  Unfortunately for democracy, its problems are even greater than rational ignorance and the impossibility of a clear “will of the voters.”  The “will of the voters” may actually be for policies that are harmful to those voters themselves and the public at large.  This is what Brian Caplan has called “Rational irrationality”.

Voting is not the same as purchasing something in the market.  To vote is to express a preference, while to purchase something is to demonstrate a preference.  Voting, like filling out an anonymous survey, is “free”.  You can voice whatever preference you like without being held accountable for the result.  Imagine if a grocery store sent a survey to nearby residents and asked them to vote for what items they would like on the shelves.  It’s not hard to see what a disaster this would be for patrons of the store.  People may vote for bizarre items just to be funny.  People may vote for items they think they ought to buy, rather than items they actually do buy; or items they think their neighbors should like, rather than what they do like.

When people are asked whether they like it when companies outsource production to countries where labor is cheaper, most will say no.  Yet many of these same people purchase lower priced items produced overseas instead of more expensive domestically produced alternatives.  Their stated preference is for American made goods, but they demonstrate by their actions that they see foreign goods as more beneficial to their own well-being.  It is “free” to say you want to protect American manufacturing jobs, and it may feel better to voice that opinion, but if faced with the costs that result from the outcome of a protective tariff, people may choose otherwise.

Voting is a free way to indulge irrational biases.  Voters do not vote for policies that they themselves favor, but for policies that make them feel good to vote for.  They vote for the candidate who promises to stop immigration because it feels right on an emotional level, yet they hire the migrant worker to landscape their business because it benefits them more than the alternative.

Voting separates the voter from the results of his vote, and creates an incentive to use votes carelessly and in ways contrary to his actual interest.  Even if we grant the most generous assumptions imaginable – voters who are fully informed no matter the cost to them and the fact that they have no chance of benefiting from being informed, and a democratic process that can clearly express a single “will of the voters” across a complex range of issues – democracy still provides incentives for policies that harm the public by their own definition.

Public goods revisited

We began the exploration of how government works by assuming it was the solution to public goods problems.  Government was supposed to the solve those instances where it is in no individual’s interest to bear the cost of overcoming a problem, but where everyone would be better off if all would share the cost.  What Public Choice reveals is that, rather than solving public goods problems, democracy is the greatest public good of all.  It is in no individual’s interest to bear the cost of being informed and voting their true preferences, but in order for the system to work everyone would have to sacrifice their self-interest to the greater good.

Regardless of the moral standing of the state, the practical outcomes of government activity are inferior to what the market produces.  Even in cases of so-called “market failure”, it may be better for the government to take no action than to intervene and make things worse with the even greater “government failure” embedded in the incentives of the state.  In other words, whether or not government is an evil, it may be an unnecessary one.

Hope?

To reduce the harmful effects of the perverse incentives in government, it must be reduced to its smallest possible form.  The scope of activities taken on by the state must be narrowed as far as can be accomplished.  Many practitioners of Public Choice theory advocate constitutional checks, supermajorities and other adjustments to government procedures in the hope that these will change the incentives and create a more accountable government.  The flaw in this approach is that the parties responsible for making such changes are themselves part of the government apparatus and face all the same incentives they are hoping to overcome.

If followed to its logical conclusion, pure Public Choice theory would lead us to believe that the state would be all-encompassing even now.  The incentives are aligned, for example, so that there should be mandates on every facet of our lives in every industry and the sphere of freedom should be nonexistent.  Yet this is not the state of affairs in which we find ourselves.  Why, given the incentives in the system, has the state been restrained at all, little though the restraint may seem to us?

In the final analysis, it is the beliefs of the public that create the ultimate check on the state.  If the public has a firm belief that alcohol should be legal, the interests of bootleggers and Baptists will not be sufficient to bring prohibition back.  We cannot reasonably expect incentives to be overcome or people to act against their self-interest, but we can and do see incentives change as people’s view of what is in their self-interest changes.  Most people would not find it worth their while to attempt to stop the passage of a subsidy to Midwestern beet farmers; but a great number of people consider it worth their while to attempt to stop the passage of a new prohibition bill.

Only when it is widely believed that farm subsidies are as absurd as alcohol prohibition will the incentives change enough to produce a more restrained state.

Further reading

Public Choice, A Primer – Eamonn Butler

Beyond Politics – Randy T. Simmons

Government Failure – Gordon Tullock, Arthur Seldon, and Gordon L. Brady

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*I am indebted to Professor Benjamin Powell for the basic structure of the arguments in this article, which he presents in a lecture for the Foundation for Economic Education.

*I am indebted to Matthew Mitchell for the example of vote cycling.

*This was originally posted at LibertarianChristians.com.  I thought it prudent to repost here because there are so few basic intros to Public Choice and because many would-be readers who are not interested in Christianity or Libertarianism may overlook it at the original site.