Sunday, March 27, 2011

Obama and Public Choice Theory

Frederic Sautet has written an interesting post over at the Austrian blog. He seems to be suggesting that the people do not yet realize what they have done. Obama will not be able to deliver on his promise of change because politics, as Sautet writes,

"is all about promises made and promises broken, vote trading, bureaucracy capture, self-interest, ignorance, and perverse incentives. Politics is done by interest, not by principles."

In other words, the people do not yet understand Public Choice theory, according to Mr. Sautet.

I think Mr. Sautet is completely wrong. I can't stand reading these kinds of arguments, largely because nearly every Austrian thinks like this. Lachmann certainly would have never said something like this. It does not make sense to say that self-interested politicians can accomplish whatever they want; human behavior is not that simple (and knowledge is not that perfect!). Public Choice is so terribly naive. And we can prove this by making explicit Mr. Sautet's suggestion that the "public" does not yet realize that "politics without romance is impossible."

Let me give you an example in connection to Obama's victory. Implicit in the assertion that "politics without romance is impossible" is the assumption of public ignorance. The public does not understand the niceties of politics. This is all the more amazing upon observing how emotionally involved people become in something (presidential elections) while remaining so woefully ignorant of it --- and even ignorant of their own ignorance! Voters actually think that they are making the right choice; in most cases they are convinced of it. But the truth is that voters typically do not know what is going on. (They know the color of Mrs. Obama's dress, but are ignorant of the minute details of Mr. Obama's policy proposals.) And it is funny to hear commenators on the news repeatedly lament that other commentators are not sticking to the issues, issues that people want to hear! I would be willing to bet that if popular news outlets began discussing the "issues" in great detail, the people's interest in politics, and their participation in it, would quickly end.

But what makes Austrians think that this ignorance stops with voters? This ignorance cuts both ways. Politicians cannot know the effects of any political exchange (vote trading). Public Choice Theory relies on the principle of omniscience for its validity. And it is deeply disturbing to find that not only are Austrians not the most vigorous critics of this approach, but that they actually support it! Austrians are doing great injustice to Hayek and Mises in believing that politicians can accomplish whatever they want by acting in their own self-interest. The effects of any action in politics are terribly complicated, and its unintended consequences too numerous to assess and evaluate intelligently.

Here is the irony. Obama campaigned on the promise of Change and Hope. Austrians, as good Public Choice theorists, are for this reason afraid of an Obama presidency. But Obama does not actually know what he needs to do to bring about this Change. If Austrians abandoned Public Choice theory, they would be able to see this, and begin to worry more about the unintended consequences of positive action, and not about the effects of the "vote trading" that will result from Obama's empty promises.

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