Monday, December 17, 2012

Fifty Years of "The Calculus of Consent"

The bible on political is The Calculus of Consent by James M. Buchanan and Gordon Tullock, first published back in 1962.

Wow!  That means that we are celebrating its golden anniversary.  I wonder why I wasn't aware of this until today.  It's not as if people haven't been celebrating.

But I have been reading the book, so you don't have to.  No sex, no plot twists, you see.  Nothing to keep the reader's attention, except a devotion to learning.

In Calculus Buchanan and Tullock analyze the behavior of electors and politicians using the normal economic assumption that people seek to maximize utility, and with occasional resort to game theory.

Since I've just finished the chapter on special-benefit legislation using general taxation and the chapter on general-benefit legislation using targeted taxation, I thought you'd be interested to know what Buchanan and Tullock have to say.

In the case of special-benefit legislation, (e.g., getting the whole county to pay for a few peoples' road improvements) the average individual voter is going to get screwed unless he is able to bargain for compensation from the majority.  Since this is usually called "corruption" except when legislators do it informally in the process known as "logrolling" you can see that special benefit legislation is a bad deal for the average person.

In the case of general-benefit legislation, let us just quote from the book:
If the dominant majority is able to impose the full costs of general-benefit projects on the minority, it follows that all projects yielding any benefits at all to the majority coalition members, and costing no more than the maximum taxable capacity of the minority, will be adopted without question... [F]or all such projects a member of the majority coalition may secure some net benefit without cost to himself.(p.166-7)
As in "the rich pay a little more" Mr. President.

So Buchanan and Tullock judge that: "There is nothing in the operation of majority rule to insure that public investment is more 'productive' than alternative employments of resources".

An interesting claim in Buchanan's and Tullock's analysis is that "side payments" (or logrolling or graft or bribes) tend to reduce the amount of over-investment.  In other words, when the majority has to pay off the minority in order to get its project passed, then the value of the project to the majority is reduced, and the less "productive" investments won't get passed.  This seems to go against common sense.  You would think that, if side payments were forbidden, that it would be harder to pass special interest legislation.

But you can see why limited government is a good idea.  If there is no identifiable benefit from public "investment" then maybe we should all get together and limit the ability of organized minorities and dominant majorities from imposing costs on their fellow citizens.

Try telling that to President Obama.

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