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Saturday, July 1, 1995

Beyond Politics

A Public Choice Perspective on Political Interventionism

Within the last 30 or so years some advocates of limited government have begun promoting public choice economics. This small but increasingly influential school of thought applies assumptions of neoclassical economics about human behavior to public employees, elected or not. Public choice economists insist that politicians and bureaucrats are motivated by rational self-interest, and the manifestations of that self-interest result in perverse and disastrous consequences for the public. Many of their insights buttress earlier sociological and political analyses of both the State and the political class, echoing the work of such theorists as Franz Oppenheimer, Vilfredo Pareto, and Ludwig von Mises.

William Mitchell and Randy Simmons have written an interesting and informative work on political interventionism in the economy from a public choice perspective. The book, Beyond Politics, begins with a discussion of welfare economics, that branch of the dismal science that deals with, among other things, issues of market failure. Market failure refers to the divergence of real markets from the assumptions of perfect competition.

One of the most troubling of market failures in the eyes of the general public is monopoly. On this issue and others, the authors approach the “market failure” from a public choice point of view, showing that the incentives of government officials are structured in such a way as to exacerbate the very problems, real or imagined, that the State is being used to solve.

For example, politicians in a democracy must seek popular re-election. The easiest and most effective means of staying in office is often the use of public power to benefit an electorally powerful interest or constituency. Why then the absurd belief that politicians can be relied upon to eliminate monopolies? For one thing, a genuine monopoly is impossible to maintain against the forces of a competition in a free market economic system. Politics is the only means of creating a sustainable monopoly through artificial barriers to competition. More importantly, it is in the interest of politicians to structure regulatory mechanisms that inhibit competition and lead to consolidation, since this creates a wealthy and grateful backer for the politician.

In a similar fashion, Mitchell and Simmons argue convincingly that market failures are often ill-defined and almost never warrant the degree of criticism they invoke. To drive the point home, the authors show that private solutions are invariably superior to public solutions. In fact, most of the book deals with what the authors call “public failure,” the inability of the public sector to live up to the vision of an efficient and benevolent government handling the flaws of the marketplace.

The book ends with a call for a return to a free and unfettered economy, something which the authors have succeeded in demonstrating as superior to the various schemes involving the State. Occasionally lost in the long discussions of the personal interests of politicians and bureaucrats and the economic consequences of interventionism is the fact that the most precious cost of growth of the State can be measured in terms of human liberty. The loss of freedom may be one of the unseen costs for economists, but it is the heaviest of burdens for civilization.

Beyond Politics is flawed by an overreliance on equilibrium models to illustrate points in the text. A free economy is dynamic and constantly changing, Many of the authors’ points could be made using economic laws based on apodictic principles that do not presuppose static conditions in the economy. But this caveat should not preclude an appreciation of the devastating critique of statism, government intervention, and the pretensions of the political classes found in this book’s pages. Beyond Politics is a cogent defense of the economic system of a free society and a firm rebuttal to some of its most vociferous critics among the economics profession. It deserves the attention of anyone interested in the great economic controversies of our day. []

Mr. Pavlik is director of The Freeman Op-Ed program at The Foundation for Economic Education.

  • Mr. Pavlik was director of The Freeman Op-Ed Program at The Foundation for Economic Education. He was editor of Forgotten Lessons: Selected Essays of John T. Flynn, to be published by FEE next month.