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Wednesday, May 1, 2002

Designing Dependence

Manipulating Political Transaction Costs Allows the Government to Steadily Encroach Upon Our Private Lives

Government now permeates American life, shaping and determining in countless ways the choices available to us. As Tocqueville feared, the U.S. government has largely succeeded in its efforts to spare us “all the care of thinking and all the trouble of living.” Through Social Security, Medicare, public education, and the rest, the sphere of autonomous individual action grows ever smaller, despite widespread understanding that personal responsibility is essential to self-respect and therefore necessary to individuals’ pursuit of happiness. In the modern redistributive state, we are no longer free to choose in many fundamental areas of our lives.

How has it happened? What are the specific mechanisms by which Americans have been induced to relinquish their patrimony of liberty—the ways in which they have been, in Tocqueville’s prescient words, “softened, bent, and guided” to government purposes? This book develops a new framework for understanding the political techniques and institutional mechanisms that have led us to embrace pervasive government controls and corresponding personal dependence. Deliberate manipulation of political transaction costs—meaning costs to individuals of reaching and enforcing collective agreements regarding the role and scope of government—will be seen as central to this process of softening, bending, and guiding the populace to government purposes.*

Conventional wisdom often views dependence on government in America as an inadvertent byproduct of benign legislative intent, codified in democratically adopted measures reflecting the will of the people. To the contrary, this book shows that manipulating costs of political decision making in order to achieve results initially inconsistent with actual public preferences has been a recurrent strategy in capturing and maintaining increased government authority over U.S. citizens. The key insight is that political transaction costs shape action and inaction in political contexts, and that those transaction costs routinely are manipulated by self-interested political actors. In contrast to some economists’ visions of a transaction-cost minimizing state, this book documents government officials’ characteristic willingness and ability to deliberately increase the political transaction costs facing others on issues that influence the scope of government authority.

How has the federal government been able to so greatly expand its powers, sometimes in ways initially contravening public sentiment, without provoking rebellion? My answer, developed at length in subsequent chapters, is that government officials have both the power and the personal incentives to change the costs to private citizens (and to others in government) of taking particular political actions. Through statutory law and otherwise, they change the rules of the game in diverse ways that alter the costs of resisting particular political measures. In the language of economics, government officials change the transaction costs to individuals of taking political action on measures that influence the scope of government authority. They do so through familiar political behavior such as lying and misrepresentation—which raise the costs of obtaining accurate information—and also by changing in other ways the costs to private individuals of achieving and enforcing political agreement on matters that determine the scope of government authority. I provide many examples of this behavior in subsequent chapters.

For government officials, the trick is to selectively curtail political resistance. In each of the policy areas examined in this book, deliberate government manipulation of political transaction costs will be shown to have achieved exactly that result. Government officials shaped political outcomes to their own liking in these cases by deliberately increasing the costs to private citizens of resistance. Once established, the new institutions refashioned the status quo into one characterized by greater government authority over people’s lives. In turn, such institutional change facilitated widespread ideological change that buttressed and reinforced the new powers of government.

It has been understood for centuries that politicians lie, of course. Niccolò Machiavelli, giving advice to his prince in 1513, described forms of calculated political decision making echoed by the Clinton administration from 1993 to 2000. Lying about the nature and consequences of proposals to expand federal authority is clearly one way of raising the costs to individuals of resisting them.

But politicians do more than lie to secure passage of legislation they favor: they also seek to increase other costs to individuals of taking political action. One striking example…is the Supreme Court’s role throughout the twentieth century in changing the Constitution, sidestepping the constitutional amendment process designed by the Framers. The amendment process purposely made it costly to change the scope of government authority established by the U.S. Constitution. Actions by Supreme Court judges that supplanted the constitutional amendment process—for example, judicially expanding the Constitution’s interstate commerce power—both increased the costs to citizens of maintaining the established scope of government and reduced the costs to government officials of vastly expanding the scope of federal authority over the economy….

My concern in this book is not only the growth of dependence but also the growth of an ideology of dependence—the normative judgment that broad governmental power creating pervasive dependence on government is desirable. Accordingly, I identify linkages connecting government manipulation of politically relevant transaction costs, dependence on government, and the emergence of ideological change. I argue that the continued experience of dependence on government over time fosters acceptance of the propriety of such dependence, making it increasingly difficult for society to envision politico-economic solutions based on individual autonomy.

Consider again the transformations wrought in America in the twentieth century. How could the politico-economic landscape have been so altered? Why does the peacetime public now acquiesce to the forced turnover of more than 33 percent of U.S. citizens’ total annual income to governments and the billions of uncompensated labor hours spent creating records to satisfy these governments? What has made possible the “gentle” servitude, the “enervating” of people’s independence that Tocqueville so clearly foresaw? My thesis is that political transaction-cost manipulation was practiced both at the inception of the new governmental institutions and as an integral part of their subsequent implementation, maintenance, and growth. Buttressed by this transaction-cost augmentation, processes of ideological change then reinforced the institutional changes and made them self-perpetuating.

While “manipulation of political transaction costs” at first may seem dry and theoretical to some readers, it will quickly become clear that governments have put the concept into actual practice in ways that are all too real, using it as a central tactical strategy to expand their power. If we wish to preserve our freedom, we’d better come to understand it. After all, federal officials already do. With it, the central government has steadily encroached upon our once private lives.

Charlotte Twight is a professor of economics at Boise State University. From the book Dependent on D.C. by Charlotte A. Twight. Copyright © 2002 by Charlotte A. Twight. Reprinted by arrangement with Palgrave, LLC, New York, N.Y.

*Editor’s Note: For more details on this process, see Charlotte Twight, “A Constitutional Counterrevolution,” Ideas on Liberty, October 2000, p. 21.