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Tuesday, June 1, 1999

Policy Analysis and Public Choice: Selected Papers by William A. Niskanen

A Delightful Smorgasboard of Policy Analysis

This volume has much to recommend it. First off, William Niskanen, chairman of the Cato Institute, presents an organized collection of 34 papers that span his interesting and productive 40-year career as a professional economist. Never so technical as to restrict access to readers of policy analysis, the papers cover issues as diverse as school choice, drug policy, Reaganomics, trade policy, voting rules, and the prospects for a liberal economic order. In short, the papers represent a delightful smorgasbord of policy analysis by one who is at once a respected scholar and a friend of liberty.

But the range and quality of the papers is just one gainful reason for reading the book. The second reason, and perhaps the more interesting one, is that the collection reveals the author’s preferences regarding the work of his long and impressive career. In that regard, Niskanen shows that he is as much concerned about rules of just conduct and constitutional constraints that assure a liberal order as he is about good economic analysis and the powerful insights offered by Public Choice. The papers demonstrate thoughtful appreciation of both the normative and positive aspects of public policy.

To Public Choice scholars, the name Niskanen brings an immediate association with his seminal work on bureaucratic tendencies to increase budgets and bargain with politicians in all-or-nothing deals to expand activities beyond efficient margins. To industry economists, the name generates memories of Ford Motor Company’s chief economist who resigned after attempting to counter the firm’s protectionist stance. To defense and government economists, Niskanen is known for his work at the Pentagon and as acting chairman of President Reagan’s Council of Economic Advisers. And to those who know none of this, the collection demonstrates the power of careful analysis to offer useful and sometimes unexpected insights.

Niskanen’s 1994 paper on crime and police offers an example of the power of his thinking. After his analysis of the data, one begins to doubt the generally held idea that crime rates rose; for one thing, crime reporting has improved considerably. Moreover, what can be done to counter any possible crime increase? The author’s conclusion: not much. To a large degree criminal activity represents tolerance for crime, the demise of rules of just conduct. The best thing the federal government could do would be simply to get out of the way by repealing its own crime legislation and encouraging state and local experiments.

A strong believer in looking at the data, Niskanen does this in spades when he deals with drug policy. After modeling the problem, he concludes that legalization would reduce drug-control expenditures by as much as $10 billion annually, reduce violent crime and AIDS transmission, and generate substantial tax revenues from an excise tax on drugs. But Niskanen has a habit of recognizing all sides; so he describes the fallout that might be generated by a more open market for drugs: cocaine babies, increased health-care costs borne by taxpayers, and additional welfare dependency. Weighing the evidence, he concludes that legalization could generate net benefits, but that some new costs would be produced along the way.

Niskanen’s paper on economists and politicians overflows with insights into the activities in the higher reaches of government. He begins with a question: Why do politicians hire economists? He stakes out his answer by describing canons of good policy analysis, which are worth studying. Niskanen then describes the rising status of economic advisers in government, noting the arrogance that developed among those who thought Keynesian economics would solve the nation’s unemployment problems. Finally, Niskanen returns to his Public Choice roots by observing that politicians hire economists to serve political interests. On the whole, the record of economists as policy advisers has been more congenial to the growth of government power than to liberty.

Of all the papers in this stimulating book, my favorite is a graduation address given at Suomi College in Michigan in 1983. Here Niskanen lays out some simple but profound rules for living: recognize and reinforce your natural abilities, be willing to take risks, learn from the errors risk-taking generates, be humble, keep a sense of humor, and develop respect, but not fear, for the many mysteries of life.

Public Choice scholars, anyone who appreciates strong policy analysis, and readers interested in political economy should put this book on their reading list.

  • Bruce Yandle is dean emeritus of Clemson University's College of Business & Behavioral Science and alumni distinguished professor of economics emeritus at Clemson. He is a distinguished adjunct professor of economics at the Mercatus Center, a faculty member with George Mason University's Capitol Hill Campus, and a senior fellow emeritus with the Property and Environment Research Center (PERC).