The economics behind the issues: James Buchanan

The liberty movement suffered a somber loss yesterday with the death of Nobel Prize winning economist, James Buchanan.

Along with Gordon Tullock, Buchanan founded the “public choice” school of economics which sought to understand the economics of political action. Whereas economists before him had utilized the assumption that government officials were able to selflessly correct “market failure” in the most theoretically efficient way possible, Buchanan viewed politicians and bureaucrats as self-interested economic actors who face personal incentives and costs, just like anyone else.

Because Buchanan studied politics without the romance, he was able to explain why politicians do what they do. He revolutionized the way we think about complex subjects such as crony capitalism, pork-barrel politics, and the reasons why bureaucracies tend to grow without limit or why governments so often fail to provide the services they are presumed to be able to provide.

In doing so, he gave the economics behind the liberty movement a good, hard shove forward and should be mentioned in the same breath as F.A. Hayek and Milton Friedman.

Many of Buchanan’s pivotal ideas apply to Kentucky politics here today.

Take the legislature’s stubborn resistance to school choice, for example. Why are alternative educational institutions like charter schools or voucher programs outlawed in Kentucky when they have been proven throughout the nation to improve student performance and provide increased opportunities for young people?

Buchanan had the simple answer: concentrated benefits to special interests.

Because the modest benefits of outlawing school choice are concentrated to a relatively tiny group (those affiliated with education unions), each individual in these unions has a lot to gain from lobbying Frankfort to ban educational choice.

On the other hand, because the extremely substantial costs of outlawing school choice are dispersed among a relatively huge group (students, parents, and virtually any Kentuckian that would have benefited from a better educated population), those in the general public don’t have much to personally gain from fighting for educational choice. Thus, they don’t.

What results is a no-brainer for politicians: they vote to keep school choice outlawed. If they don’t, they get voted right out of their jobs by those who have a large stake in the matter – the unions.

Buchanan taught us that concentrated benefits and dispersed costs are why politicians pass so many of the laws which, on net balance, significantly harm society. If they don’t do so, they’ll lose their jobs.

Although such an explanation isn’t very romantic, we must understand the beast in order to combat it.

Speak Your Mind

*