Public Choice Theory

The Failure of Rational Choice Philosophy

But Hegel had his reasons. Ideas for him are public, rather than in our heads, and serve to coordinate behavior. They are, in short, pragmatically meaningful words.  To say that history is “idea driven” is to say that, like all cooperation, nation building requires a common basic vocabulary.

One prominent component of America’s basic vocabulary is ”individualism.” Our society accords unique rights and freedoms to individuals, and we are so proud of these that we recurrently seek to install them in other countries. But individualism, the desire to control one’s own life, has many variants. Tocqueville viewed it as selfishness and suspected it, while Emerson and Whitman viewed it as the moment-by-moment expression of one’s unique self and loved it.

After World War II, a third variant gained momentum in America. It defined individualism as the making of choices so as to maximize one’s preferences. This differed from “selfish individualism” in that the preferences were not specified: they could be altruistic as well as selfish. It differed from “expressive individualism” in having general algorithms by which choices were made. These made it rational. This form of individualism did not arise by chance. Alex Abella’s “ Soldiers of Reason ” (2008) and S. M. Amadae’s “Rationalizing Capitalist Democracy” (2003) trace it to the RAND Corporation, the hyperinfluential Santa Monica, Calif., think tank, where it was born in 1951 as “ rational choice theory .” Rational choice theory’s mathematical account of individual choice, originally formulated in terms of voting behavior, made it a point-for-point antidote to the collectivist dialectics of Marxism; and since, in the view of many cold warriors, Marxism was philosophically ascendant worldwide, such an antidote was sorely needed. Functionaries at RAND quickly expanded the theory from a tool of social analysis into a set of universal doctrines that we may call “rational choice philosophy.” Governmental seminars and fellowships spread it to universities across the country, aided by the fact that any alternative to it would by definition be collectivist. During the early Cold War, that was not exactly a good thing to be.

The overall operation was wildly successful. Once established in universities, rational choice philosophy moved smoothly on the backs of their pupils into the “real world” of business and government (aided in the crossing, to be sure, by the novels of another Rand—Ayn). Today, governments and businesses across the globe simply assume that social reality  is merely a set of individuals freely making rational choices. Wars have been and are still being fought to bring such freedom to Koreans, Vietnamese, Iraqis, Grenadans, and now Libyans, with more nations surely to come.

Pennington on Public Choice Theory - Ideas Matter

Men are no angels. Nor are they omniscient. It doesn't matter whether they're acting in the market or acting in government. These facts about people simply get dropped when we urge government to correct so-called "market failures." It is as if when human beings become public servants -- whether in elective office or in bureaucratic appointments -- they undergo a kind of baptism. Out of this baptism arises a noumenal self that is free of self-interest, one that is capable of bringing about the public good (whatever that is). But this would be to assume they are suddenly free of their own humanity.

When we start thinking of people in government as a combination of a) self interested, b) idealistic and c) ignorant (which is just to say lacking perfect information), it's much easier to explain the zigzag of politics. We get some really interesting -- but usually deleterious -- effects when we let these people loose with power and resources.

Showing respect to traditional public choice, I put self-interested first. It is almost always the driving force behind political behavior. But we should not fail to include idealism and ignorance as factors in how people act in the political process. The incentive system of representative democracy under an eroded Constitution actually mutes and distorts the idealistic instincts of many politicians, bureaucrats and voters. But I think the idealism is still there to varying degrees. We must acknowledge the variation among ideologies, as well.

Then, of course, few have any idea what sorts of trade-offs might be required to realize their ideals. Because there are no direct consequences to voting behavior as there are with market behaviors, people tend to repeat their mistakes. And because there are usually direct consequences to politicians when they slavishly follow ideology (e.g. special interest groups stop giving them campaign money and legislators stop horse-trading with them), politicians almost invariably choose career longevity over their ideals. But there are Ron Pauls and Dennis Kuciniches who have been lucky enough to be rewarded for their ideology. 

Let me add one more dimension to a, b, and c -- tribal. People are clannish. It makes for strange voting patterns and unprincipled commitments.  

When you pit imperfect markets against imperfect government, markets still do better overall. If it isn't apparent from the above why this is the case, consider this: The profit and loss system rewards and punishes more directly as an incentive system. In such a system a value can be exchanged for any other value. In political allocation of resources, this is not the case. It's no wonder then that politics is such a strange animal. It makes for good entertainment, even as it slowly dissolves republics.

Public choice theory

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Public Choice Theory

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