James Buchanan: Surprisingly, Politicians Are Humans
With a simple discussion on how stuff gets done in the political arena, it is easy to understand why it’s so hard to achieve the intended outcomes of that “stuff.” Everything is riddled with side-deals, loopholes, and compromises that detract or cause larger problems than the one(s) they are trying to solve.
You don’t have to dig too deep to find examples of political frustrations. At the forefront, we have the healthcare debacle, which can’t seem to find a consensus and has us at the edge of our seats with how it is going to turn out. And, rightly so as healthcare policies directly impact all of us since we will likely make use of the services at some point in our lives.
This is the phenomena Nobel laureate James Buchanan wanted to model. He used economic tools to better understand and analyze political behavior, which is also called “public choice economics.” He won the prize in 1986 “for his development of the contractual and constitutional bases for the theory of economic and political decision-making.”
Yeah, it sounds boring until you realize how right-brained the basis of his model is.
At the heart of public choice economics is the idea that people who work in government are not always doing stuff in the public interest. Rather, they are doing stuff that benefits their own, individual, interests.
This isn’t a novel idea, per se, but it is an idea that people, both public servants in the government and the rest of us, seemingly still can’t come to terms with.
Slapping politics with economics
When people think of “market transactions” they think of people going to the store, buying what they want, an apple for example, by pulling out some money and exchanging it for the apple, and going home. From the store owner’s perspective, she brings the apples to the store (keeping in mind that she, too, bought it from someone), sets a price that is higher than what she bought it for, and is happy to sell the apple to you at a profit.
In both cases, the exchanges were based on the respective parties’ interests. You want the apple. The store (owner) wants money. This is essentially how all market transactions play out. They are based on individuals wanting stuff that makes them better off. It’s why we go to school, apply for jobs, work at said jobs, go out to eat, buy cars, pay rent, buy insurance, go to the doctor — you get the idea.
But, when it comes to our esteemed public servants, yes including our most verbose Twitter-fingered leader, this thought process is often thrown out the window. It is most obvious when we get upset at a politician for taking action or supporting a policy that will negatively affect us or something we care about. It’s because we forget government workers are acting in their own interests (most, if not all the time) rather than in the public, or your interests.
So, now that we understand that government workers are also human, in that they do stuff that ultimately furthers their own interest, we can go on to figure out and analyze where markets and politics differ.
Enter me paraphrasing an eloquent Buchanan passage:
The difference between markets and politics doesn’t lie in the players, but in the rules of the game. Politics is a system where individuals attempt to secure their own needs and wants, but can’t really go to the store and buy it. In the market, individuals exchange apples for oranges (or money) whereas in politics, individuals exchange handshakes (regrettably, even those DJT handshakes) to share the costs of goods and services that are commonly desired, from fire stations and firefighters to courts and judges.
No matter the reason why folks get into politics, the how is what’s important. They have to get elected. But unlike in markets, where you get what you want by exchanging money, in politics you exchange votes. To get those votes, politicians should do the stuff their voter base wants, engage with the industry leaders and special interests, and basically sell their souls.
In any case, Buchanan highlights that, fundamentally, voters will vote for policies, projects, and people that will make them economically better off. It’s no surprise that the number one concern for voters in all the surveys is either “the economy” or “jobs.”
Just look at healthcare
The Affordable Care Act, or Obamacare, though increasing the amount of people that would be covered with health insurance, was arranged in a way that ended up putting a large chunk of people, namely younger, middle class, healthy people in a worse financial position. Premiums skyrocketed and so did the deductibles for many voters. On top of that, people that didn’t want (or couldn’t afford) to pay for health insurance would have to pay $650 per year to the government.
As a result, Republican politicians crushed the Democrats and took over the House, Senate, and the White House. The Republicans told voters that they could make them financially better off by getting rid of Obamacare, while Democrats were praising what Obamacare had done for the American people.
Remember public choice economics: People care about other people as long as their own interests align with other people’s interests.
It’s not that Republican voters don’t care about people without health insurance, it’s that they prioritize their wallets and interests first. In fact, so do Democrats as they, too, are human.
Though it was easy to ride the “repeal and replace Obamacare” wave to get elected, actually making it happen is a different story. Now, the politicians must deal with the special interests and the opposition to come through for all those votes. As a result, we get this gridlocked mess with
- the House’s “American Health Care Act,”
- the Senate’s “Better Care Reconciliation Act,”
- The Senate’s “Repeal Plan,” and of course,
- The Democrat’s “Let’s stick with Obamacare Act.”
To be sure, beside the non-politically-feasible complete repeal of Obamacare, the other two plans look almost identical to Obamacare. The Obamacare alternatives have loopholes and compromises that bring on extra costs and attempt to maximize votes while doing nothing to solve the high costs of healthcare problem.
Economics and Political Philosophy Gets #deep
The idea that people don’t turn into these strange selfless angels when they go work for the government is not new. They stay human. In fact, James Madison famously claimed, “If men were angels, no government would be necessary.”
What Buchanan did was take that assumption and economically model how constitutional constraints can most effectively “get stuff done” in a way that protects our individual interest, safety, and most importantly, our freedoms. One of the several key suggestions, which still hasn’t been applied today, is the “generality principle.” This principle, which should be enforced by the constitution, is that there is no special group of people when it comes to politics. Everyone plays by the same rules.
This comes from from Hayek’s recommendation who once suggested to him a new constitutional amendment: “Congress shall make no law authorizing government to take any discriminatory measures of coercion.” When it comes to healthcare, it would mean that no group should be taxed for the benefit of a particular group, e.g. members of society with pre-existing conditions. What the proposed options are virtually doing is coercing healthy members of society into subsidizing the unhealthy.
Though, he would say there is no hard or fast line that can be drawn when it comes to handling this problem, having a constitutional constraint like this while interpreting what to do about healthcare would be a good start. With this constraint, it might lead government to analyze the costs of mandated collective provision of healthcare versus individual or voluntary collective provision of healthcare, i.e. single payer, private, or state mandates. Additionally, this constraint could potentially keep government from creating problems in the economy and meddling with our lives.
In any case, Buchanan brought to light the old idea that politicians are only after themselves, but gracefully modeled that behavior with economics. To be clear, he wasn’t showing that all politicians are evil in any sense, but that they are human and responsive to incentives, just with different rules to the game.
H/t: Professor Randall Holcombe for his helpful suggestions.