Public choice (also known as political economy) is applying economics to politics. Behavioral economics is applying psychology to economics. What happens when you do both at the same time, creating a “behavioral public choice”? Gary Lucas and Slavisa Tasic‘s “Behavioral Public Choice and the Law” (West Virginia Law Review, 2015) provides an amazingly careful, comprehensive, and entertaining review of the literature. Intro (with voluminous footnotes omitted):
Behavioral public choice is both an extension of and a reaction to
behavioral economics and its counterpart in legal scholarship, behavioral law
and economics. Psychologists and behavioral economists have documented
imperfections in human reasoning, including mental limitations and cognitive
and emotional biases. Their research challenges the rational actor model of
conventional economics, especially the idea that individuals acting in a free
market can make optimal decisions without the government’s assistance.
Behavioral economists and legal scholars in the behavioral law and economics
movement have used this research to justify paternalistic government
interventions, including cigarette taxes and consumer protection laws, that are
intended to save people from their own irrational choices. Because of their focus on market participants and paternalism, most behavioral economists and
behavioral law and economics scholars ignore the possibility that irrationality
also increases the risk of government failure.” Behavioral public choice
addresses that oversight by extending the findings of behavioral economics to
the political realm.A key insight of behavioral public choice is that people have less
incentive to behave rationally in their capacity as political actors than in their
capacity as market actors. Elections are rarely decided by a single vote, so
voters have little reason to take them seriously. Moreover, the voters,
politicians, and bureaucrats who participate in the political process know that
the costs and benefits of their decisions fall largely upon others. So these
political actors have less at stake than consumers, investors, and other market
participants who make decisions that primarily affect themselves.Because political actors have little incentive to behave rationally,
irrationality is common in politics, and it has a substantial negative effect on
the law.
One fun section among many:
I. Opportunity Cost Neglect: Ignoring Implicit Tradeoffs
Some scholars are skeptical of certain government interventions on the
grounds that they are ineffective, excessively costly, and inimical to economic
growth. But opinion research shows that the public enthusiastically embraces
government spending, tax expenditures, and regulation. Moreover, affection
for government is not limited to liberals and Democrats. Conservatives and
Republicans also express strong support for government as long as researchers
ask them about specific programs rather than asking about government in
abstract or general terms.Nonetheless, opinion research also reveals that support for many
government programs declines (often substantially) when researchers draw
attention to the programs’ opportunity costs. The opportunity cost of a
government program consists of the private and public goods that society must
forgo to make that program possible. Opinion research suggests that unless
explicitly prompted to consider these costs, the public often ignores them. Opportunity cost neglect is consistent with the finding that decision makers
focus on salient situational elements and irrationally ignore implicit
information. The benefits of many government programs are obvious, but their
opportunity costs are often implicit and therefore easy to overlook…[…]
Widespread neglect of the opportunity costs of government programs
has several implications. First, it artificially increases the demand for direct
spending, tax expenditures, and regulation above the level that voters would
otherwise support. In particular, opportunity cost neglect helps explain chronic
budget deficits. Voters express strong support for government spending, but at
the same time, they are also unwilling to pay for it. Second, opportunity cost
neglect results in a misallocation of government funds. Specifically, opinion
research suggests that the federal government spends more on the military and
less on other programs than it would if voters were cognizant of the tradeoffs
involved. Finally, opportunity cost neglect affects the government’s choice of
policy instruments. Voters are attracted to policies that conceal tradeoffs. This
explains why voters generally prefer tax expenditures to similar direct spending
programs. It also explains why, despite economists’ objections, voters prefer
to address global warming through command-and-control regulations, which
conceal the opportunity costs of environmental protection, rather than a carbon
tax, which would make those costs more salient.
READER COMMENTS
AgentBased
Apr 21 2016 at 12:46am
Cigarette taxes are based in rational choice — i.e. increasing the cost decreases the rational agent’s response. If it were based in behavioralism (or irrationality) then you’d get a different answer.
This type of oversight is unfortunately common.
Regardless of the laurels of rest of their arguments, because the premises are wrong, the answers must be as well.
BC
Apr 21 2016 at 1:59am
One implication of behavioral economics is that revealed preference may not apply: irrational consumers’ actions may not always reflect their true utilities and preferences. The counterpart in behavioral public choice is that polls and elections may not always reflect rationally ignorant voters’ true preferences.
Since our system of government is based on the principle of popular consent — Government legitmately assumes only those powers to which the People consent (and sometimes not even then) — the default is that Government should not have a power that the People haven’t unambiguously consented to. Government power is opt-in, not opt-out. Since elections are imperfect reflections of popular will, it follows that simply winning elections is insufficient reason for political leaders to claim electoral mandates for bigger government. Elections are not a strong enough opt-in mechanism.
Lucas and Tasic discuss some difficulties with constraining government constitutionally — mainly cheating and unwillingness of the Courts to constantly over-rule elected legislatures. However, one solution might be to require super-majorities to pass legislation that expands government powers and to have such legislation automatically sunset unless explicitly renewed, again with super-majority vote. While not perfect, super-majority consent is at least a stronger opt-in than simple majority.
ThaomasH
Apr 21 2016 at 9:00am
If the result of this is to discuss the expansion or contraction of any particular regulation, tax, expenditure, or tax expenditure on the basis of all the costs and benefits as likely to be filtered through the actual, not idealized, political and economic decision processes, it can only be good.
ThaomasH
Apr 21 2016 at 9:03am
If the result of this is to discuss the expansion or contraction of any particular regulation, tax, expenditure, or tax expenditure on the basis of all the costs and benefits as likely to be filtered through the actual, not idealized, political and economic decision processes, it can only be good.
Andrew_FL
Apr 21 2016 at 9:08am
“opinion research suggests that the federal government spends more on the military and less on other programs than it would if voters were cognizant of the tradeoffs involved.”
Not exactly what I’d call an improvement…
John Alcorn
Apr 21 2016 at 9:24am
Here are a few other sharp articles about political psychology and government failure. These articles highlight mechanisms that are not covered by Lucas & Tasic.
a) William R. Keech & Michael C. Munger, “The Anatomy of Government Failure,” Public Choice 164 (2016) 1-42. Here is the abstract:
An ungated version of Keech & Munger is available here:
http://polisci.uga.edu/uploads/documents/Munger_Draft_paper_for_UGA.pdf
b) Alvin E. Roth, “Repugnance as a constraint on markets,” Journal of Economic Perspectives 21:3 (2007) 37-58.
Here is the abstract:
An ungated version of Roth is available here:
https://dash.harvard.edu/bitstream/handle/1/2624677/Roth_Repugnance.pdf
c) Robert J. MacCoun, “Moral Outrage and Opposition to Harm Reduction,” Criminal Law and Philosophy 7 (2013) 83-98.
Here is the abstract of MacCoun:
An ungated version of MacCoun is available here:
http://conium.org/~maccoun/MacCoun2012_MoralOutrage_onlinefirstversion.pdf
Comments are closed.