Public choice

2011 US Republican billionaire special interest lobbyist David H. Koch. Photo : Getty

Both supporters and critics of liberalization share a common criticism of corruption of powerful decision makers as a risk either for market agents or for political leaders.

Of far greater concern [than small informal payments as compensation for service] is the systemic corruption of government institutions by practices such as bribery, nepotism, cronyism, patronage, embezzlement, and graft. Though not all are crimes in every society or circumstance, these practices erode the integrity of government wherever they are practiced. By allowing some individuals or special interests to gain government benefits at the expense of others, they are grossly incompatible with the principles of fair and equal treatment that are essential ingredients of an economically free society. - Miller, Heritage Foundation, 2020 Economic Freedom Index Report The generalization of liberalization ideology goes a step further to claim a “direct relationship between the extent of government intervention in economic activity and the prevalence of corruption” (Miller, 2020). While it may be a stretch to claim corruption as an inevitability of the size of government, the analysis of Public Choice could be used to help design systems that are resilient to different forms of inefficiency and corruption. The limitations of voting systems in aggregating preferences was an interest for Kenneth Arrow who presented a proof known as “Arrow’s impossibility theorem” that no voting system can convert individual ranked preferences to a complete, transitive community ranking when there are three or more choices (Arrow, 1951). While the theorem provides an insight into set behavior and may have important implications in systems with highly formal decision making routines such as software programming it may not fully capture the whole set of collective feedback dynamics operating in real human social systems. The work of James Buchannan “The Calculus of Consent, 1962” and Dennis Mueller “Public Choice III, 2003” followed a similar approach in “Public choice” to analyze voting systems as a preference aggregator and was skeptical of the efficiency of voting systems for creating public welfare. Through a series of specific cases argues that such systems produce perverse outcomes (Shughart, 2020). Public choice follows a similar line of reasoning as the tragedy of the commons - that a voting system based on majority can produce suboptimal outcomes when individuals act in self-interest rather than collective interest (Shughart, 2020). Some of the specific cases review the potential for a minority interest to secure special privileges for themselves from a common pool resource in a process known as “pork barrel”.

The insights of public choice could provide useful skepticism of the limitations of majority voting in representative democracy and guide design of public institutions. Real social dynamics however may be more complex than a simplistic model of atomized self-interested agents and these insights while informative may fall short of proof that public institutions are less effective than the alternatives at producing socially optimal outcomes. The ultimate aims of liberalization however are not to develop deeper understanding of motivation and behavior of humans, nor tailored solutions for managing common grazing areas nor to reform democracy, but policy reforms at the level of government on areas of budget revenues and spending, trade, banking and monetary policy.