“Public choice” economics?

By | September 3, 2018

I’ll bet that very few of you know about James Buchanan. No, not the one who preceded Lincoln and was, to date, America’s first and only openly gay president. I’m talking about James Buchanan the inventor of public choice economics, who taught quietly although very influentially at George Mason University and other places for decades and decisively shaped the perspective of generations of economists and conservative politicians. If you don’t, you ought to.

There’s no doubt that Buchanan was one of the most influential although least known of the various eminences grises who have godfathered the right wing internationally over the last fifty years. In association with Milton Friedman, he was particularly influential in placing his grad students in departments of economics and business schools across the country, where they energetically promoted the doctrine of shareholder value maximization as the only legitimate corporate goal since the 1970s to multiple generations of aspiring MBAs who went on to staff the corporations, consulting firms, and financial institutions now draining the country. One of Richard Condon’s lesser-known novels postulated that this movement was deliberately instituted by a professor who could be an avatar of Buchanan or Friedman who was secretly a Soviet agent doing so to weaken and destroy American industrial capacity. Had that been true, it could hardly have been more ultimately destructive to the economies of the US and the world, and ultimately to capitalism itself.

What’s particularly disingenuous about Buchanan’s approach is its apparent rejection of a role for government in improving people’s lives – even as he implicitly called for strengthening the power of government to enforce a conservative status quo. This view of government came into sharp focus as he tried to develop a theory of racial segregation in Virginia in the 12950s. But to one degree or another, it’s always been part of “capitalist” pragmatics.

There is no doubt that Marx was correct in asserting that capitalism contains certain internal contradictions (here’s a reasonable summary), although there is debate about their severity, inevitability, and consequences.. One of these is the tendency of capitalism to overproduce goods while at the same time seeking to restrict the wages of workers. Who do you sell to when your workers don’t make enough money to buy anything? There is a lot of dancing around this one, but it clearly remains a live issue. Part of the answer is that so-called “free enterprise” firms have never been hesitant to co-opt the institutions of the State in order to maintain their socially privileged position. Howard Zinn makes it abundantly clear that this isn’t either recent or a historical accident; rather, it’s been a distinguishing feature of capitalism since its origins (cf. Henry VIII’s Poor Laws). The Koch’s libertarianism pointedly does not rule out using government power to enforce its unequal contracts or to impede the organization of opposition to its practices. Since we’ve never had anything approximating pure capitalism in this country or anywhere else for that matter, we really don’t know if its internal contradictions are serious enough to collapse it.

Libertarians are fond of quoting the idea that “Any government capable of giving you everything you want is capable of taking away everything that you need.” While this is true, it misses the point that virtually ANY government is capable of taking away anything from its citizens, and historically speaking, won’t hesitate to exercise that power whenever it so desires. This is true whether we’re talking about a government run by the hereditary priests of Great Cthulhu or the democratically elected chair of the local People’s Co-op. The nature of human organization biases it toward pursuing the interests of its members over those of non-members, while Michels’ Iron Law of Oligarchy describes how inevitably power in organizations will come to be concentrated in the hands of the relative few who actively pursue it. Very few libertarian/public choice theorists are willing to engage with the social consequences of full privatization of society, mostly because it makes them sound like less sympathetic versions of Scrooge. His expostulation “Are there no prisons? Are there no workhouses?” is  an explicit formulation of the same set of public policy assumptions that allows companies like Walmart and McDonalds to pay their workers little enough that they have to rely on public assistance to sustain living levels.

An interesting sidelight on this question of living standards propped up by the public. Wilbur Cohen, former Secretary of HEW and one of the main architects of the New Deal, happened to be a good friend of my mother. He once told her that Social Security was never intended originally to be enough to support a person living independently. Rather, it was conceived as providing enough extra money that families could be induced to allow grandpa and grandma to continue living with their families, rather than throwing them out onto the street. But during the 1950s, social attitudes toward relatives changed significantly, and older people no longer saw living with their kids as necessarily a good thing; the upward pressure on Social Security to provide enough money to live independently was the initial force destabilizing it. In fact, there’s no way that the system can provide independent living for all those planning to leave the workforce or forced out of it in the coming couple of decades, particularly given the appetite of Republicans for continually gutting the system. The public’s own ambiguity can be embodied in the sign seen at various Tea Party and Trump events, “Keep your grubby Federal hands off my Medicare!”

The Pinochet regime can be seen as the ultimate evidence that no less than Keynesianism, public choice economics ultimately relies on the power of the State to enact its program. Had it not been enacted by dictatorial fiat, the Chicago Boys’ program could never have been enacted in Chile or anywhere else. Its effects were largely to further enrich the traditional elites with access to the powers of the State to steer the rewards in their direction. There’s no indication in any of the Kochs’ proselytizing that they are prepared to give up the State as the instrument of enforcing their prerogatives. And as Zinn told us, this is in fact as American as apple pie.