Econ 1a. Foldvary

From The Science of Economics

chapter 15, governance and public choice.

Governance can be voluntary and contractual.

p. 109: Government policy can play two roles:

marketization, and intervention

Marketization is based on ethics:

the market has an inherent ethic.

Marketization is the implementation of natural moral law

to establish a uniform rule of law,

by which property rights are protected,

including the property we have in our bodies and lives.

Marketization imlements equal self-ownership

by prohibiting and penalizing coercive harm to others,

such as murder, theft, trespass. and pollution.

Marketization also includes the enforcement of contracts.

A pure free market permits all human action that is peaceful and honest.

Marketization establishes a voluntary economy.

P. 110: the fundamental rules of marketization are best inscribed in a constitution,

just as the US constitution recognizes freedom of speech in the First Amendment.

Intervention is an interference with voluntary action,

changing what people would otherwise want to do.

Intervention hampers the market,

because voluntary action is based on individuals seeking to maximize utility.

We can’t do that if government says no, we can’t do what we want.

Taxes on human action are interventions,

because by making human action more costly,

the tax reduces what people would otherwise voluntarily do.

Would there be much of little pollution in a pure free market?

Pollution is trespass on others’ property.

If the polluter does not compensate the social cost, he is subsidized.

Thus marketization requires the polluter-pays principle.`f

P. 110 public choice

Students ask, if the taxation of land and pollution are

Studies public choices of voters, representatives, and bureaucrats.

Henry Geroge, Social Problems:

"a principle should always be kept in mind is that the people cannot manage details,

nor intelligently choose more than a few officials."

Our voting system is mass democracy.

A few voters are interested and study the issues, propositions, and candidates,

but most choose to remain ignorant.

They are not only ignorant about the specific items in the election,

but worse, ignorant about ethics, governance, politics, economics, and the environment.

Many voters are swayed by emotional appeals, prejudice, and superficial images.

Candidates try to influence the median views of the majority.

They need to use the mass media to send their messages and images to the voters.

including negative and misleading advertising.

So there is an inherent demand for campaign funds.

Some individuals contribute, but much of the funding comes from special interests.

Special interests with benefits concentrated among a few people have a strong incentive to contribute campaign funds and pay for lobbyists.

Corporations, lawyers, labor unions, real estate interests, financial interests.


 For example, owners of large farms.

The costs of the subsidies and privileges for the special interests

are thinly spread among the consumers and voters.

The attempt to get these favors is called transfer seeking or rent seeking.

The average person has little incentive to try to stop this.

Special-interest legislation is passed by trading votes.

There is regulatory capture of government agencies that regulate industry.

Much of government spending and policy caters to special interests at the expense of the public.

We don’t need subsidies to farmers.

We don’t need trade barriers with Cuba.

The revolt of Arabs is an example of people finally rebelling against government that cater to an elite rather than to the people.

P. 112: government structure

The waste and injustice from favoring special interests is a government failure.

It is not a failure of democracy, but of mass democracy.

Constitutional constraints, including the division of powers and federalism,

have not constrained the continuing growth of government,

and bad policies such as deficits and unfunded liabilities.

Top of p. 113: an alternative is bottom-up voting with small group voting.