Yesterday in Tampa, Florida was a good day for the GOP. The program was well-organized and well-promoted with an excellent slate of speakers. With only one exception – the slimy anti-abortion- focused Rick Santorum – the speakers kept a relentless focus on the economy. This is essential, because if the election turns primarily on the economy President Obama is toast. His record is backward not forward on all fronts: worse unemployment, worse economic growth, worse indebtedness, worse hope, worse change. ‘No we can’t.’ There is no economic Morning in America for 2013 if an Electoral College majority sticks with Barack Obama.
The theme of Day 1 was ’We made it’. Those three words perfectly projected the essence of the American Dream that drives enterprise in free-market America. It was aimed like a dagger at the heart of President Obama’s exclusively negative and mean-minded divisive election campaign.
Political conventions easily slide into shallow rhetoric and, of course, there was much of that. The Speaker of the House was the worst offender and that was unfortunate as he opened the evening program. Rick Santorum followed up with a speech that made me cringe with almost every self-serving word that he uttered. Mitt Romney served the nation well by disposing of this corrupt politician in the GOP primaries.
Political conventions also lend themselves easily into self-promotion. Governor Chris Christie served up a banquet in that respect as he prepared the audience for a 2016 run for 1600 Pennsylvania Avenue, rather than setting the scene for a Romney/Ryan victory in 2012. Surely, The Governor will have to discipline his appetite to have any chance at all of victory. Indeed, he will have to discipline his appetite to live long enough to run. It is difficult to appear serious about putting one’s nation on a debt diet when one evidently will not offer an example to an increasingly obese nation by remotely attempting to eliminate excess belly-fat.
Political conventions rarely lend themselves to authenticity. And in this respect, the Republican convention dramatically defied the odds. First the balanced, factually accurate account of Virginia Governor, Bob McDonnell set the tone. Then the simply magnificent Ann Romney stole our hearts and souls. With a First Lady like Ann Romney, who clearly loves and respects her husband just as much as she loves and respects her country, the nation will be well blessed. It is impossible to imagine that Hillary Rodman could have spoken so authentically about Bill Clinton in the wake of the Gennifer Flowers ‘affair’ during the 1992 Democratic Party convention..
Now we await the remainder of the convention to determine whether Mitt Romney and Paul Ryan live up to the high standard set by Bob McDonnell and Ann Romney. The bar is set extremely high. If the two candidates vault it effectively, the White House is theirs to lose.
Tags: a high bar is set, GOP convention off to good start, McDonnell and Ann Romney shine, program well-organised, the economy center-stage
August 30, 2012 at 5:25 am |
Mr. Rowley: It’s a source of amusement the extent the popular writings of public choice architects discount their own theories. You simply don’t take your own theories seriously.
Politics is a rent-seeking game. I simply not familiar with the notion of “pro-freedom” redistribution vs “anti-freedom” redistribution(or a pro-freedom political party vs an anti-freedom political party).
In any event. the blatant transparency of TARP, the financial bailouts and the current financial oligopoly drives a stake in Tullock’s “inefficient market hypothesis”(to explain the divergence of rents >> outlays).
de jasay’s radical rational choice model(the total state firm) demolishes the classical liberal version of public choice. The empirical evidence simply points to de Jasay’s libertarian version of public choice as the more accurate model.
http://rulingclass.wordpress.com/2012/05/15/de-jasay-and-the-model-of-the-total-state/
You may as well devote the pages of this blog to composing poetry. You would be more productive…
August 30, 2012 at 10:28 am |
Jasay’s model is very relevant and I like it a lot. However, a far better and more ruthless model is now available from Bueno de Mesquita et al: ‘The Dictator’s Handbook’ offers the best public choice understanding of the political process. It makes Jasay look relatively benign.
All this said, an electorate ultimately must choose between the options before it. So one looks for nuggets of hope in the morass. The choice is between the least worst of all the evils. And it remains rational to try to choose between them.
Occasionally I do devote my columns to poetry, others’ as well as my own! I write primarily to encourage readers to think, and evidently with some success as your comment indicates, and as the fact that you read this column surely confirms.
September 1, 2012 at 2:40 am |
Mr. Rowley: I would have to disagree a bit. de Jasay’s account is not benign next to any comparison. It attempts to explain why the State persists even when the rulers/leaders hate it. In the language of a current meme, we would ask why the State persists even when we have the 100% vs 0%. Indeed, I wrote an old post on this topic: the “One Hundred Percent.”
http://rulingclass.wordpress.com/2011/10/29/the-one-hundred-percent/
Institutional persistance(status quo) is the more important problem/consideration in public choice than ruthless leaders. We do not need public choice to explain the actions of autocrats. But we do need public choice to explain the persistance of things like the drug war, the military industrial complex, central banking in liberalism.
Do we explain this by a model that has democratic leaders behaving like autocrats? But why? And this is not really a new idea. I wrote a post back in 2010 positing that we could model rationality in politics by assuming politics to be the rule of “coordinating psychopaths.”
http://rulingclass.wordpress.com/2010/09/13/conspiracy-theory/
Once again, I would ask why aren’t you taking your theory seriously? If politicians are rewarded for behaving like psychopaths, then you should know that you are being lied to. But why are you expressing feelings of being uplifted by a speech and having your “heart stolen” by a speech? If institutional persistence/preservation is the important problem, then there simply is no “lesser of two evils.”
September 1, 2012 at 11:40 am |
Mesquita’s analysis is not restricted to autocracies. It encompasses democracies also. He focuses on the concept of the size of the minimum winning coalition relative to the size of the real selectorate. This allows him to explain why public goods are provided more extwnsively in democracies but only for the purely private advantage of the incumbent winning coalition. His work is based on early contributions by William Riker. It is well supported by case studies of various positions on the autocracy-democracy spectrum.
Jasay’s work is not public choice. Jasay deals with an organic state, not methodological individualism. What would you do if you were the state is his question. There is no such thing as a state. Only a collective of individuals. Mesquita does not make that fundamental analytical error.
September 2, 2012 at 10:10 am |
Professor Rowley:
I disagree with your exclusion of de Jasay from the Public Choice sphere. de Jasay applies a rational choice method to the agency of the State itself to model, in effect, a “total State,” or a “Firm”, or, in your words, an “organic state.” If we were to borrow from the language of say, The Calculus of Consent, we might refer to this as the “Protective State” and cast de Jasay’s critique as “incentive-incompatibility problem” of collective choice to abide by the “unanimity” of the so-called social contact. In a sense, we would say that the Protective State acts as if it were endowed with agency.
The Calculus of Consent neatly divides the Protective State from the Productive State(Redistributive State), wherein the latter is modeled by a type of von Neumann–Morgenstern cooperative n-player game model of symmetrically shared payoffs, logrolling and dominant coalitions organizing themselves into the smallest, effective coalitions. But this division is really not warranted. It falls apart upon deeper analysis.
For one, I would suggest the political competition model of The CoC, which more or less revolves around logrolling, is superceded by the later rent-seeking model of the Tullock Auction. I find it interesting that you would say: “there is no State Agency; there is only a collection of individuals.” Would you likewise say: “There is no Microsoft or Google. There is only a collection of individuals.” In other words, there is no Firm. I doubt you would subscribe to the latter sentiment. And I can’t see any theoretical justification for the sentiment that rent-seeking in free-market competition results in Firms, but rent-seeking in political competition does not.
Now, obviously, the micro-economic foundations of The Firm has been a difficult problem in economics. I would suggest that Oliver Williamson’s treatment of The Firm, which netted him the Nobel Prize a few years back, is a compelling model. The Firm is a Dispute Resolution Organization(DRO), a form of economic governance that arises as means to efficiently reduce the bargaining costs from the gains of trade in terms of the opportunity costs of asset allocation. Since your an economist you obviously know what I mean by that. Assets that are specific to one another do not(or may not) trade at opportunity cost. This potentially introduces “haggling”(significant bargaining costs, friction, etc) in a regime of horizintal trading partners(purchasers and suppliers). Rent-seeking agency(here, I mean rent-seeking in a very generic sense of economic rents) can lead to a sort of DRO clumping(a population of Firms).
So Williamson’s insight is that the Firm is a type of DRO. If we combine this with Tullock’s insight regarding the Tullock Auction, we can begin to see why we would have Firms in political competition, particularly given the Viriginia School insight that competitive entry of equal agents can result in a rent dissipation ratio D >> 1(can approach “infinitely wasteful”). The third insight is once again from Tullock, namely the problem of “Efficient Rent-Seeking: Chronicle of an Intellectual Quagmire.” The equilibrium sum of the investments/outlays for a given prize(rent) depends on the structure of the contest. There is no unique or logical equlibrium pattern of rent-seeking. It depends on the institutional context. The addendum to this third insight is an earlier work by Tullock, “The Economics of Special Privilege and Rent Seeking,” that attempted to explain an observable pattern that emerged in the late 1980s, namely the rent dissipation ratio << 1(outlays were too small relative to rents). Tullock's attempted to explain this discrepency in terms of deliberate opaqueness and inefficiency of the rent-seeking technology. This may have been partially explanatory at the time(you yourself wrote that Tullock's explanation saved the Public Choice method), but TARP and the Financial bailouts were much too transparent. The consequence that action, according to Tullock's explanation, should have been a massive influx of outlays bidding for the rents(new entrants). Instead we saw an action that essentially outlawed any new competition(Dodd-Frank). To me, the bailouts clearly demonstrated the actions and reality of the State as a Firm.
So The Protective State is a Firm, that is, a DRO, for exogenous rents. I prefer the term "Firm," rather than "organic," because it is an artificial construct. We can model the Firm as its own agency but we can derive its existence from microeconomic processes. In other words, it is not the product of some historical or theological dialectic. We start with the factual history that the US Constitution was borne from a pit of political economic interests(Hamiltonian/financial/banking vs Jefferson/agrarian) and note that the Madisonian attempt to "frictionalize" a legal structural constraint against a domination of any one given interest(rent seeking being infinitely wasteful for equal competing players) incentivizes a structural change in the contest for the rent-seeking equilibrium. This structural change is really more political economic than legal. The Protective State evolves into the DRO for the political economic structural changes in the contest. Just simply observe the massive number of committees and sub-committees in the legislative branches and the sprawling regulatory agencies in the executive branch. It resembles one massive vertically integrated corporation.
This type of result begins to lead us to the classic French liberal method–that is, libertarian class analysis. The Firm acts as a "market setter," that is, that which does not have explicit legal recognition is illegal. This is the real meaning of "Laissez Faire." Laissez Faire is anyone can set the markets as opposed all economic activity set by the political economy of the State. The final devolution to a full blown libertarian critique model is when the Protective State becomes dominated by a military industrial complex–which is what we have now. The coherent libertarian class conflict model of Charles Comte, Charles Dunoyer, Augustin Thierry and JB Say was borne from the military industry complex of the Napoleonic political economy. War is the Health of the State.
Regarding the "Dictator's Handbook," I have not read it. It's a new book. I did read a few reviews before commenting in my previous post. I understood that it applied to both autocracies and democracies. And I will stand by my original statement. You do not need public choice to explain the actions of autocrats. And you do not need to resort to the actions of "The Prince" to explain liberal institutionalism. Without having the read the book, I would ask an immediate question: shouldn't there be a "Prince" in every position of power? Not just politics. Is every CEO a Prince? Is every university president a Prince, etc, etc. Since no one will claim that, you then are forced to explain the exceptions because the general method being claimed(from the reviews) is that to hold power involves a Machiavellian calculaion between a selectorate and a winning coalition and (i)the only constraints on the Prince's actions is the minimum size of the wining coalition and (ii) the product of the Prince's actions is a function of the ratio of the minimum size of the winning coalition relative to the size of the real selectorate.
I don't think the leadership model of an autocrat applies to the leadership model of, say, The Free Software Foundation. But, in principle, a Prince could become the head of The Free Software Foundation. But then why wouldn't every leader of the Free Software Foundation act like a Prince? If there are ad hoc exceptions, then its not really a reliable method.
An immediate exception to applying the "Prince Model" to liberalism would be democratic Iceland. In that example you actually a democratically accountable reform/correction to the financial corruption of the international bailouts. The Prince Model not only has to explain that but also the evolution of an institutional capability that would allow any such democratic accountability. The logical of collective action is dominated by minorities, which would be controlled by Princes. Why would a Prince evr allow ademocratic accountability in the first place?
To me, without having read the book(which may offer illumination on these matters), it seems you are taking a model that explains one thing particularly well and may partially explain other things , but which is nonethless going to get bogged down in exceptions. And the problem is that it can't explain why there would even be exceptions.
The problem of the inability to explain exceptions dooms another competing method of rational choice: Bryan Caplan's "Rational Irrationality." Caplan looks at the failures of the Rational Ignorance model(particularly with respect to political reform) and proposed the rational irrationality alternative. It explains some things regarding politics but not others. But the fatal flaw in the model is that it assumes decling marginal returns invested outlays and rent dissipation is the "rational" or logical behavior of rents(as if some law of nature). But the "quagmire hypothesis" informs us that there is no such normative behavior as rational. Politics is a fantasy means to externalize costs on others and practice preferred delusion; but you can enforce this in any context because the equilibrium is a function of the structure of the contest. If delusion is preferred, there is no reason to see full rent dissipation, ever. In other words, it Caplan can't explain "free market rent dissipation." That we observe it is not proof that is the "rational standard." This is the ought-is fallacy. If its a preferrence outcome(which is what it is), then there are competing preferences, obviously.
September 2, 2012 at 12:24 pm |
dL:
Because I approve of Milton Friedman’s methodology – including the unrealism of assumptions and the predictive value of model – I can accept in this sense that Jasay’s model does constitute a branch of public choice. I still think that agency problems are so huge in politics that to ignore them is likely to lead to some results that do will not square with the evidence. I also think the same about the theory of the firm.
Bueno de Mesquita and Smith explicitly include the leaders of all organizations – governing coalitions, CEOs of companies and financial institutions, churches etc as princes. That is why I like their book so much. They deploy examples in some of those fields.
You are obviously highly intelligent and well-read. I agree with you about the importance of Tullock and the borderline role of Caplan.
However, a good scholar should never lock himself into one source of light. So why not read The Dictator’a Handbook with an open mind. I assure you that it will match your instincts though it might test your loyalty to Anthony
By the way, Anthony de Jasay is one of the most risk-preferring individuals I have ever met. Once when he was visiting the Public Choice Center, I asked him at lunch how his morning had gone. ‘Not too well’, he replied. I bet the wrong way on a stock this morning and lost $1 million’ ‘But this afternoon, I will invade the market again and pull back into the black’ And he did just that.
That, of course, is the spirit of capitalism. And that primarily is why I think so highly of my old friend. He does all this – writing great books and playing the Bourse like a wild man, – while he is completely blind. Another phenomenal achievement.
September 3, 2012 at 7:36 am |
Professor Rowley:
I believe a defining distinction between the libertarian and the liberal(of course, in the political philosophic sense, not the modern partisan sense) boils down to the statement, “the State is its own Agency.” Understandably, the liberal will resist this.
However, I agree with you in this sense regarding methodological individualism: we must demonstrate the microeconomic foundations of this agency. A simple assumption of its existence or the waive of the wand of some philosophic dialectical abstraction is not enough. So this is why I took the time to outline a microeconomic argument for this agency. I would say we can talk about the agency of the Protective State in the same way we can talk about the agency of Microsoft or Google.
I’m not exactly sure what you mean by ignored agency problems with a model of the firm that potentially dooms the model. I certainly do not mean that we treat this agency as a monolithic black box. There are conflicts and dissenting agencies within the agency–just as there are within any firm.
I actually used to be(at one time) more or less a Chicago school adherent until it was empirically obvious its serious methodologicl flaws regarding political economy. The lesson learned from that is to resist the urge for model extrapolation. For example, efficient market in stock prices is one thing. Efficient market in political corruption is quite another. Markets are not(or “not necessarily,” ==not a sufficient condition) a regulating mechanism of the State.
de Jasay was the one who actually converted me to that dirty little word, “anarchism.” But he is not by any means my only light. I might describe myself as a left-wing Hayekian complexity type(spontaneous order, etc., which means the emergent regulatory mechanisms of non-linear systems, etc…). But with respect to political economy, it is Bastiat who stands supreme. What I would say is that I can draw a line from the Virginia School to de Jasay to Bastiat(and the old French Laissez Faire political economists).
Regarding the Dictator’s Handbook: once again, I have not read the book. An initial critique that I would have off the top of my head(because the reviews I read only discussed political institutions and not civil institutions) was that “the Price” model would have apply to both types of institutions. Apparently, the authors are consistent with their application. But this leads me to my second critique(once again, of the top of my head). And this critique is not going to run up against de Jasay; instead, it’s going to conflict with my inner Hayek(and complexity, non-linear analysis). Namely, complex systems cannot arise from the artifical calculations of the Prince nor is the Prince the equilibrium of complex systems. The Prince is what I would a “positive feedback loop only.” Complexity cannot arise only from positive feedback loops. And any complex system under a positive feedback loop only eventually has to undergo regime transition or terminate at something like George Orwell(and Orwell is not the Prince),
So, in the analogous way you initially critiqued the hypothesis of the agency of the State because it assumes the State, I would say “The Prince” model assumes the institutions that the Prince can rule and exercise the benefits of power. Now you might make an argument that the Prince is likely to eventually capture complex institutions, but a universal Prince Model would have to demonstrate that the “winning coalition” factor serves as a “negative feedback loop” factor.
September 13, 2012 at 9:12 am |
[...] readers may be interested in this little exchange I had with Charles Rowley a few weeks back. Admittedly, I started the commentary with a bit of a snarky entrance, asking how [...]