Saturday, May 13, 2006

Package Deals

In preparing for my micro final, I'm re-reading Donald Wittman's critique of public choice economics. PC (in its most basic form) claims that the political sector rarely achieves the efficiency of free market economics because of the incentive structure in play.

Wittman disagrees, claiming politics is as efficient as economics. I disagree with him but one claim he makes bears special mention. "Candidate develop reputations. If they have not kept their campaign promises in the past, they are less likely to be reelected or elected to a higher office. In economic markets, a firm's "goodwill" may be capitialized in the value of the firm and ultimately sold." (1397)

Implict in Wittman's reasoning is an astonishing assumption: candidates are not package deals.

In economics, there is not any product that, all at once, promises to make your car run smoother, feed your baby, improve your productivity, clean your air, secures your retirement and educates your child. Yet these (and more) resemble the standard claims of politicians. And while any one of these promises I can check and punish for on a product-by-product level, a candidate asserts to be a master at all of these. It becomes too easy to forget what he's promised to do and impossible to punish him for just that violation.

I'd buy Wittman's argument more if we lived in a world where each politician was only allowed on campaign promise and could only work on that one thing if elected. (Though there would still be other problems with this world.)


ryan said...

But most products are package deals, aren't they? If you said that the reason why you believe in the efficiency of the market is because the market consists of products that have only one function, sold by owner-operators, where all activity is divisible and regulated by a pure price mechanism, I'd say you were a closet communist and should be expelled from George Mason on general principle.

David said...

Oh Ryan you found me out! Curses!

But seriously, you're right that most products are package deals so it would be more appropriate to say that politicians are package deals of package deals. The problem remains.

Jason Br. said...

David, I have the same fundamental problem with the entire Wittman-Caplan debate. The multiplicity of issues at play in a quadrennial, one all-or-nothing election strikes me as fundamental to why electoral politics is inferior to the market... and both Caplan and Wittman seem to take it as given that this is a non-issue.

You may recall when I asked Caplan about this in class, he said that issues tend to clump together (e.g., that if you know an individual's stance on abortion, you can probably guess his stance on gun control). But as I see it, it's not only issues at play in an election, but also interpretation of historical events, candidate personalities, etc., and by grouping the whole thing into one "accountability moment", there is essentially zero accountability for any one issue or event.

Anonymous said...

If the problem is really as bad as all that, and elections really are clumping together a whole bunch of issues and dimensions that shouldn't be clumped and are wholly unrelated , then why do democracies seem so stable? That is, if there are multiple dimensions, shouldn't Arrow's Impossibility Theorem kick in and make all elections a matter of rock-paper-scissors? Doesn't the observed stability suggest that the set of all bundles that people actually want can pretty much be represented on one dimension? And if the issues really are just one dimension, inseparability of candidate traits is irrelevant, right?

And on the other hand, doesn't interjurisdictional competition look at least a little bit like a market, even assuming multiple dimensionality?

ryan said...

I'm totally getting expelled.

David said...

Arrow's Impossibility Theorem merely states that no voting system can be perfect (ie, meet the five criteria he establishes). It does not say that voting will be determined randomly as a result of the imperfection.

Stablity certainly doesn't mean complacency, either. If a voter values Issue X more than Issue Y, she'll side with the candiate that shares her view on X even if he doesn't share it on Y. (Assuming there's no alternative that's better.) That doesn't mean she changes her mind about how important Y is or what her view on it is.

ryan said...

I wasn't saying that Arrow says you randomly change what a particular individual favors. I'm saying nothing about individuals or randomness. I'm saying that Arrow's Impossibility Theorem says that if there are multiple dimensions, then all political outcomes are unstable in that another outcome would be preferred by the majority. Even with perfect stability of preferences, all coalitions are unstable and should disintegrate the moment they win.

I am further saying that we know that this is not the case, and therefore we know there isn't much multi-dimensionality, and therefore I am unclear why bundling is a problem -- for all intents and purposes, the different issues and character traits apparently covary.