The pay of state politicians in America is low



George Stigler’s theory of economic regulation


Must everything be a crisis



Bruce Yandle on interest group capture of regulatory agencies


Groucho Marx on evidence-based policy


The public choice economics of Winston Churchill


Paul Heyne on good government


Richard Posner on the drivers of interest group capture of regulatory agencies


Modern democracy: the power to replace governments at periodic elections

Citizens do have sufficient knowledge and sophistication to vote out leaders who are performing poorly or contrary to their wishes. Modern democracy is government subject to electoral checks.


The power of the electorate to turn elected officials out of office at the next election gives elected officials an incentive to adopt policies that do not outrage public opinion and administer the policies with some minimum honesty and competence.

A representative democracy enables the adult population, at very little cost in time, money or distraction from private pursuits commercial or otherwise:

  1. to punish at least the flagrant mistakes and misfeasance of officialdom,

  2. to assure an orderly succession of at least minimally competent officials,

  3. to generate feedback to the officials concerning the consequences of their policies,

  4. to prevent officials from (or punish them for) entirely ignoring the interests of the governed, and

  5. to prevent serious misalignments between government action and public opinion.

Enough of politics and elections, I have a life to lead, don’t you? Too many want to remake democracy with the faculty workshop as their model.


Such deliberation has demanding requirements for popular participation in the democratic process, including a high level of knowledge and analytical sophistication and an absence, or at least severe curtailment, of self-interested motives.

More on More Efficient Tax Systems Leading to Bigger Government

…in Deadweight Costs and the Size of Government (NBER Working Paper Number No. 6789) , [Gary Becker and Casey Mulligan] conclude that flatter and broader taxes also tend to encourage bigger government because taxpayers offer less resistance to increases in flat tax rates than in rates of more onerous and less efficient forms of taxation.

Any decline in the resistance of taxpayers leads to larger government budgets since an endless number of groups agitate for greater government support.

Flat tax rates, such as the VAT and Social Security taxes on earnings, usually start at very low levels but invariably increase over time.

The VAT is now 20 percent and higher in some countries. And payroll taxes began at a modest 2 percent in the 1930s in the United States, but have been increased 21 times to the present 15 percent combined rate on employees and employers.

via More Efficient Tax Systems Lead to Bigger Government.

Constitutions are brakes, not accelerators

Much of constitutional design is about checks and balances. This division of power slows the impassioned majority down.


Constitutional constraints are basically messages from the past to the present that you must think really hard, and go through extra hurdles before you do certain things.

The 18th and 19th century classical liberals were highly sceptical about the capability and willingness of politics and politicians to further the interests of the ordinary citizen, and were of the view that the political direction of resource allocation retards rather than facilitates economic progress.

Governments were considered to be institutions to be protected from but made necessary by the elementary fact that all persons are not angels. Constitutions were to constrain collective authority.

The problem of constitutional design was ensuring that government powers would be effectively limited. The constitutions were designed and put in place by the classical liberals to check or constrain the power of the state over individuals.

The motivating force of the classical liberals was never one of making government work better or even of insuring that all interests were more fully represented. Built in conflict and institutional tensions were to act as constraints on the power and the size of government.

Representative democracy is a division of labour in the face of information overload

John Stuart Mill had sympathy for the that parliaments are best suited to be places of public debate on the various opinions held by the population and to act as watchdogs of the professionals who create and administer laws and policy:

Their part is to indicate wants, to be an organ for popular demands, and a place of adverse discussion for all opinions relating to public matters, both great and small; and, along with this, to check by criticism, and eventually by withdrawing their support, those high public officers who really conduct the public business, or who appoint those by whom it is conducted

Representative democracy has the advantage of allowing the community to rely in its decision-making on the contributions of individuals with special qualifications of intelligence or character. Representative democracy makes a more effective use of resources within the citizenry to advance the common good.


Members of parliament are trustees who follow their own understanding of the best action to pursue in another view. As Edmund Burke wrote:

Parliament is not a congress of ambassadors from different and hostile interests; which interests each must maintain, as an agent and advocate, against other agents and advocates; but parliament is a deliberative assembly of one nation, with one interest, that of the whole; where, not local purposes, not local prejudices ought to guide, but the general good, resulting from the general reason of the whole.

You choose a member indeed; but when you have chosen him, he is not a member of Bristol, but he is a member of parliament. … Our representative owes you, not his industry only, but his judgment; and he betrays instead of serving you if he sacrifices it to your opinion.

Mises on politics, politicians and the reforming zeal


More Efficient Tax Systems Lead to Bigger Government


George Stigler vindicated: Learning the Wealth of Nations

Tyler Cowen has drawn attention to a 2011 paper on policy learning in the 1970s and 80s by Francisco J. Buera, Alexander Monge-Narajo, and Giorgio E. Primiceri was published in Econometrica in 2011. Their paper found that:

1. Policymakers have priors about how good the market economy is, and they revise those views — and thus revise policy — as they observe their own growth results and those of their neighbors.

2. A simple learning model predicts about 97% of the policy choices observed in the data.  The model accounts for more than 77% of the observed policy switches over a three-year time window.

3. Evolving beliefs — and not just the fixed demographic characteristics of countries — are critical for understanding policy decisions.

4. It was probably the growth collapse of the late 1970s for interventionist countries which led to a greater reliance on markets.

5. Adjustment toward better-performing policies is often quite slow.  In part this is because policymakers attribute the superior performance of other countries to heterogeneity rather than policy per se.

This record of politicians learning from failure and success at home and abroad is a vindication of George Stigler’s views of the relative unimportance of economists in influencing public policy.

There was no neoliberal conspiracy that captured the hearts and minds of politicians through mass hypnosis in the 1970s and 1980s as both the Left over Left and the Twitter Left like to suggest

The policies of Friedman had to wait, as George Stigler predicted, for a market to develop among interest groups and the voting public. Once that market developed, Milton Friedman, FA Hayek and others looked like leaders of an opinion.

A few years earlier, Friedman and Hayek were just angry men in the wilderness.

The reason for this sudden change in their public profile and purported influence on the shape the course of public policy in th 1970s and 1980s onwards was political parties were yet to conclude that the existing policy regime had failed irretrievably, and that the successes of neighbours on economic reform might be worth imitating locally.

Once politicians, the voting public and interest groups concluded that new solutions are needed, just as Stigler predicted, the ideas for reform been around for a long time came to the front.


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