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Tuesday, August 27, 2013

Public Choice Theory informs us that Obamacare is a bad idea

You will not find defenders of Obamacare (aka ObamaCONcare) evoking Public Choice Theory (PCT).In some instances this is out of ignorance of the ideas contained therein and in other instances a wise, tactical decision was made not to have to face those ideas as they relate to Obamacare.

In a nutshell here is what PCT is all about;it is based on certain views concerning human nature namely:

1)Humans tend to respond to incentives.2)Humans  frequently tend to act in what they believe to be in their own best interests.3)Humans have definite cognitive limitations.

PCT does not claim that people always act on the basis of some cost benefit analysis nor that sometimes folks do not act in ways that seem to be altruistic.

These aspects of human nature apply to businessmen,butchers,bakers and con men but they also apply to elected public officials,politicians,and bureaucrats.Accordingly this second group will from time to  time act- most of time probably- in their own interests and not in some effort to bring about some abstract public good and that politicians just might respond to the incentives of campaign contribution in return for sponsoring some legislative act that benefits some special interest group at the expense of the public at large.

There are two others aspects of PCT worth briefly mentioning.

PCT explains that although private and public actors both respond to incentives (and constraints) the set of incentives and constraints are not the same for the two groups.Secondly, for the PCT analyst the unit of analysis is the individual- not society or the group or the community. Society does not make decisions,individuals do -realizing necessarily that the individual does not make decisions in a vacuum.

James Buchanan and Gordon Tullock are credited with the explication and promulgation of PCT but were not the first nor alone  alone in their efforts .From one point of view, their work restored and re-invigorated views that were part of the common wisdom and discourse of the English speaking inhabitants of the British colonies in the later part of the 18 Th century. For much of the twentieth century journalists,historians and high school civic texts as well as college courses treated governmental action and public officials actions as not being self interested and assumed those acts were done in the public interest and typically carrying out the voters' will. Buchanan and Tullock said lets rethink those assumptions. As Buchanan said it is about politics without romance. Political actors acting in their individual self interest replace the wishful thinking which envisioned benevolent,wise selfless officials carrying out whatever society wanted which they were able to discern with near omnipotent wisdom.

The Founding Fathers realized the dark side of human nature  and were very aware of the risks involved with investing power with the government.The government needed enough power to protect individual rights but the power could be used to restrict liberty as well. The Madisonian project was to devise a system of government that could constrain the power of the government that it needed to have to protect individual liberty.

Obamacare from the PCT perspective is a bad idea in part because it invests  governmental entities with too much power.Further the power is concentrated in a few governmental entities and in regard to their edicts there are few if any avenues of appeal.Think HHS Secretary,IPAB,the IRS and the US Preventive Services Task Force.

The power given to the Secretary of HHS is a prime example.The absurd number of times the statute says "The Secretary [of HHS] shall determine" illustrates the concentration of power in a single politically appointed governmental official and is a dangerous transfer of power from the legislative to the administrative. The corrupt political ends to which a number of those decisions, i.e exempting friends of the administration from certain aspects of the law, serve to illustrate illustrate Acton's axiom of " power corrupts".

And then here is the matter of the IRS.Politicians feign shock and horror regarding the revelation of IRS acting in an illegal and politically motivated way and will hold hearings to investigate. The same thing has happened with previous administrations, both democrat and republican. Does anyone really believe that giving the IRS a major role in the administration of Obamacare is a good idea?


Unknown said...

I am so glad that the private sector doesn't suffer from bouts of "too much power" and avarice, which appear to be traits that you so assuredly assume are the a sole proprietorship of the federal government. The ACA is far from perfect but if the Republicans would get their act together, they could approach the concept of fixing the ACA and keeping the beneficial aspects ("The ACA has some important fixes to America's healthcare problems; however, we intend propose significant improvements..."). Instead, they waste time attempting to throw out the baby with the bath water.

james gaulte said...

Fred Jones

Neither Public Choice Theory nor I assume that power and avarice are solely found in the federal government. Self interest is part of human nature and avarice is found in all walks of life and entering into the political arena does not involve a person become transformed into a selfless creature dedicated to the public good.This applies equally to Democrats and Republicans. The point is that the more power that is accreted to government (local,state or federal)the more efforts will be made by the equally selfish (or self interested)private sector to channel some of that power to their particular self interest.Public choice theory speaks to the important and ever increasing collaboration (cahoots is more accurate term) between private interest and various governmental or political entities to channel benefits to the politically connected private interests while diffusing the cost to the tax payers.The forces of the "iron triangle" (politicians,bureaucrats and special interests groups)that created this poster child of crony capitalism may well be the same ones that make a meaningful fix of ACA improbable.

James Gaulte

prof prem raj pushpakaran said...

**Professor Prem raj Pushpakaran** ♡ പ്രൊഫസ്സർ പ്രേം രാജ്‌ പുഷ്പാകരന്‍ ♡ writes -- 2019 marks the birth centenary year of James M. Buchanan Jr!!