Arnold Kling  

David Friedman on the Myth of the Rational Voter

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David Friedman's Machinery ... The Center-Wonk Vote...

In The Machinery of Freedom, p. 132, Friedman writes,


Imagine buying cars the way we buy governments. Ten thousand people would get together and agree to vote, each for the car he preferred. Whichever car won, each of the ten thousand would have to buy it. It would not pay any of us to make any serious effort to find out which car is best; whatever I decide, my car is being picked for me by the other members of the group. Under such institutions, the quality of cars would quickly decline.

I think this paragraph is quite profound. It gets to an important issue: if competitive government (or anarcho-capitalism, as Friedman termed it) would be so much better, then why don't we observe it? One view is that "they" are out to get us, "they" being the evil politicians running the state. Instead, it is the institution of democracy that is to blame. Majority voting is bound to lead to bad outcomes.

This suggests to me that we ought to try to get competitive government on the ballot, where it only has to win once. In states that allow Constitutional initiatives, try proposals that allow for other entities to compete with government on a level playing field. Charter schools, for example. Or state constitutional amendments that make it easy for people to break off from large jurisdictions and instead form charter communities.

These initiatives might be defeated. However, if you get lucky and pass one, then it may get a chance to work. Going back to Munger's Puzzle, which is how the government of Santiago, Chile, could get away with a public bus system that is worth than its private predecessor, I wonder what might happen if the people of Santiago could take a yes-or-no vote concerning whether to allow private competition. My guess is that a direct vote would stand a better chance than hoping that people will elect pro-market politicians.


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TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/867
The author at HeresyBlog in a related article titled Velfærdsstaten i en nøddeskal writes:
    Fra Machinery of Freedom af David Friedman s. 132:Forestil dig, at vi køber biler på same måde, som vi køber ydelser fra staten. Vi mødes ti tusind mennesker for at stemme på den bil vi foretrækker, hvorefter alle ti tusind er forpligtet til at ... [Tracked on July 13, 2008 10:13 AM]
COMMENTS (14 to date)
Daniel writes:

It's even worse than DF's quote suggests. Imagine that most of the 10,000 voters believed, and acted on, completely off the wall statements about cars, what makes them run, etc. You might find the majority agreeing with statements like:

"Most of the cost of a car is accounted for by the spark plug"

"Antique cars perform the best, innovation is not to be trusted"

Josh writes:

Is Irvine a charter community?

Instead, it is the institution of democracy that is to blame. Majority voting is bound to lead to bad outcomes.

Again, comparative institutional advantage is important here. Government institutions are not designed to achieve the most efficient decisions; they're designed to achieve political stability by brokering ideological divides.

If we wanted government to do EVERYTHING for us, then competitive government (a/k/a anarcho-capitalism) would make sense. But if we have an eco-system of public, private, and public-private partnerships, then we don't need to push so hard for an agency theory of representation.

conchis writes:

"if competitive government [] would be so much better, then why don't we observe it?"

That's a pretty big if.

8 writes:

First, use the argument to point out that we shouldn't be voting on a retirement system, a school system, an energy system or a healthcare system.

Kurbla writes:

Its not criticism of democracy, it is criticism of centralized decisions in general. Author claim, its better that everyone make his own decisions. The most frequently it is, but not always. If twenty people have to lift one heavy object, it is clearly better that one commands start of pulling, than that everyone decide the moment he'll pull for himself. You know, one-two-threeeee system.

Democracy is only the method to determine which kind of centralized decision it will be - fast or slow counting. Lifting on "three" or "after three." If you think slow is better, and people chose fast counting, then you think collective decision was wrong. It doesn't matter: even poor collective decision is in this case better than that sum of the best individual decision. That's why his argument is wrong.

Kling's proposal for Chile is on the line of direct democracy. One form of direct democracy petition for referendum. Such system exist in many countries, probably in USA as well, I do not know about Chile. If say 5% citizens of Santiago believe that bus system should be privatized, they can force public referendum about that topic.

Mentioning anarchocapitalism, it looks kinda feudalism to me; owner of the land has supreme power on his private property (in feudalism it was king) and he makes contracts with some people (higher nobility) and they make their own contract etc. What is the differentia specifica between feudalism and anarchocapitalism?

Alex J. writes:

Kurbla,
Just because you need someone to say 1-2-3, that doesn't mean that the other 20 guys should be chained to the heavy object.

8,
Everybody pays for what they want and gets what they pay for. All of those things are private goods.

Alex J. writes:

Why don't we see competitive governments? Because people, in general, don't like competitors. Unlike, say, barbers, governments are in a position to do something about it.

In the case of the Chilean bus system, it "stands to reason" (that is, to uninformed intuition) that when something big and important happens, it happens because of a purpose-directed effort by an agent of some kind. It's easy to think of a complicated private system as being chaotic, choked by cutthroat competition and just generally incomprehensible and untidy. "Clearly", someone should come in and set up one rational bus system.

Competitive, non-territorially-based governments can't work because, for all legitimate government purposes (security, enforcement and adjudication of rights), the "government" would simply become a private security force constantly at war with other "governments" or individuals over the particular rights its "customers" desire.

Under such institutions, the quality of cars would quickly decline.

Is this necessarily true? What stops a majority from voting for Mercedes for all? Especially if there is a progressive income tax to pay for them.

A much better argument of the type is Mark Harrison's--just substitute auto dealership for supermarket:

...imagine if we ran our supermarkets the way we run our schools. Due to the importance of equality of opportunity to buy groceries and to protect children from starvation due to negligent and ignorant parents buying the wrong groceries, we have government provided supermarkets, financed by taxes, at which shoppers can get a basket of groceries for free. Customers are forced to shop at the supermarket in their suburb, and can only change to another government supermarket with permission, and subject to room at that supermarket. There are private supermarkets, but customers have to pay for their groceries there. Entry of new supermarkets is heavily regulated. New supermarkets are not allowed in areas of declining population. The government favours private supermarket proposals from the large national chains. The public supermarkets in each State are run by huge Departments of Supermarkets. Pay, staffing and working conditions are centrally determined, by negotiations with the unions. Some regions find it difficult to attract staff. Employment conditions are strictly regulated, with rigid job classifications (check-out operator, shelf-stacker, trolley retriever, price labeller). Hours worked and tasks are strictly mandated. The number of staff in each position in supermarkets is strictly regulated. Pay rises tend to be uniform across all classifications. Although the public supermarkets seem to be overmanned, particularly when compared to the private sector, checkout queues are much longer and shelves are frequently empty.
Dr. T writes:
Under such institutions, the quality of cars would quickly decline.

Patrick R. Sullivan writes:

Is this necessarily true? What stops a majority from voting for Mercedes for all? Especially if there is a progressive income tax to pay for them.

You forgot about the losing car makers. Designing a car costs a lot. If your costly car designs keep losing elections, you go bankrupt. Since all car makers feel this pressure, they resolve it in one of two ways: design cars on a shoe-string budget (and have a mediocre car if you win the election) or quit the car business.

A corollary to this is once you win an election, getting re-elected is vital. The winning car maker will do everything possible to stay 'in office': change election rules, prohibit negative campaigning, restrict 'issue' ads that refer to car models, add safety or environmental requirements that only your car model can meet, etc.

Snark writes:
Why don't we see competitive governments? Because people, in general, don't like competitors.

Those who can compete, do. Those who can’t, sue. I’d like to see Arnold take up the cause of competitive government by reviving and chairing the old Cobden Club, named for Richard Cobden (a.k.a. “The Apostle of Free Trade”). If nothing else, the Pigouvians could use some friendly club competition to help improve the quality of their arguments.

Steve Sailer writes:

Imagine fighting a war the way we buy cars. Ten thousand people would all do whatever they want. And they'd all wind up captured or slaughtered.

Government is, fundamentally, about violence.

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