Bryan Caplan  

Everything You Ever Wanted to Know About Behavioral Public Choice

PRINT
It's NGDP growth expectations ... Selgin on Money...
Public choice (also known as political economy) is applying economics to politics.  Behavioral economics is applying psychology to economics.  What happens when you do both at the same time, creating a "behavioral public choice"?  Gary Lucas and Slavisa Tasic's "Behavioral Public Choice and the Law" (West Virginia Law Review, 2015) provides an amazingly careful, comprehensive, and entertaining review of the literature.  Intro (with voluminous footnotes omitted):
Behavioral public choice is both an extension of and a reaction to behavioral economics and its counterpart in legal scholarship, behavioral law and economics. Psychologists and behavioral economists have documented imperfections in human reasoning, including mental limitations and cognitive and emotional biases. Their research challenges the rational actor model of conventional economics, especially the idea that individuals acting in a free market can make optimal decisions without the government's assistance. Behavioral economists and legal scholars in the behavioral law and economics movement have used this research to justify paternalistic government interventions, including cigarette taxes and consumer protection laws, that are intended to save people from their own irrational choices. Because of their focus on market participants and paternalism, most behavioral economists and behavioral law and economics scholars ignore the possibility that irrationality also increases the risk of government failure." Behavioral public choice addresses that oversight by extending the findings of behavioral economics to the political realm.

A key insight of behavioral public choice is that people have less incentive to behave rationally in their capacity as political actors than in their capacity as market actors. Elections are rarely decided by a single vote, so voters have little reason to take them seriously. Moreover, the voters, politicians, and bureaucrats who participate in the political process know that the costs and benefits of their decisions fall largely upon others. So these political actors have less at stake than consumers, investors, and other market participants who make decisions that primarily affect themselves.

Because political actors have little incentive to behave rationally, irrationality is common in politics, and it has a substantial negative effect on the law.
One fun section among many:
I. Opportunity Cost Neglect: Ignoring Implicit Tradeoffs

Some scholars are skeptical of certain government interventions on the grounds that they are ineffective, excessively costly, and inimical to economic growth. But opinion research shows that the public enthusiastically embraces government spending, tax expenditures, and regulation. Moreover, affection for government is not limited to liberals and Democrats. Conservatives and Republicans also express strong support for government as long as researchers ask them about specific programs rather than asking about government in abstract or general terms.

Nonetheless, opinion research also reveals that support for many government programs declines (often substantially) when researchers draw attention to the programs' opportunity costs. The opportunity cost of a government program consists of the private and public goods that society must forgo to make that program possible. Opinion research suggests that unless explicitly prompted to consider these costs, the public often ignores them. Opportunity cost neglect is consistent with the finding that decision makers focus on salient situational elements and irrationally ignore implicit information. The benefits of many government programs are obvious, but their opportunity costs are often implicit and therefore easy to overlook...

[...]

Widespread neglect of the opportunity costs of government programs has several implications. First, it artificially increases the demand for direct spending, tax expenditures, and regulation above the level that voters would otherwise support. In particular, opportunity cost neglect helps explain chronic budget deficits. Voters express strong support for government spending, but at the same time, they are also unwilling to pay for it. Second, opportunity cost neglect results in a misallocation of government funds. Specifically, opinion research suggests that the federal government spends more on the military and less on other programs than it would if voters were cognizant of the tradeoffs involved. Finally, opportunity cost neglect affects the government's choice of policy instruments. Voters are attracted to policies that conceal tradeoffs. This explains why voters generally prefer tax expenditures to similar direct spending programs. It also explains why, despite economists' objections, voters prefer to address global warming through command-and-control regulations, which conceal the opportunity costs of environmental protection, rather than a carbon tax, which would make those costs more salient.
Read the whole thing.




COMMENTS (6 to date)
AgentBased writes:

Cigarette taxes are based in rational choice -- i.e. increasing the cost decreases the rational agent's response. If it were based in behavioralism (or irrationality) then you'd get a different answer.

This type of oversight is unfortunately common.

Regardless of the laurels of rest of their arguments, because the premises are wrong, the answers must be as well.

BC writes:

One implication of behavioral economics is that revealed preference may not apply: irrational consumers' actions may not always reflect their true utilities and preferences. The counterpart in behavioral public choice is that polls and elections may not always reflect rationally ignorant voters' true preferences.

Since our system of government is based on the principle of popular consent --- Government legitmately assumes only those powers to which the People consent (and sometimes not even then) --- the default is that Government should not have a power that the People haven't unambiguously consented to. Government power is opt-in, not opt-out. Since elections are imperfect reflections of popular will, it follows that simply winning elections is insufficient reason for political leaders to claim electoral mandates for bigger government. Elections are not a strong enough opt-in mechanism.

Lucas and Tasic discuss some difficulties with constraining government constitutionally --- mainly cheating and unwillingness of the Courts to constantly over-rule elected legislatures. However, one solution might be to require super-majorities to pass legislation that expands government powers and to have such legislation automatically sunset unless explicitly renewed, again with super-majority vote. While not perfect, super-majority consent is at least a stronger opt-in than simple majority.

ThaomasH writes:

If the result of this is to discuss the expansion or contraction of any particular regulation, tax, expenditure, or tax expenditure on the basis of all the costs and benefits as likely to be filtered through the actual, not idealized, political and economic decision processes, it can only be good.

ThaomasH writes:

If the result of this is to discuss the expansion or contraction of any particular regulation, tax, expenditure, or tax expenditure on the basis of all the costs and benefits as likely to be filtered through the actual, not idealized, political and economic decision processes, it can only be good.

Andrew_FL writes:

"opinion research suggests that the federal government spends more on the military and less on other programs than it would if voters were cognizant of the tradeoffs involved."

Not exactly what I'd call an improvement...

John Alcorn writes:

Here are a few other sharp articles about political psychology and government failure. These articles highlight mechanisms that are not covered by Lucas & Tasic.

a) William R. Keech & Michael C. Munger, "The Anatomy of Government Failure," Public Choice 164 (2016) 1-42. Here is the abstract:

Government failure is a much bigger problem than its contemporary treatment implies. Setting aside natural disasters, most of the great catastrophes of human history have been government failures of one sort or another. We argue that many so-called market failures are government failures because government defines the institutions in which markets succeed or fail. The concept of government failure has been trapped in the cocoon of the theory of perfect markets. Narrowly defined deviations from market perfection have been designated market failures, for which government corrections may or may not really be a solution. Government failure in the contemporary context means failing to resolve a classic market failure. We propose an alternative approach for evaluating whether government fails: the Pareto standard. If an available Pareto improvement is not chosen, or is not implemented, that is a government failure. We organize government failure into two types: substantive and procedural. Substantive failures include the inability or unwillingness to maintain order, to maintain sound fiscal and monetary policies, and to reduce risks of transaction costs, which we classify as corruption, agency and rent-seeking. Procedural failures are inadequacies of available social choice mechanisms, causing collective decisions to be arbitrary, capricious, or manipulated. We conclude with some reflections on human rationality and the implications of behavioral economics.
An ungated version of Keech & Munger is available here:
http://polisci.uga.edu/uploads/documents/Munger_Draft_paper_for_UGA.pdf

b) Alvin E. Roth, "Repugnance as a constraint on markets," Journal of Economic Perspectives 21:3 (2007) 37-58.
Here is the abstract:

Abstract: This essay examines how repugnance sometimes constrains what transactions and markets we see. When my colleagues and I have helped design markets and allocation procedures, we have often found that distaste for certain kinds of transactions is a real constraint, every bit as real as the constraints imposed by technology or by the requirements of incentives and efficiency. I’ll first consider a range of examples, from slavery and indentured servitude (which once were not as repugnant as they now are) to lending money for interest (which used to be widely repugnant and is now not), and from bans on eating horse meat in California to bans on dwarf tossing in France. An example of special interest will be the widespread laws against the buying and selling of organs for transplantation. The historical record suggests that while repugnance can change over time, it can persist for a very long time, although changes in institutions that reflect repugnance can occur relatively quickly when the underlying repugnance changes.
An ungated version of Roth is available here:
https://dash.harvard.edu/bitstream/handle/1/2624677/Roth_Repugnance.pdf

c) Robert J. MacCoun, "Moral Outrage and Opposition to Harm Reduction," Criminal Law and Philosophy 7 (2013) 83-98.
Here is the abstract of MacCoun:

Three public opinion studies examined public attitudes toward prevalence reduction (PR; reducing the number of people engaging in an activity) and harm reduction (HR; reducing the harm associated with an activity) across a wide variety of domains. Studies 1 and 2 were telephone surveys of California adults’ views on PR and HR strategies for a wide range of risk domains (heroin, alcoholism, tobacco, skateboarding, teen sex, illegal immigration, air pollution, and fast food). ‘‘Moral outrage’’ items (immoral, disgusting, irresponsible, dangerous) predicted preference for PR over HR, with disgust the most important predictor. In contrast, preferences were not predicted by whether the risk behavior was common, no one else’s business, or harmless. Study 3 explored whether there are domains where liberals might reject HR. A sample of liberal students preferred HR > PR for heroin, but PR > HR for ritual female circumcision; path analysis suggested that this reversal was explained by moral outrage rather than consequentialist judgments of harm to self and harm to others.
An ungated version of MacCoun is available here:
http://conium.org/~maccoun/MacCoun2012_MoralOutrage_onlinefirstversion.pdf

Comments for this entry have been closed
Return to top