Thursday, April 19, 2012

The Purposely Politico-Designed Rent Seeker Extravaganza

How did it come to the point that federal, state and local government systems are perceived as rent seeking opportunities? Moreover, do such systems then lend to a notion that rent seeking is a natural, acceptable and everyday way of doing business?

Beyond Buchanan and Tullock and all the other public choice theory leaders from the school of thought known as the Virginia School of Political Economy, one of the best quotes that sums up the current atmosphere for rent seeking was made long ago:

 "The state is the great fiction by which everybody seeks to live at the expense of everybody else." - Frederic Bastiat, French economist, 1850

 Hence what you are watching, observing and playing out is the end product of Bastiat’s observation in which people manipulate a system and those same people think it's perfectly fine, natural and required to play the game of rent seeking as it’s at someone else’s expense.

How did Bastiat’s observation come to be present reality? The present U.S. state, local and federal environment for rent seeking [beyond the mechanics explained in public choice theory which is an explanation of how it all works after the environment is created] goes back to the 1930's:

 “Keynes was exceedingly effective in persuading a broad group—economists, policymakers, government officials, and interested citizens—of the two concepts implicit in his letter to Hayek: first, the public interest concept of government; second, the benevolent dictatorship concept that all will be well if only good men are in power. Clearly, Keynes’s agreement with “virtually the whole” of the Road to Serfdom did not extend to the chapter titled “Why the Worst Get on Top.”

Keynes believed that economists (and others) could best contribute to the improvement of society by investigating how to manipulate the levers actually or potentially under control of the political authorities so as to achieve desirable ends, and then persuading benevolent civil servants and elected officials to follow their advice. The role of voters is to elect persons with the right moral values to office and then let them run the country."

- Milton Friedman, Richmond Federal Reserve Economic Quarterly, volume 83/2 Spring 1997.

 The concept of politicos manipulating the levers is an important Keynesian axiom that is missed by many as they want to concentrate on spending, debt, tax, Keynesian economic models, etc.

 The achievement of desirable ends is another item much overlooked. That "outcomes" can somehow be managed in a complex society through political planning. That is an erroneous assumption and one can merely point to the results as evidence. However, consider this observation:

 "This way lies charlatanism and worse. To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm.

But in the social field the erroneous belief that the exercise of some power would have beneficial consequences is likely to lead to a new power to coerce other men being conferred on some authority. Even if such power is not in itself bad, its exercise is likely to impede the functioning of those spontaneous ordering forces by which, without understanding them, man is in fact so largely assisted in the pursuit of his aims." - F.A. Hayek, from the essay The Pretense of Knowledge

 The next proposition one should consider is the size and scope of government. That the mere "size" creates the environment for shenanigans. From $800 defence department toilet seats, to recent GSA parties, to our subject at hand of rent seeking are all magnified by such size and scope. That is, if government was limited in size and scope then shenanigans, would too, in the main, be limited in size and scope.

 What has been purposely-political developed is a giant hulking money trap run by politicos and the manipulation thereof by politicos creates an environment of rent seeking purposely promoted by the system itself [a politically driven economy directed by politicos through the mechanaism of government rather than an economic driven economy directed by free people in free markets, with government also based on economics rather than pure politics] as well as the size of the system itself [the sheer size makes it out of control at the margins].

F.A. Hayek made an observation many years ago that identifies the above problems as well as offers a solution. It’s a solution not a panacea. Hayek observed that if the greater public wants collective action to address a need or desire [defence, education, fire protection, welfare, social security, etc., etc.] then government through collective action can tax to create funds to address such items.

Keep this in mind: a tax created to fund. One then must examine a fork in the road. How does one then go from the "fund created" to implementation of the "action" that the fund is intends to do??

Hayek argued two choices exist for the created fund leading to the action phase: act through the private sector or deliver through a created public sector. That is, if you now want the "action" to occur, the delivery method appears as the next step and two distinct choices appear: private or public.

The politico opts for public means as political power is gained in a much greater magnitude than opting for private delivery of the action. The political power leads to dependent political constituency building of the public sector workers themselves and others that now supply items to the now public and politico directed delivery system.

 Therefore, in the main, what you see, experience, and lament as "government" is not an economic organization, it’s a pure political machine of the nth degree by, for, and designed by politicos. The rent seeking pattern is promoted by the purposely built political system. Further, rent seeking is welcomed by the same politicos running the system as the rent seeking activity further dependent political constituency exercises that politicos depend upon.

1 comment:

  1. Krugman amounts to nothing more than an arrogant shill for the academic and intellectual bankruptcy of the failed "progressive" economic and social justice agendas.