Saturday, January 23, 2016

But What If No One Wants To Come? Part Two

“The plans differ; the planners are all alike…” - Frédéric Bastiat

In the video accompanying the post “But What If No One Wants To Come?” there are several political economy, public choice theory and general economic concepts worthy of mentioning.

Private-public partnership is a warm and fuzzy concept politicos love to trot on stage. The concept politicos want to sell the voter upon is that the private sector, the home of efficiency, is going to partner with the public sector, the home of inefficiency and then a magical moment occurs where an efficient outcome results. Nay, nay! As pointed out by Ludwig von Mises in his 1921 book Socialism, An Economic and Sociological Analysis, private-public partnerships produce sub-optimal outcomes with the only worse outcome being a totally public sector endeavor. How so?

Politicos through the mechanism of government use bureaucrats to deploy their dealings. Bureaucrats are by design cautious characters that take no risk. Meanwhile private sector entrepreneurs are risk takers. The mixture of the risk adverse and the risk taker inevitably produce a sub-optimal outcome. Enterprise is a risk taking venture with the bureaucrat being a fish-out-of-water wanting to take little or no risk. Meanwhile the risk taking entrepreneur is stymied by the bureaucrat’s need to be risk adverse, with the result in the main and upon normal occasion, being a sub-optimal outcome. (1)

Incumbent politicos like to show potential voters that they are “doing something”. The “something” proposed can easily be highly uninformed policy. Notional proposition based policy rather than evidence based “something(s)” are routinely proposed by politicos. How can they propose such non-evidence based propositions? The politico knows that contrary to popular belief, voters are uninformed. Voters are rationally-uninformed as the price to become informed is outweighed by the cost (deploying their time and resources elsewhere i.e. the alternative). Hence uninformed policy matches an uninformed electorate.

The “something” proposed in many cases comes in the form of a “monument building exercise”. Politicos love to build monuments to themselves. Monuments depicting the “something(s)”. Moreover, the monument to themselves is generally advertised as anything but a monument to themselves. The monument building exercise is cloaked as doing so for the greater good (whatever that is), for the voter, for you, for the public and generally enhanced as a “legacy for future generations”.

Then comes the complications of central planning of turning the “doing something” into the “monument”. The base uninformed policy, a central plan, inevitably runs into reality. The notional proposition begins to unravel as rather than being spontaneous/emergent order based with free market forces influencing demand and supply, an artificial demand and supply have been created. Hence the central planner has to tweak their “something” in an attempt to fix the many shortcomings associated with notional propositions (non-market, non-evidence based central plans).

And about the legacy and future generations: The incumbent politico’s event horizon is the next election. Therefore the cascading unintended consequences inherent with the deployment of a notional proposition, occurring years into the future, a price borne by future generations of un-born voters, are of no matter to the politico as they will either be dead or out-of-office. Therefore the event horizon of the politico dictates near-term “something(s)” with the “legacy” being no more than the price of failure of near-term something(s) superimposed upon future generations years into the future.

“The inefficiency of political control of an economy has been demonstrated more often, in more places, and under more varied conditions, than almost anything outside the realm of pure science.” - pg. 166, Thomas Sowell, 1999, The Quest for Cosmic Justice


(1) Socialism, An Economic and Sociological Analysis, 1921, Ludwig von Mises, pg. 256 - 257.