AS THE ECONOMY TURNS
SCRATCH MY BACK
Dr. William Shingleton
July 27, 2006
Among professionals, the majority opinion is that economics as an
independent discipline started with the publication of ADAM SMITH’S WEALTH OF
NATIONS in 1776. If we accept that dating
standard, then economists spent almost two hundred years treating questions of
public policy as if we believed our political representatives to behave like Jimmy
Stewart in the 1939 movie classic, MR. SMITH GOES TO WASHINGTON. We thought that all we had to do was to
figure out what was “optimal” for society, throw in a little mathematics to
impress people with our knowledge of calculus, and expect the government to
behave as we had directed. Remarkably simple.
And quite naïve. However, in the post-WWII period, economists began to
provide us with a much more realistic model of government behavior, developing
a new field of study which came to be called PUBLIC CHOICE. [NOTE: The leading
authors were KENNETH ARROW, SOCIAL CHOICE AND INDIVIDUAL VALUES (1951), JAMES BUCHANAN and GORDON TULLOCK, THE
CALCULUS OF CONSENT (1965), and ANTHONY DOWNS, AN ECONOMIC THEORY OF DEMOCRACY
(1957). While we are going to focus on the LEGISLATURE, the theory of public
choice applies just as well to members of the executive branch. See, for instance, WILLIAM NISKANEN’S
BUREAUCRACY AND REPRESENTATIVE GOVERNMENT (1971)] In this new field, the
leading premise was that each decision in politics, whether it is made by a
statesman or by a scoundrel, is made on the same MARGINAL BENEFIT / MARGINAL
COST basis we use to make our other everyday decisions about whether to go out
to dinner or how much gasoline to buy for our cars. Given the recent controversy surrounding the
people and events in
If we want to understand the workings of a legislature, we should
first accept that a government is not a singular entity. Instead, a government
is a collection of individuals, gathered together according to institutional
rules, and entrusted with the welfare of the republic and its citizens. Each
representative is a logical individual, trying to achieve specific goals and
subject to a number of limitations. The pattern of behavior that evolves for
each individual is the result of what we call CONSTRAINED MAXIMIZATION, which
is the standard model for explaining a wide range of individual behaviors in
economics. Understanding individual behavior is a matter of identifying both the
specific goals and the multiple constraints of the individuals under
examination. Let’s start with the goals.
Each member of Congress is different; they have different ideas of
what is “good” or what is “bad” for the republic; and they have different ideas
on the importance of each decision. When we want to sound technical, we refer
to this as having different preference maps.
For a member of Congress goals can be social, political, or personal.
SOCIAL GOALS may include objectives like getting laws passed that help the
republic conform to his/her ideas of optimality, maybe even like the economists
would suggest. For example, some may
believe that environmental issues are of primary importance while others may
believe that the label of “primary importance” belongs to issues of health
care. Alternatively, POLITICAL GOALS are never far from the surface in
Let’s try an example.
Suppose our representative really has a Mr. Smith mentality and wants to
prevent the bad guys of the world from going something that would harm his/her
constituents. All he/she has to do is vote against the bad deed and he/she is
doing his/her job, right? That one is
not even close. There are 434 other members
to the U.S. House of Representatives so, if that’s all he/she does, then his/her
vote gets buried in a 434 to 1 landslide and the bad guys win. That does not
seem like a particularly good job to us. He/she may have voted correctly but
he/she was INEFFECTIVE, in that his/her position was on the losing end of the
vote. Voters not only want a representative who will vote the way those voters
want on key pieces of legislation, they also want representatives who will get
the job done, who will win the important votes.
What our congressperson needs are allies, other members of
Congress who will vote with him/her and help to achieve the 218 votes needed to
win the vote count. For the sake of this
example, we’ll divide the other members of the Congress into three groups,
those who are willing to vote the same way as Mr. Smith because they would have
done so for their constituents, those who would vote against Mr. Smith’s
position because they (or their constituents) don’t like the idea, and those
who really don’t care very much and are open to persuasion. In the U.S. Congress this is the point at
which the PARTY WHIP becomes important. In the American institutions, each
party’s whip has two jobs, to count votes and to keep members of that party in
line. He/she tries to find out which
representatives are going to vote which way before a final vote is taken in
order to anticipate the result. That
way, if there is going to be a problem; he/she can exert pressure on wavering
members to vote with the party in order to win the vote. In Mr. Smith’s example, he could go to his
party whip to get a reading on how the vote would break if it were just a
simple, up or down, vote. If Mr. Smith
has enough natural allies on the floor he may just let the vote go forward and
hope for the best.
However, for many votes, there are two opposing sides and each
side believes strongly that it is supporting the decision that is best for the
country. Here the question could be as
simple as whether or not to fund a particular program or as emotional as
whether or not to make a particular decision on abortion. If the vote is expected to be close, Mr.
Smith has more work to do. He needs to entice some of the representatives who
really don’t care very much to support his position. If he has the support of
his party’s leadership, his party whip will help him on this. What he needs is
something to trade for the votes that he needs. What he has that he can trade
is his vote, not on this particular decision, but hopefully on something that neither
he nor his constituents really care about. The technical term for the strategy
is “You scratch my back and I’ll scratch yours.” If he has enough things that he doesn’t care
about and other legislators have enough things they do care about, then they
may be able to reach some sort of a deal.
Of course, the opposing side is playing the same kind of game, so it’s
not quite as easy as it sounds. But the
end result here in the 21st Century seems to be that we end up with
pieces of legislation that are hundreds or even thousands of pages long, with a
little bit for everyone and a budget deficit in the hundreds of billions of
dollars. That’s because here in Indiana we demand that our representatives get
the government to spend money to benefit Indiana but we really don’t care
whether or not it spends any money to benefit the other 49 states or not.
The other problem for the would-be Mr. Smiths of the world is
that, in order to help ensure that Congress makes the optimal decisions; they
believe that they need to be re-elected. By itself, that is no problem.
However, election campaigning costs money, and that is a problem. As of January
of 2006, your representative has a salary of only $165,200 per year. [NOTE:
Since 1992, Senators and
So where does the marginal cost/marginal benefit stuff come in?
Suppose Mr. Smith supports gun control and educational reform, but that the gun
control bill will come to the floor before the election while the educational
reform bill won’t come up until after the election. In addition, he really
doesn’t care that much about gun control and that educational reform is dear to
his heart. He has two choices. He can vote his heart on gun control, knowing
that the NRA may retaliate by financing a successful challenge by another
candidate. If that happens then he never gets to vote on the education bill
because he will be a former-congressman by then. On the other hand, he believes
that, if he gets re-elected he will be able to push through some sort of
education reform bill that has always been close to his heart. He may vote
AGAINST the gun control bill that he really likes if it will keep the NRA from
supporting his opponent in the coming election.
Then, after he wins the contest, he will help push through the education
reform bill. Has he given in to the
lobbyists and joined the Jack Abramoff fan club? In this case the marginal cost of voting the
wrong way on the gun control bill was judged to be less than the marginal
benefit of getting the education bill closer to passage. Of course, in each case judgments must be
made on the PROBABILITIES of the outcomes and one of the things that separates
a master political leader from the pack is his/her ability to assess the
chances of success. But sometimes an
issue is so important that a politician will cast a critical vote while
recognizing there will be long-term political consequences and we get to see a
true profile in courage. Our favorite example was LYNDON JOHNSON’S signing the
CIVIL RIGHTS ACT OF 1964. He is said to
have signed the legislation and then turned to an aide and said, “We have just
lost the South for a generation.” LBJ, quite correctly, read the future
marginal political cost to the Democratic Party but believed that the marginal
benefit to the country was more important.
The reported cost of all this lobbying, as reported by those same
lobbyists, was over two billion dollars in 2005 [SOURCE: politicalmoneyline www.fecinfo.com]. Again, some of it may have been people,
corporations, unions, and other institutions donating to campaigns out of the
goodness of their hearts and an Aristotelian sense of civic duty. We guess
economists are a little too cynical to believe that, so the question is. “Why
would all of these people spend over two billion dollars in a non-election
year?” Most economists would argue that the two billion dollars was spent
because the people who hired the lobbyists expected to get more than two
billion dollars back in benefits. To be blunt, it was spent because it was
expected to be profitable. The lobbyists, and those that hired them, expected
to rake in more than two billion dollars in gravy (There’s a sloppy metaphor!) from
the two and a half trillion dollar budget, about one tenth of one percent, if
they only expected to break even. Of
course, as any good businessman knows, you never go spend money if you only
expect to break even, you should only spend money when you can expect a decent
rate of return, even-more-so if there are risks involved, like having to deal
with some of these shady characters in the first place.
So we come to the final question of the evening, “How do you get
the money out of politics?” The answer is simple. The money is there because the people who
spend the money are expecting something in return. If the government did not
have two and a half trillion dollars of taxpayers’ money to play with, there
would not be as much money being invested in lobbyists in the first place. And, if the federal government got out of
those activities and regulations (powers) that are not delegated to the United
States by the Constitution, nor prohibited by it to the states [SOURCE: 10th
Amendment to the Constitution.] we would not have nearly as much money chasing
after power. You really have to give JAMES MADISON, ALEXANDER HAMILTON and
those other guys credit. They got it right the first time with the notion of
LIMITED GOVERNMENT. If we want less money in politics then we must have a
government with less money to spend and less power to exert. Without the money
to spend and the power to exert it would not be profitable to spend money on
lobbyists. That’s the old marginal cost and marginal benefit rule again.
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