Why Government Fails So Often: And How It Can Do Better (21 page)

This chapter discusses the first two features so lacking or deformed in government: incentives and rationality, at both the individual and especially the collective levels.
Chapter 6
discusses the other four: information, inflexibility, incredibility, and mismanagement.

INCENTIVES

Policy effectiveness is powerfully affected by three categories of incentives—those that animate
policy makers
,
citizens
, and
private actors
whose interests a policy might affect. Private incentives are also explored in
chapter 6
(on government credibility) and
chapter 7
(on markets).

For decades, social scientists who study government have carefully explored two fundamental questions: What do government officials and other political actors do, and why do they do it? The “what” question is descriptive; it can only be answered by direct observational studies and other more indirect methods.
¹
The more intriguing “why” question—our principal concern here—is more elusive; true motivations can only be inferred based on some theory. Officials’ motives may have been more straightforward up until the early twentieth century when many officials could charge the government for some of their official acts (e.g., prosecutors earned a fee for each conviction) rather than receiving salaries.
²

Generally speaking, there are two theoretical approaches to this “why” question. The first takes officials at their word. They usually are proud of what they do and invoke a high-minded reason for action such as the desire to do what the law or the “public interest” requires.
*
Steven Kelman insists that this “public spirit is important in public behavior and that therefore the dolorous results for the policymaking process that result when one assumes self-interest do not occur simply because self-interest fails to dominate the way advocates of the public choice approach believe it does.”
³
In reality, however, Kelman’s claim is little more than wishful thinking and cannot possibly be verified. But even if it were true, the more important point is that his preoccupation with officials’ motivation is quite irrelevant. What matters, or should matter, to the citizenry is the actual performance of officially administered programs on the ground, yet this performance may have little or nothing to do with how public-spirited they are. Indeed, just as speed is a bad thing if one is going in the wrong direction, so officials’ zeal may in some situations actually exacerbate program failure.

One must distinguish between two uses of the “public interest”: the normative and the positive. Almost all who speak of the public interest invoke it as a standard that all public policies
should
satisfy; indeed, it is one to which all but the most benighted and misanthropic can repair.
†
But as a positive account of how political actors actually behave, the public interest is a hollow, dangerously naive explanation. (This cynicism is
especially
common among self-styled “public interest” advocates on both the left and right who criticize most political behavior [other than their own] on precisely this ground.) The central difficulty is that the public interest is not self-defining. Even the most scrupulously public-regarding citizens, not to mention the many more narrowly selfish ones, tend to view the
public interest through their own particular lenses, investing their own preferences with broader justifications. Indeed, few political actors will concede, at least publicly, that their actions do not conform to the public interest. Whether the public interest conceit is delusive or something else, it is probably almost universal.

Government officials, like most trained people, tend to believe in what they are doing and that their programs serve the public interest. Is this inconsistent with the central hypothesis of “public choice theory” (discussed in
chapter 4
), which holds that officials’ behavior is best predicted by assuming that they are motivated by self-interest? The answer depends, of course, on what one means by self-interest. As we shall see, public choice theorists define an official’s self-interest not as her pride in advancing a public interest goal but more narrowly as her pursuit of individual or institutional power over budget, discretion, and other resources that are useful in attracting political support.

The competing answer to the “why” question posits that officials pursue their self-interest through rational, utility-maximizing choices and that their decisions can best be understood and predicted in light of that motivation. The body of scholarship that advances and seeks empirical support for this rational-actor model is known as “public choice” (or “rational choice”) theory; its architects are largely economists and economics-oriented political scientists. It claims to show that these utility-maximizing policy-oriented actors—individual voters, politicians, other officials, interest groups, policy entrepreneurs, and even courts
⁴
—produce policies that tend to be inefficient and cost-ineffective, and to benefit discrete, well-organized interests at the expense of the diffuse general public, especially taxpayers. This bias can create many “invisible victims,” an often large but politically ineffectual group discussed in
chapter 2
.

Public choice scholars also claim—both theoretically and empirically—that the smaller, better-organized policy-oriented actors purposefully embed their self-interest in “deals” negotiated by politicians to create and preserve governmental institutions and practices—congressional committees, judicial doctrine, administrative agencies, the
Administrative Procedure Act, seniority rules, and much more—that project these deals far into the future, protecting these arrangements against opposing interests that would undo them.
⁵

Such an account encourages cynicism (many will call it realism) about politics and public policy, as
chapter 1
showed. Whether this cynicism/realism harms the body politic, or instead provides a healthy antidote to both the frequent malignity of political self-seeking and the perils of credulous idealism, is of course a matter of profound disagreement between statist liberals and their more conservative, limited-government opponents. There is surely some truth to the public choice account of official decision making. This book is replete with examples of inefficient policies that seem consistent with a public choice explanation. Many published studies, reviewed in
chapter 8
, ascribe policy failure to the distortions introduced by interest-group politics. Even so, it is hard to know just how true the public choice account is. After all, these outcomes are also consistent with other explanations in which the self-regarding incentives of officials and private groups combine with other motives that are harder to define or model.
⁶

Public choice theory has drawn many perspicacious critics, and its difficulties—exaggerated claims to universality, fragile empirical foundations, tautological use of “self-interest,” excessive focus on collective action problems, reductive accounts of human intentions, and inability to exclude competing explanations—have been well-developed in the social science literature.
⁷
For example, if utility maximization were the only goal of political actors, one would be hard-pressed to explain why individual citizens bother to vote. After all, the burdens of voting far exceed the vanishingly small chance of affecting the electoral result and thus the voter’s favored policy outcome. It follows that people vote for reasons other than rational utility maximization—expressive, idealistic, and reputational reasons, for example—but these other reasons are harder to model rigorously. One might call these other reasons self-interested, of course, but that renders the public choice explanation essentially meaningless:
any
action is self-interested at least in the minimal sense that the actor wants to achieve
something
for herself, but this tautology gives us little or no predictive power.

Another problem with public choice theory is that ideology evidently plays a significant role in much political behavior, yet ideology often suppresses or overrides narrow self-interest. One can describe ideology as self-interested to the extent that it provides the actor with a coherent, satisfying account of the world, but again this claim would render the theory wholly circular and nonfalsifiable. By explaining everything, the self-interest hypothesis would explain nothing. These question-begging aspects of public choice theory also make its claims somewhat vague, rendering its empirical predictions vague as well.

Still, this is hardly a fatal indictment; after all, no theory is perfect. The critical question for any theory is whether it explains and predicts the phenomenon of interest (here, official behavior) better than its rivals do.
*
My answer to this question consists of four propositions, which the evidence and analysis in the chapters that follow will amply support.

First, as a positive matter, public choice theory’s rational actor model explains and predicts far more observed official behavior than its main rival, public interest theory. Second, public choice theory’s defects—chiefly its ambiguity, resistance to rigorous empirical testing, and circularity—apply even more strongly to public interest theory. Third, public choice theory is most effective in explaining and predicting how a policy will be
implemented
once it is adopted (the subject of
chapter 8
). Finally, although both theories are flawed in some respects, both do contribute to our understanding of public policy.

This last proposition may come as a surprise, given my claim that the “public interest” account of politics tends to be vacuous and dangerously naive as a positive account of policy making. Properly defined and documented, however, it often has some explanatory
power. Consider the Airline Deregulation Act of 1978 (discussed in
chapter 11
), whose legislative history has been carefully documented and which expert analysts generally consider a great policy success.
⁸
The law was enacted through a combination of (1) self-interested lobbying by some members of the industry, would-be entrants, opportunistic politicians, and consumer groups seeking to benefit their supporters, and (2) reform advocates whose support for deregulation is best explained by their genuine belief that it would better serve the general public and most communities in medium-to long-run reform. These advocates included senator Edward Kennedy, Alfred Kahn (chairman of the agency that would be abolished by the act), Stephen Breyer (then counsel to Kennedy and now a Supreme Court justice), academic policy analysts, and even some regulators who would expect to lose their jobs under deregulation. In short, public-regarding motives, not just politicians’ self-interest, animated the enactment of this important reform.
⁹
Likewise, the project to search for the Higgs boson and other cosmological esoterica is not easily explained in terms of our politicians’ self-interest; the chief beneficiaries seem to be widely dispersed cosmologists, highly specialized equipment manufacturers (not all American), and construction workers in Europe, where the hugely costly CERN facility is located, spanning across the border of France and Switzerland.
¹⁰
Another example is the National Ignition Facility, a giant laser fusion project that is widely considered a failure and has already cost taxpayers $5 billion, with continuing operating costs of $290 million per year.
¹¹
Congress’s continued willingness to fund it might simply reflect pork barrel politics, loss aversion, and the sunk-cost fallacy, but it might also reflect a public interest bet that the project will produce low-cost power in the future. It is hard to know for sure.

However one may interpret these decisions, rational self-interest (as the actor perceives it) unquestionably drives most political behavior most of the time. Only the cloistered idealist will regard this as altogether pernicious. Self-interest, after all, is among the most powerful motors of human action and thus of the civic conduct and participation on which a vigorous democracy depend. Idealized images
of the Athenian polis to the contrary, citizens are unlikely to undertake the burdens of this participation—time, study, inconvenience, frustration—unless they believe that it will advance their private interests as well as their more public values. James Madison’s insistence on the need to design government in light of “the defect of better motives” and the fact that we are not “angels” confirms the fact that citizens are primarily self-interested when they venture into the larger, more impersonal world beyond their family circle and a few other small, moralized, interactive, and intimate collective enclaves.
¹²
Field studies by Nobel laureate Elinor Ostrom has confirmed how differently people think and behave in these disparate kinds of settings.
¹³

If self-interest fuels much or most democratic participation and is in any event ubiquitous and inescapable, what are its effects on the shape, content, and effectiveness of public policy? Public choice theory propounds a number of hypotheses of midlevel specificity that empirical studies have been able to substantially confirm. Again, these hypotheses do not specify absolute rules; they merely predict strong tendencies. Here are a few of the findings that seem most relevant to predicting the effects of public policies. As we shall see in what follows, these structural regularities—political axioms, if you prefer—tend to produce policy failure. And as we shall also see, assessments of actual policies tend to confirm these predictions.