Political Incentives

Introduction

Everyone acts in response to incentives. We all seek the shortest path to the reward. Most of us assume that the right path is through our own efforts using our own resources.

But some want to do it by using other people's resources (OPM). Some just steal it. This applies to people in high office as well as to ordinary workers.

We ignore incentives at our peril. We need to remain aware of them and to understand them. If we misunderstand them we are likely condemn an economic system that works and promote slavery.

Most people in the private sector, whether self-employed or working for a company, have a common motivation, to produce something that can be sold for more than it costs to make. And in order for the product or service to fetch a good price, it has to have qualities that meet expectations (the correct meaning of "quality")..

Government motivations work in the opposite way, quite like criminal gangs.

When a crime is not a crime

On the one hand, most of us make a living doing productive work. We design things, we grow or manufacture useful products.

On the other hand, some seek a living without productive work. The source of their living is the income of the productive ones. While the reward sought is the unearned, some effort and some cost has to be expended. Thieves and robbers also find that their booty is worth less when they sell it than it was worth to the owner. The reward must still seem worth the crime. This appears to be true even if the chances of being caught and punished are one out of ten, or worse.

The whole situation is quite otherwise if the thievery and robbery in question has NOT been declared to be crimes. And I submit that is what will happen when we delegate law-making and punishment to a monopoly such as a government.

However, we have already delegated our powers and rights to deal with crimes to one legal, monolithic monopoly.

And along with those powers go the power to make the laws. None of these laws declares any actions of the monopoly itself as crimes, even though they are largely based on appropriating the income and wealth of the productive people. However, this is NOT commonly called thievery, since it's being done by this legal monopoly.

We call this monopoly government. Government is made up of elected politicians and appointed bureaucrats. They share many incentives and motivations, but not all.

Politicians

The first job politicians have is to get elected, which means they strive to appear motivated to implement policies that the voters support. Voters prefer candidates who are primarily motivated by certain policies, but sometimes vote for those who are just after The Office. The two types of candidates present themselves almost identically, since the office-motivated ones mimic the policy-motivated, and the voters can only distinguish them when they see what the winner actually does once he or she is in office.

Once they are in office some of the latter go back on their campaign promises quite clearly, others less so. However, all of them make “little compromises” in the ways they cooperate to pass each other's proposed legislation.

Bureaucrats

Government employees who are not elected, but rather are appointed, most of them bureaucrats, initially may be seeking government employ out of truly public-spirited motives, but sometimes because of the benefits that come with the job. Once they are in office and there is little fear of losing their jobs, their behavior changes.

They do comply with the basic job requirements, but become committed to the growth of their department and its budget. This goal requires propaganda and some “spinning” at times. Information must flow out that, whether good news or bad, shows that they are dealing with problems that deserve larger budgets. Thus, problem data and success data both have a high value.

Bad Examples

This encourages non-government thievery. Everybody acknowledges the effect of seeing how people with authority behave. Their actions become examples to follow. The example set by government is sometimes good, when true criminals are caught, convicted and punished. But after seeing years and years of the systematic and persistent way governments appropriate the earnings and savings of citizens, more than a few wonder why they as individuals can't do the same. Crime ensues.

This doesn't necessarily mean that people turn to committing crimes themselves. Groups and corporations can put the government to work to carry out thievery on their behalf. It is called corporate welfare. It comes in the form of investment credits, tariffs, regulation of commerce, anti-trust laws, laws against cut-throat competition, etc.

What government really wants

No matter what a government does, you can count on it to be motivated by a quest for more wealth and greater power. Behind the noble-sounding language of proposals to benefit the people lurks a desire for your freedom and wealth. Noble causes are proposed in order to expropriate your means for Life, shrinking the rights that make up Liberty and erecting innumerable obstacles to the Pursuit of Happiness.

Government can't help it. It is needed to create order among imperfect human beings. Government is made up of the same imperfect beings. It is supposed to create an order that individual humans don't create. The people who run the government are supposed to subordinate their own interests to maintaining order among all the rest. It is a joke! It is supposed to have different motivations than individual humans have. It does.

Sneaky and Insidious

So government carefully tires to avoid actions and talk that is too direct, such as coming to your door to take your money. The indirect approach is favored in order that the true motives will not be obvious. Various legitimate functions are performed by governments. However, without the pricing mechanism of the market, the results of these functions, the quality produced is usually poor and costs are not well controlled.

Take education as an example. Elementary education has been made “free” and compulsory in order that the minds of the people be made more malleable and willing to pledge allegiance to whatever the government wants. Cost per student keeps climbing year after year, while test results of reading and math skills stay flat or fall.

Do you want market or government?

Government

What is government? Is is like the infamous committee that met to build a horse? They had the right plans, all the right parts. But each time they tried to build a horse, they created a camel. But seriously, consider what the essence is of what government always tends to do.

According to economist Bruce L. Benson:

“The primary functions of governments are to act as a mechanism to take wealth from some and transfer it to others, and to discriminate among groups on the basis of their relative power in order to determine who gains and who loses.” ( The Enterprise of Law: Justice without the State , (1990, San Francisco, Pacific Research Institute for Public Policy), pg 43.

And from The Online Freedom Academy :

“Government is the absence of a market.” ( TOLFA )

A government agency can continue forever while losing money each and every year (expending more than the value of the goods or services delivered). Without a market prices cannot be calculated. No one can tell whether a given program is worth the cost.

The more that government interferes with private activity, the less effective is the provision of information necessary for an economy to work in a healthy way. But government persists, and grows, even though the value of its work decreases and expenditures increases. In a market, the opposite is true.

Market

A private agency will cease to exist if what it delivers is less valuable than what the customers are willing to pay. For one group of goods and services the customer has no choice but to deal with government, whereas in the market a customer freely deals with any of several companies and only when they consent to each transaction.

In the market, where private individuals and groups make exchanges of products and services, a seller competes by making offerings of higher quality and/or lower prices than others. Within each group or company the managers of engineering, marketing, sales and production departments each can justify budgets based on contributing to higher quality, greater production at the same or lower cost, innovative products, the skills to convince the public that its (possibly higher) price is worth it, and over-all good management of the company.

A company begins to lose if it maximizes either sales volume or product quantity or product quality or price (the over-all company performance becomes sub-optimal). It must maintain a balance of optimum performance in all areas, sales volume, product quantity, quality and pricing. We are hard pressed to see these ear-marks in government departments.

More Government

Managers in government departments have the opposite motivation of department managers in private companies. Private managers can only get budget increases if their contribution to profits increases. Those who fail to deliver get budgets cut. Government managers output value cannot be measured in the same way. What they “produce” is valued at cost.

Higher spending means more public goods (or "public bads") are delivered. Failed programs often are touted as candidates for more spending because the failures are presumed to be due to under-spending. And of course, “successful” programs actually have a questionable value when you take into account what members of society lost when the cost of the programs was expropriated. But the “successful” programs certainly are touted as proof that we're on the right track. Let's spend more on this too!

In government the only competition we can find is for the biggest slice of the pie. When a manager foresees that the year's expenditures might fall short of the budget allocated, some late-minute spending ensures that the next year's budget will not be smaller than the last. Choice parking spots are reserved to a government agency's managers rather than the customers. In the private sector the customers get the prime parking areas. ( Foundation for Research on Economics and the Environment )

William A. Niskanen Jr., chairman of the Cato Institute, discussing bureaucrats, attests that the lack of real rewards robs the bureaucrat of motivation to excel. Budget maximization remains as the main satisfaction, not contribution to profit. ” (University of Alaska )

From Dr. Paul M. Johnson's glossary:

“Bureaucratic politics theories or explanations of why particular public policy decisions got made the way they did stress the motivation by the relevant officials in the government bureaucracy to protect or promote their own agency's special interests (in competition with other agencies) as a major motivating factor in shaping the timing and the content of government decisions.” ( Dr. Paul M. Johnson Glossary )

Johnson goes on to say bureaucrats strive to increase their budgets, manpower and scope of authority. While many government policy decisions have some basis in reasoned analysis and the opinions of the constituencies of the elected representatives, powerful input also arises from bureaucratic turf-battles

Government bureaus misreport and cheat in order to appear to be performing better. ( Meier and Krause )

Most incentives and motives of government are not just suspect but down-right wrong. Executive leaders tend to jump on crises, or even provoke them, to enhance their performance and grow the power of government. Legislative persons respond more to special interests than to the voters. The Courts are biased by the executives who appoint them. Their motivations are always quite different from those of leaders in private organizations. No cure seems to be available. Government itself is suspect or down-right wrong.

Government vs Market, Where do we go from here?

Incentives and motivating factors can only be ignored at our peril. They must be understood. They must be corrected.

Government has built into it powers that we often come to regret giving to such an organization, and also unstoppable incentives to do less than was first intended at greater cost to us. Government and corruption are inseparable.

What is the essence of government that makes this inevitable? The government is a monopoly on the use of force in a specific geographic area. Nothing that we ask government to do for us can be done without using force – as any legal monopoly will do. Libertarianism must work for a more radical solution.

To end this immorality must we end monopolistic single-power government?