- The Washington Times - Tuesday, July 16, 2002

At a time when condemning corporate greed is de rigueur, publishing a book eviscerating public greed seems almost like an act of impiety.

Still, that's exactly what the contrarian Cato Institute has done thankfully. That may not have been the original intention of "Government Failure," but the effect is the same, although the essays in this volume were written when Enron was still a successful energy corporation and WorldCom was busy gobbling up the entire telecommunications industry.

How can anyone spend time on public rather than corporate greed when "everybody knows" how serious the latter is? Public- choice economists can and will continue to do so.

Even though public-choice analysis has been around for 40 years making its founders Nobel laureates, it remains largely hidden from view of the media and the general public alike. Many economists and most political scientists wish it would just go away politicians even more so if they were aware that public-choice economists say their dedication to selfless public service is largely a sham.

The neglect of public-choice analysis is unfortunate, but thanks to the repeated failure of modern government, that can't last forever. That's true despite the chattering classes' inability to distinguish between marginal utility and a marginal cost curve although the same crowd of ignoramuses "know" that September 11 proves government is good and we need more of it. Three of public choice's leading lights, Gordon Tullock and Gordon Brady, both American, and Arthur Seldon, an Englishman, can, however. They also give us an introduction to public-choice economics that is far more likely to shape our futures than the current penchant for regulation ever will.

First and foremost, public- choice economics takes on the conventional wisdom that government is best when it addresses market failure. After Enron and WorldCom, that is all one hears these days and it is seldom challenged. The authors, no doubt, would do so in a Wall Street second. Most economists since Aristotle know that markets are not perfect after all, they are based on human decisions, and human beings are neither perfect nor perfectible.

Their primer on public choice is divided into three parts. The first essay by Mr. Tullock outlines the basics, including why public interest is often private interests writ large and why that leads to rent-seeking, and what the consequences really are. The second essay by Mr. Brady gives real-world applications to the basic tenets of public-choice economics including international trade, the Internet and telecommunications. Not that Mr. Tullock doesn't provide some choice examples.

Consider his chapter on tax avoidance. On page 65, he describes the consequences of repealing the 17 pages of the tax code devoted to breeding racehorses. In fact, Mr. Tullock's bite-sized examples are easier to swallow then some of Mr. Brady's analytical chapters the eyes-glazed-over section on the Internet being the prime example.

Finally, Mr. Seldon provides case studies from Britain that focus on public-choice analysis of that country's antiquated, costly (and increasingly failing) welfare services. Only one example: The families of state hospital patients must supply the minimal comforts something right out of the old Soviet Union as detailed in Alexander Solzhenitsyn's "Cancer Ward."

Britain's devotion to the welfare state, of course, is more fervent than in the United States and Britain has paid the price, says the author, with a public sector that works less well than here. For those who have been in a post-office line lately that may seem incredible, but, yes, it is true. Would anyone prefer the London underground to the Washington Metro, broken escalators and elevators included? I think not.

There are many more insights in this section, but one finding is absolutely essential. The central conceit of social welfare advocates, Mr. Seldon argues, is that as incomes rise, the welfare state can and should expand. That is precisely the opposite of the truth. As incomes in Britain (and elsewhere) rise, consumers demand more and better. Technology and economic diversity (that is, the private sector) are far better able to do what the state never did very well in the first place.

Any hope for change? Of course, it is already happening because of secular trends, trends that can't be stopped distorted, slowed down even but unstoppable nonetheless. Thus, before burning the heretics from public choice, a moment of reflection on the lessons they offer might be salient.


Roger Fontaine served on the staff of the National Security Council under President Ronald Reagan.


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