J. R. Clark

The Political Economy of Dissonance

Cognitive dissonance is defined as the psychological discomfort or annoyance that may exist when an individuals choice is not consistent with his values and beliefs. Dissonance may cause an individual to reconsider his values and beliefs, enter new choices with different parameters, respond to the constraints imposed, or change his individual preference function. This paper extends Festingers (1957) theory of cognitive dissonance to the work of public choice theorists and seeks to explain the incentives of the iron triangle to foment and quell dissonance. Examples are provided for specific environmental and health and safety risks.Akerlof and Dickens (1983) used cognitive dissonance to justify public sector intervention as necessary to correct what they perceived as a market failure in the choice of safety equipment by workers in hazardeus industries. Unlike Akerlof and Dickens (1983), we argue that the concept of cognitive dissonance is applicable to the analysis of public sector decisions giving rise to government failure as well as private decisions involving possible market failure. This paper views the public sector as a market-like arrangement in which dissonance may be produced and exchanged like any other commodity. Cognitive dissonance provides a useful framework for examining individual choice and also expands our understanding of the unseen elements of rent-seeking.

An extension of the Tiebout hypothesis of voting with one’s feet: the Medicaid magnet hypothesis

This study empirically extends the Tiebout hypothesis of ‘voting with one’s feet’ in two ways. First, it provides updated estimates using net migration data for the period 2000–2008. Second, in addition to investigating variables reflecting public education outlays, property taxation and income taxation, it investigates whether migrants are attracted to states with higher Medicaid benefits per recipient. The latter hypothesis is referred to as the ‘Medicaid magnet hypothesis’. The analysis includes three economic variables, three quality of life variables and three Tiebout-type factors in addition to Medicaid benefits. Results indicate that consumer voters were attracted to states with higher per pupil public school spending, lower property and income tax rates, and that certain consumer-voters may be attracted to states that offer higher levels of Medicaid benefits.

Is trust in government compatible with trustworthy government

This authoritative and encyclopaedic reference work provides a thorough account of the public choice approach to economics and politics. The Companion breaks new ground by joining together the most important issues in the field in a single comprehensive volume. It contains state-of-the-art discussions of both old and contemporary problems, including new work by the founding fathers as well as contributions by a new generation of younger scholars. Â

The Impact of Higher Quality Government Regulation of Business and Greater Economic Freedom on Living Standards: Evidence from OECD Nations

Purpose – The purpose of this paper is to evaluate whether two specific forms of government policy influence entrepreneurship and hence the performance economy as a whole. Performance is measured in terms of living standards and growth therein. The policies are, as follows: higher quality government regulation of businesses and higher levels of economic freedom. Design/methodology/approach – The paper first provides a basic model focussing upon the regulation and economic freedom variables. The study then adds a dummy variable for G8 nations, a tax burden variable, and the long-term interest rate and provides six estimates. The empirical analysis involves pooled time-series/cross-section data for the OECD over the period 2003-2007. Findings – The findings indicate that for OECD nations, higher quality public regulation promotes entrepreneurial spirit and performance. Higher economic freedom does the same. The findings are that higher quality government regulation of business and higher levels of economic ...

The effects of economic freedom, regulatory quality and taxation on the level of per capita real income: a preliminary analysis for OECD nations and non-G8 OECD nations

This study of the impact of economic freedom, regulatory quality and the relative burden of taxation on the level of per capita real income/GDP among OECD nations over the period 2003 to 2007 adopts a modified version of the overall economic freedom index computed by the Heritage Foundation (2013), one with the fiscal freedom and business freedom indices removed. This study then provides panel least squares fixed-effects estimates for five linear specifications/models. Each nation during this time frame can be regarded either as a nation per se or as a de facto ‘economic region’ within the OECD. The analysis first focuses upon all of the OECD nations and then, as a robustness test, subsequently focuses only on non-G8 OECD member nations. The estimations in this study all provide strong empirical support for the three central hypotheses proffered here, namely: (1) the higher the overall degree of economic freedom, the higher the per capita real income (GDP) level; (2) the higher the level of regulatory quality, the higher the level of per capita real income (GDP) and (3) the higher the overall tax burden, expressed as a per cent of GDP, the lower is the level of per capita real income (GDP).

The Problem with the Holdout Problem

Recent theoretical work has investigated the exact mechanism(s) by which the holdout problem creates inefficiency and thereby justifies eminent domain. In parallel, recent empirical work has demonstrated that state courts and legislatures either grant discretion to, or prohibit, local authorities from using eminent domain for economic development. This article extends Miceli’s (2011) strategic holdout model to incorporate political inefficiencies that may emerge when granting discretionary powers. Using eminent domain for non-efficiency-enhancing purposes substitutes for voluntary exchange, which is optimal, and attracts rent seeking by developers. Therefore, the efficiency justification for eminent domain is conditional. It depends on the relative magnitudes of the market and political sources of inefficiency. This analysis informs the efficiency consequences of court rulings, most notably Kelo v. City of New London, and the various changes in states’ laws that followed.

Trust and the Growth of Government

A feature of post-World War II economic history is the growth in government, paradoxically accompanied by a decline in trust of government. How does a mistrusted institution continue to grow? We utilize key findings in the economics, behavioral, and psychology literatures to develop a model to understand how this can occur, as well as illuminating the interconnections between government, rent seeking, productivity, and trust. When an increase in government powers leads to more rent-seeking activity, mistrust of government is engendered, which lowers productivity and sows the seeds for more rent seeking and further government growth. Also, a version of our model has a “trust trap,” illustrating how an economy may become stuck in a low trust/high rent seeking/big government equilibrium.

The Impact of The Calculus of Consent

Clark and Lee consider the impact of The Calculus of Consent and public choice more generally. There is no doubt that Buchanan and Tullock made an important contribution to the economic and political science literature in their classic book. But our attempt to examine its impact on economic education, scholarship, and the political process leads to mixed conclusions. Public choice has had less impact on the teaching of basic economics than one might think. Though mentioned in almost all economic principle texts, it is done mostly in passing, with a primary contribution of The Calculus of Consent, systematic government failure, largely ignored. While market failure is prominently discussed, government failure receives almost no consideration, if it receives any at all. The Calculus has received a large number of scholarly citations and spawned a remarkable amount of research by some impressive economists and political scientists. But this research has not spread as widely through the academy as one would have predicted, given the interest people have in government and politics. And new fields in economics have developed with almost no consideration of public choice despite its relevance to those fields, with behavior economics being the example discussed. It is also difficult to detect any change in the political process that could be seen as the result of public choice. This is not surprising given the large number of factors that impact on politics and the fact that much of Buchanan’s and Tullock’s classic work suggests that it will not have much, if any, impact on how political decisions are made. We conclude our chapter, however, by arguing that political process is subject to long-run influences that can improve the political process, and, if this happens, The Calculus of Consent and the public choice scholarship that followed will deserve some of the credit.

Too Inexpensive to Be Inexpensive: How Government Censorship Increases Costs by Disguising Them

Politicians often see price ceilings, subsidies and third-party payments as effective ways of reducing the amount consumers pay directly for goods and services and take credit for reducing their costs. While these policies may reduce prices, they are a form of censorship that invariably increases costs. Politically inspired interference in the communication that takes place through market prices reduces the information and discipline required to control costs. The most notable recent example of politicians trying to take credit for reducing costs with policies that increase them is found in their recommendations to reform health care. There are unfortunately a number of other examples such as price controls on apartment rents and subsidies to agriculture and education.

Suppressing Liberty, Censoring Information, Wasting Resources, and Calling It Good for the Environment

This paper considers prevailing environmental policy in the United States with the emphasis on liberty, markets, utilizing information, entrepreneurial discovery and the economic analysis of political decisions (public choice). The general discussion is illustrated by the concern over global warming and policies for addressing this concern. The political incentives to confront environmental problems directly with mandates, restrictions and subsidies ignore the power of liberty and market incentives to solve problems by fostering an impressive network of information transfer, increasing innovation and expanding prosperity. Indeed, most environmental policies systematically suppress liberty, censor the communication of information, and retard innovation and prosperity, with the result that they provide less environmental quality at greater cost than is possible. While such flawed policies might be justified in cases where pollution problems pose clear, serious and immediate threats, we argue this is not true of global warming, and the most effective response to concerns over carbon emissions may be limiting the discretionary power of government to take direct action and rely on the indirect effects of liberty and market incentives to move us beyond the petroleum age more quickly and efficiently than will result from the direct action of government.