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The Thing….Itself. Michael Munger Duke University November 7, 2005. The Thing Itself. Difference between Samuelsonian “public goods” problem and the problem of making choices collectively

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the thing itself

The Thing….Itself

Michael Munger

Duke University

November 7, 2005

the thing itself1
The Thing Itself

Difference between Samuelsonian “public goods” problem and the problem of making choices collectively

"In vain you tell me that Artificial Government is good, but that I fall out only with the Abuse. The Thing! the Thing itself is the Abuse!"

socialist calculation debate
Socialist Calculation Debate

“This is not a dispute about whether planning is to be done or not. It is a dispute as to whether planning is to be done centrally, by one authority for the whole economic system, or is to be divided among many individuals. Planning in the specific sense in which the term is used in contemporary controversy necessarily means central planning—direction of the whole economic system according to one unified plan. Competition, on the other hand, means decentralized planning by many separate persons. The halfway house between the two, about which many people talk but which few like when they see it, is the delegation of planning to organized industries, or, in other words, monopoly.” (Hayek, 1945).

hayek again

“The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate "given" resources…It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.” (F.A. Hayek, 1945, AER).

the right thing
“The” Right Thing
  • There may not be any one right thing to do. It depends.
  • It is the nature of collective choices that they are unitary: One defense budget, one standard for pollution, and so on.
  • Asking “What Will We Do?” begs the question. The real question is…

Why Do You Think There is a ‘We’?

p j o rourke information and scope problems of mr
P.J. O’Rourke—Information and Scope Problems of MR

Now, majority rule is a precious, sacred thing worth dying for. But—like other precious, sacred things, such as the home and the family—it's not only worth dying for; it can make you wish you were dead. Imagine if all of life were determined by majority rule. Every meal would be a pizza. Every pair of pants, even those in a Brooks Brothers suit, would be stone-washed denim. Celebrity diets and exercise books would be the only thing on the shelves at the library. And—since women are a majority of the population, we'd all be married to Mel Gibson. (Parliament of Whores, 1991, p. 5).

step back for a moment the fundamental human problem according to munger
Step back for a moment….The Fundamental Human Problem(according to Munger)

How can we construct or preserve institutions that make individual self-interestnot inconsistent with the common good?

origins of government institutions
Origins of Government Institutions

What if we all wanted the same thing? Would government even be necessary?

It would. Because we do all want the same thing: more….

On disagreement, Charles IV:

“My cousin Francis and I are in perfect accord—he wants Milan and so do I.”

two approaches to solving the fundamental problem
Two Approaches to Solving the “Fundamental Problem”
  • Madisonian

“Ambition must be made to counteract ambition…”

  • Rousseauvian

Transform the self, solve the problem of amour propre. Inscribe the law on the hearts of men. Some preferences are better than others.

madisonian institutions
Madisonian Institutions
  • Markets—Smith’s baker
  • Politics—Federalist #51:

Men are not angels

Men are not ruled by angels

“Ambition must be made to counteract ambition…”

democracy unbound rousseau
Democracy Unbound….Rousseau

But it is asked how a man can be both free and forced to conform to wills that are not his own. How are the opponents at once free and subject to laws they have not agreed to?

I retort that the question is wrongly put. The citizen gives his consent to all the laws, including those which are passed in spite of his opposition, and even those which punish him when he dares to break any of them…. (From The Social Contract)

democracy unbound
Democracy Unbound….

When in the popular assembly a law is proposed, what the people is asked is not exactly whether it approves or rejects the proposal, but whether it is in conformity with the general will, which is their will….

When therefore the opinion that is contrary to my own prevails, this proves neither more nor less than that I was mistaken, and that what I thought to be the general will was not so.

If my particular opinion had carried the day I should have achieved the opposite of what was my will; and it is in that case that I should not have been free.

loyal opposition
Loyal Opposition?

This conception of democracy is logical. The actions of government are driven by the people; the general will is sovereign. Opposition to the general will is treason, and must be punished. No need for two parties: only one general will.

All those countries with “Peoples’ Democratic Republic of ___” were not perversions of democracy, but examplars. That is what pure democracy, with no limits on scope, looks like. Cannot be otherwise.

Democracy, in and of itself, is an attractive concept that must constitute a recipe for tyranny, unless the scope of collective sovereignty is strictly limited.

che guevara s man and socialism in cuba 1965
Che Guevara’s “Man and Socialism in Cuba” (1965).

Society as a whole must become a huge school....We can see the new man who begins to emerge in this period of the building of socialism. His image is as yet unfinished; in fact it will never be finished, since the process advances parallel the development of new economic forms. Discounting those whose lack of education makes them tend toward the solitary road, towards the satisfaction of their ambitions, there are others who, even within this new picture of over-all advances, tend to march in isolation from the accompanying mass. What is more important is that people become more aware every day of the need to incorporate themselves into society and of their own importance as motors of that society

coherence and legitimacy
Coherence and Legitimacy

Can a group of people who disagree come to a consensus? How would this work? Why would we believe that the “consensus” is any more than an imperfect choice?

Do the choices of majorities tell us anything about “the right thing to do”?

Is there such a thing as “the majority,” which we just have to discover through voting or some political process?

I want…you want…what do we want?

democratic choices war in iraq
Democratic Choices: War in Iraq

You’ve got to help me out here…play along!

Preferences and beliefs, on the little card. REALLY! Accept the premise, and act like those are your preferences. Three choices:

No war: N

Aggressive war: W

Police/political means: P

choices war in iraq
Choices: War in Iraq

One possibility: isolationist variant of Powell doctrine

N > W > P

We should not get involved.

But, if we do, we should go in with overwhelming force.

Worst thing is to expose our troops/workers in a limited police action, depend on the U.N.

choices war in iraq1
Choices: War in Iraq

Another possibility: Rummy World

W > P > N

Iraq/Saddam is an imminent threat, will develop WMD.

If not war, then must vigorously pursue sanctions

Worst thing is to do nothing, relax sanctions and let Iraq become nuclear power

choices war in iraq2
Choices: War in Iraq

Final possibility: Prudent Dove

P > N > W

Let sanctions and inspections do their work, because Iraq is a potential danger to its neighbors and the world

We have no good claim to just war, so next best is to do nothing

Worst thing is to use war against a nation that has made no overt attack on the U.S.

choices war in iraq3
Choices: War in Iraq

So…we have disagreement

  • Prudent dove wants to use P, police action
  • Rummy wants war
  • Isolationists would prefer to stay far away from foreign entanglements, so do nothing.
choices war in iraq4
Choices: War in Iraq

Let’s use “democracy,” the pure kind where the people make the choice directly.

First, let’s decide whether to use force, or do nothing….

Vote P vs. W to decide which activity is better, and then vote that against N. That way, we are comparing the best “do something” against “do nothing.”

choices war in iraq5
Choices: War in Iraq

Consider what just happened. Simply by changing the order in which we consider the alternatives, I could generate as the “winner” any one of the three alternatives.

Choosing the agenda, then, is tantamount to choosing the outcome.

Is this just a conjurer’s trick, or does it tell us something about democracy?

choices war in iraq6
Choices: War in Iraq

If there are three (or more) alternatives, and there is disagreement, then democracy may be radically indeterminate.

More simply, there is no correct answer to the question, “What do the people want?”

In fact, some majority opposes every alternative.

choices war in iraq7
Choices: War in Iraq

Here is the problem:

I/P Rummy Prud Dove

N W P Best

W P N Middle

P N W Worst

Majority preferences:

W > P > N > W

Endless, infinite cycling over alternatives. Not a tie, but a literal perpetual motion machine

but this is nonsense meetings end
But this is nonsense: meetings end

That is what should terrify you: meetings end, and things get decided. The point is that we are rarely presented with three or more alternatives. We usually are presented with two. How are those two chosen?

The “Charney Revolution”: coalitions form, charismatic people take power. Not the will of the people, but the force of will of some demogogue or tyrant

If the rules matter to this extent, that means that procedures, not preferences, determine outcomes. And elites control procedures….

democracy works fine so long as everyone agrees
Democracy works fine…. So long as everyone agrees

But if there is disagreement, and at least three alternatives, then a majority opposes every available choice. So, democracy fails us when we need it most!

Since some choice has to be made, we are left with an outcome that is either

  • Imposed (tyranny)
  • Arbitrary (random or procedure-driven)

In either case, “democratic choice” is chimerical

Dictatorship with the trappings of democracy

the worst of all worlds
The worst of all worlds

Democracy without constitutional liberalism…

1. Rule of law, protections of property and liberty

2. Limits on scope of issues within the jurisdiction of collective choice…

Democracy without these is the most terrifying kind of tyranny you can imagine. Americans, and the West, are confused about “good government.” The key is constitutional liberalism, not democracy.

more generally
More Generally….

There are limits to what government can do. One of the first people to recognize this was the man who put the dismal in the dismal science, Parson Thomas Malthus. He discovered a general principle that will sound familiar to everyone:

The more you have of something, the more you need!

In third world countries, we have found that if all you do is give people enough resources to make them a little bit healthier, you increase births. Births continue until the society comes up against the new resource constraint. People are still starving, but now there are lots more of them. Sri Lanka: incredible success story.

2004: 20 m 1950: 7.5 m 1901: 3.6 m

malthusian logic is everywhere
Malthusian Logic is Everywhere

In cities and counties, the same logic applies to roads: if you make commuting cheaper by building or widening roads, it isn't long before people are once again, stopped and staring at the stationary taillights ahead of them. There are six lanes of gridlock now, instead of two, but people respond to the costs of the activity until the cost rises. If cost of commuting drops, more people live there, until the marginal cost rises again to its previous level.

you can t help people
You CAN’T Help People

Sometimes we try to get around this problem by subsidizing an activity we think we value. Suppose, for example, we all think family farms are good. But we look around, and see that family farmers are all poor or going out of business. So, Congress or the state legislature passes a law that subsidizes farm crops. Everyone who owns farmland gets a one‑time wealth transfer from consumers and taxpayers. So far, so good: farmers (briefly) are wealthier.

you can t help people1
You CAN’T Help People

Over time, though, people sell the land, or deed it to their children. But these people now implicitly pay a higher price for the land, a price that capitalizes the subsidy on the crop. If you ever cut the subsidy, the farmers will go bankrupt. But if you leave the subsidy, the farmer (at best) only breaks even, barely scraping by. We all still hear stories about the poor farmers, and wonder how this can be, when we are spending all this money on farm support.

you can t help people2
You CAN’T Help People
  • This is how it can be: after the one‑time wealth increase for people who own land, new people enter (or farmers or their children stay on their farms). Profits fall back to subsistence levels, and farmers are once again poor, just indifferent between staying and leaving. Only now, we are all paying high prices for crop support programs, and taxes for subsidies! Lots of pain for us, no gain for the poor farmers!
rent seeking

If proposals for funding are competitive, instead of pure pork barrel, can get dissipation or even super-dissipation

HUD-Chapel Hill


Bentham: “In political economy, there is much to learn, and little to do…”

three histories
Three “Histories”
  • Plato
  • Shakespeare
  • Plutarch
plato democracy means tyranny
Plato: Democracy Means Tyranny

“Democracy is precisely the constitution out of which tyranny comes; from extreme liberty, it seems, comes a slavery most complete and most cruel….When a democratic city gets worthless butlers presiding over its wine, and has drunk too deep of liberty’s heady draught, then, I think, if the rulers are not very obliging and provide plenty of liberty, it calls them blackguards and oligarchs and chastises them…and any who obey the rulers they trample in the dust as willing slaves and not worth a jot.” (Republic, Book VI, 560a-564b)

Shakespeare’s Tragedy of Coriolanus: Act II, Sc 3

BOTH CITIZENS. The gods give you joy, sir, heartily! (Exeunt citizens)

CORIOLANUS. Most sweet voices!

Better it is to die, better to starve,

Than crave the hire which first we do deserve.

Why in this wolvish toge should I stand here

To beg of Hob and Dick that do appear

Their needless vouches? Custom calls me to't.

What custom wills, in all things should we do't,

The dust on antique time would lie unswept,

And mountainous error be too highly heap'd

For truth to o'erpeer. Rather than fool it so,

Let the high office and the honour go

To one that would do thus. I am half through:

The one part suffered, the other will I do.



[Aristides] being surprised and asking if Aristides had ever done him any injury, "None at all," said he, "neither know I the man; but I am tired of hearing him everywhere called the just." Aristides, hearing this, is said to have made no reply, but returned the sherd with his own name inscribed. At his departure from the city, lifting up his hands to heaven, he made a prayer (the reverse, it would seem, of that of Achilles), that the Athenians might never have any occasion which should constrain them to remember Aristides.