A harmony of values: political versus market solutions

People tend to become better at doing thing they are rewarded for doing. Entrepreneurs are good at turning money into products, politicians are good at getting votes, and bureaucrats are good at increasing their budgets and influence.

In markets systems, there is a tendency for explicit and actual motivations to match.  For example, Apple, BMW, or Wal-Mart want to make stuff I want because they are rewarded to the extent that they make stuff I want.

In politics, the trend is reversed.   Incentives in politics are often the opposite of political promises or goals.   For example, politicians and bureaucrats may honestly want to fix poverty, pollution, corruption, and terrorism, but they are more often rewarded for making all these things worse.   The worse the problem becomes in the voters mind, the larger the politician’s power and scope for action.  The more power a politician has, the greater his ability to rewards the pressure groups who fund his campaigns.

The more efficient a democracy, the more it tends to reward those who re-direct resources away from problem-solving activity and toward towards vote-generating activity. In an inefficient or indirect democracy, someone who is a good problem solver can win though the support of a minority that directly rewards success.  In a popular democracy, the ability to get votes will tend to triumph over the ability to achieve campaign promises.  By contrast, the more efficient a market is, the better it is at directing the production of goods towards what consumers actually desire – a harmony of consumer and producer values.

In the big picture, the intentions of politicians and voters are irrelevant – whether they are good or evil, the outcome depends only on what kind of behavior is incentivized. Studies show that most voters are altruistic, not selfish — and this is very destructive. Selfish voters tend to vote based on their own evidence and reward problem solving. Altruistic voters tend to vote based on campaign platforms, have no empirical basis to evaluate a candidate’s proposals, and no incentive to follow up on outcomes.

One Reply to “A harmony of values: political versus market solutions”

  1. I must add that, though alluded to in your article, politicians must make popular decisions. If not, in a democracy, they may be voted out of power. Which to your point is that: as Plato says; from the exaggerated license which people call liberty, tyrants spring up as from a root . . . and that at last such liberty reduces a nation to slavery. Everything in excess is changed into its opposite. . . . For out of such an ungoverned populace one is usually chosen as leader . . . someone bold and unscrupulous . . . who curries favor with the people by giving them other men’s property. To such a man, because he has much reason for fear if he remains a private citizen, the protection of public office is given, and continually renewed. He surrounds himself with an armed guard, and emerges as a tyrant over the very people who raised him to power. (quoted by Albert Rubio,
    Referenced by Will Durant in Story of Civilization vol 3, Caesar and Christ) “The best government is that which governs least.” (The United States Magazine and Democratic Review motto)

Leave a Reply