Hypothetical Answer On Political Parties

What would happen in a country that was made up of 50% libertarians and 50% big government advocates? The following is my best guess though I am open to persuasion.

That country would end up with two political parties each splitting support from half of the libertarians and half of the big government advocates. The result would be big government.

In politics, power is rewarded to those who give a return on investment. A corporation can make money for itself in two basic ways.

  • It can invest resources in the free market: by creating a better product, a more efficient manufacturing process, smarter advertising, etc. If it invests wisely, it will achieve a positive return on investment.
  • It can invest resources in the government. It can give campaign donations to political parties to get politicians elected who then pass legislation that benefit the corporation. Politicians can get away with this because the laws cost the average person very little individually but yield a large benefit to the corporation as an aggregate.

As an example, suppose ACME, Inc has $1 million to invest. What should it do?

It can invest $1 million in the free market and its management believes that will yield a 20% return on investment, i.e., it will end up with $1.2 million.

As an alternative, management perceives that it can invest $1 million in the government which will then pass tariffs against foreign competition. For the average american buyer of the ACME's widgets, this will mean $1 in higher prices in widgets. If there are 2 million buyers, this means $2 million in revenues for the corporation. Its return on investment in the government will be 100%.

Note the difference between the amount of cost to each consumer vs the profit for the corporation.

Whether the ACME invests in the free market or in the government will usually depend on where management believes the return on investment is higher.

It is in a politician's interests to cater to corporations because the money invested by corporations in government is needed to run campaigns, advertise, and win elections. Politicians can afford to do this because voters won't get angry at such a small rise in prices. They'll barely notice it. But the corporation will notice the benefit of the large return. Why play fair in the free market when it can bend the rules via the government and achieve a higher return?

This strategy is not just open to corporations, but also to any group. A union can bribe politicians to pass laws that ward off competition from other workers. The costs that the average American incurs are very small individually, but the unions benefit greatly through increased job security from the captured monopoly on labor. The same tactic can be used by any special interests group - trade organizations, environmentalists, moral authoritarians, etc. It is often in these groups' interests to invest in government for a focal benefit whose costs are dispersed enough that it doesn't hurt the popularity of the government in power.

In my hypothetical country, political parties will have the same incentive to reward focal benefits to special interests. That is how they will fund their own rise to power. Any starting point will likely lead to the same situation down the road.

Consider the case in which the starting point is one party of big government advocates and one party of libertarians. If the party of libertarian party wants to stay in power, it will have start offering a higher return on investment to the interest groups that are investing in big government party. Otherwise, it will lose elections.

As a result, some focal interests will abandon the big government party in favor of the pro-libertarian party. Perhaps at this point, some purist libertarian voters will protest and go over to big government party to 'punish' the pro-libertarian party in hopes that it may take the libertarian contingent more seriously in the next election. Sooner or later, an equilibrium will be reached where the two parties will be nearly indistinguishable, each catering to a multitude of special interests while the libertarians are split between the two parties, powerless in their ambitions. Some libertarians might even try to break off from both parties and start their own third party, but the third party will find it difficult to garner resources to run campaigns, spread its message, and create publicity. This situation would be likely true with an even higher percentage of libertarians in the hypothetical society.

I think this situation is very much like what is happening in the US today. A large swath of Americans are broadly politically libertarian - defined as socially liberal and fiscally conservative - but still big government reigns. As should be obvious, the two parties are virtually identical. Both candidates voted for the Patriot Act, supported the prescription drug bill, hold the same views on entitlement spending, and voted for the Iraq War. Kerry was not going to repeal Bush's tax cuts nor change the policy in Iraq. Any actual differences between the parties split libertarians in half, with the socially libertarian platform on the Democrats' side and the fiscally libertarian platform on the Republicans' side. Despite the media's infatuation with the red/blue split, the two parties are only different cosmetically. The election was about identity, not policy.

Even with a large libertarian population, the odds of libertarians being a strong political party in government are essentially nil, as getting rid of tariffs, ending union privilege, deregulating, and allowing people to choose their own paths in life have small dispersed benefits to everyone and large focal costs to privileged special interests - exactly the opposite of what yields a good return on investment via government. They will find few investors because party politics is about focal power aggrandizement. Liberty is a difficult to supply public good.

 


 

Props to Tanner Pittman for agreeing with me.

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Forgive the scathing

Forgive the scathing pessimism, but what's the practical upshot here? "We're screwed"? :dead:

I don't know if what I've

I don't know if what I've written above is even correct. There are a lot of assumptions that go into it, and I'm not sure if they're all correct. I was hoping to hear some criticism of it.

But if it is correct, I think it shows how steep (dare I say nearly vertical?) the climb for a libertarian 3rd party is if it wants to win elections. I'm going to elaborate in a post next week.

Forgive the scathing

Forgive the scathing pessimism, but what’s the practical upshot here? “We’re screwed"? :dead:

If you think the way to a libertarian society is through government, then yes, you're screwed.

Not quite. Basically, in a

Not quite. Basically, in a democratic nation, you can't rely on simply convincing a majority of the people that classically liberal policies are the correct ones. Even if majority or even a super-majority of the people were of that persuasion, the structure of the system is against us. You can't win by playing against a stacked deck. Instead, work politically to change the underlying structure and work intellectual to change the terms of the debate. See my post here.

Not quite. Was this

Not quite.

Was this addressed to me or someone else? It sounds like you're agreeing with me.

Jonathan, With so many

Jonathan,

With so many libertarians, don't you think it would be expensive to risk alienating them?

Wouldn't the market produce reporting agencies, Consumer Reports of libertarianism, that would serve as watchdogs over the legislators, and rate them according to their adherence to principle? It might not be worth my time and energy to keep track of representatives myself, but it would probably be worth it to many people to kick a few bucks to these agencies once in a while to keep the system under control. And the agencies would depend on their reputations for reliability for continued support.

Hell. Groups of bloggers might do this for free!

If a low rating would cost politicians elections, I'd think they'd try hard to avoid one.

Noah - within a terrestrial

Noah - within a terrestrial democracy, yes. We're screwed. But as nelziq says, we can work to change the structure to one that is not stacked against us. You've probably heard my thesis that on the ocean and in space, where people automatically have stronger Exit ability, things will be better. The same is true in cyberspace. And as technology marches on, those areas will become more and more accessible.

Giving up on national democracy does not mean giving up. It just means finding less obvious routes to change. This may be donating to the ACLU, earning much of your income on the black market, creating alternative institutions to government, teaching young people our ideas, changing academic viewpoints...

I think it shows how steep

I think it shows how steep (dare I say nearly vertical?) the climb for a libertarian 3rd party is if it wants to win elections.

I think "undefined" is a good description.

Could we perhaps try

Could we perhaps try training demagogues who could get into office and hopefully make libertarian policy?

I didn't mean to imply there

I didn't mean to imply there were no alternatives, but it is pretty striking to conclude (if it's true) that it's just impossible to maintain a relatively free democratic/republican nation-state. That a slide into interest group tyranny is inevitable is a very powerful statement.

Of course, Rothbard drew a similar conclusion. He argued that a paper constitution can't enforce itself, and since any checks and balances must come from within the system they will become corrupt and ineffectual. I found that very convincing when I read it, but later became more cynical about the prospects of the anarchic alternative.

Maybe I'm losing my youthful zeal, but if the equilibrium tendency is towards, well, what we've got... it's just depressing.

Libertarian moles, who

Libertarian moles, who infiltrate the 2 major parties!
Or, only slightly less implausibly:
Proportional representation or similar scheme, so the (maybe) 10-20% of the population who are soft-core libertarians can opportunistically ally with the social-democratic party or christian-democratic party.

I think slowly working to change norms, mores, political thinking is as plausible as it's going to get. That and sea-steading.

Perhaps. But don't forget

Perhaps. But don't forget the Marxists managed to change Russian monarchy into a Dictatorship of the Proletariat--a similarly drastic change.

My history may, admittedly, be a bit fuzzy.

Noah - look at the evidence.

Noah - look at the evidence. Many democracies are even worse than we are! And arguably, none are better. Depressing or not, it seems to be true. Democracy is flawed.

It would be a lot more depressing if we didn't understand why, and didn't have any ideas for dealing with it.

Verry interesting post. As I

Verry interesting post. As I cruise around the blogosphere observing commenatry from the various political/economic ideologies, I am struck by how often the middle seems to be filled with libertarian tendencies. Yet, we have two parties that seem to split these libertarian tendencies right down the middle.

IMHO you hit the nail on the head when you address special interest groups when you state

"Even with a large libertarian population, the odds of libertarians being a strong political party in government are essentially nil, as getting rid of tariffs, ending union privilege, deregulating, and allowing people to choose their own paths in life have small dispersed benefits to everyone and large focal costs to privileged special interests - exactly the opposite of what yields a good return on investment via government."

One possible solution to this condundrum may be a devolution of power to state and local governments. This can have the effect of intesifying the cost of special interest legislation. It also introduces an intensity in tax/regulatory competition between states, which I see more good than bad arising from this type of arrangement (public finance economist will want to argue that tax competition leads to an under provision of public goods).

So, yes, attempts to elevate the libertarian idea into the federal system will probably fail because of the narrow benefit diffuse cost decision calculus, but at the local level it may have a much better chance of surviving and flourishing (after federal powers to tax and regulate have been decoupled from local government politics).

I would have put it a bit

I would have put it a bit differently, but you
have the essence.

Pols sell security. That's that ol' Insurance
Co. in the Sky. It's a hot item. Everybody wants
it.

That's what politics is all about, selling
insurance to one group at the expense of another
all the while bullshiting everyone that it's free
for everyone and that politics---as opposed to
markets---can provide everything for everyone at
no cost to anyone in a vainglorious attempt at
remaking the world in the image of the pol of the
hour.

There is no political solution to this. The
Ruling Concept is always 'get more power'. The
game can't be won playing with this ball and in
fact a whole new game has to be invented. One
without a ball...not even a game.

Everyone ends up paying until USA, Inc. goes
broke like all the others who've gone before.

US$ going into the terlet. This could be The Big
One.

Then it begins again...or maybe it can be
different this time... if you don't play the game.

"small dispersed

"small dispersed benefits"
Dispersed yes, but perhaps the benefits aren't so small.
A society where half the people were libertarians would tend to see things differently; social norms would be different. Arguendo, lets say there was a generally held belief that in a libertarian society, lifespan would double to 150, where in statist society it would hold steady at 75.
Further assume that at age 20 people start saving 10%, invest it in a way that has real return, and understand how compound interest works.
Given these beliefs, the perceived benefits of smashing the state might outweigh the payoff from investments in political capital.
Currently, the number of people with that sort of extropian outlook is smaller, less able to establish social norms, and will tend to use other methods besides winning majority elections.