The Democratic candidate is part of a long intellectual tradition that’s gone forgotten in the West: pro-market leftism.
By Henry Farrell | December 12, 2019, 10:12 AM
U.S. Sen. Elizabeth Warren, right, pats Sen. Bernie Sanders on the back after Sanders spoke at a news conference on the Social Security system in Washington on Feb. 16, 2017. Win McNamee/Getty Images
Warren’s politics are so confusing because we have forgotten that a pro-capitalist left is even possible. For a long time, political debate in the United States has been a fight between conservatives and libertarians on the right, who favored the market, and socialists and liberals on the left, who favored the government.
It has been clear since 2016 that the traditional coalition of the right was breaking up. Conservatives such as U.S. President Donald Trump are no fans of open trade and free markets, and even favor social protections so long as they benefit their white supporters. Now, the left is changing too.
Warren is reviving a pro-market left that has been neglected for decades, by drawing on a surprising resource: public choice economics. This economic theory is reviled by many on the left, who have claimed that it is a Koch-funded intellectual conspiracy designed to destroy democracy. Yet there is a left version of public choice economics too, associated with thinkers such as the late Mancur Olson. Like Olson, Warren is not a socialist but a left-wing capitalist, who wants to use public choice ideas to cleanse both markets and the state of their corruption.
------------------------
Public choice economics has big influence and a bad name. It is a school of economic thought that has at different times been associated with scholars at the University of Rochester, Virginia Tech, and George Mason University. Public choice came into being in fervent opposition to the mainstream of economics, which was dominated by scholars such as Paul Samuelson.
Samuelson, in his famous and influential textbooks, saw a clear role for government in regulating markets. Public choice scholars vehemently disagreed. For political and theoretical reasons, they instead saw government as a fountain of corruption. Public choice economists argued that government regulations were the product of special interest groups that had “captured” the power of the state, to cripple rivals and squeeze money from citizens and consumers. Regulations were not made in the public interest, but instead were designed to bilk ordinary citizens.
Perhaps the most influential version of public choice was known as law and economics. For decades, conservative foundations supported seminars that taught judges and legal academics the principles of public choice economics. Attendees were taught that harsh sentences would deter future crime, that government regulation should be treated with profound skepticism, and that antitrust enforcement had worse consequences than the monopolies it was supposed to correct. As statistical research by Elliott Ash, Daniel L. Chen, and Suresh Naidu has shown .. http://elliottash.com/wp-content/uploads/2019/03/ash-chen-naidu-2019-03-20.pdf , these seminars played a crucial role in shifting American courts to the right.
The conventional story is that as Warren moved from the right to the left, she abandoned the public choice way of thinking about the world, in favor of a more traditional left-wing radicalism. A more accurate take might be that she didn’t abandon public choice, but instead remained committed to its free-market ideals, while reversing some of its valences. Her work as an academic was aimed at combating special interests, showing how the financial industry had shaped bankruptcy reforms .. https://www.vox.com/policy-and-politics/2019/5/6/18518381/baccpa-bankruptcy-bill-2005-biden-warren .. so that they boosted lenders’ profits at borrowers’ expense. Notably, she applied public choice theory to explain some aspects of public choice, showing how financial interests had funded scholarly centers .. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=332162 .. which provided a patina of genteel respectability to industry’s preferred positions.
Now, Warren wants to to wash away the filth that has built up over decades to clog the workings of American capitalism. Financial rules that have been designed by lobbyists need to be torn up. Vast inequalities of wealth, which provide the rich with disproportionate political and economic power, need to be reversed. Intellectual property rules, which make it so that farmers no longer really own .. https://qz.com/1582262/elizabeth-warrens-prairie-populist-policies/ .. the seeds they sow or the machinery they use to plant them, need to be abolished. For Warren, the problem with modern American capitalism is that it is not nearly capitalist enough. It has been captured by special interests, which are strangling competition.
Steve Mariotti , Contributor Steve Mariotti is the founder of the Network for Teaching Entrepreneurship (NFTE) and an advocate for entrepreneurs worldwide.
What Every Voter Should Know About Public Choice Theory
09/29/2015 08:31 pm ET Updated Dec 06, 2017
...and Why It May Determine the Next President
If you really want to understand the unfolding presidential race, check out a little-known economic theory called “public choice.” Public choice theory argues that economic self-interest is the driving force of politics. According to public choice theory, people will vote for the candidate that they believe is going to give them the greatest access to more money.
Public choice theory was developed by economist James Buchanan in The Calculus of Consent .. http://www.amazon.com/Calculus-Consent-Collected-Works-Buchanan/dp/0865972184 , a seminal book he co-authored with Gordon Tullock in 1964. Initially, Buchanan described himself upon entering the University of Chicago’s graduate economics program as a “libertarian socialist.” After six weeks there, however, he recalled later, he had become “a zealous advocate of the market order.”
Buchanan and Tullock co-founded the influential academic journal Public Choice, and Buchanan continued to explore the relationship between economic self-interest and politics throughout his career. He also proposed a fascinating distinction between two levels of public choice:
1. The initial level at which a constitution is written and agreed upon by the founders of a country.
* The post-constitutional level, where voters can influence policy and politicians jostle for their votes.
The first level, Buchanan argued, is like setting the rules of a game, while the second is like playing the game within the rules. In 1986, Buchanan was awarded a Nobel Prize in economics for these insights.
As Buchanan famously remarked, public choice is “politics without romance.” People, he argued, vote in their best economic interest, period. Under public choice theory, for example, a person working for a local government — whether in the school system, or on the police force — will be more likely vote for a government that increases taxes, because the voter expects some of that increased tax revenue to come his or her way in the form of higher wages or more work.
Let’s look at another example: If a candidate promises additional resources towards law enforcement and drug control, prison guards will benefit and should therefore be more likely to vote for that candidate. A candidate promising smaller government with less spending and taxation will be less appealing to a prison guard and more appealing to a small business owner, who will hope to benefit from having to pay lower taxes and being able to keep more profit.
Buchanan argued persuasively that most people have a strong sense of how changes in government will benefit them. This relationship between voters and their self-interest drives all types of political involvement and action — not only voting, but also fundraising, lobbying and grassroots organizing — according to public choice theory.
Big corporations and industries spend hundreds of millions of dollars advocating for their economic interests. It’s easy to find examples of powerful industries lobbying in our country today: the sugar industry, the defense industry and the prison industry are just three that spring to mind. For this very reason, many people today see American elections (as well as those in other countries) as little more than a competition between those with the deepest pockets. Often this dichotomy has translated into a war between those working for government interests and those working for private ones.
In 1975, Berkeley PhD student Herman M. Levy (who went on to become a beloved and distinguished college professor) studied the voting patterns for the Agricultural Labor Relations Act, which he had a hand in drafting. The results of his study supported Buchanan’s theory of public choice that, in general, people vote based on their economic self interest. Those working for government agencies voted against the Act that would not directly benefit them, and those in the private sector voted for it.
Levy’s advisor, Bill Niskanen, was head of the economics department at Ford Motor Company, where I worked as a financial analyst after earning my MBA. Niskanen became my mentor in the use of economics to analyze voting behavior, and a few years I revisited Levy’s study while seeking to analyze how people voted on Michigan’s Tax and Expenditure Limitation Amendment.
I published a paper about my .. http://goo.gl/7ngl4X .. research Public Choice in October 1979.
My work showed that indeed generally people be expected to vote their economic self interest, but also that the voting could be influenced by advertising campaigns altering people’s perception of their economic interests.
The Headlee Amendment — named after the political leader who advocated it — ultimately passed in Michigan, limiting state expenditures to 9.96% of total income. Today the amendment is still credited with keeping the state of Michigan on a balanced budget — in stark contrast to many states; the Federal government which has $16 trillion of debt; and even Michigan’s own city of Detroit, which is $19 billion in debt.
So think about it — which candidate are you leaning toward? What is influencing you in his or her favor? For starters, during this national election season, every American should carefully analyze how each candidate’s policies will influence government spending at national, state and local levels. By doing so, all citizens will be empowered to weigh their own economic interests against any other issues that carry personal import.
Market Data 
Markets 
AI
