How does self-interest affect politicians’ decisions?
It was at the University of Chicago that James Buchanan, still a young researcher of public finance, first read the work of Swedish economist Knut Wicksell. He would later describe it as the most exciting intellectual moment of his career, and the starting point of his journey to winning the prize in 1986. In a nutshell, Wicksell offered a different way of looking at the structures in which political decisions were made. And he argued that economists needed to stop thinking of politicians as saints.
Buchanan, who had a picture of Wicksell in his office ever after, decided to spend much of his career thinking about how politicians’ and bureaucrats’ self-interest would affect their decision making.
Armed with Wicksell’s wisdom, I could dare to challenge the still dominant orthodoxy. I called upon my fellow economists to postulate some model of the state, of politics, before proceeding to analyze the effects of alternative policy measures.
Are politicians motivated by the greater good?
Though Public Choice Theory wasn’t a new branch of economics, Buchanan became its strongest proponent and leading figure. As he put it, Public Choice gives “a new insight into political reality. How do people behave as political leaders who’ve been elected to legislative offices, as party leaders, in executive office?” He emphasized that it was overly simplistic and, quite frankly, absurd to think of politicians as benevolent civil servants, waking up every morning wishing to make the world a better place, with the greater good of all people as their only objective.
“Politicians do in many cases try to further what they think is the interest of the whole group, but in a sense, they’re just like the rest of us. Sometimes they’re motivated in terms of their own private interest, just like a business man.” So they might care more about getting re-elected or increasing their own power than stopping climate change or world hunger.
Why doesn’t democracy work perfectly well?
Prior to Buchanan’s work, no economist had seriously taken this idea into account. Economic science thought about market players as individuals caring for utility maximization, or in other words, consumers trying to get the best value while spending as little as possible. They didn’t analyze political behavior in the same way. Knowing that someone who behaves selfishly in other areas of life will do so in political life as well, Buchanan emphasized that democracy couldn’t always work as perfectly as predicted. He therefore suggested setting up constraints on the authority or power of politicians. “They will operate depending on what rules they’re working within. And so we need to think about that when we lay down the structure of the rules.”
How can constitutional rules be modified?
Buchanan often referred to politics as a game, and he underlined the vital importance of the ‘rules of the game’, the constitution. In his work, he examined how constitutional structures could be modified.
We must have a strong government. But we can restrict it within constitutional limits, by division of power, by federal structures, by competition among local units.
Still, Buchanan believed in people taking part in the political discourse – in an orderly way, at least. “I was very upset by the experience of the 1960s, especially in universities, where many people were just rebelling against the rules. For society to be viable, it needs to obey whatever rules are in existence and then try to change those rules in a gradual process.”
How can a constitution balance everyone’s interest?
Buchanan did not agree with the assumption that the state was in any way superior to its citizens. “Everybody should be very sceptical of people who purport to have the authority to tell them how they ought to organize their lives. Beware of those who come around saying this is the way we ought to do things,” he advised.
In the political process, a constitution must be able to balance everyone’s interest - trying to agree on a set of rules under which we can carry on our separate activities, and not have too much negative influence on each other.
Can Switzerland function as a role model for the EU?
Compared to other economists at the time, Buchanan had lots of close relationships with European researchers and academic communities. He spent time in Italy and Britain to learn more about the domestic culture and the continent’s relationship between the individual and the state.