Writing in The Guardian, Jesse Norman opined that recent weeks have ‘revealed a sea change in the whole nature of British politics.’ Norman says that Fabianism is forever dead in the United Kingdom and lower state spending ‘here to stay’, citing increased public understanding of why leaner government is to be desired. Meanwhile, the enduring West Lothian Question and the issue of Scottish independence continue to occupy headlines. Given the themes of political and economic decentralisation presented by these stories, the contributions of free-market economic theory are thrown into sharp relief – particularly the idea of concentrated benefits and dispersed costs.
The insights of this literature have long counselled an end to Fabianism; they teach us to be distrustful of the easy, uncritical assumption that the ‘compromises’ supposedly immanent in the parliamentary process are apt to produce good results economically, that is, results both efficient and fair. A rather different picture is revealed at even a perfunctory glance in the direction of the moneyed interests that are the ingredients in any given recipe for legislation. Pressure groups mobilise and lobby not necessarily (or even most often) to stand guard over some high-minded notion of the bonum commune communitatis. On the contrary, interests hound lawmakers precisely to leverage the coercive contraptions of state power to their own ends, to sculpt the law in such a way as to benefit their particular coterie. Within such a process, heed to the protection of the fruits of one’s labour or of free and open exchange must certainly be an afterthought, when it is accounted for at all. Principles are but an obstacle to and an enemy of politics.
Mancur Olson’s The Logic of Collective Action is the definitive treatment of the features and dynamics of concentrated benefits and dispersed costs, but of course the idea was not new when the book was first published in 1965. Indeed, F. A. Hayek identified the general phenomenon in a passage in 1944’s The Road to Serfdom, writing of ‘the innumerable interests which could show that particular measures would confer immediate and obvious benefits on some, while the harm they caused was much more indirect and difficult to see…’
In a 1983 paper for The Quarterly Journal of Economics, Gary S. Becker maintains that voter ignorance in large part ‘explains the importance of political form’, including ‘attachment to ideologies’ and ‘rel[iance] on crude proxies’ as against actual knowledge of policy subject matter. This is not, however, to misprize the intelligence or interestedness of the voter generally; rather, we may regard the ignorance of voters in matters of public as a rational ignorance, an outgrowth of the fact that each of us is focused from day to day on the particulars of his own life, his work, family, hobbies, etc. On a largely tacit basis, the voter thus accepts that, as ‘experts’ devoted entirely to their respective policy bailiwicks, lawmakers and bureaucrats are well-equipped - indeed better equipped - to render decisions about the commonwealth. The flaw in this narrative is its omission of a key element in the overall formula of law making, that is, the interests at play, which at every juncture vitiate the possibility of economically sound legislation. To give an idea of our august experts’ ostensible esteem for prudence and for empirical findings, Becker’s paper contends that ‘research findings that oppose the interests of powerful pressure groups’ are often brushed aside in favor of cherry-picked facts more propitiatory to the powerful.
Genuine free markets necessarily lessen the problem of pressure group favoritism and collusion by actually returning economic power to the whole of the people, precluding the system whereby governments pick the economic winners and losers. Under a market system freed from the grasp of special interest lobbies, decisions about resource allocation emanate from the aggregate of millions of smaller economic decisions made by the populace each day. Granting lawmakers more power over the economy assumes both that they have far more information than in fact they do (the knowledge problem identified by Hayek), and that they can be trusted to act outside of the influence of interest groups. Both assumptions create fertile ground for the waste of taxpayer dollars and relatedly for economic crisis.
Smaller political entities governing fewer citizens and commanding fewer tax dollars are as a matter of course less equipped to legislate favoritism. The devolution of central government powers to smaller, more local bodies, then, is desirable in eliminating the attenuation that allows for the problem of concentrated benefits and dispersed costs. Where citizens more closely and intimately confront the decisions of their government, they are less likely to be rationally ignorant of the questions at issue and are correspondingly more likely to notice the costs (which are now dispersed over a smaller area). Certainly smaller, more regional governments are nevertheless capable of economic tyranny and inefficiency. It is the potential for these, though, that is diluted with the distribution of power into smaller polities, more responsible and closely linked to communities. As historian Ralph Raico observes, because it ‘was a decentralized system of competing jurisdictions’, Europe become the seedbed of classical liberalism, the flash point of a new political-economic paradigm.
One hopes that Norman is correct about the change at hand in the United Kingdom. Increased economic freedom and less government paternalism is still the order of the day.