Public Choice: Why Politicians Don't Cut Spending
Why do politicans never seem to cut government spending? Using public choice economics, or the economics of politics, Prof. Ben Powell shows how voters are rationally ignorant of what politicians do. This leads to a phenomenon called “concentrated benefits and dispersed costs,” which favors recipients of government payments at the expense of the average taxpayer.
Public Choice: Why Politicians Don’t Cut Spending
Let’s say you design a policy that takes one penny from a million people, and it gives that $10,000 to one person. Who’s going to know about this policy? Are any of the million going to even notice? I bet you the guy who gets $10,000 will.
I’m Ben Powell, Professor of Economics at Suffolk University. Here we have politicians promising to cut spending, which voters generally want. But that’s a dispersed benefit. When they actually pick the specific programs, that’s a concentrated cost. Let’s do some real back of the envelope calculations here. There’s roughly 300 million people in the United States. Roughly half of them are registered to vote. That’s 150 million. If half of them show up in any given national election, that’s about 75 million. For your vote to change the outcome of an election, it would have to be exactly 37,500,000 to 37,500,000. And you showing up at the polls makes it 37,500,001 to tip the outcome so that you actually get a different result. What’s the likelihood of that happening? Near zero. In fact, economists have figured out you’re more likely to die in a car accident on the way to the polling place than to change the outcome of a major national election.
As a result, voters are massively ignorant of the policies and their politicians. And it makes sense. But a lot of interest groups are very well informed about policies, not all of the politician’s policies, but those policies that specifically affect them. Farmers who get farm subsidies have a big incentive to know which politicians support their subsidies and how much they’re getting. As a result, they not only know about it but give money to the campaigns to help these people get elected to make sure they stay in favor of the favored subsidies. Meanwhile, spread across the food cost of an average American, it’s a trivial amount of money. So most Americans don’t even know or feel this cost. And if they do, they hear some general ad on television that talks about how farmers are good for America, and they feel good about this inefficient policy.
These same interest groups that lobbied to get their benefits lobby to keep their benefits. This is the logic of politics, and this is why we end up with more spending than the average voter usually wants.