Why Government Can't Make Decisions Rationally
Ben O'Neill examines the difference between private and public decision making. Government solicits the views of the relevant "stakeholders," identified by the bureaucracy. Who are these stakeholders? Why, they are the people and groups that have a stake in the decision of course.
And when we say "a stake," we must be a little selective. After all, government spending is paid for, at least in part, by the myriad of taxes that are stolen from virtually every person in the population. And since we do not wish to take a complete census of the population, we must therefore limit ourselves to only some stakeholders, or more precisely, to those stakeholders who have the biggest stake in the decision. FULL ARTICLE
Comments (9)
Nice article, thanks - particularly relevant to the SOuth African milieu, where nothing gets done without the 'rolling out' of a comprehensive 'consultation' 'process' with the 'input' of the 'relevant' 'stakeholders'. With 'faciliation' and 'interventions' for garnish.
More seriously, the subtleties of the self-selection the writer describes in these consultations are the very same biases that permit the usual 'democratic' electioneering process to result in elected officials being able to implement policies that nobody approves of - at all.
this is because elections are fought on very few 'Big issue' masts that the parties pin their colours to. ( It is odd that the issues are often very silly ones , such as gay marriage, or stem cell research, but I digress.....).
But the point is, governments activities run to multiple issues , thousands of them. So the incumbent majority party gets elected based on the 2 or 3 'hot button issue' positions that its supporters very strongly support. But the same party's position on other issues could well be opposed by those same voters, but their opposition is weaker - they dont feel strongly enopugh about it to outweigh their fervent support for the Big Ones.
So its quite concievable that whenever the 'democratically' elected government passes laws and other absurdities on matters other than the Big Issues over which the election was fought, their actions do not find the approval of ANY of the electorate. At all. And this is the thin end of the totalitarian wedge, even with a 'legitimately' elected 'representative' government.
Logrolling, in a word.
I read a short paper about a decade ago ( By Brian Dollery, another Australian economist, I believe....) which modellled the logrolling process by contrasting support vs disapproval of various policy positions among the supporters of different parties, and showed on the above lines that democracy as it is usually cast does indeed lead to universally unpopular decisions, and yet stiull retain majority support at subsequent elections.
The knack, then , ( if you are a politician) is to ensure that whatever power/tax/subsidy/tariff proposal it is you want to ram through has to be more feebly opposed by your voters than the strength of their positive support for you elsewhere in the portfolio.
Published: July 26, 2007 11:02 AM
I think there is a fallacy in your reasoning about 'consultations'. You state, if I understand you correctly, that 'consultations' are invalid because they are not random (i.e. representative). However, 'consultations', random or not, are merely oracular pronouncements. They are not actions. Merely stating an intent of action is not the same as performing the action. Action can only be measured in a free, unrestricted marketplace. Oracular pronouncements are of little value, regardless of whether the government or a private institute polls them.
Of course you are completely correct that 'stakeholders' acting in conjunction with deamagogues have even less validity than representative consultations, since they are even further away from the actions of citizens.
Published: July 26, 2007 3:34 PM
The term "government" is misleading. Decisions are made by people and people claiming to make decisions with the authority of "government" are as rational [or irrational] as the rest of us. In short when their personal and group interests conflict, and they can get away with pursuing personal interests under the guise of doing what is good for the group, they do! Robert Mugabe's and Saddam Hussein's governments are clear examples. Less clear are such governments as Ben describes. George Bush claims his actions [such as those against Saddam Hussein] were and are in the interests of "the people" governed by him. The more significant question [for Ben & all of us "governed"] is why so many of those people believe his actions are in their interest rather than his. At least in the US, there is clear evidence from the published "election" polling, that most of those "governed" by George did not consent to be governed by him [or the other major contender]. This raises other questions about "democracy".
Published: July 26, 2007 6:49 PM
David, as a fellow South African I can certainly see what you mean. :) I wouldn't return to South Africa any time soon though, not at least until Mbeki and his pseudo-communist buddies disappear off the radar.
Published: July 26, 2007 8:27 PM
My experience with community consultation in Australia is even worse than described in the article. In regard to land use planning, where non-owners get to decide what owners may do with their land, the most affected stakeholders - landowners - are positively excluded from the process, on the basis that they have too great a 'vested interest' in the outcome. It's one step away from outright communism.
Published: July 26, 2007 10:08 PM
Anthony...
Point taken, but bear in mind th euniversality of the problem - Mbeki and his lot are no worse ( or better) than any of the others - blair/Brown, Bush, Howard. The details change from state to state, but the governmental effect remains much the same
Published: July 27, 2007 1:03 AM
Thanks for your comments on my paper guys. I think there are a host of potential sampling bias issues in government electioneering and regular government operations. I have tried to limit the scope of my article to just the consultation process, and in particular, consultation for cuts in services and expenditure. There is definitely room for more general thinking on the issue.
Soren: I am not sure that all consultations are necessarily ‘invalid’ if they do not use random sampling. Random sampling is one very common way to prevent biases (and the simplest method). However, it is also possible in some cases to correct bias in a sampling mechanism through statistical techniques, but only if you are aware of the problem and can get sufficient information to measure the bias (these kinds of techniques are set out in statistical literature on informative sampling — they are generally fairly complicated). The problem is that the mechanism for government consultation is indeed biased and there is never —to my knowledge— any attempt to account for or correct this bias.
This kind of consultation might still be useful if you want to know the views of specific people or if you want to use the expertise of stakeholders in your decision (assuming they have some special expertise). However, too often governments try to pass off the outcome of these consultations as “the community’s view”, which it is not.
Jim: I’m afraid the title of the article is not mine — it was changed by the editor (I presume) from my submitted title, which was ‘Consulting the Rent Seekers’. Nonetheless, I think the title is appropriate in the delimited context of the article. I agree with you that, by and large, the people in government are generally as rational or irrational as the rest of us (save for their more prevalent desire for greater statism). The problem is with the mechanism of community consultation, not the people in government that do it. It is irrational to use this consultation mechanism if it is your intention to determine the “community view” on the issue. Like you say, there is a wider issue about the legitimacy of the ‘representation’ of government, but I felt that this was a bit beyond the scope of my article.
Alex: A good point. I have not encountered these situations before. In light of the kinds of rent seeking behaviour of many lobby groups that act as stakeholders in government decisions, the absurdity of excluding owner-stakeholders from decisions on the basis of a ‘vested interest’ is too hypocritical to contemplate!
Published: July 27, 2007 1:51 AM
"Anthony...
Point taken, but bear in mind th euniversality of the problem - Mbeki and his lot are no worse ( or better) than any of the others - blair/Brown, Bush, Howard. The details change from state to state, but the governmental effect remains much the same "
True, and Britain is bound to only get worse. On top of that, its officials maintain a semblance of honesty. The Mafia must envy the government and its officials - it can do what they can't: rob and plunder without any persecution.
Alex, I am amazed by how collectivist Australia is at times. I always thought it was a free country.
Published: July 27, 2007 6:59 AM
The usefulness of "stakeholder" to the politicians
is it's semantic stealth. This single term allows them to put all people involved in or affected by an enterprise or chattel to be perceived as equal in their entitlement to a voice in it's disposition. Thus, entrepreneurs and employees are levelled before the public discourse even begins. The same with those who contribute ideas and those who implement them. Most deceitful of all, taxpayers are treated as though their role in the decision making process
should be no more important than that of tax-eaters.
Published: July 28, 2007 4:48 PM