The Journal Of

Randy T. Simmons

Peace, Prosperity & Freedom

Beyond Politics: The Roots of Government Failure
Reviewed by Luke McGrath
Its a familiar tale for those who have studied economics at high school or university. In the first week or two, youre exposed to various ideas explaining the astonishing ability of markets to facilitate the creation of wealth by coordinating individual actions. But lest your enthusiasm for markets get the better of you, youre soon taught that unfettered markets are prone to all manner of deficiencies and shortcomings. Whether its creating pollution or generating inequalities of wealth, the lesson is clear: though markets are tremendously beneficial, government intervention is needed to counter the ubiquitous problem of market failure. In his book Beyond Politics: The Roots of Government, Randy T. Simmons challenges this notion by defending the robustness of markets and highlighting the muchneglected occurrence of government failure. Beyond Politics is, foremost, a primer on public choice economics, which is the application of economic theory to politics. While economists had traditionally used their tools to understand the behavior of individuals acting in the private, market sphere, beginning in the 1960s economists turned their sights to the public sphere. Could economic analysis be employed to yield new insights about voting, special interest groups, and other factors in democratic polities? If market participants are assumed to be self-interested, for example, should we not similarly apply this standard when evaluating the actions of those in the political domain? The result of doing this can be crushing to ones civic sentimentalities, which is why James Buchanan, one of the fathers of public choice, called such analysis politics without romance. The orthodox position as regards market failure is outlined by Simmons in chapters 1 155

Journal of Peace, Prosperity and Freedom

Summer 2012

and 2. He introduces us to various economists, particularly welfare economists, whose work established the framework and justification for intervention in the market. People like William Baumol, for instance, whose 1952 book Welfare Economics and the Theory of the State became the economics professions standard for the study of market failures and provided an intellectual foundation on which to base proposals for government programs designed to improve on markets (p. 12). Simmons goes through a whole raft of alleged instances of market failure, explaining the conventional theory with respect to public goods, externalities, imperfect competition, inadequate information, and transaction costs. In chapters 3, 4, and 5, Simmons expounds public choice theory, particularly as it concerns government failure. Rather than improving on market outcomes, Simmons argues that governments usually make them worse. The fundamental reason, he explains is that the information and incentives that allow markets to coordinate human activities and wants are not available to government (p.49). The provision of public goods is one oft-cited market failure but, as Simmons points out, even if government does provide such goods, crucial questions still remain: How much is enough? Who shall pay how much? How should payments be made? (p.55). In politics, there is a fundamental disconnect between the apportioning of costs and benefits: In the market, consumers or buyers confront price tags to which they can relate their own estimates of the value of the good. Not so in the polity where there is no direct connection between the costs and benefits of a good or service (p.55-6). Simmons identifies numerous problems with that most sacred of cows in contemporary democracies: voting. Because the probability of your ballot being the one that decides the election is so infinitesimally low, while the costs of being informed about political issues is so high (staying up to date on the candidates and their positions, voting records, and so on), a situation results where the incentive for voters is to remain uninformed. In one of the many examples one can point to in the book, Simmons eloquently explains and contrasts the underlying economic rationale that distinguishes market behavior and political behavior: In the market, prudent consumers must consider income and prices before deciding to buy, which must be done at the margin with an eye to ones future prospects and obligations. In the polity, on the other hand, citizens are not constrained by income or prices. The goods and services of government are provided whether one wants them or not (p.57). One of the core ideas of public choice is the notion of concentrated benefits and dispersed costs. Simmons sees this separation of cost and benefit considerations [as] perhaps the fundamental political fact. It explains much of what we see in the world with regard to the undesirable influence of special interest groups because, in a democracy small groups who benefit from government expenditures have more incentives and cheaper means of organizing than do the diffused taxpayers (p.64). A subsidy may be worth many millions of dollars to a particular interest group but this cost will be spread out amongst millions 156

Reviewed by Luke McGrath

Beyond Politics

of taxpayers. What incentive does an individual have, then, to organize and pressure the government to eliminate such an inefficiency if such action only results in their paying a few cents less for the good at the point of purchase? In chapters 6, 7 and 8 Simmons dives in to the topics of property, markets, the firm and the law, explaining more thoroughly the importance of these institutions in influencing social behavior. In the seven chapters that then follow, Simmons builds on the theoretical groundwork of the prior sections and evaluates the political pursuit of private gain in numerous case studies. This applied section is very good, with Simons exploring the dynamics of consumer protection legislation, the environment, government schools, the politics of macroeconomic policy, and numerous other issues. The final chapter closes with some general, wide-ranging remarks on how we can use the knowledge of public choice to foster a world that is more free and more prosperous. It should be noted that Beyond Politics is more than just a work in public choice. Simmons draws on a whole lineage of free market scholarship that includes the Austrian School, the Chicago School, and the New Institutional Economics. At the end of each chapter, he provides a very helpful and instructive annotated bibliography of recommended readings that includes such thinkers as F.A. Hayek, Israel Kirzner, Douglass North, Elinor Ostrom, Gary Becker, Armen Alchian, and Anthony de Jasay. Taken together, this body of thought comprises a powerful case for the superiority of markets over government. Beyond Politics is a book that can be understood by economics students and lay people alike, with only the occasional appearance of a supply and demand graph to buttress Simmons arguments. Its an accessible and compelling read and is just the book to disabuse people of the notion that government intervention can improve the operation of markets.

Published by the Independent Institute (2011).

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