Tuesday, December 7, 2010

More Public Choice Theory You Wouldn't See From Self-Identified Public Choice Theorists

The Economist reports some interesting new research by Alesina, Carloni, and Lecce which suggests that austere administrations don't fare especially badly in the polls. This appears to be robust to endogeneity concerns, at least as far as these concerns have been tested by the authors (that popular governments implement austerity, not that austerity doesn't harm electoral popularity).

This isn't all that surprising - or at least it shouldn't be for anyone who takes the basic insights of public choice theory seriously. Who is more likely to win an election - the politician who says "I'm going to increase spending and the deficit" or the politician who says "I'm going to slash spending and balance the budget"? This might be an actual head scratcher in a place like Greece, but in Western Europe or the U.S. the answer is obvious. And yet you'd be hard pressed to find anyone at George Mason emphasize this point.


  1. Well, here's a thing. Canada and Sweden have had cut their civil service and public sector by one-tenth without loss of any political capital.

    But Canada and Sweden are already very generous on state largess, and removing marginal workers probably does not alienate the public sector workers much. Take a country with a large but not so large public sector like UK, and then the friction is more likely, because it's not just the marginal workers (i.e. young workers) threatened but also the older ones with more attachment to their job.

    However, the magazine's point is correct that it's journalists, think tanks, and special interest groups angriest about cuts, and since they are all the source of information for politicians in the capital city, the politicians will be nervous. The government can not collect information first-hand, and is always limited to such narrow sources of policy feedback.

    Consider that in India, "privatizing" telecom did get outrage...from the newspapers and think tanks in Delhi. The government was accused of hurting the poor, although it's unclear how a metropolitan thing like telephones are the most primary thing in a country where people starve, and how a complicated change in complicated industrial policy is the same as cutting welfare for poor.

  2. What I find interesting is that while austerity is a popular talking point, its rarely implemented. After all, the deficit really ramped up during the Bush years, but most Republicans didn't really take make a big deal about austerity programs until the Democrats were in power. And then they start talking about not extending unemployment benefits instead of making real structural changes.

  3. nickn -
    Not implemented? I'm not so sure that's true. It depends on how you conceptualize austerity. We have definitely reduced government spending as a share of GDP before. What some people consider to be acceptable levels of austerity may never happen, but we have certainly oscillated back and forth.

    Keep in mind also the authors of the study are looking at a broad sample - and they are looking at cases where austerity actually occurred, not just cases where it was discussed.


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