Note: Permission to use this article was generously granted by the author, Dr. Donald J. Boudreaux, former president of the Foundation for Economic Education. Several of his essays are on line at the CEI.




"NOT ALL WANTS ARE EQUAL"

by Donald J. Boudreaux

President, Foundation for Economic Education

Irvington-on-Hudson, NY 10533

www.fee.org

 

presented before The Discussion Club, St. Louis, MO

March 4, 1999

 

                I come today on what very well might be a suicide mission.  It would certainly be a suicide mission in almost any other audience outside of Cuba, North Korea, and mainland China. My mission tonight is to discredit democracy.  I dislike democracy.

                Winston Churchill famously accused democracy of being the worse form of government "except for all the rest."  Churchill's back-door endorsement of democracy, I think, is mistaken.

                I will argue tonight that while democracy is not the worst form of government...absolute dictatorship, for example, is far worse than democracy...there is a form of government that is far better than democracy.  But to keep your attention, I'll not spell out what this other and superior form of government is until the end of my talk...although many of you will likely soon guess what I'm driving at.

 

WHAT IS DEMOCRACY?

                Democracy, of course, is revered in the 20th century.  This is why I say that my mission tonight has something of a kamikaze element to it:  I'm attacking the form of government that almost everyone in the United States assumes to be responsible for our freedom and our prosperity.

                I mean by "democracy" nothing unusual:  a governmental system in which a large percentage of the adult population have the right to vote for officeholders (and, sometimes, directly for issues) and where such democratically elected governments are sovereign...that is, where such democratically elected governments are largely unconstrained by any legal authority other than that of the voters.

 

WHY IS DEMOCRACY SO REVERED IN THE 20TH CENTURY?

                Most citizens believe that democratic nations are free, and undemocratic nations are unfree.  America's participation in World War I justified as the necessary means of making "the world safe for democracy."  Courageous citizens of repressive foreign regimes are typically referred to by the American news media as "pro-democracy protesters."

                In the popular mind, democracy is good.  Period.  But why?  Why is democracy so revered in the 20th century?  One reason democracy is so revered today is because we automatically, without thinking, assume that the only alternative to democracy is some form of dictatorship in which one person, or one small segment of society, enjoys unlimited power over citizens.

                We think of democracy as being the only alternative to communism and other tyrannies such as that of Saddam Hussein.  And, indeed, if this were true, then Churchill's aphorism would be on target:  democracy would be the worst form of government...except for all the rest.  But again, as I will argue later, democracy has alternatives other than dictatorship and totalitarianism.

                However, the most important reason why democracy is so revered today is that we citizens of democratic countries are taught that democracy is government according to the will of the people.  And this is good:  better to have 'the people' make their own rules rather than to have these rules imposed by some outside force.  The alleged beauty of democracy is that it lets us choose just what laws are best for us, without any meddling from outsiders or from kings, queens, and other dandies who get a charge out of lording it over ordinary folk.

                Democracy gives people what they want, rather than force the people to be the pawns of kings or dictators. I think this common view of democracy is sadly uninformed.

 

PROBLEMS WITH DEMOCRACY: THE THEORY OF PUBLIC CHOICE

                Among economists and political scientists, it is easy sport these days to point out lots of problems with democracy...problems that far too seldom are noticed by other citizens.  James Buchanan, my former colleague at George Mason University, won the 1986 Nobel Prize in Economics for revealing many of democracy's inherent flaws.  Buchanan, along with Gordon Tullock, pioneered the field that is now known as Public Choice economics.  This is a very rich research program, but two of its central conclusions are relevant for my purposes here tonight.  These are, first, the special-interest-group effect, and second, the recognition that voters are rationally ignorant.

                The special-interest-group effect explains the bulk of what government does...for example, why government takes money from sugar consumers and gives it to sugar producers, or why government forces New York City taxi-cab passengers to pay monopolistically high prices to taxi owners.  The special-interest-group effect occurs whenever the costs of a government program are spread widely...so that each person who pays the cost pays only a small amount...and the benefits of this program are concentrated...so that each beneficiary receives a substantial amount.  The beneficiaries have an incentive to lobby for the program while persons harmed by the program have no incentive to lobby against it.

                Consider sugar farming.  Uncle Sam restricts the importation of sugar into the U.S., driving up the price that Americans pay for sugar to about twice the world price.  Why?  The reason that there are far fewer sugar producers than there are sugar consumers.  The gains to each domestic sugar producer from this program exceed the costs to each consumer.  Therefore, even though the total cost of this program are far greater than the total benefits, the political dynamic is such that sugar consumers don't lobby to abolish the program, while sugar producers scream bloody murder whenever anyone even mentions letting more foreign sugar into the American market.

                The other main pillar of Public Choice economics is the aptly named concept "rational ignorance."  Rational ignorance, at root, is the idea that voters don't know enough about the candidates and issues...and it's rational for them to be so ignorant. 

                Two facts of reality combine to make becoming politically informed an irrational act.  First, time is scarce.  Whatever time you spend learning about the issues and different candidates, you can spend earning a living, relaxing, playing with your children or grandchildren...whatever.  Second, your vote doesn't count; your vote won't change the outcome of the election.  Because of that, why bother to spend anytime learning about what's at stake?

                Now, how many of you have ever heard of the Federal Register?  How about the code of Federal Regulations?  How many of you have ever bothered to read the United States Code...or even know what it is? 

                The Federal Register is a daily announcement of all prospective regulations promulgated by Uncle Sam's bureaucracy.  In principle, the bureaucracy tells the people ahead of time what it's thinking of doing, the people read these announcements, and then the people share their thoughts with the bureaucracy.  But the practice differs dramatically from the principle:  virtually no citizen reads the Federal Register.  Indeed, most citizens never heard of it.

                The Code of Federal Regulations is the compilation of all outstanding federal bureaucratic regulations which have the effect of law.  This code is updated annually.  Currently, it takes up well over twenty feet of shelf space!  Have you ever read any of the CFR?  How many of you have ever even heard of it?  The United States Code is compiled of all the statutes enacted by Congress.  It, too, is massive.  How many of you have ever read any of it?

                These are all statutes and regulations that affect how you live your life...how much you pay for your food, how you can use your own property, how you can raise your children, how you can spend your money.  And yet, few people even know where to look to see what their leaders are doing to them.  Why are people so ignorant?

                The reason is perfectly rational:  because no ordinary citizen can individually affect that outcome of what the government does...that is, because no individual vote counts...there is little reason for any individual to spend valuable time becoming adequately informed.  It would be irrational to become adequately informed!  It would be irrational for each individual to take time away from matters that he can affect...raising his children, advancing his career, visiting a sick friend, relaxing with an enjoyable novel...and to spend this time on matters that he cannot affect.

                The special-interest-group effect and rational ignorance are two extraordinarily powerful reasons why democracy is less desirable in practice than it might seem in principle.  As I see it, these problems alone make democracy such a disgrace that no more really needs to be said.  But I want to say more...in part because not everyone believes that the special-interest-group effect and rational ignorance are severe problems, but also because I want to say something original here tonight.  Even if the special-interest-group effect and rational ignorance did not exist, or were just minor potholes on the democratic highway, there is another reason that democracy is not to be trusted.  There is another reason...I think a vital reason and one that has gone almost completely unnoticed...for why democracy can in no way be said to reveal "what the people want."  I'll spend the rest of my time tonight explaining this serious but overlooked flaw of democracy.

 

ANOTHER PROBLEM WITH DEMOCRACY:  IDLE WANTS

                As I mentioned earlier, more and more people believe that democratic outcomes are what the people want.  If the people vote for candidates who support saving the spotted owl, for federal limitations of the amount of water that we  can have in our toilet tanks, for antitrust prosecution of Microsoft, and for higher taxes, it is because the people want these things.  The people might be wise or unwise in their wants, but hey, these are the people's wants.  And no one should be permitted to stop the people from getting what they want.  This notion is mistaken.

                The problem is that we use the verb "to want" in two subtly different ways.  These different meanings are close enough that we seldom realize the difference, and yet the difference is real.  We are unsuspectingly misled by our own confusion over the different meanings of the word "want."  This failure to recognize the dual meanings of the verb "to want" leads us to greatly overestimate the merits of democracy.

                Let me label each of the two different meanings.  One is "idle wants"; the second is "serious wants."  Each of us has idle as well as serious wants...and for each of us our idle wants far outnumber our serious wants.  You have an idle want whenever you desire something for which you don't have to pay full price.  In contrast, you have a serious want whenever you...you personally...must pay the necessary price to acquire that something.  Let me explain.

                I often idly inform my wife that I want a new Lexus LS 400.  She pays little attention.  And she often tells me that she wants a new Jaguar.  I pay little attention.  Like everyone else, I am constantly saying idly "I want this" and "I want that."  Each of us says these kinds of things all the time...we each constantly inform other folds of our wants.  "I want a Mercedes or a Lexus."  "I want to quit this job and move to the country."  "I want to kill by boss!"  These wants might be real...but only in a sense.  They are real, but idle.  We express such wants so idly and frequently because it is costless to do so.

                Consider my wanting a new Lexus LS 400, a car that costs well over $50,000.  In my eyes, it's the most beautiful car on the road...and, from what I've read about it, it's a remarkable piece of automotive engineering. Now I'm not lying...I really do want that Lexus.  But I want that Lexus only if I don't have to pay $50,000 for it...that is, I want that Lexus only in the idle sense of the word.  If it would cost me nothing to acquire a Lexus LS 400, I would snap one up pronto.  But the serious sense of the word, I don't really want a Lexus LS 400.  You know how you can tell for sure?  I don't own one!

                The reason I don't own this automobile is because I'm unwilling to pay the necessary price of acquiring one.  In fact, I really want a used, two-year old Infiniti I-30...a nice car, but one that costs less than half of what a new Lexus LS 400 costs.  Most of the time that I say I "want" something, I do so idly, without intending to commit myself actually to acquiring that something.  Clearly, no one is required to take these expressions of wants seriously. (If I don't take it seriously enough to act on it, why should anyone else?)

                Only when I actually commit myself to paying for what I say I want should you take my want seriously.  Only then are you justified in believing that my want is more than just a whim or an idle fancy...that is a want worthy of respect. I hope that none of you will disagree with me when I say that a good economic system is one that attempts to satisfy as many serious wants as can be satisfied, but which ignores idle wants. There are a number of reasons why this is so; let me just mention one.

                It is impossible to satisfy all idle wants.  And attempting to do the impossible can only lead to disaster.  The number of things that I would want is vast if the price of everything were zero...or if I could somehow rope other people into paying for all that I acquire.  But a fundamental lesson of economics is that nothing is free.  If I don't pay the full cost of getting what I want, then someone else must pay that cost.  If I, personally, were given the power to confiscate all the resources in the world to satisfy all of my idle wants, I'd try to satisfy them all.  But this arrangement would clearly be bad for everyone but me.  I'd use not only my own resources in ways that I think best for me, I'd also use your resources in ways that I think best for me.  But, of course, my using your resources in ways that are best for me is not good for you.  You and others will suffer from my ability to confiscate your property.

                A good arrangement, therefore, is to leave every person free to use his own resources to satisfy as many of his wants as possible, but without the power to force others to subsidize his consumption.  Each of us will then satisfy our most urgent wants first, and leave our most idle wants unattended. 

                This outcome is just what is achieved by a free market:  because each person must pay for all that he consumes, each person satisfies only his serious wants, and doesn't bother satisfying his idle wants.  Government, of course, substitutes for the free market. 

                If the government is a totalitarian dictatorship, the lucky few members of the ruling class get to satisfy not only their serious wants, but many of their idle wants as well...for the rulers can confiscate the resources of others to help satisfy their own idle wants.  Unfortunately, democracy isn't as far from dictatorship as we imagine.  Democracy encourages each voter to demand that government try to satisfy many of his idle wants.  Government will try, and fail...and louse things up in the process.

 

GOVERNMENT BY SHOPPING-MALL SANTAS

                I can better explain what I mean by pointing out that voting booths are very much like shopping-mall Santas...an ideal forum for expressing idle wants.

                Every Christmas season, each Santa listens to the wish lists of dozens of young children.  Each of these children tell Santa what he or she wants.  But these are idle wants.  These are wants that these children have independent of the costs of satisfying these wants.  No child...at least no normal child...considers and takes account of all that must be sacrificed in order to satisfy his or her demand for toys.  Each child knows that whatever Santa brings on Christmas morning will be paid for with other people's money...either Santa's money or mommy's and daddy's money...but not the child's.  So each child on Santa's lap is unconstrained in expressing wishes for all sorts of toys.  It's easy to want lots of things if other people will pick up the tab.  Of course, children on Santa's knee are harmless because each shopping-mall Santa immediately forgets each child's wish list.  The demands that the little kiddies' put on Santa have no real consequences.

                But imagine what would happen if, next Christmas, all of the shopping-mall Santas kept records of what each child says he wants.  Then, as Christmas approaches, all of these Santas assemble together and actually try...really try...to satisfy as many of these wants as they can possibly satisfy.  Well, Santas aren't miracle workers.  They can's produce toys out of thin air, and there's no army of elves waiting to produce these toys free of charge.  So in our imaginary world here, let's also give to these Santas the power to tax and to regulate.  Being well-meaning folk, the Santas sincerely aim to satisfy the children's wants.  So the Santas collectively start to tax and to regulate in ways that produce all the new toys the children said that they want.  The children get the new toys that they said they want.  But at what price?

                It's one of the indisputable truths of economics that getting more of one thing requires getting less of something else.  For children to have more toys requires that fewer other things be produced...fewer medicines, fewer automobiles, less leisure, fewer books, fewer concerts, less on-the-job safety, fewer shoes, fewer computers.  And the greater the number of new toys produced, the fewer of these other things we can have.

                As Thomas Sowell reminds us, reality is not optional...it is inescapable.  To produce more toys requires...necessarily and indisputably...that fewer other goods and services be produced.  It's easy to see that if all of the shopping-mall Santas, with the power to tax and to regulate, got together and tried to satisfy all of the expressed wants of the children, the economy's output would be thrown way out of kilter.  We'd be awash in toys, but lacking too many of the other things necessary to sustain our standard of living.  And note...not only would adults be worse off, but the children themselves would be worse off even if each child got every toy he or she wished for!

                This is so even if the Santas are all well-meaning servants of the children.  The more diligently the Santas try, and succeed, at satisfying the children's expressed wishes for toys, the less is the availability of other goods and services of value not only to adults but to children as well.  The children might have more toys, but they'd have fewer clothes, less health care, less education, less food, fewer vacations, fewer television programs.  I think that you'll all agree that the world would be a far worse place if shopping-mall Santas tried actually to fulfill the children's wishes as expressed on the Santas' knees.  It would be a far worse place even though no child lied when he told Santa what he wants for Christmas.

                The problem is that these wants aren't worthy of attention...they're idle wants.  These are wants that each child has independent of the cost of supplying these wants.  Again it's easy to want things if other people will pay for them.  But the only wants worthy of attention are those that each of us is serious about.  And the only way to tell if someone is serious about a want...if someone truly believes that satisfying the want is worth the cost of doing so...is to have that person personally pay to satisfy his wants.

                Now, hopefully, you can see what I mean when I accuse democracy of being very much akin to having shopping-mall Santas tallying up the wants of children and trying to satisfy these wants.  Each voter in a voting booth is very much like a child on Santa's knee.  Each voter expresses all sorts of wants for things that will be paid for largely by other people.

                Think about it.  Each voter has all sorts of wants.  Some of these wants are narrowly selfish...for example, a retiree might want higher Social Security payments or the President of General Motors might want protection from the competition posed by Toyota and Honda.  Other wants are less self-centered...for example, a desire that Wal-Mart not force the downtown general store of business, a desire that the bald-eagle population increase, a desire that family farmers not be forced out of business by low prices, a desire for American troops to keep peace in Kosovo, Somalia, and the middle east.

                Each of us wants all sorts of things.  We each have a wide range of idle wants.  But we also have serious wants...true wants...wants that we're willing to pay for.  These serious wants, of course, are far more limited than are our idle wants.  Putting a price on wants is a way of limiting them.

                Suppose that the kind of car I drive is determined not by my individual choice but by majority vote.  Suppose also that automobiles are paid for by the government out of tax revenues.  You can bet that under these circumstances I'll vote that Don Boudreaux be bought a new Lexus LS 400.  Why shouldn't I vote in this way?  The vast bulk of the cost of this luxurious new car will be paid for not by me but by other people.  And if each of you is picking up part of the tab for my car, then I want only the best!

                But is this a want that should be taken seriously?  Is it a want that society ought to try to satisfy?  Of course not.  This is an unconstrained want.  It isn't at all akin to the  kinds of wants that our intuition tells us should be satisfied...namely, constrained wants.  It is consistent with both justice and good economics to let everyone fulfill each of the wants that he is willing to pay full price to fulfill.  But both justice and good economics are offended when someone tries to satisfy any wants that he has only on the condition that others pick up the tab.  Regrettably, that's just what democracy attempts to do:  satisfy people's idle wants.  So this is the principal reason why I so dislike democracy:  its government by shopping-mall Santas.

                Democracy treats us as though we are children on Santas knee.  It encourages each voter to express wants without that voter having to bear personal consequences for expressing such wants.  The one big difference between actual shopping-mall Santas and politicians is that the Santas soon forget what each child wants and feels no obligation to try to satisfy these wants.

 

WHAT'S THE ALTERNATIVE TO DEMOCRACY?

                The mark of a good economist is to always ask "as compared to what?"  It's fine for me to stand up here and to point out all sorts of very real problems with democracy, but even if you believe every word I say, that is insufficient reason for you to endorse scrubbing democracy.  You must know...and I must answer the question..."as compared to what?"  What's the alternative to democracy?

                As I said earlier, if the only alternative to democratic rule were rule by an absolute monarch or by a totalitarian dictator or oligarchy, then, despite its flaws, democracy wins hands down as the best form of government.  But totalitarianism is not democracy's only alternative:  a much better alternative is governance according to the rules of private property rights.  If property rights are privately held, if they are secure, if they can be exchanged voluntarily and on terms agreed to by the parties to the exchanges, then society becomes largely self-governing.

 

                Government need not mandate things such as:

 

                - how much employers must pay employees

                - what levels of safety employers must supply

                - how much rent landlords can charge

                - what prices truckers, airlines, and taxicabs can charge

                - how much can be imported into the country

                - what hours and days retail stores can be open for business

                - how much water we are allowed to have in our toilet tanks

 

                Indeed, nearly everything that government does today is simply unnecessary...it is a substitution of the rule of the state for the rule of the market.

                I don't want to debate just how much the market...private property...can substitute for the state.  Some people believe that government is unnecessary even to supply courts of law and protection against physical violence.  Maybe these "anarcho-capitalists" are right; maybe they're wrong.  But one thing is certain:  a system of secure private property rights goes an extraordinarily long way toward eliminating the need for most of what government now does.

                So, yes, insofar as we have government, it is best that it be manned by people chosen in regular elections by citizens who enjoy a wide franchise.  But this government should be severely limited in what it may do.  Even when an overwhelming majority of voters "want" something, that is no reason for government to try to satisfy that want.  To be worthy of being satisfied, a want must be serious, but voters naturally express their idle wants...wants that politicians try to satisfy but, being idle, should not...indeed, cannot...ever really be satisfied.

                I wish I knew how best to keep government constrained to performing only that small handful of tasks that most people regard as essential, but I don't.

                But I do know that the most fundamental task of practical politics (at least for those of us who cherish liberty) is to dedicate ourselves to the task of keeping government limited to performing just a few basic tasks...namely, to protecting us from physical coercion.  If government does only this, it will do all that it possibly can to promote a civil, prosperous and flourishing society.

                Thank you.