Drowning in the Common Pool

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Drowning in the Common Pool

By: John A. Baden, Ph.D.
Posted on October 23, 2013 FREE Insights Topics:
Here is my recommendation for understanding how the policy world works: read the "Weekend Edition" of the WSJ and skim The Economist.  Curious people will quite naturally latch on to interesting and policy relevant articles.  
 
A few individuals have an intuitive appreciation of systems.  My suggestion will foster their understanding by providing logical structure and examples.  Consider The Economist's observation on the latest federal budget turmoil.  
 
America's "...long-term fiscal problem is immense: it taxes like a small-government country but spends like a big-government one.  Eventually demography-and the huge tribe of retiring baby-boomers who expect pensions and health care-will bankrupt the country....” The brief article then describes possible outcomes and castigates both parties.  
 
Neither The Economist nor the WSJ has provided the parsimonious explanation of why America and most other democracies suffer this fate.  Mancur Olson provided the logic in his 1982 book, The Rise and Decline of Nations. Olson invented the concept of ‘‘institutional sclerosis,’’ which means that special interest groups gradually multiply and reduce the economic efficiency of their economy.  
 
San Francisco's BART, corn ethanol mandates, and wind energy subsidies are obvious examples of the corrosive process Olson describes.  And there are ever more of these.  That's one important reason nations decline, debased culture another.  
 
But here is a more succinct explanation. The Federal Budget is a common pool: that's why we're drowning.  
 
The "tragedy of the commons" is a well-understood parable.   In the post-tests of participants in FREE's conferences for seminary professors and other religious leaders, the great majority, sometimes 90%, said they understood it.   Most demonstrated they actually did.  
 
Three plus decades ago an undergraduate student, Rodney Forte, and I published a long paper in Policy Review, "Natural Resources and Bureaucratic Predators".  We applied the tragedy of the commons logic to federal appropriations.  (Rodney went on to earn his economics Ph.D. at Cal Tech.)  Then, fifteen years ago, another former student Douglas Noonan, and I wrote "The Federal Budget as a Common Pool Resource" as chapter fifteen in our Managing the Commons book published by Indiana University Press in 1998.  (Doug earned his economics Ph.D. at the University of Chicago.)
 
Here is the result of this work. A few academics thought we had a cute argument but nobody paid serious attention.  Timing is important.  When a nation is wealthy and most expect it to become ever richer, why worry about waste that results from a bit of political plunder?  
 
There is, of course, an acceptable amount of political corruption--and like pollution, it isn't zero.  Obtaining favors via the force of government ("rent seeking" as economists call it in a remarkably poor choice of terms) has some lubricating quality.  
 
More importantly, however large the ethical benefits, the policing costs of eliminating political corruption would be excessive.  Even heavily religious North Dakota, 90% Christian, mainly Lutheran and Catholic in 2001, had a little corruption in its politics.  
 
Below are selections from chapter 15 in Managing the Commons.  They apply the common pool argument to natural resource and environmental issues. We built our argument to lay the foundations for a bureaucracy-devouring parasite.  The problems we face today are different, unsustainable entitlements, but the logic is applicable across the policy arena.  Here it is.
 
Environmental activists, freedom lovers, and those preferring a smaller, less intrusive government share a common perception.  They see the agency officials.... systemat­ically advocate programs that: (1) have environmental costs that exceed environmental benefits, (2) are financially wasteful, and (3) increase the command sector of the economy at the expense of voluntary exchange and coordination.    
 
It's no accident that the term "bureaucrat" carries a crust of derision in every language, for bureaucratic incentives ultimately produce problems.  Bureaucracies tend to replace the goals that justified their creation with actions protecting their budgets.  Bureaucracies are relentless.  They pursue a budget-maximizing agenda with tenacity, single-mindedness, and even occasional creativity.  Supreme Court Justice Stephen Breyer, in Breaking the Vicious Circle, describes this fundamental bureaucratic characteristic "tunnel vision."    While new agencies may work well for a brief period, perhaps while the reform zealots are in charge and the reform interest remains vigilant, over the long run we should expect bureaucracies to be run for the benefit of those running them and the clientele upon whom they depend for authority and budgetary appropriations.  Agencies are so pathologically preoccupied with budget maximization that fifty years ago another Supreme Court Justice, William Douglas, advocated that "all agencies be eliminated after their first ten years because they lose sight of their mission."
 
Only with heroic, but unrealistic, assumptions can sponsors of state activism claim "this time it will be different."  
 
By the way, perhaps Obama Care isn't a mistake. Perhaps it's a strategy.
 

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