James d. Gwartney

Video:
Trade Restrictions and Crony Capitalism
The weak incentive of voters to make informed choices is in sharp contrast to that of
consumers in the marketplace. Market consumers individually decide how to spend their
money, and if they make bad choices, they personally bear the consequences. That fact gives
them the motivation to spend their money wisely. When consumers consider the purchase of an
automobile, personal computer, gym membership, or thousands of similar items, they have a
strong incentive to acquire information and make informed choices.
Third, the political process generally imposes the same outcome on everyone, while
markets allow for diverse representation. Put another way, government allocation results in a
“one size fits all” outcome, while markets allow different individuals and groups to “vote” for
and receive desired options. This can be illustrated with schooling. When schooling is
allocated through the market (through private schools and homeschooling), rather than
supplied by the government, some parents choose schools that stress religious values, while
others opt for education that emphasizes basic skills, cultural diversity, or vocational
preparation. Individual buyers (or members of a group) willing to pay the cost are able to
choose a desired educational option and receive it. Markets provide for a system of
proportional representation and this makes it possible for more people to obtain goods and
services more consistent with their preferences. Moreover, markets also avoid the conflicts that
inevitably arise when the majority imposes its will on various minorities.

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Video:
Is Government Too Big?
Fourth, market and political decision-makers face different incentives. As previously
discussed, the profit-and-loss mechanism of a market economy tends to direct resources toward
productive projects and away from counterproductive ones. But, the political process does not
have a similar mechanism that can be counted on to direct resources toward productive
activities. This is true even when controlled through voting. Instead, when unconstrained by
constitutional limits, elected officials will tend to gain votes by providing favors to some at the
expense of others. As the saying goes, if you take from Peter and give to Paul, you can usually
count on the support of Paul.
To a large degree, the modern political process can be viewed as a series of
“exchanges” between coalitions and politicians. Concentrated interest groups provide votes,
financial contributions, high-paying jobs in the future, and other forms of support in exchange
for subsidies, spending programs, and regulatory favors often financed by taxpayers. The
rational ignorance effect—the fact that voters choose not to spend the time required to be well-
informed—facilitates this process because a lot can happen in the halls of legislatures of which
voters are unaware. As a result, resources are moved toward lobbying and other favor-seeking
activities and away from production and development of better products.