New Ideas From Dead Economists Summary

Modern economic thought is built on the assumption that all individuals are inherently selfish. As Todd G. Buccholz states in his book, New Ideas from Dead Economists, “If businessmen are self-interested, why not assume that government officials are “political entrepreneurs?” (Buccholz 255). Instead of maximizing profits and monopoly, our political leaders seek to maximize their power and position within the bureaucracy. Thus, the Public Choice Theory of economics suggests that government can be viewed as an economic model in which the behaviour of politicians, incentivized by the desire to increase their personal status, outweighs the principles of utilitarianism. Accordingly, it concludes that democratic governments will unravel if politicians

Thus, decisions that cause societal harm are oftentimes made without the direct knowledge of the executive decision maker. An example of this is the “capture” theory of regulation, by which regulatory agencies come to be dominated by those industries they were responsible for regulating. This occurs when a regulatory agency, charged with acting in public interest, makes decisions that benefit the special interest group it is supposed to regulate, instead of the public. As the benefit is shifted from the public to the special interest firm or political group, society experiences a net loss. Bureaucratic individuals with high stakes interest in political and regulatory decisions will always, consciously or unconsciously, invest their resources in achieving the preferable outcome. The regulatory agency is successfully “captured” when the members’ preferred policy outcome aligns with that of the special interest group. This allows “motivated organizations [to] trample on the interests of consumers, who individually have a small stake in the outcome,” (Buccholz 257) and thus, are ultimately uninterested. Further, legislators are affected by a similar special interest paradox as, ultimately, they are making decisions regarding how to use other people’s resources. Though politicians could, and sometimes do, choose to spend taxpayer money effectively, there is no incentive for such actions. There is no tangible reward conferred upon them for legislating against powerful interest groups to provide the public with benefits they are unaware of. Instead, most legislators will chose to act in opposition to the public interest in order to garner support and sometimes campaign funds from interest groups. In sum, because legislative