Incentives in policy realm

On August 25, 2017, the members of Liberty Discussion Group sat down at Gaia Restaurant and Coffee Shop to discuss the article, ‘Pigs Don’t Fly: The Economic Way of Thinking About Politics’ by Russell Roberts.

In the article, the author talks about the incentives facing the political decision makers. He claims that a private decision maker makes a decision as according to incentives. In the same manner, the decision maker in the political or policy realm responds to the incentives while making political decisions. Hence, the politicians are no different than individuals responding to the incentives and pursuing their own self-interest. The author also talks about how the problem of information asymmetry between the politicians and voter allow the politicians to do the wrong thing and pass it off as the right thing.

The discussants had a really interesting discussion among themselves. They talked about how an increase in the taxes of products like cigarettes are considered to be a noble act by the general public and how the politicians can tap into this perception of the public to benefit themselves. They agreed that when the taxes increase the existing players in the market are benefitted as high taxes demotivates the new players from entering the market, ultimately raising the market share and profits of the existing players. Here, the politicians without being defamed are able to gain benefits from the existing player in the market and the existing players can accrue rent from the policy.

The participants also discussed the notion proposed by Ralph Nader. In Nader’s view, in order to formulate better public policies, we have to elect better people. The wrong policies are into place because the wrong people get elected. The participants disagreed with this view as they claimed that the whole definition of good people and bad people cannot be concretely established. It is impossible to define good and bad absolutely, and these are just relative terms. Additionally, they asserted that it is not a matter of good or bad people being elected. In the support of the author’s claim, they emphasized that all the people respond to the incentives, and optimize their personal gains.