Back in the mid 70’s, Gordon Tullock and James Buchanan wrote “The Calculus of Consent.” Its subtitle is “The Logical Foundations of Constitutional Democracy.” This book, along with his previous writings, earned Buchanan the Nobel Prize in Economics for launching the study of political economy.
People have all sorts of ideas about how the political process works, and even more opinions about how it should work. Political economy is the study of how politics actually works. As it turns out, politicians aren’t all that different from people in any other job. On a day to day basis, they will do whatever allows them to keep their job and get them promoted. What these things are will vary depending on the type of government and the times they live in, but the general concept holds.
So why call the subject political economy? Why not just call it political science or just political studies? Another name for microeconomics is rational choice theory. By putting the label of “economy” on it, we emphasize the rationality of the actors as opposed to the ideology of them.
Political economy essentially tells us that when faced with a decision, politicians will tend to make the choice that benefits them the most. In this governmental system, politicians need votes, but it usually pays for them to target specific voting blocks. Political economy also has a lot to tell us about why bills tend to look the way they do. I’ll talk more about political coalitions and bill formations in a bit, the main idea I want to get across is that politics works the way it does because of rational choices given the incentives that they face. People’s frustrations over politicians stem much more from the system than from individual politicians. It isn’t a matter of avoiding evil ones and electing “good” ones, the system makes politicians what they are. In an ideal system, it wouldn’t matter much who was elected, but that’s not the system we have.
I think the next installment will be about voting blocks and the nature of power in the political process.