06 December, 2007

The Baptists and the Bootleggers

Russell Roberts, in a superb essay titled “Pigs Don’t Fly: The Economic Way of Thinking about Politics”, writes:

[The] wiggle room for politicians in a democracy leads to some strange outcomes. It allows politicians to do the right thing and the wrong thing at the same time. How is that possible? We shall see below. Even stranger, the imperfect information available to voters can even allow politicians to do the wrong thing and pass it off as the right thing if we’re not paying close enough attention.

Bruce Yandle uses bootleggers and Baptists to explain what happens when a good cause collides with special interests.

When the city council bans liquor sales on Sundays, the Baptists rejoice—it’s wrong to drink on the Lord’s day. The bootleggers, rejoice, too. It increases the demand for their services.

The Baptists give the politicians cover for doing what the bootleggers want. No politicians says we should ban liquor sales on Sunday in order to enrich the bootleggers who support his campaign. The politician holds up one hand to heaven and talk about his devotion to morality. With the other hand, he collects campaign contributions (or bribes) from the bootleggers.

Yandle points out that virtually every well-intentioned regulation has a bunch of bootleggers along for the ride—special interests who profit from the idealism of the activists and altruists.

If that’s all there was to Yandle’s theory, you’d say that politics makes for strange bedfellows. But it’s actually much more depressing than that. What often happens is that the public asks for regulation but inevitably doesn’t pay much attention to how that regulation gets structured. Why would we? We have lives to lead. We’re simply too busy. Not so with the bootleggers. They have an enormous stake in the way the legislation is structured. The devil is in the details. And a lot of the time, politicians give bootleggers the details that serve the bootleggers rather than the public interest.

In the rest of his essay, Roberts gives us examples of modern-day Baptists and bootleggers. I have a question for my readers: What examples of Baptists and bootleggers can you think of in an Indian context? Write in and let me know—if I get enough interesting examples, I’ll make a separate post out of it, and give due credit.

And I simply can’t end this quote without quoting another choice excerpt from Roberts’s essay:

We should be realistic about politicians. George Stigler used to contrast his theory of politics with Ralph Nader’s. In Nader’s view, all of the ugly aspects of government were caused by the wrong people getting elected. If we could just elect better people, then we’d get better policies. Stigler argued that it didn’t matter who the people were—once they got in office, they responded to incentives. They would convince themselves that they were doing the right thing, either because they really thought so or because doing the wrong thing was necessary in order to be able to do the right thing down the line.

Read the full thing.

Also read: A Beast Called Government.