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No, Melissa, There Isn't a Santa Claus

Mises Daily: Saturday, December 24, 2011 by

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Political Scientist and MSNBC contributor Mellissa Harris-Perry has called for renewed faith in Democracy. According to Harris-Perry, recent events have damaged public confidence in the democratic process.

Our faith has been badly damaged by governors who crush unions, by a Congress that will not govern, by a military that tortures, … by CEOs who slash jobs as profits rise, by a system that seems irreparably broken. But building a country requires investment in one another, hope that we can be better tomorrow than we are today and faith that our failures are not definitive. In these final days before we enter the 2012 election year, it is time to ask, "Do you believe?"

In this article Harris-Perry makes timely reference to stories about those who question the existence of Santa Claus. In Miracle on Thirty-fourth Street and the famous "Virginia" editorial in The Sun people were exhorted to have faith in Santa Claus. As the character Fred Gaily put it, "Faith is believing when common sense tells you not to." Harris-Perry wants to apply this sentiment to democracy.

Even as we challenge it to be better, fairer and more honest, we still have to believe that democratic governance by the people, through their institutions, can and should exist. Like Santa Claus, democracy requires us to believe that collective faith can be greater than our individual doubts.

I agree that belief in our current system requires faith, but the Gaily quote does need to be rephrased. Dogmatism is believing when science tells you not to. What does science tell us about the system that "seems irreparably broken"? It is true that Congress often seems ineffective in dealing with modern affairs, but this is what we should expect. The contemporary American government intervenes into nearly all aspects of our lives. How can any senator or congressman comprehend all of the interests at stake in all of the matters that the government tries to regulate? We live in an extraordinarily complex society. There are literally millions of businesses in America, and a larger number of households. These organizations deal in countless products and services, each of which is produced in complicated ways. Legislators have staffs to help manage their affairs, but the fact of the matter is that modern economies are complex beyond the comprehension of any staff or committee. Consequently, legislatures that try to manage a modern economy in detail become ineffective talking shops, and must defer to bureaucrats.Download PDF

Reliance on bureaucrats is a necessary part of government, but hardly desirable. Bureaucrats are supposed to serve the public. Economic science points to agency problems in public bureaucracies. Bureaucrats, as agents of the public, should serve the public. Since neither elected officials nor ordinary citizens have strong incentives, let alone enough time, to monitor bureaucrats, these functionaries have leeway to pursue their own interests, at the expense of the general public. Bureaucrats have poor reputations for public service, and deservedly so. Bureaucrats will have opportunities to misuse their authority. To the extent that bureaucrats want to serve the public, they still face the problem of forming a rational plan for managing commerce. Market prices coordinate private activity, but public bureaucracies lack any feasible method of large-scale coordination.Download PDF Consequently, government regulation often generates chaotic results.

Of course, private interests can lobby to direct public policy towards useful endeavors. Special-interest groups also have well-earned reputations for misuse of governmental powers. The problem here is that lobbying is severely biased towards special interests.Download PDF Narrow-interest groups organize and operate at lower costs, relative to broad-interest groups. Consequently, special interests tend to win out over broader interests. Ideally, the democratic process is supposed to deliver public goods that benefit nearly everyone. The cost advantages of special interests enable them to direct policy towards public production of private goods (aka rent seeking).

Of course, the public does get outraged about some special interests and bureaucratic activity from time to time. This is especially true when special interests–bureaucrat relationships become part of the problem. Public outrage is an unreliable mechanism for regulating government because the incentives to be accurately informed about public affairs are so weak. Voters often support policies that are based on faulty economic logic. The task of being well-informed about the relative costs of public policy is beyond human capabilities anyway. Since neither the public nor politicians can be vigilant regarding modern bureaucracies, the only "solution" to these problems is to restrain bureaucrats with rigid rules.Download PDF

Scientific analysis of the democratic process reveals that public regulation or management of private actions throughout society is severely defective. Of course, Harris-Perry is arguing for belief in an ideal, not for the efficiency of social democracies. She might argue that the egalitarian ideals of social justice are worth pursuing, even if there is little chance of success. However, notions of socially just redistribution are personal, arbitrary, and attainment of any particular egalitarian ideal would come at a tremendous cost. The fact of the matter is that the derivation of a set of rational, economically efficient public priorities is logically impossible.Download PDF

Of course, the defects of the public sector matter only if there is a feasible alternative to a politicized government regulated economy. Harris-Perry complains about executives slashing jobs as profits rise. Harris-Perry does not understand the efficiency of capitalism. Profits rise precisely because executives "slash jobs" and the use of physical resources whenever the productivity of a worker or physical resource does not justify further payment. Direction of commerce by profit and loss does not conform to popular notions of social justice, but it does move people and resources toward more productive endeavors. Redeployment of labor and capital for profit does cause temporary dislocation and permanent inequality, but rising living standards depend upon efficiency, not equality.

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Scientific analysis of democracy casts doubt on the means and even the ends pursued in the democratic process. At one level Harris-Perry is correct. Belief in our modern system of democracy does require faith. To an idealist the system should seem broken. To a scientist the system is working in the dysfunctional way that it should. As a political scientist Harris-Perry should consider the scientific facts regarding democracy and capitalism before urging people to remain faithful.

To put it simply, there is no "Santa Claus," regarding the democratic process, Melissa. There is no reason to believe that our current system of politicized crony capitalism will ever improve.Download PDF There is no reason to believe that we will ever attain, or even agree upon, social justice. We should believe in the free-enterprise system, not simply because of faith in any ideal but because theory and evidence indicate that this system works best.