CHAPTER 16Public Choice: Politics in Government And the Workplace I have no fear, but that the result of our experiment will be, that men may be trusted to govern themselves without a master. Could the contrary be proved, I should conclude, either that there is no God, or that he is a malevolent being. Thomas Jefferson revious chapters have discussed the effects of various government policies on the market system in general and the firm in particular. We looked at government efforts to control the external costs of pollution. We considered the economic impact of price controls and consumer protection laws, for example, on the market for final goods and services. Throughout the analysis we have focused on assessing the economic efficiency of government policy. We said little about how government policy is determined or why government prefers one policy to another. In this chapter, we will shift our focus to the functioning of government itself. Using economic principles, we will examine the process through which government decisions are made and carried out in a two-party democratic system, and consider its consequences. Today, when government production accounts for a substantial portion of the nation’s goods and services, no student of economics can afford to ignore these issues. A study of the political process is especially important for many MBA students, mainly because a non-trivial amount of your time will be involved with seeking to change one governmental policy or another. Moreover, politics is also endemic to many businesses. Our discussion of the “economics of politics” has various implications for how businesses can be expected to operate, especially those that rely on “participatory management” processes (which are necessarily democratic to one extent or another). The Central Tendency of a Two-Party System In a two-party democratic system, elected officials typically take middle-of-the road positions. Winning candidates tend to represent the moderate views of many voters who are neither liberals nor conservatives. For this reason there is generally little difference between Republican and Democratic candidates. Even when the major parties’ candidates differ strongly, as Ronald Reagan and Walter Mondale did at the start of their 1984 presidential campaign, they tend to move closer together as the campaign progresses. P
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