Shrinking Leviathan: can the interaction between interests and ideology slice both ways?

• Author: Clark, J.R.
• Position: Essay

Optimism is difficult to come by when considering the possibility of halting the growth of government, much less reversing it. Public-choice economics identifies several reasons why political arrangements allow organized groups to advance their private interests by demanding government growth that harms the public interest. Moreover, excessive government also springs from what are widely seen as "other-regarding" features of human nature, which are driven by ideology and morality. For more than one hundred years, noble concerns have persuaded well-meaning people to favor more government to promote the public interest, and others have exploited those concerns to grab political privileges at public expense. Concentrating here on the history of government growth in the United States since the 1890s, we argue that private interests and political ideology have reinforced each other to become potent forces for government expansion. This history seems to provide little reason for optimism for those who believe, as we do, that the social gains from reducing the size and scope of government would far exceed the costs.

Yet our purpose in this article is to argue that the history of government expansion provides reasons for optimism that the expansion can be reversed. We consider the possibility that the growth of government fostered by private interest and political ideology may be altering political incentives and the prevailing political ideology in ways that will shrink Leviathan. Relevant to this possibility are considerations that have been forces for past government growth.

One consideration is found in Frederic Bastiat's statement that "[t]he state is the great fictitious entity by which everyone seeks to live at the expense of everyone else" (1995, 144). Movement in the direction of Bastiat's state can find interests and ideology joining as forces for government growth, but as this state is approached, the opposite can occur, with interests and ideology shifting in favor of smaller government. Once ideological support for smaller government begins to grow, an ideological network effect may come into play, increasing the popularity of the ideology--just as the network effect in the opposite direction has increased the popularity of the ideology favoring larger government. The political impact of the ideology favoring Leviathan was magnified by the mathematics of voting, but the same mathematics will magnify the political impact of a shift in ideology in favor of shrinking Leviathan.

U.S. Government Growth

Government spending in the United States grew little, if at all, during the nineteenth century as a percentage of national income. The federal government spent about 3 percent of national income in 1900, and state and local governments spent about 6 percent. Most of the federal government's spending went for national defense and a few public goods. State and local government expenditures were devoted primarily to such things as police protection, court systems, and other local goods and services that had at least a plausible claim to being public goods. Today, the federal government spends (counting Social Security payments) approximately 30 percent of national income, which is roughly twice what the state and local governments together spend. Most government spending now goes for transfers from one group to another, not for public goods. In comparison with the cost of government in the nineteenth century, the current cost of government includes a great deal more that does not show up in government budgets: a significant amount of the cost of government today results from government regulations and controls that impose tremendous expense and inefficiency on the private sector. These costs manifest themselves in the form of higher prices and reduced productivity that few people trace back to government.

The size of government and the scope of its activities were relatively small in the nineteenth century for many reasons, but surely the most important factor was the prevailing political ideology. In the nineteenth century, the primary constraint on government was the limited degree to which the public condoned government involvement in private affairs, a limitation strengthened by the wide range of matters considered private. A telling illustration of this constraint on government is that although President Grover Cleveland vetoed legislation appropriating $10,000 in federal funds to distribute seed corn to drought-stricken Texas farmers in 1887, he was nevertheless reelected; his two terms as president were separated by Benjamin Harrison's term, but he received more popular votes in the election of 1888 than Harrison did (see Higgs 1987, 83-85). This political success did not occur because Texas farmers were less anxious for more money in 1887 than they or others are today, but because of the prevailing ideology regarding the federal government's proper (limited) role.

The ideological constraint on government growth that prevented Cleveland's veto from being political suicide was already under attack, however, during his second term in office, from 1893 to 1897. During the Progressive Era, the belief that government had the ability and the responsibility to solve an increasing number of problems began to spread, and more problems came to be seen as "social" problems. As government began to expand to deal with a few of these problems, which often involved provision of government protections and transfers to particular groups, additional groups saw an opportunity to make their own claims for government assistance. What had been considered ordinary problems and inconveniences to be dealt with primarily through private action were soon elevated to crises that demanded government action. Although previous government expansions to deal with real crises had largely been reversed after the crises had passed, the pattern became one of expansions that were never completely reversed between the time that one crisis ended and the time that another began. (1) Furthermore, moral hazards created by government attempts to protect people against crises (and problems in general) increased their frequency and severity, which escalated the demands for yet more government assistance and provided political justifications for providing that assistance.

The shift in political ideology favoring a more expansive role for government provided greater scope for private interests to organize to seek government privileges, protections, and transfers. In the next section, we consider how this shift in the prevailing political ideology interacted with voting and organized political interest groups to fuel government growth.

The Mathematics of Voting, Cheap Morality, and Government Growth

The assumption (we would say insight) that forms the foundation of public-choice analysis is that people are no less motivated by self-interest when making political decisions than they are when making market decisions. This assumption does not imply, however, that people behave the same in the political process and in the market process. They do not because the incentives differ in the two domains. People typically must pay with their own money for what they get in markets. Demand is less constrained in the political process, where people can secure personal benefits for which others must pay. This difference is clearly the primary reason for excessive government growth.

Some defenders of political action have dismissed the view that government growth is excessive by arguing that people, in making political decisions, are motivated by a sense of community and by shared concerns that extend beyond their narrow private interests. (2) They support their argument with studies showing that people commonly vote for politicians and policies on the basis of what they believe is best for the general public even when it is against their own personal interest to do so. (3) However, this position is consistent with the public-choice perspective based on the dominance of private interests, and in fact it helps to explain why organized interest groups have succeeded in eliciting public support in their efforts to benefit at public expense by expanding the size of government.

The explanation is based on a fundamental difference between market choices and voting choices. The choices made by buyers are far more decisive than those made by voters. People get what they choose in markets, and they get it because they choose it. When making a choice in the voting booth, each person gets what the majority votes for, regardless of the choice he makes. Hence, people have a stronger incentive to give more thought to the consequences of getting what they buy than to the consequences of getting what they vote for. A person's voting decisions, unlike his market decisions, are so unlikely to affect what he receives that the cost of voting for something that is not in his personal interest is effectively zero.

For example, assume a voter is considering a vote on a policy (or for a politician who supports the policy) that he believes will accomplish some noble purpose, such as reducing pollution by developing green energy. Assume further that if the policy receives a majority vote, the present value of his taxes will increase by $1,000. It might seem that even if the voter feels he should do his part to protect the environment, he will be reluctant to vote for the policy because of the high costs of doing so. However, the minuscule probability that his vote will decide the election outcome means that the expected cost of voting for the policy is also miniscule. Assuming that the probability is 1 in 50,000, the voter's expected cost of voting for the policy is two cents ($1,000 times 1/50,000). (4) If the voter gains a feeling of moral satisfaction worth more than two cents from voting to protect the environment, it pays him to vote yes.

Therefore, voting decisions can be...