Everything You Ever Wanted to Know About Behavioral Public Choice By Bryan Caplan

Public choice (also known as political economy) is applying economics to politics. Behavioral economics is applying psychology to economics. What happens when you do both at the same time, creating a “behavioral public choice”? Gary Lucas and Slavisa Tasic‘s “Behavioral Public Choice and the Law” (West Virginia Law Review, 2015) provides an amazingly careful, comprehensive, and entertaining review of the literature. Intro (with voluminous footnotes omitted):

Behavioral public choice is both an extension of and a reaction to

behavioral economics and its counterpart in legal scholarship, behavioral law

and economics. Psychologists and behavioral economists have documented

imperfections in human reasoning, including mental limitations and cognitive

and emotional biases. Their research challenges the rational actor model of

conventional economics, especially the idea that individuals acting in a free

market can make optimal decisions without the government’s assistance.

Behavioral economists and legal scholars in the behavioral law and economics

movement have used this research to justify paternalistic government

interventions, including cigarette taxes and consumer protection laws, that are

intended to save people from their own irrational choices. Because of their focus on market participants and paternalism, most behavioral economists and

behavioral law and economics scholars ignore the possibility that irrationality

also increases the risk of government failure.” Behavioral public choice

addresses that oversight by extending the findings of behavioral economics to

the political realm. A key insight of behavioral public choice is that people have less

incentive to behave rationally in their capacity as political actors than in their

capacity as market actors. Elections are rarely decided by a single vote, so

voters have little reason to take them seriously. Moreover, the voters,

politicians, and bureaucrats who participate in the political process know that

the costs and benefits of their decisions fall largely upon others. So these

political actors have less at stake than consumers, investors, and other market

participants who make decisions that primarily affect themselves. Because political actors have little incentive to behave rationally,

irrationality is common in politics, and it has a substantial negative effect on

the law.

One fun section among many:

I. Opportunity Cost Neglect: Ignoring Implicit Tradeoffs Some scholars are skeptical of certain government interventions on the

grounds that they are ineffective, excessively costly, and inimical to economic

growth. But opinion research shows that the public enthusiastically embraces

government spending, tax expenditures, and regulation. Moreover, affection

for government is not limited to liberals and Democrats. Conservatives and

Republicans also express strong support for government as long as researchers

ask them about specific programs rather than asking about government in

abstract or general terms. Nonetheless, opinion research also reveals that support for many

government programs declines (often substantially) when researchers draw

attention to the programs’ opportunity costs. The opportunity cost of a

government program consists of the private and public goods that society must

forgo to make that program possible. Opinion research suggests that unless

explicitly prompted to consider these costs, the public often ignores them. Opportunity cost neglect is consistent with the finding that decision makers

focus on salient situational elements and irrationally ignore implicit

information. The benefits of many government programs are obvious, but their

opportunity costs are often implicit and therefore easy to overlook… […] Widespread neglect of the opportunity costs of government programs

has several implications. First, it artificially increases the demand for direct

spending, tax expenditures, and regulation above the level that voters would

otherwise support. In particular, opportunity cost neglect helps explain chronic

budget deficits. Voters express strong support for government spending, but at

the same time, they are also unwilling to pay for it. Second, opportunity cost

neglect results in a misallocation of government funds. Specifically, opinion

research suggests that the federal government spends more on the military and

less on other programs than it would if voters were cognizant of the tradeoffs

involved. Finally, opportunity cost neglect affects the government’s choice of

policy instruments. Voters are attracted to policies that conceal tradeoffs. This

explains why voters generally prefer tax expenditures to similar direct spending

programs. It also explains why, despite economists’ objections, voters prefer

to address global warming through command-and-control regulations, which

conceal the opportunity costs of environmental protection, rather than a carbon

tax, which would make those costs more salient.

Read the whole thing.