Like the ideological opponents of free markets, the birds of Edinburgh show little respect for the founder of Economics
In my view there is a lot to be said for attempting to
develop a coherent ideological position – a system of ideas and ideals - that
can be applied to public policy issues. Those who insist on approaching every
issue with an empty mind, refusing to draw upon a priori reasoning and lessons
learned from previous experience, are severely handicapping themselves.
It is important to note that having a coherent ideological
position does not necessarily imply being ideologically blinkered. An
ideological commitment can be consistent with being sufficiently openminded to
consider the possibility that it could be appropriate to depart from a general
principle in a particular instance. For example, people who have an ideological
commitment to free markets are often open to persuasion that government
regulation might be warranted in some instances.
Ideologies are not necessarily heavily laden with
values. In my view that applies
particularly to the free market ideology favoured by many economists. As a
result of their training and work experience economists tend to acquire
objective knowledge about the operation of markets that leads them toward a
system of ideas and ideals that is relatively favourable to free markets.
Many non-economists have an anti-market bias. As Bryan
Caplan implied a few years ago in his book The
Myth of the Rational Voter (discussed previously on this blog) some people
have a strong ideological attachment to false beliefs. More generally, however, it seems to me that
the anti-market bias among non-economists is attributable to lack of understanding
of the functioning of markets. Few people are so wedded to conspiracy theories
about market behaviour that they are unwilling to consider economists’
explanations.
During my work career as an economist, I had many difficult
policy discussions with engineers, who seemed to have acquired an ideological
commitment to planning that led them to favour government regulation. From
their perspective free markets appeared to be chaotic and planned solutions
appeared to promise order. However, they were able to appreciate that actual
outcomes that were likely to emerge from chaotic political and administrative
processes might not be superior to market outcomes.
The most difficult policy discussions I have been involved
in have been with Greenies whose ideological opposition to free markets is
based on the view that capitalism leads to bad environmental and social
outcomes. The main problem in these discussions is not a difference in values; we
all want to avoid environmental and economic catastrophes. It seems to me that
the main barrier to communication is that the Greenies have an ideological
commitment to the belief that better outcomes will follow automatically if the regulation
they favour displaces markets and voluntary cooperation.
In thinking about how economists could have more useful
policy discussions with Greenies it occurs to me that there is not much to be
gained by talking to them about externalities. They might support proposals for
limited intervention to correct specific externalities, but they actually see
no virtue in limited intervention. They see market failure as pervasive and
believe that superior outcomes can be produced by burdening governments with
massive responsibilities.
I wonder whether it might be useful to begin a policy
discussion with Greenies by considering the tragedy of the commons. When I
re-read Garrett Hardin’s 1968 article with that title I was reminded of its
shortcomings with regard to population projections, but his warnings about the
potential for common pool resources to be over-exploited have a fairly solid
foundation in economic reasoning.
Hardin wrote:
“The tragedy of the commons develops in this way. Picture a
pasture open to all. It is to be expected that each herdsman will try to keep
as many cattle as possible on the commons. Such an arrangement may work
reasonably satisfactorily for centuries because tribal wars, poaching, and
disease keep the numbers of both man and beast well below the carrying capacity
of the land. Finally, however, comes the day of reckoning, that is, the day
when the long-desired goal of social stability becomes a reality. At this
point, the inherent logic of the commons remorselessly generates tragedy. …
Each man is locked into a system that compels him to
increase his herd without limit - in a world that is limited. Ruin is the
destination toward which all men rush, each pursuing his own best interest in a
society that believes in the freedom of the commons. Freedom in a commons
brings ruin to all.”
However, as Elinor Ostrom demonstrated, it is by no means
inevitable that use of common pool resources will end in tragedy in the absence
of government intervention. She found that some communities of individuals have
been able to manage common pool resources with reasonable degrees of success
over long periods of time “relying on institutions resembling neither the state
nor the market”.
The methodology adopted by Elinor Ostrom in her research
strikes me as highly relevant to the question of how people who approach issues
from different ideological positions can have useful policy discussions. In the
preface to Governing the Commons: The
Evolution of Institutions for Collective Action, Elinor Ostrom wrote:
"Instead of presuming that the individuals sharing a
commons are inevitably caught in a trap from which they cannot escape, I argue
that the capacity of individuals to extricate themselves from various types of
dilemma situations varies from situation to situation. The cases to be
discussed in this book illustrate both successful and unsuccessful efforts to
escape tragic outcomes. Instead of basing policy on the presumption that the
individuals involved are helpless, I wish to learn more from the experience of
individuals in field settings. Why have some efforts to solve commons problems
failed, while others have succeeded? What can we learn from experience that
will help stimulate the development and use of a better theory of collective
action – one that will identify the key variables that can enhance or detract
from the capabilities of individuals to solve problems?"
Some advocates of smaller government (including myself) are
fond of pointing out that the logic of the tragedy of the commons applies to interest
group politics as well as to physical resources. When goods such as education
and health services are converted into common pool resources there is an
incentive for interest groups to attempt to increase their share at the expense
of other groups and the general public. More generally, when interest groups
view the coercive power of the state as a common pool resource to be used for
the benefits of their members, the adverse impact of tax and regulation on
incentives for productive activity is likely to result in outcomes that will be
detrimental for everyone. The incentives facing individual interest groups in
that situation are similar to those facing individual fishermen – when their
collective actions results in over-fishing, that is detrimental to all.
However, it is reasonable for the advocates of big government
to ask why the tragedy of the political commons has not resulted in the failure
of all experiments in representative government. If we apply Elinor Ostrom’s
research methodology we have to acknowledge that some countries have been more
successful than others in coping with the common pool resource problems
associated with interest group activity. The reasons for this seem to me to be
an important topic for research and discussion.
It strikes me that people who approach issues
from different ideological perspectives would be able to have more useful
policy discussions if they could turn their attention to what they can learn
from the actual experiences of people in different institutional and policy
settings. 
