Some Iron Laws of Political Economics
<p>Mancur Olson, in his book <cite>The Logic Of Collective Action</cite>, highlighted the central problem of politics in a democracy.  The benefits of political market-rigging can be concentrated to benefit particular special interest groups, while the costs (in higher taxes, slower economic growth, and many other second-order effects) are diffused through the entire population.  </p>
<p>The result is a scramble in which individual interest groups perpetually seek to corner more and more rent from the system, while the incremental costs of this behavior rise slowly enough  that it is difficult to sustain broad political opposition to the overall system of political privilege and rent-seeking. </p>
<p><span id="more-984"></span></p>
<p>When you add to Olson&#8217;s model the fact that the professional political class is <cite>itself</cite> a special interest group which collects concentrated benefits from encouraging rent-seeking behavior in others, it becomes clear why, as  Olson pointed out, &#8220;good government&#8221; is a public good subject to exactly the same underproduction problems as other public goods.  Furthermore, as democracies evolve, government activity that might produce &#8220;good government&#8221; tends to be crowded out by coalitions of rent-seekers and their tribunes.</p>
<p>This general model has consequences.  Here are some of them:</p>
<p>There is no form of market failure, however egregious, which is not eventually made worse by the political interventions intended to fix it. </p>
<p>Political demand for income transfers, entitlements and subsidies always rises faster than the economy can generate increased wealth to supply them from.</p>
<p>Although some taxes genuinely begin by being levied for the benefit of the taxed, all taxes end up being levied for the benefit of the political class.</p>
<p>The equilibrium state of a regulatory agency is to have been captured by the entities it is supposed to regulate.</p>
<p>The probability that the actual effects of a political agency or program will bear any relationship to the intentions under which it was designed falls exponentially with the amount of time since it was founded.</p>
<p>The only important class distinction in any advanced democracy is between those who are net producers of tax revenues and those who are net consumers of them.</p>
<p>Corruption is not the exceptional condition of politics, it is the normal one.</p>
