Can this nut be cracked?

There are thousand of different groups and movements trying to promote transparency or, at least, to create in society an awareness of the problem, see for instance Radical transparency.

Nevertheless, political movements or political parties who focus on this issue, like the German Piratenpartei, are not successful in elections (for other reasons as well, obviously), and no established political party puts this topic on their agenda.

There are as well thousand of articles about transparency and political parties, see this one, Improving transparency and democratic functioning of political parties focus of ODIHR seminar. (The articles are chosen by chance, after a two minutes research, there are millions of articles on the topic, in various languages.)

Most of the articles are about transparency in the funding of political parties, and most of these websites suggest that political parties are the main problem, for instance, this one, Politics and government, but the problem is more general, and the solutions must be more concrete.

Neoliberalism and his brother in spirit the Austrian school are more philosophical systems than economic theories. They describe society as something Kafkaesque and the more the government intervenes in the economy, the more Kafkaesque it becomes. This is actually a general feeling, and everybody understand the video, The 12 Tasks of Asterix: The Place That Sends You Mad. (For American readers: Asterix is a very known comic strip from the French authors René Goscinny and Albert Uderzo.)

Actually, the whole issue, see the previous chapter, is about control. Big companies have the same problem as public administrations. The bigger they get, the more difficult it is to control them. That's why they are very often split off, or entire preliminary products are bought elsewhere. The difference is that even in the case of big companies, there is an external, automatic control, the market. If Dacia produces a car similar to the German Golf for 5 000 euros less, it is an obvious and objective signal that it is possible to produce it cheaper. No discussion is possible.

In the case of public administrations, there is no market price and the market mechanism has to be introduced artificially, what is possible, see the previous chapter.

Friedman notes that people will always try to use political power for their own interests. That's obvious. It is hard to imagine that someone working in a public company is different from someone working in a private company, and he assumes that more abuse is possible if the public sector is increased and that there is no abuse in the private sector. This is kind of a philosophical debate.

He illustrates his point of view with some isolated examples, licences (for medicine and lawyers), public schooling, post office. There is no doubt that there is a lot of truth in what he says about these issues. There is no doubt as well that he launched a necessary public debate.

However, he didn't discuss the relevance of transparency. He illustrates the effects of governmental intervention only by some isolated issues. He is a little bit more concrete than Friedrich Hayek, but not very practical neither.

There will always be a discussion about how much governmental intervention is needed and when it becomes harmful. In the previous chapter, see can this nut be cracked? we tried to describe the different scenarios. A general discussion of 'Capitalism and Freedom' leads nowhere.

There will never be an agreement about how much governmental intervention is useful, but there will always be a total agreement about whether governmental intervention must be transparent. Therefore, the relevant question is not whether capitalism is the guarantor of freedom, but how to make governmental intervention transparent.

Concerning this, there are two very different problems and is it very strange that Anthony Down in An Economic Theory of Democracy pays no attention to transparency. Transparency is not only a problem of getting data but as well of the price to pay to get them. Anthony Down discusses the fact that the price to get information is too high. The author would say that depends on how easy it is to get the information. People spend a lot of time to get useless information, about royals or actors, and they spend a lot of time hearing and reading the same information. In other words, all the theory of Anthony Downs about the marginal value of information is bullshit. That's not the problem.

At first glance, the idea that people won't seek more information if there is little or no benefit from it seems obvious. Therefore, democracy has a problem. For a single household, it doesn't make sense, for instance, to become informed how much coffee is taxed, if that makes sense and who pays the tax. Even in the case that he had a real change to get this tax eliminated, what is not the case, the benefit would be insufficient to recompensate for the effort.

However, that's not because of the fact, as assumed by Anthony Down, that it is too hard to get this information if the newspapers informed about that instead of informing about the love affairs of the royals, he can get this relevant information with the same effort he gets the irrelevant information.

The problem is that this topic is not on the political agenda. It would require an enormous effort, to put this topic on the political agenda. (And it is very unsure if this will be successful.)

At the other side for little pressure groups, well organised it can be interesting to lobby for their interests. A tax on elaborate chocolate imported from foreign countries is very interesting for chocolate producers. That way they get rid of foreign competitors.

It is a strange kind of phenomena, by the way, that every country has some monopoly commission aiming to maintain the intensity of competition intensive enough, but they don't care about foreign competitors kept out of the market through taxes and other trade obstacles.

If we want to specify the thesis of Milton Friedman, we should have to formulate a little bit clearer. Certain well-organised groups con use the government for their interests. (All of the issues he discusses in 'Capitalism and Freedom' turn around this problem.)

The problem is that the lobby group gets a very strong advantage by lobbying for their interests and for the other group, the ones who pay the bill, it doesn't make sense to invest time in defending themselves.

Consequently, much of the evidence frequently cited to prove that democratic politics are dominated by irrational (non-logical) forces, in fact, demonstrates that citizens respond rationally (efficiently) to the exigencies of life in an imperfectly informed world. Apathy among citizens toward elections, ignorance of the issues, the tendency of parties in a two-party system to resemble each other, and the anti-consumer bias [consequences of government in the consumer sphere affect all a little bit. Therefore, the interest of this issue is small, consequences on the producer side affect a certain group in a relevant way. Therefore, there is a significant interest in this issue] of government action can all be explained logically as efficient reactions to imperfect information in a large democracy.

Anthony Downs, An Economic Theory on Political Action in a Democracy

The whole affirmation depends on one central argument. Value information is more difficult to obtain than useless information because hundred millions of people consume every day the yellow press paying millions of dollars to get irrelevant information. With the same amount of money and time they can get as well useful information.

Perhaps Anthony Downs would say that the yellow press and useless information is more entertaining than useful information, but he doesn't discuss the topic. He only talks about costs and time, but referring to cost and time there is no difference.

If the story about Diana and Prince Charles, for instance, is more entertaining than the debacle of the CIA in Afghanistan, for instance, is doubtful. It depends on how the story is told. Nobody cares, to take another example if an academic economist adds to numerous articles about the financial crises of 2008 another one, but millions of people go to the cinema if Michael Moore makes a film about the topic.

The real problem is another one. Political elections are about arbitrary topics, and nobody knows if the topics that are important during voting time are the relevant issues and, in any case, they are only a little part of all the topics influenced by government.

Anthony Downs has the same problem as Milton Friedman. It is more about philosophy than about economics. It is not concrete. He assumes that the only control exerted by the electorate is through the election of one or other party and that the only thing to be controlled is politics. Both assumptions are false.

Elections are almost never about concrete topics. The programme of the conservative party in the United Kingdom is meaningless, see Our long-term economic plan. They will reduce the deficit and reduce the taxes; that's difficult to do. If we talk about 'Delivering the best schools and skills for young people' we must talk about very concrete things, very in detail. If people in the UK vote for the Labour Party or the Conservative Party is a question of "feeling". No rational choice can be taken on the basis of this program or based on the programme of the Labour Party and in any countries this is impossible. We do not even know if the programme addresses the most relevant issues.

We hope that we will give throughout this manual some basic ideas allowing to evaluate the risks and chances of certain political measures, but we will not discuss, obviously, all the programmes of political parties around the world.

Milton Friedman and Anthony Downs use the same premises, although Anthony Downs explains more in detail why a rational choice is not possible in politics. It is not possible, as it is the case for the market player because the costs of getting informed and make a rational decision is to fight. Therefore, it is rational not making any decision, for instance not to vote at all. This gives minority groups the possibility to defend their interests influencing the government. This is what Milton Friedman illustrates with some examples taken from health care system, the public schooling, licenses in general and so on.

The problem is that this is not true (anymore). Information can be spread through the internet, and no cost, and it is an interesting business to offer information.

(Anthony Downs only considers the demand side for information, actually equally important it the supply of information, although we can say that if the distribution of information costs nothing, the production of information can be very low if the knowledge is already there.)

The second point is that both, Anthony Downs and Milton Friedman, simplifies too much. In practice, we must distinguish an equally important thing as decision making by politics and the bureaucracy. There we have to distinguish different situations, see chapter before.

The product of the bureaucracy can be clearly defined. In this case controlling is a simple question of using the right software and publishing the data. The pressure exerted by publicity in most instances would be strong enough to change the behaviour of the employees involved.

The situation becomes a little bit more complicated if the product is not clearly defined, as it is the case with jurisprudence. However, a systematic publishing of its product, the judgement, would it make possible to get a deep insight into their efficiency. The infos24 GmbH, the company behind this manual, is running a website about jurisprudence, www.recht-eigenartig.de, and it is to be supposed that this will lead in the long run to a change of the employees involved.

Very often the problem has nothing to do with politics. It is a systemic failure on the level of the bureaucracy. It is obvious, that in the case that there is no relationship between performance and income, the performance tends to be low. However, transparency can exert a control almost as efficient as the mechanism of the market.

The situation is still more complicated, if the product is undefined, or if the society is not able to agree on clear goals and clear parameters allowing in which degree these goals have been attained. A case like that is public schooling. We will see later on when discussing Milton Friedman, that there are solutions in this situation as well.

In a typical case the main problem is not taking a rational decision at the time of voting, but to control the quality of governance and the public administration.

Anthony Downs addresses directly the lack of information: "...of government action can all be explained logically as efficient reactions to imperfect information in a large democracy...". Milton Friedman supposes implicitly that every kind of governmental intervention leads to a sort of a Kafkaesque castle. A total lack of information. However, none of them actually defines the term information.

In the case of programmes of political parties, they are based, unconsciously or consciously, on a theory. It would be good if the electorate understands the theory behind, but he will never be able to say if the theory is true or not. That's why we need democracy as a learning process. In the long run, we will see what is right or wrong. What we should not do is to vote several times for programmes based on a theory which was proved to be wrong. In this case, full information is impossible to obtain.

An entirely different scenario is the case where the goals, as well as the parameters to measure the achievement of the goals, are well defined.

However, that is not the main problem. The main problem is that Anthony Downs considers only the demand side for information but not the supply side. For the mass media, it is interesting to spread news cheaply generated to a maximum of people. In other words, more interesting are information, which concerns many people a little bit, than information which imports only a few people much. In a situation like that, it is obviously true, that it is time-consuming to get more detailed information. We will rediscuss this topic when we talk about Adorno.

It is to be supposed that there are many readers of these lines, who didn't really understand what access to information and data means. It is universal phenomena of the mass media. The net they weave is so dense that everybody feels perfectly informed. The mass media decide which topic is on the top of the agenda, they decide about the perspective this topic is discussed, and they as well decide the questions to be asked. In that system, any taskmaster can become an expert on any issue. He just has to know which questions are discussed; there is no need to make the right questions. For example, it is useless to find a reason the stock market goes up or down; there will always be a reason. The right question is, harder to answer, how the up and down is financed, where the cash comes from.

return to the top of the page ...