Economists and public policy: Chicago political economy versus conventional views

Conclusions and implications

Both conventional welfare economics and public choice analysis suggest that economists have an important educational role to play in the public policy process — in improving the decision-making process. In sharp contrast, information and incentive problems related to voting rules, the bureaucracy, and the legislature do not arise in CPE because these processes are all perfect agents of interest groups. Consequently, the political process is efficient and there is no scope for beneficial economic analysis as it relates to the sugar program or other public policies. That is, the polity is efficient or it would be reordered by competing interest groups to make it so. But, as Mitchell (1989: 290) stresses, the important unanswered question in CPE remains: if there is no scope for improvement how and why does change occur?

The analysis here suggests that the sugar program (and similar policies) may persist not because they are beneficial to the public at large but rather because information and incentive problems in the collective choice process lead to perverse results. Consequently, economic analysts can make a positive contribution to the public policy process by providing information about the responsiveness of alternative institutional arrangements to the values and choices of individual citizens (Wiseman, 1989). The Friedmans' “Tide in the Affairs of Men” view holds that economic analyses are important in changing public opinion, which is an important precursor to changes in public policy.

In scores of studies over the past fifty years, economists have shown that the sugar and other argiculture price-support programs are inconsistent with the goal of open markets and provide most of the benefits to people with above-average incomes. Although only modest changes have been made in farm programs, deregulation of agriculture finally is being seriously discussed. For example, in 1987 the Reagan Administration proposed a sweeping initiative under the Uruguay Round of GATT to phase out all trade-distorting agricultural programs by the year 2000. The fact that the elimination of agricultural trade restrictions was seriously discussed under GATT auspices for the first time in forty years reflects the growing recognition that the sugar program and other domestic farm programs are better explained by rent-seeking than by a “what is, is efficient” view of agricultural policies. This change in intellectual climate is consistent with the thesis that ideas have consequ4ences and that economists can play an important role in affecting both the intellectual tide and the course of public policy.