Mike Munger and Russ Roberts deliver one of the best podcasts ever. Munger describes the way in which moving from a private bus system to a public system in Santiago Chile made essentially everyone in the city worse off. The puzzle that Roberts keeps pushing Munger to resolve is why the political incentives do not work to abolish the public system and revert to a private system.
My sense (you should listen to the podcast yourself) is that Munger thinks that the popular revulsion toward profit is the key factor. Near the end, he draws the analogy with public revulsion toward creating a market in organs. He says that a reasonable instinct of “no one should be forced to sell their organs” gets translated into “no one should be allowed to sell their organs.”
Economists are familiar with the example of sweatshops. We don’t think anyone should be forced to work in a sweatshop. But we have a hard time understanding why prohibiting sweatshop labor is such a good idea, considering that the alternative for the workers is often worse–equally undignified labor on farms, earning even less money. Still, for many people, “no one should be forced to work in sweatshops” becomes “no one should be allowed to work in sweatshops.”
In a sense, Munger’s explanation for persistent government failure is moral disgust over profits. I think that what we might call Anti-profitism is at work. For example, in Canada, the people love their health care system, even though it costs more than that in other countries (except the U.S.) and has some pretty inhumane consequences. (In most other countries, even though government pays most of the bills, health care provision is still a private function.) In the U.S., people love public education, even though it seems to fail miserably. In both cases, supporters can at least point to the fact that there are no profits in the system.
I have three daughters. They know my views. Yet none of them would feel comfortable working for a business that makes a profit. All of the messages they are getting from elsewhere in society tell them that profits are bad.
If people make a conscious choice to have a lousy education system, a lousy transportation system, or a lousy health care system because they hate the idea of profits, I suppose that’s fine. However, what I think happens instead is that in the public sector our choices are made on the basis of crude anti-profitism, demagoguery, and careless reasoning.
My guess is that the irrationalities found in the field of behavioral economics are trivial compared to those that could be found by studying behavioral politics.