Dr. Zupans book look at the sources of national decline. Typically when people think about the sources of national decline they often look outside of government at specialInterest Groups that try to coopt government for their own benefit. However dr. Zupan takes a different approach and looks at the sources of national decline that come from inside government , from government insiders and it may cause even more harm to countries and civilizations than the harm that comes from outside of government we are really looking forward to hearing from dr. Zupan today. The way we will be framing todays book forums first we are going to hear remarks from dr. Zupan and then we will have comments from both Lindsay Cutshall from the Brookings Institute and myself. First i would like to introduce dr. Zupan. Dr. Zupan begin his tenure as the 14th president of alford university on july 1, 2016. Histidine at the Business School at the university of rochester from january 1, 2004. Zupan served as dean and professor of economics at the university of arizonas college of management from 1997 to 2003. Before his appointment at arizona zupan todd at the university of southern californias Marshall School of business where he also served as associate dean. He was also a Teaching Fellow at harvards department of Economics Program while pursuing his dog world studies at m. I. T. He is a faculty member at the Amos Tuck School of Business Administration at dartmouth university. He has a bachelors degree in economics from Harvard University and a ph. D. From Massachusetts Institute of technology. I will now turn to time over to dr. Zupan and we look forward to an exciting conversation. [applause] thanks emily for the kind introduction. Thank you all for being here. A special shout out to jim dornan who is in the back, the editor of the cato journal who provided me a space while he was on sabbatical and a lot of interesting leaves and thoughts about articles and research to pursue this work. Its been a work in progress for about 30 years but the sabbatical year and a half ago provided the opportunity for these ideas to come to fruition. The book is probably got more topical in light of our most recent president ial election. When you look at the Pew Research Poll that is done annually on trusting government the percentage of americans that trust government either all the time are most of the time is at an alltime low. Right now its 19 as of 1966 and the poll has been done for over 50 years. It was 77 . Its lower now than it was during watergate. There is probably some correlation i would argue between that assessment and the rising candidates like donald j. Trump and bernie sanders. Like emily said though the book deals with a topic thats been with us for a while why a nation succeeds and fails and its a topic that has been extensively thought of weather by columnists political scientists, sociologists etc. , philosophers. Looking at either a talker seas are democracies or both. The economic model of politics has been around roughly 50 years so it has grown out of a time where democracy has been the focus and it conceptualizes politics like other settings in life that economists look at. On the demand side or interest to compete for favorable rulings, policy decisions that generate positive wealth transfers for them. Whether these interests are as this is, labor unions, consumer activist environmentalists or general citizens. The supplyside according to this model is comprised of rulers or political leaders but more broadly also those that are appointed to execute policies, bureaucrats and also also anything more broadly the military and Public Employees. Where things go wrong as emily mentioned earlier the common belief among economists has been there has been capture in the system from the demand side of this political marketplace. George stigler who won a nobel prize in economics for this idea initially conceptualized this model and believed the producers because they are more copies concentrated and would be most likely to coopt the system. They are similar to the way karl marx look at what happened in politics. That conceptualization got robbed by other economists like gary becker, posner, elfman to be expanded to include other potential capturing Interest Groups on the demand side. We could certainly find cases where it seemed not producers but consumers were coopting the process for their benefit or environmentalists or one percenters or economic leaks. Any good criminal investigator though when you are trying to find out who may be at fault, what you look for is motive and means of opportunity. Those are all present on the supplyside of politics. Had we not been looking at just the last 50 years, hadley looked more broadly over the last several centuries were talker seas were the norm we would probably have a different perspective on this marketplace. When they were the norm for belief would be that the rulers owned the state the country and the citizens. Louix xiv saying. Its not to say the government cant advance the Public Interest. They are human beings like the rest of us and i dont know whether those human beings public the business settings, everyday workplaces they have capacity for great good or also great evil. Anybody who has been at the beaches in omaha and normandy cant help but be moved that the people who sacrifice for the greater good. Harold glass while the political scientist, to paraphrase whose definition of politics was who gets what, how, why, when and where and what this book does is look at those fundamental questions. If we were to pry open the black locks on the supplyside, who is it . What and why, what motivated to coopt the system, how do they do it and when and where have they done it . And its an important enough question in the Development World and now government accounted for 50 of gdp and 20 of the workforce. Who is on the supplyside . In autocracies we think of rulers. And democracies we think of decisions is people like ms. Caan and james b. Wilson appointed that we need to worry the people who populate our bureaucracies. They arent perfectly police. They have some latitude to design and implement policies. Also Public Employees in the military. There was a recent book review done of the praetorian guard in the roman empire and the role they played in figuring out who was going to be in power, stay in power and in many cases to the detriment of the roman citizenry. There have been other similar reviews. A recent book that came out on alexander the great or the elite military troops that defended bizarre. The supply side shows up in a few places. This is what first got me started on the question back in the 80s. A colleague looking at democratic settings. We were trying to test george stiglers model and what other economists have done was to try to find out to what extent Interest Groups could actually explain individual issue outcomes that we started looking at voting on surfline the legislation. While there was some it explanatory power from the demand side it was surprisingly limited and also surprised as to what extent we could explain senators votes with how they voted on abortion bills. So there was something about the ideological motives. Police perhaps they were policed at election time round individual issues but they seem to matter and even when you look at the broader people that we elect in congressional settings and democracies there seem to be a presentday United States a bit of latitude. Whether republican or democrat they had different you points to pursue their nonpecuniary object gives. What are the motives . We usually think of clip talker cs at pecuniary motive than they are certainly examples we could point to in the play out in the daily press most recently rulers in places or officials in places like malaysia or what was revealed in the panama papers. Historically we can point to the marcos family or even further back. Trujillo in the Dominican Republic. At one point his family was 100 of gdp in this country and he accounted for 60 of the hiring. We certainly can find examples of that but we also have to leave room for nonpecuniary motives. Again for good or for ill. We can strictly point to what hitler accomplished once in power and was able to move germany from a democracy to an autocracy. Its not to say the capture just occurs on the playa site or just occurs on the demand side. As the book argues we often see symbiotic cases. The best way to think about it is like dna. Therefore nuclear type aces. Sitin seen only, so even if the capture occurs on the demand side we should expect to see something awry on the supplyside. Or if the captures motivated from the supplyside there will be something a kilter on the demand side. Roads and friedman have this up separation theres nothing so permanent as a temporary Government Program and other washington pundits have observed the staying power policies even though the explanations may vary over time why they have their lasting nature people only think about both sides in what the vested interest might be in keeping those policies in place that inertia becomes easier to understand. Where and when has it occurred . If you look at paul kennedys work and its now been 30 years to rise to great powers what is striking in rereading his two principle stories, and he goes back to 1400, 1300 asks fundamental questions, if we were to predicted that point what would be the dominant powers nowadays we would pick china and we would pick the Ottoman Empire. How they unwound themselves, its hard not to construe that as a supplyside story. From looking at the population, the technological advances, the military prowess, the chinese empire and how under the meng dynasty they start to turn inward due to either what Francis Fukuyama calls the bad emperor problem in terms of facing should the link, moving and restricting trade, shifting the border and word, the skepticism about entrepreneurship as a bureaucracy starts to weigh in on it and the last two starts to set in when it came time to support a technological innovation. Likewise in the Ottoman Empire batch mobile closet the idiot problem and there certainly cases we can point to succession planning that wasnt well thought out but often with two constantinople who pass with the most is because of the number of male errors but also the bureaucracy, the elite fighting troops. They figured out a very creative way to probe their talker sand to avoid favoritism. They would. Christian lands to identify ablebodied males conserving their army and brought them back to constantinople to train them. It was a one generation based military with the feared fighting force. Once in place some of the seeds of the cave lay with the adversaries. If im here, why not my son and the benefit starts to bargain. Two were murdered attempting to promote reforms. The Ottoman Empire became the dash of europe that wasnt just the embassy area. It was also the large army of scribes who were threatened by the Printing Press and similar worries in meng china about the spread of information. As robinson talked about the Ottoman Empire went 225 years without a Printing Press. By 1800 only 2 of the empire was literate where is places like germany and england had 50 literacy rates. Very much as applied side story if you read the book 30 years later. The new kingdom of ancient egypt comes the latest statue has just been found. The greek name in his famous poem. Beyond its military conquest when you look at the history and the extent of building projects, the palaces of selfaggrandizement, putting a larger priesthood on the payroll part of Public Employment plus 30 was accounted for by a part of Land Ownership and 30 was accounted for by priests in that period. It became increasingly hard to sustain under the new kingdom. The regime, the venetian republic, trujillo again the Dominican Republic but also it democratic examples and a marvelous book a year and half ago about boom and dust of the United States looking at places like boston and San Francisco and when they became extractive. The ability to not only selfaggrandizement but also to chase out opponents. Looking closer to home my hometown and till recently was rochester new york and the state of new york. A Public Investment made it a boom town. The erie canal lowering transportation costs by 90 . Rochester went from 15 people in 1817 to being the United States 13th largest city by 1840. Growth of the roh rode slowly loosened some of rochesters preeminence but rochester and the rest of upstate new york dont start falling off the wagon until the 1940s and the 1950s. Its a story that cant connect to the demise of kodak or carrier that can more generally be correlated to the new york state becoming a high tax state. Recent book by steven moore a look at nine states without income taxes versus the tenth highest income tax states and migration rates. A very similar story in seattle last week for an alumni event. Its striking how many are there in my absent of my former hometown of rochester. More modern examples youve read about them in the news whether they are autocracies are democracies. North korea three generation of the kims and russia and putin and the treats you boys. The Iranian Revolutionary guard. By conservative estimates owns 33 of their country. What chavez has been doing in venezuela but it applies to democracies to. In india most recent surveys taken 54 of citizens report having to pay for bribes to get a public service. Even higher for the lowest income class, 75 . 34 of recent electoral candidates were under criminal indictment. It pays to be in the assembly there. When you look at a recent general economy article or you look at argentina bronzer kirchners more recently and anyone who has traveled to argentina under the kirchner there are three Different Exchange rates and the best one is typically the corner bakery where the suites are good in argentina but the Foreign Exchange was trading more briskly. Some of the challenges in the eu , Hans Warner Simms in his book theyearold trap, some of the challenges they beat the European Union faces than the periphery countries. These issues apply to china and the u. S. Whether we look at china under mao or more recently under xi. An interesting read is the most recent economist issue and the consolidation of the power under xi and the Upcoming Congress and the fall and the words will that trend continue. Also in the United States there is a chapter that deals with some of the challenges we face. We are the Worlds Largest democracy. Whether its more professional congress and tenure of being roughly doubled over the last 100 years. Robert caro has a wonderful book on Lyndon Johnson and how he was one of the first to figure out if you do this service well it would insulate you from any of the voting, the roll call voting and it would increase your tenure and your political power. Whether you look at unfunded pension liabilities. Paul krugman will argue its only detroit whether its failing cities like San Bernardino in california or puerto rico or philadelphia. Yesterdays news in new jersey, dallas or houston. Josh rao and robert marks josh in stanford and robert at the university of stanford estimates these unfunded liabilities our second visit biggest fiscal challenge conservative base at 5 trillion. Whether you look at how more monopolized our Education Sector has gotten. The number of districts since 1950 has decreased by over 80 . We are spending in real terms per student three times more than in 1960. The publicsector unionization rates and some of the challenges that Daniel Disalvo has pointed to. There are some issues for us that we need to think about on the supplyside in the United States. Its a simple book in one respect. There is only one figure, one equation and two dates and heres the equation. Just to conceptualize its important to capture the process that government insiders lean. Its a combination of how much potential there is to be captured. The slack on the supplyside, how imperfectly competitive and the slack can vary from zero to one with zero being no slack at all for a full week police supplyside, one being perfectly untethered and then how much interest is there in this . Michael sandel earlier philosophers like aristotle who also argued about the importance of needing to instill civic mindedness and relying on virtue so even when there is lack we can rely on that factor to diminish the chance that those on the supplyside will operate not to the benefit of the Public Interest. Theres a chapter on what drives potential gains. The perks, the patronage, the bureaucracy, the transactions. Potentially and this is something the ruler in persia argued in 500 a. D. If i let the economy grow that will mean more tax revenue so theres potential one could argue having an economy thats productive and that will allow the gut greatest gains to the government insiders. The transaction cost with operating a government tax and transfer programs which browning and texas a m have probably studied the most extensively how porous is the leaky bucket and will arguably want to transfer 50 cents is basically chews up 1. 50 to create that transfer. Twothirds of the tax gets chewed up along the way either in disincentive effects of the management of the tax transfer policies. There are economists like Carrie Becker and Steve Whitman that will argue just like adam smiths invisible hand should work. Competition to hand up to the best possible worlds because the group that has the most interest in a piece of legislation will bid the most for the legislation. I would argue there are too many examples to the contrary. The key thing in politics is political clout and the United States not correlate onetoone with political clout. On optimality and the reason for sugar quotas. In addition to the damage we do to poor countries like haiti and the philippines but the political clout of users outweighs the 55 each family in the United States loses from the actions of producers and the maintenance of those is. Public goods. When i teach economics to students this is one of the classic reasons why government should intervene and from a purely economic reasons you would argue public goods will be under provided but then one may begin to think of a political economy point of view their reasons why we should worry like isenhour about the militaryindustrial complex. From political economy perspective you want to also worry about the political clout producers of those goods, consumers of those good and average tax. Someone could argue taxpayers are the most centrist group and their reasons why we see programs like the f35 in the f22 continue despite massive cost overruns and quality controls. If the park could come from a place and the House Services decided. That was known in the industry as a doublehitter. Common pool problem, what the scientists call one over end. Russ roberts has a wonderful analogy when we go out for 99 or 34 of our closest friends and agree to split the bill, you start getting unusual behavior. I lived for a while in l. A. And l. A. Is one of the most challenged places because of the geographic spread to build the subway, but a subway was built. Having looked more recently at the studies, but at the time more riders, 90 of the funding came from elsewhere, outside of l. A. 10 came from l. A. The 10 that came from l. A. Was paid for, partially by raising bus fares that led to less ridership on buses than was picked up on the subway system there. These supply autoca krchautocac theres a book about single districts, there are now 90,000 districts in the country and we add one every single hourment chicago became one of our highest sales tax cities, probably because cook county, Public Safety and the hospital, tax districts. Theres an a Park District and if they all get to fish from the same pool and the problems are exacerbated as the elections that over see the districts dont occur c contemporaneously. And theres a natural curve and a fascinating tunisian scholar from the 1800s who posit that theyll last for four generations, come in with new idea to are society ap those in power, require kruch comforts leads to higher taxes, and the higher taxes, a new group will come in. And even caldoone, someone art laffer drew on, design curves and benchmarks, and going to singapore and japan helped move communist china to liberalizing that marketplace. India, seeing nearby growth rates in places like pack san, exceeding theirs, was a key impetus of of their modernizing. The old mark twain quote, theres nothing so good as a good example. And the quantum market control, we dont see the green male buyouts in the corporate world. Power is the currency of the realm in politics, once you give up power, you give up the ability to write the rules, so anything youre promised there isnt third Party Enforcement that those promises will be kept and we can point to calms like louis or marine antoinenet and these may just some fundamental conclusions. For as of 2014, based on a categorization of democracies done by noted Political Science, how long had the regime been in power and transference out of germany had been developing a compendium of surveys, how much integrity is there in the public sector, from none, zero to 100. And it may seen obvious. Checks and battles, regimes are in powerless. But some of the fundamental points that come out of this, i think this is the first study done that conclusively shows that the checks and balances our founders envisioned would help, that people are not angels. If uncon straighted like these, and democracy is. And democracy a score less than 50, less than the midpoint. A quarter of democracies out there are less than the average au autocrasy. On average theyre lower than democracy. So francis had a book and the table one results say we cant be assured of democracy by the people, thats not automatically does not ensure government for the people. Good news with the results, when you look over time and admittedly Transparency International has been around only 20 years, integrity has been improving at three times the rate of democracies and autoc autocrasis. What the pew center measures is not the same that is measured. Government may do things efficiently and people may still have a negative feeling about what government is doing. When you look at changes as opposed to levels, either au autocrases. Italys changed power at the top 44 times, its almost a joke, since world war ii and yet they rate close to being economically unfree. Below the surface, theres still a lot of ridgety built in the supply side. And same thing in mexico, or in greece the average tenure when you look at Transparency International integrity scores, theyre pretty low, close to the autocrasees. Correlations over time are closer to one in democracies. A leader can less change the system than in autocrassys, thats either good or bad. In new guinea low levels. And others like denmark and sweden, democracies, high levels of public integrity. And the very last two pages, big question for us, why is democracy spreading . Why, from virtually none in 1800, to now over or close to twothirds of the nations around the world. Was it just a fluke . And something that we then started learning . Would argue theres probably more of a doug north institutional explanation based op opportunity costs. And based on people becoming more productive, whether its through tradings mobility, education, specialization, that you have to give the populous more skin in the game if youre to realize greater gains, and to avoid the markets for political control. Theyve looked at this recently and you cant find the relationship, that relationship on a year to year or decade to decade basis, you have to look over a longer time horizon. And its still an area that were investigating. And then the fundamental point, government by the people is not the same as government for the people. Last chapter taubs about how do we form a more perfect union, some potential thoughts, once we received the internal study at the u. S. Postal service. At the time 10 of their routes were contracted out. At 50 the cost and at higher quality. It was difficult to get the study. We got it almost by chance. But where there are opportunities to promote more competition, we should be open to them. Limiting opportunities insulate people for life, whether its term limits or other means. Gary livecap and Richard Johnson looked at civil service. Wellintentioned, when lincoln came to surpri, there was a sur as government grew and the nation grew, you had to focus your efforts on more activities besides filling offices. It was wellintentioned, but johnson argued that it was more insulated over time with its consequences. In the state of new york over the past year and a half weve had both the number two and number three legislator or policy maker lose office, one a democrat, one a republican and both you could pin the story how long they were in office and some of the pillfalls that went with it. Grover cleveland said a Public Office is a public trust. We have to think about to what extent do we allow public trust . We have antitrust and Public Market sector market places and some should motivate us on the supply side. Especially because Public Employees get two bites of the apple, not only collectively bargain, but theres an electoral link that can influence and make the agents the principals as opposed to the agents. And what sarah and her political talk how money starts flowing in the reverse direction youd expect it to. Institutional rules matter, whether its proportional democracy versus representative, and proportional democracies, governments spend more, debts are higher, per gdp and they lock in Interest Groups more easily. There are less checks and balances than these democracies than president ial. You get higher spending looking across time and across nations. The further look for checks and balances, whether its switzerland with the double majority spending break rule that dramatically decreased the Government Spending relative to the rest of europe and started to decrease their debt level relative to gdp. Hitting benchmarking and groups like Transparency International and Economic Freedom should be applauded for starting to better keep track. And that was our founders intent in setting up individual states where experimenttation could occur. And maybe difficult to do, but maybe the thoughts of the possibility of buyouts. They look unseemly in the political world. But think of how much angst. The rest of the campus is there a third party guarantee . And what kind of payment would it take. Its difficult to think of because power has unique currency hard to replicate in the nonpolitical world. Thank you for the opportunity, we look forward to comments and thank you very much. Next well hear from the National Journal magazine and later for the economist magazine as a freelance writer currently a contributing editor of the journal and atlantic. Hes a the author of five books, kindly inquisitor, the new attack on free thought and expanded edition from cato and realism ap how hacks machines, big money and big deals can strengthen american democracy. Ill turn the time now over to jonathan. Thank you emily, thank you, mark. Thank you all for coming. I was sent this book by john samples of cato who asked if i wanted to come and i figured ill glance at it and set it aseat and three and a half hours later, i had mostly finished the book and took bundles of note. Yeah, this is a good book, a book to comment on. Its a short book, but its absolutely packed with information, with hard thinking. Its examples, as you can dates from ancient time to modern, its sweep is admirable. And theres a lot you can learn from mark zupan, zupan . Forgive me if i mispronounce it. I can pronounce mark. And a ton could be learned from marks book. Because time is short and its more interesting for tv and dialog. And focus on part of the book that i may disagree with and may challenge some of you in the audience. Thats the larger frame work in which its embedded. Particularly two figures lurking in the background, one is mentioned, one is not. Its important to triangulate the book and understand where its coming from. The first of the people is an economist by the name is maneser olson, mentioned in few minutes ago. He began in the 60s through the 80s, a remarkable man who pointed out what happens to societies over time is that they accumulate Interest Groups, cartels. What he called coalitions for collective action and they lock in subsidies, and programs and over time this will tend to o osiffy society. And you would tend to have the economy to slow down and ossify. It stood the time well if you look at japan, European Union and in some cases the United States and of course, it heavily figures in the background in the kinds of theories that mark writes about. Mark interestingly takes the idea that olson pioneers on the demand side and he looks at the supply side. Look at how bureaucrats and Public Officials are part of this. Im a fan about olson, and why governments stop working. I think a lot of people in this room are fans of olson. Theres a difference, i think, between olson and the structure of mark zupans book. Olin is special development, not of social jiflt. Theres no more tickle element in olsons work. He tells you that economies slow down, but hes not telling that its unjust, or the Public Interest. He think its a problem and that we need to deal with. And you cant wish it away. He sees it as a fundamental change in society, not just things that people in government are doing. Not what a few Interest Groups are doing. Its a change in organization at the time. Theres a different way to think about this and here is where we come to the second lurking in the background of the book and one who may surprise you, ralph nader. A left wing progressive consumer activist on most, if not all respects, i think hed disagree with mark and many of the people in this room. But one of the things i thought i learned from this book was how deeply the progressive thinking of the last hundred years and especially the last 40 or 50 years has penetrated libertarian worlds. So progressive thinking has the idea that theres something out there called the Public Interest. Its not necessarily the sames a the peoples will, but something good for society and we should, if we were wellinformed and knew what was good for us, know what the public good is. As opposed a transform for politics where people do deals and compromises and get along. I think a lot of the libertarians absorbed and without asking questions about it. Know you, mark zupan and i think that ralph nader would design the public in somewhat din ways. Marks definition, he says the pub interest, in many would disagree with they would look at free Market Forces on justice ground. The left would identify with egalitarianism and serves of larger social justice and be anticorporate and straining the issues of capitalism. Get that aside and you have the basic idea, theres an abstract to which we should try to get government to confirm. If it doesnt conform to that, we should be upset about it. This thinks to marks book an element of moralism, which is absent, or mostly absent in olson. Compares rent seeking to crime. Thats an economic pair sons, but conveys inevitable moral overtimes, and he compares it to cancer and that can be used nonjudgmentally, but its a strong image. And of course, the inside job, the title of the book, you have pea got bad people getting away with something at the expense of somebody else. So you get this kind of moralism on both side of the line and i would say thats the paradigm in this world. I would argue in some ways, that is unfortunate. I have to step back and i wrote a book called governments end which itself has a title chaptered the parasites, the renting with parasites and slowing down Economic Growth and so on. What i think ive learned since then, i placed insufficient evidence, though it was in the book, i placed insufficient emphasis on the parasite economy. Representati rent seeking has plus and minus. Its not that we should all go out and seek rents. Its a bad idea. However, it has needed functions, society by creating stakes. People who are investigating in government stuff from government and from each other are going to be involved in the political process. That seems to be stabilizing that doesnt have that overtime that have a lot of internal instability. Second, this allows for rent seeking and its related phenomena allow for trancizational politics. Its hard to look at goods and issues like abortion, but your marks, fine. Thats the stuff that allows you to create promise and buy off compromise. And if you want to pass a debt limit bill, want to restrain the growth of entitlement. Deregulate and do most of the things, for example, that free market and the Current Congress want to do, you have to offer incentives to people who are taking tough votes and who can expect primaries in their district. Thats something that transactional politics is good at. If you can get entitlement reform, its a good deal. When you take those tools away, you wind up demonizing the government ap its government on autopilot, grows and grows and grows and gets more in the way. More fundamentally, ive become a critic in my old age of the ab tract position of the public, more harm than good. It attempts to make politics conform in way that are not of course we dont agree about about society and the things we do and dont dush. The idea that theres a Public Interest out there to which we should conform, essentially allows to believe, weve got the Public Interest in mind, the other person is just selfreceiving and thats bad for our politics and i think delegitimizes. Ap the second are those who claim to speak to the public. Some of you know to whom im alluding and we dont need to get into that. So its a dangerous eyed. So it leads people to think if they elect better people and make changes, instead of messy government with lots of compromise and inefficiency, youll have something beautiful to soft expectations and problems. And a whole lot of dreams that they would pick up and serve the Public Interest better and forget about inten sives. There are many on the progressi progressive right. Term limits would make this bette better and as far as the legislators would probably make these things worse and so on. So, i dont want to exaggerate my disagreements with the book, in fact, its an admirable book and so much that we do agree on and its such an important book and such an important corrective to those who naively believe that the government is a trance parents conveyer of popular wishes. We know thats not true and mark zupan gives us a better understanding why thats not true and of course, some of his recommendations are smart, some not so smart, and i think thats a different conversation. That said, id like to suggest in the big scheme of things wed be advised to remember olson and take cues from him and try to set our moralism aside when we focus on these problems and focus on realism. I think that libertarianism and the model of antigovernment sort of progressivism, but an antigovernment version of progressivism is a bad idea and likely to fail. Thanks. [applaus [applause] thanks, jonathan. So as i mentioned earlier, i had an opportunity to moderate and comment on the book. So ill now be changing roles in that vein. I also have an academic background, a ph. D. In Political Science and my research focuses on Public Opinion research so i read this book through kind of that unique lens of Public Opinion. I found the book absolutely fascinating, like jonathan, i took copious notes, theres so much to learn from this book and a lot of just interesting facts throughout history of ancient regimes as well as the present so i highly recommend taking a look at the book and reading it. First, i want to start by saying how much i appreciated the framing of this book. Typically, when regular americans think about failures of democrat government to be responsive and be accountable to the people, the assumption is that the problems comes from the outside in, that special Interest Groups, the wealthy, the politically connected, the 1 use their wealth and power to try to buy access to politicians and political insiders to get special favors that aggrandize themselves, thats the common story, but what mark does differently, he focuses instead on the insiders within government and makes a compelling case that perhaps that actually could be even more deleterious than the special interests on the outside, on exploiting government for their own purposes. When you think about it, donald trump throughout the campaign appealed to many of his supporters by saying, look, im so rich, nobodys going to buy me, quote. Nobodys going to buy me. And people like that. A lot of people believe if only we could do a better job of limiting campaign spending, Campaign Donations and Campaign Finances more generally, then finally we would make government more accountable and more responsive to the people. There are some problems with this reasoning, however. The first is that Campaign Finance regulations often arent able to an achieve what they hope to achieve and in some ways compromising the freedom that is essential to freedom and society and democracy. And as a consequence, even if we were to completely stamp out this problem, and thats outside special Interest Groups were not able to exert undue influence on government, mark points out we would have a problem in which government would be able to use its power to benefit those on the inside. The interesting thesis of the book is that the more the government is able to do in terms of the regulations that it passes, the money that it spends, the provisions and services that it offers, the more opportunities there are for this to occur, so, a striking example, i thought, was the example mark gave of india, that was particularly illustrious. Its a large democracy that ranks, quote, poorly, for doing business. It requires 60 state approvals in order to build a skyscraper. And as a result, that takes about ten years to build. So, what might that incentivize . All of that red tape, 60 different state approvals . Bribery, and illegal activities and who does that benefit . That benefits the people who already have resources, who already have the connections that are able to access that and as mark cites in a survey, 54 of surveyed reported having paid a bribe in the last year, not just their lifetime, but past year that was striking and worse for the poor and vulnerable. According to that survey, those that were, quote, slum dwellers, 75 , to obtain a basic service, like kerosene. There was a lot of focus in the book on both autocracies and democracies and the systems of government somewhere in between. However, i think many people find it unremarkable that autocracies failed to be responsive to the people and autocracies if its not the insiders coopting for their own interest, who isnt . And i found it interesting that mubarak, former leader of egypt amassed 70 billion dollars, its striking, 70 billion is a lot of money, but we would expect that. And some argue if only we brought democracy, people could vote out of office those leaders that were trying to abuse their power. Though mark addresses that in the book where he argues, as you do transition from an autocracy to democracy explaining how government insiders can profit, as accountability goes up with democracy its true theres less to be gained. I thought an interesting example that he gave was in kenya thats gone in and out of democracy several times that a study found that during a time where was an autocracy, the political leaders, they found that political districts shared the ethnicity with the political leader and receives five times the amount of Infrastructure Spending as political districts that did not share the ethnicity with the political leader. But when can you shift it from autocracy to democracy . Those differences evaporated and it was proportional and equitiable. So certainly democracies does inject some greater degree of accountability. However, what i found the most remarkable about this book is that even democracies fail to be responsive to create a system in which political leaders are responsive and accountable to the people and that this occurs for reasons entirely separate from special Interest Groups. That even if we were to solve that problem. This would still exist and that the insiders in even democratic governments could cause even more problems than with special Interest Groups. I think more detail could be maybe we can do that at q a to discuss why the problems present in autocracies persist even to a lesser extent into the democratic regimes. And why democratic regimes failed to solve the problems. So i thought some of the more compelling examples in the books, included democracies like venezuela, argentina, greece, india and what weve seen in the countries, insiders nationallize large blasts to the economy, replace judges, inflate the currency, renege on contracts, that price controls on food and electricity. And the consequences are, you know, pretty predictable in that gdp goes down, inflation increases and theres rationing, theres shortages and the people become poorer and theres more suffering. i think even more compelling though are democracies that are more stable like the United States. The extent to which this can issues like this or government insiders were able to exploit government for their own benefit occurs even in the United States. So some of the statistics provided in the books, u. S. Senators earn a rate of return on their investments, about 12. 3 and members of the house of representatives earn a rate of interest, 6 Percentage Points above the average, which is doing pretty well. And probably not random chance. You give the example of president johnson who used his political clout to be able to at the point his applications for radio and tv stations in austin, texas to be approved and use that political clout to channel or funnel advertising to those radio stations and was able to amass a fortune of about 100 million dollars. Now, thats far less than mubaraks 70 billion with a b, but still, its a pair amount of money, 100 million. And you give a variety of examples, these are not random, that we see a lot of examples, even in a stable democracy, political leaders, regulators, insiders, bureaucrats are able to use the system for their own benefit and the consequences are dire. In the u. S. We have unfunded liabilities in other words, unfunded benefits to Public Employees. Pensions that we promise to pay people in the future and right now have no way to pay them, thats total 5 trillion dollars, which is the same as 29 of the entire u. S. Gdp. If we were to take all the state and local government revenue in the United States and added it together, it wouldnt be enough to pay all the promised benefits that we have offered government employees. How come democracy allowed that to happen . You also gave a very interesting example of the u. S. Postal service, in which a study found that when they contracted routes to private providers, they were able to do that at 50 of the cost of the u. S. Postal service. How come the u. S. Postal service continues to operate inefficiently even when we have a democracy . This will lead to another point that i want to go into greater depth later on, which is i think what this shows is that democracy alone is insufficient to bring about sufficient accountability for government leaders, officials, regulators, to bring about the Public Interest and the way that i describe this, democracy alone doesnt seem to be enough. I think that some readers of the book may have gotten the impression that the book was suggesting that the responsiveness the unresponsiveness of political insiders might be purely the result of them seeking their own benefits. Certainly the way i have been talking about it thus far to give that impression and i dont mean tosy thats the only reason. I think far more often elected officials, regulators are doing what theyre doing because they believe that its the best thing for the American Public or they believe that thats true. It doesnt mean it is, but they they have that Good Intention in mind. In many cases, the growth of government in terms of regulations past, expanded Government Spending, additional government provision of services, hiring more workers to administer new Government Programs, its all done under the banner of doing good for children, the poor, the elderly, the vulnerable. Its driven by desire to help people to help people and often is in line with what we think the public wants. An example like venezuela and argentina, democratically ele elected leaders, and economies set price controls. But those very policies are actually in line with what many rank and File Americans would wish their types of policies, price controls are in line with what rank and File Americans say they might want if theyre not talking about costs. And like health care, the other day i was reading an article from a Columbia University professor no less in which he advocates for the nationalization of facebook, which was very surprising, price controls. How many people tell you that they hate rent controlled buildings . Economists, theyll tell you that, but people who are living in them like price controlled buildings. Weve seen it in health care, bubble polling shows when knows looking at costs. Even though rigorous academic shows that price controls in health care cause massive distortions in the market and threaten to undermine the exchanges for americans. Spending and education, weve more than doubled the spending per pupil over the past decades and basically have gotten no increase in test scores. However, a Keiser Family Foundation survey found that 67 of americans want us to increase spending for education even more. Why . Because nobody knows that we have more than doubled spending and that its had no effect. No benefit. So if they dont know that. Part of what im getting at is that democracy isnt very good at sorting out all the costs and benefits. And that even though these policies may be desired when people are presented with the costs, they often turn against those policies. So, when government insiders pursue them, they may do no under the banner of saying this is what the people want. I believe that this will help people, however, Empirical Research shows the very policies are the ones that damage, that slow Economic Growth, slow innovation and create ridgety and stagnation and harm human forrishing. And the reason it happens, democracy, were not able to have a good conversation about tradeoff and costs. If we have price controls in health care or on gasoline, what are the effects of that and when politicians seek office, they usually dont talk about their policies in terms of the costs. Not necessarily because theyre bad intentionened. They might not know what the costs are. When we elect leaders, we do so as if theyre only offering bert benefits. The democracies fails to have total accountability because people dont know what the costs are of what theyre electing to office. Some political scientists will say, look, there is sufficient accountability in democracy to deal with the problem of them exploiting the system. We have the party system and if things get bad enough, you can kick one party out of office and withbring another party in weve seen that happen over and over again. I would argue this is a flawed argument. What if the epa is doing an extent job, but department of houses and Human Development is doing a poor job . Who do i kick out of office. It the same Political Party in the executive branch. Surprise the at state level my concern is doing an extent job, but nothing to do with the unfunded crisis in the state. Do i vote her out . Democratic voting is too much of a pool to warp elected ladiers and elected regulators for the things they do right. When we use examples like iran, venezuela and other countries that do not have fully functioning democracies in the current day, we sometimes take the heat off people ear. Well, if only they had a fully functioning democracy, that would be the problem. I think this book makes a different point, even when you have a fully functioning democracy. What is needed are strong institutions in addition to democracy which mark went into on one of your final slides and weep during the q a, a fully response civil would bring greater accountability to democracy. With that. I will now turn the time over to q a. We have microphones that will be brought to you if you have a question. Please raise your hand. Form your question with a question mark at the end, if you can. And i think we have ten minutes for q a. Im an international investor. Im sorry i came in late. And my question is i hope that cato will have the slides available at some point. Thank you. The internet is a great tool that could provide more transparency. Is it possible, and i dont know if your book touches on this, not having read it yet, is it possible it could be brought to bear to open up all sorts of activities, like the bidding process, announcing who the winner is, after the fact. Shoal that truly was the lowest price, et cetera. In other words, using the power of the internet and transparency to try to pull some of the power away from the small bureaucrats and large bureaucrats who now process it possess it. Its a great question. A promotes transparency and benchmarking. Theres a recent book out arguing pretty strongly we should be optimistic. What we see from the broader basis from the arab spring and social media. Its a way to measure the productivity of government, but then theres still, lets say you look at eds, that beat ibm consistently because their strategy under ross perot was to litigate whenever the dod didnt afford the contract to the low eest bidder. You can measure price, but what you want to bring to bear, so we make the best informed decision. Its its a blunt instrument, arguing that government tracking shoot itself in the and what the bidder. You want the performance. A great question. Actually, theres a question, i think, right over here. Maybe i didnt see that correctly. Do you have a question . Thank you. Okay. This may be im thinking could there be when you talk about this, does it answer it what could be a further outside junction that would help the democracy. Im thinking for some reason the word innovation is coming to my mind. Would there be some way that innovation could some into government processes that would make the inside of government more responsive . And its a great question, too. But cautiously optimistic, both, not just on the trend toward democracy, but there are pays, even looking at groups like Transparency International, of keeping score on a variety of dimensions that weve seen those institutions crap up over the last several decades. Big business can be looked at for delivery of health care delivery. Educational delivery. In a recent book terry moen and john say that technology is going to be the education and the solutions here. I havent seen it or as much as hopes in the book, but there are some glimmers there that would argue, give us cause for optimism and given we have more opportunities to experiment with, in questioning with our fanneders, we want to cross checking. Where is it working and not working . The i am panels that came to mind, if youve seen daniel daylewiss movie about abraham lincoln, yet, a good thing came out of that as people come into that marketplace, quote, unquote together. And at the same time i keep coming back with the statistics that most in the group free, we want to provide that and steer more to those individuals. Spice we agree to a quarter of a bill, 1 tax types just below the profferty line. If that happened the average family of four with like 125,000, that are not now behind the poverty line and the reason for her pointing that out, yes we should to market, and yes provide ownership, but even in a well functioning democracy, some of the intents and progressive as it may be, you if you want to promote fokz, and is it is this the way that market marches up to help us get our goals the question thats been bugging me for a while and im hoping with an Intelligent Panel that youll be able to is it possible, or anybody has built a completely uncapturable system. Undeniable, the government needs constitutional needs and also social means of lots of people having lots of stake in the continue utility of the federal government. So why its important that we have the groups, swafrming here to make sure that they have skin in the game. And id agree on the impossible part, but less so on the undesirable part. I think thats a classic argument why you want to limit the scope of what government can do. Even if it does the things jonathan is describing, if its still limiting in what hes doing, in the number of provisions it provides, not a few of those, there are less opportunities for these sets of problems to occur. I should say, thats a point of agreement among us. When you get into the frame work, should government be doing somewhat left and so on, i think youll find a lot of agreement in this panel and in this room. The trouble i have with the entire Public Interest framing, it encourages this blue sky utopian thinking, with all respect to the questioner, well, could we nationaling another principals pristine and it gets us off the real mission which is to figure out how to get some goshdarn entitlement reforms through congress and thats had a messy progress, but thats where we need to be focused. A question right here . Thank you. My name is peter shutly and im a retired bureaucrats, teaching people how to work in government. Lots of experience. Two comments, i met a lot of government people. I can hardly give you the name of anybody who went into government to get rich. If you want to make money and feather your own nest, you go into business and you dont go into government. A second paint point and this is the question, two variables cause a majority of the problems. One is the public ignorance of issues and im thinking just of two current Public Opinion polls. 40 of the American Public thinks that the russians had nothing to do with our last election. When youve got 17 intelligence agencies all saying they did. A majority of republicans think that obama is a muslim. My point is, those absurdly wrong opinion polls change the political process and affect congress and effect the system in cars, all calusing maybe i misunderstood some of it, but to me thats a pigger problem and lack of civic education, thats a real huge progress, i didnt see in your analysis. The information does lead to various outcomes and we will pea also thank you for your service, but theres nothing that is intended people inside government and if anything would agree with you, government doesnt have the equity rewords that the business sector does. So, what motivates people could argue, its not pecuiahy decisions. We have to look at supply side and structures. Are we doing right, are we generating the best possible outcomes and constantly raising those questions, what what exsent is a and i think that concludes the book forum and the author will be around to answer any questions that you have. Thank you. [applaus [applause] here is a look at books be