Transcripts For CSPAN2 Mark Zupan Discusses Inside Job 20170429

Book, inside job, how government insiders subvert the Public Interest. His book looks at the sources of national decline. Typically when people think about national decline, they often look outside government, add special Interest Groups that try to coop governments for their own benefit. However, mark takes a different approach and looks at the sources of national decline. Com from inside government, from government insiders. It may cause even more harm to countries and civilizations than the harms that come fro outside government. We are looking forward to hearing from him today. The way we will frame todays book form, first we will hear remarks from him and then we will have comments from Jonathan Rauch at the Brookings Institution and myself. First i would like to introduce doctor zupan. He began his tenure as the 14th resident of Alfred University on july 2016. He was at the Business School of rochester from january 1, 2004. He served as dean and professor of economics at the university of Arizona College of management from 1997 until 2003. Before his appointment at arizona, he taught at the university of Southern California Marshall School of business where he also served as associate dean of masters program. He was also a Teaching Fellow in harvards department of Economics Department while pursuing his doctoral studies at mit. He has been a faculty member of business and administration at dartmouth university. He has a bachelors degree in economics from harvard and a phd from the Massachusetts Institute of technology. I turn the time over to doctor zupan. We look forward to this exciting conversation. [applause] thank you emily for the kind introduction. Thank you all for being here. A special shout out to jim dorn in the back, the editor of the cato journal who provided me a space while i was on sabbatical and a lot of interesting leads and thoughts about articles and research i should be familiar with to pursue this work. It has been a work in progress for about 30 years. The sabbatical year end half ago finally provided the opportunity for these ideas to come to fruition. The book has probably gotten more topical in light of our most recent president ial election. When you look at the Pew Research Poll that is done annually on trust in government, the percentage of americans that trust government either all the time or most of the time is at an alltime low. Right now at 19 , as of 1966 and the pool has been done for over 50 years at 77 . It is. It is lower now than i was at watergate. There is probably some correlation between that assessment and the rise of candidates like donald trump embry sanders. Like emily said, the book deals with the topics that have been with us for a while. Why do nations succeed and fail . That is a topic that has been extensively thought of whether by economist, clinical sciences, social outages, philosophers, et cetera. Looking at hypocrisies, democracies or both. The economic model of politics has been around roughly 50 years. It has grown out of a time where democracy has been the focus, and it conceptualizes politics like other settings in life that is looked at. Its marked on the demand side of interest that compete for rulings and policy decisions that generate positive wealth transfers for them. Whether the interests our businesses, labor, labor unions, consumer activists or general citizens. The supply side, according according to this model is comprised of rulers or political leaders but we can also think of those that are appointed to execute policies, bureaucrats and also if we think broadly, the military and Public Employees. When things go wrong, as as emily mentioned earlier, the common belief among economists has been there has been capture of the system from the demand side of this political marketplace. George sigler, who won a nobel prize in economics for this idea initially conceptualized this model and believed the producers that would be most likely to coop the system. Very similar to how karl marx looks at what happened in politics. That conceptualization got broadened by other economists like gary becker, poser, and others to be expanded to expand other Interest Groups from the demand side. We can certainly find cases where we found consumers who were coopting the process for their benefit or environmentalists or 1 ors. Any good criminal investigator, when you are trying to find out who made the at fault, what you look for is motive, means and opportunity. Those are all present on the supply side of politics. Had we not been looking at just the last 50 years, had we looked more broadly the last several centuries where hypocrisies were the norm, we would probably have a different perspective on this marketplace. When hypocrisies were were the norm, the belief would be that the rulers owned the state, the country and its citizens, as in louis the 14t 14th. Its not to say that government cant advance the Public Interest. They are human beings like the rest of us whether they populate business settings, everyday workplaces, they have capacity for great good and great evil. Anyone who has been to the beaches of omaha in normandy cant be but moved by what people do to sacrifice for the greater good. The political scientists, to paraphrase his definition of politics, it was who gets what, how, why, when and where. What this book does is looks at the fundamental questions. If we were to pry open the black box on the supply side, who is it . What and why are they motivated to coop the system, how do they do it, and, and when and where have they done it . Its an important enough question in the developed world. They now account for 50 of gdp and 28 of the workforce. Who is on the supply side . We think of rulers and their rotary, in democracies we think of elected officials, people like ms. Cannon pointed out, we also have to worry about people who populate our bureaucracies. They arent perfectly policed, they have latitude to design and implement policies. Also, Public Public employees in the military, there is a recent book review done of the guard in the roman empire and the role they played in both figuring out who is 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 of recent books on alexander the greats army or the military troops that defended the star. The supply side shows up in a few places. This is what first got me started on the question, back in the 80s with a colleague, looking in democratic settings , we were trying to test george siglers model. What other account is have done was to find out what extent Interest Groups could actually explain individual issue outcomes. We started looking at voting on legislation and while there was some explanatory power from the demand side, it was surprisingly limited. It also surprised us to what extent we could explain senators votes on stripmining legislation with how they voted on abortion bills. There is something about these ideological motives, perhaps they were policed around election time but they seem to matter. Even when we looked at the broader bundles of settings in democracies that there seem to be in present Day United States some latitude, they had different do you viewpoints to pursue their objectives. What are the motives . We often think of club talk or see as a model and there are examples we can point to in the press, officials in places like malaysia or what was revealed in the Panama Papers were even further back in china, the Dominican Republic whose Family Wealth was one 100 of gdp of the country and accounted for 60 of the hiring decisions. We certainly can find examples of that, but we also have to leave room for other motives, for good or for ill. We can point to the killing, what hitler accomplished in power and was able to move germany from a democracy to an attacker see. Its not to say it just occurs on the supply side or the demand side. The book argues we often see symbiotic cases. Its like dna. There are four nuclear typefaces, site unseen. Some only bond with. [inaudible] even if the catch occurs on the demand side, we should expect to see something right on the supply side, or if the capture is motivated from the supply side, there will be something it kilter on the demand side. Rose friedman had this observation that theres nothing so permanent than a Government Program and other washington pendants have observed the staying power of policy even though the explanations may vary over time why they have their lasting nature. When we think about both sides and what the vested interest might be in keeping those policies in place, that inertia becomes a little easier to understand. Where and when does it occur . If you look at paul kennedys work, and its now been 30 years, the the rise and fall of great powers, what is striking in rereading his two stories, he goes back to 141500 asks the fundamental question, if we were to predict, what would be the dominant powers nowadays, we would put china and the empire. How they unwound themselves, its hard not to construe that as a supplyside story. From looking at the population, the technological advances in the military prowess of the chinese empire and how under the ming dynasty they started to turn inward due to the bad emperor problem in terms of shipbuilding restricting trade, shifting the border inward as to restrict trade, the skepticism about entrepreneurship, the bureaucracy started to weigh in on and supporting technological innovation. Likewise in the empire, i think they call it the idiot sultan problem and there were certainly cases we can point to in succession planning that wasnt well thought out that often lead to who could get to istanbul the fastest with the most us because of the number of male errors to a sultan, but also the bureaucracy, the elite fighting group. They figured out a very creative way to avoid favoritism. They would raid christian lands to identify ablebodied males for conserving their army and brought them back to train them and dr. Nate them. It was a one generation base military. It was a feared fighting force that ensured the spread of the empire, but once in place, some of the seeds of decay lay with anna series. It became a nonhereditary, if im here, why not my son, and then the benefits they started to bargain for. Two psalms were murdered in attempt to promote reforms, and the Ottoman Empire became the sick man of europe. It wasnt just the anna series. Also the large army of scribes who are threatened by the Printing Press and similar worries in china about the spread of information. As they talk about it, the Ottoman Empire went 225 years without a Printing Without a Printing Press. By 1800 only 2 of the empire was literate where places like germany and england had 50 literacy rates. Its very much a supplies side story if you read the book 30 years later. The kingdom of ancient egypt, ramses the second, he has a greek name and a famous poem. Beyond his military conquest, when when you look at the histories and the extensive building projects, the palaces, putting a larger priesthood on the payroll, part of the Public Employment was 30 was accounted for by Land Ownership by priests and scholars that had studied that period. It became increasingly hard to sustain under the new kingdom of expenses that went with it. The regime, the venetian republic, the dominican republi republic, but also democratic examples and Steve Walters is back there and gave a marvelous book year end half ago about boom and bust towns in the United States, looking at places like boston and San Francisco and when they became extracted, an example being curly in boston that has an effect named after him for the ability to not only grand eyes also to chase out opponents. And then, looking closer to hom home, my hometown, until recently was rochester, new york, and the state of new york that a Public Investment made it a boom town. The erie canal, lowered transportation costs by 90 . Rochester went from 15 people in 1817 to being the United States 13 largest city by 1840. Gross, the advent of railroads slowly loosened some of the preeminence, but rochester and the rest of upstate new york dont start falling off the wagon until the 1940s and the 1950s. It is a story that cant be connected to the demise of kodak or bausch lomb or carrier but can be correlated to new york state becoming a high tax state. The recent book i Stephen Moore look at nine states without income tax versus the ten highest income tax states, growth rates and migration rates. Theres a very similar story which is in seattle last week for an alumni event and its striking how many cranes are there that are largely absent in my former hometown of rochester. More modern examples, we read read about them in the news, whether they are hypocrisies or democracies, north north korea, three generations of the kims, russia and vladimir putin, the Iranian Revolutionary guard, by conservative estimates owns 33 of their country, what chavez and majuro have been doing in venezuela, but it applies to democracies. In india, most recent year that a survey has been taken, 54 of citizens report having to pay for bribe to get a public service, even higher for the lowest income class, 75 . 34 of recent electoral candidates are under criminal indictment. It pays to be in the assembly when you look at growth in the political economy articles or you look at argentina and anybody who has traveled to argentina, how under the kershners there were three Different Exchange rates and the best one was the corner bakery where the suites are good in argentina but the foreignexchange was treating even more briskly. Some of the challenges in the e eu, the book the euro trap and some of the challenges the European Union has faced, especially in the periphery countries. These issues apply to china and the u. S. , whether we look at china under mouth, an interesting read is the most recent economist issue and the consolidation of power on the Upcoming Congress in the fall and the worries if the trend will continue. Also in the United States, there is a chapter that that deals with some of the challenges we face in the Worlds Largest democracy, whether its a more professional congress and tenure lengths of being roughly doubled over the past 100 years, robert caro has a wonderful book on lyndon johnson, how he was one of the first to figure out if you can do Facilitation Services while it would insulate you from the voting that you undertook and it would increase your tenure and political power, whether you look at unfunded pension liabilities, they will argue its only in detroit, but whether its feeling cities like stockton and san bernardino, or puerto rico or philadelphia, yesterdays news in new jersey, dallas or houston, josh rao and they estimate these unfunded liabilities to be our second biggest fiscal challenge in the United States conservatively at 5 trillion. Whether you look at how more monopolize 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. A Public Sector union rate and some of the challenges that daniel pointed too. There are some issues for us to really think about on the supply side in the United States. It is a simple book in one respect. There is only one figure, one equation and two tables. Here is the equation. Just to conceptualize if we are to capture the process that government insiders gleam, it is a combination of how much potential there is to be captured. The slack on the supply side, how imperfect were the slack can vary from zero to one with zero being no slack at all and perfectly pleased to supply side and one being perfectly untethered, and how much interest is there in exploiting the slack . Michael sandel, earlier philosophers will also argue about the importance of needing to instill civic mindedness when relying on virtue. Even when there is slack we can rely on the factor to diminish the fact that those on the supply side will operate not to the benefit of the Public Interest. There is a chapter on what drives the potential gains, the perks, the patronage, the bureaucracy, the transactions cost, potentially, this is something that a ruler in persia argued in the 500 a. D. That if i let the economy grow , that will mean more tax revenue for me. There there is a potential that one could argue to have the economy be productive to allow the gate greatest gains to the government insiders, but their transaction cost with operating a government, tax and transfer programs which have been studied the most extensively, how porous and we can argue that if we want to transfer 50 cents, a basically chews up a dollar 50 to create that transfer so two thirds of the tax gets chewed up along the way either in disincentives or the management of the tax and transfer policies. There are economists like jerry becker and Steve Whitman that will argue, just like other markets, adam smiths invisible hand should work. Competition should end up leading us to the best of all possible worlds because the group that has the most interest in a peaceful legislation will bid the most for the favorable legislation. I would argue theres too many examples to the contrary and olsen was one of the first to point this out. The key thing in politics is clinical clout and economic states do not correlate 1 1 with political clout. On optimality grounds, there is no reason why we should have sugar quotas. The damage done to American Sugar consumers far exceeds the benefits to sugar producers. In addition to the damage we do to poor countries externally like katie in the philippines, but, but the political clout of producers outweighs the 55 each family in the United States loses from the actions of producers and the maintenance of those quotas. Public goods, when i teach economics to students was one of the classic reasons why government should intervene, and from a purely economic reason, economic reason, you would argue public goods would be under provided. Then, when we begin to think of them from a political economy point of view, there are reasons why we should worry about the militaryindustrial complex. From political economy perspective, you want to worry about the political clout of producers of those goods, consumers and average taxpayers. You could argue taxpayers are the most. [inaudible] interest group. The reason we see programs like the f35 and f22 continue despite cost overruns and quality control. Producers know this. The b1 bomber, Rockwell International, the parts on this plane spanned 48 states and over 400 Congressional Districts. At Rockwell International headquarters, there was a picture of the plane and a map of the United States. There was a string that connected each part of the plane with the Congressional District in the state without part was manufactured. If the part could come from a place that both the Senate Armed Services chair and the house Armed Services chair resided, that was known as a bubble hitter. Common pool problem, this is what economists and political scientists call the law of one over and. They have this wonderful analogy that when we start going out to dinner with 99 or 434 of our closest friends, and agree to split the bill, you start getting some unusual behavior. In la, we can tell you l. A. Is one of the most challenging places because of the geographic spread to build a subway. A subway was built. Having looked more recently at the studies, but at the time, 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 by raising bus fares that led to less ridership on buses than was picked up on the subway system. These supply and common pool problems, there is a recent book out by political scientist chris barry that points out how single unit districts, they are now 90,000 districts in the country, we add one every 18 hours. Chicago became one of our highest sales tax cities. Partly because they are separate Public Safety in the hospital, tax districts, there is a park district, and if they all get to fish from the same pool and the problems get exacerbated as the elections for the individuals that oversee dont occur contemporaneously. Factors affecting slack, their natural curbs, there is is a fascinating scholar from 1300s who positive civilizations will last for four generations. You will come in with fervor, new ideas on how to organize society, but those in power require creature conferenc comforts and lead to higher taxes. The higher taxes diminish industry and lead a new group to come in. Another is often considered the father of modernday sociology, our founders worried about design curbs, citizen mobility, benchmarks, going to singapore and japan helped move communist china to liberalize that marketplace. India seeing nearby growth rates in places like pakistan exceeding theirs was a key impetus that they are modernizing. Its the old mark twain quote, theres nothing so annoying as a good example. There is also quite is also quasi market for control. We dont see the green mail buyouts in the corporate world. There are reasons for that because power is the currency of the realm in politics, once you give up power, you give, you give up the ability to write the rules. Anything you are promised, there isnt thirdparty enforcement that those promises will be kept and we can point to examples like louis the 16th and that that were promised one thing and ended up getting another or charles the first. One of the two tables, this may seem incredibly simple, but let me just give you some fundamental conclusions. For as of the fall 2014, based on the categorization of democracies done by some noted political scientists, how long has the regime been in power . And Transparency International headquartered out of germany has been developing a compendium of surveys, how much integrity is there in the Public Sector from none, zero to 100. It may seem pretty obvious, democracies with more checks and balances regimes are in power less. Some of the fundamental points that come out of this, i think this was the first study done that shows that the checks and balances are founders and vision would help. People are not angels. If unconstrained his attacker sees, you end up nowhere close to 100 in terms of Transparency International scores, democracies and improvement. Second conclusion, my he is not optimal. The average democracy has a Transparency International score of less than 50. A quarter of democracies out there are less than the average autocracy. There are certainly some like singapore and botswana but do well in terms of integrity but on average they are lower than democracy. Francis had a book a few years ago about how democracy would be the Socio Economic terminus. It sells we cant be assured of democracy by the people and it doesnt automatically ensure government for the people. Some good news, when you look over time and Transparency International has only been around 20 years, integrity has been improving at three times the rate in democracies than in attacker sees. Integrity is not the same thing as trust. What the Pew Research Center measures is not the same thing as what Transparency International measures. They may be doing things efficiently and people may still have a negative feeling about what the government is doing. When you look at changes as opposed to levels, either attacker sees or democracies that across all countries, the more you can improve integrity improves your tenure and buys you more time and power. Then we cant be assured by electoral competition, to ensure integrity and trust. Italy has has changed powers at the top 44 times. Its almost a joke since world war ii. And yet, they rake close to being economically unfree, below the surface, below the easy to measure level, there is still a lot of it built into the system on the supply side. Same in mexico. We have changed leaders every six years or increased the average tenure when you look at the Transparency International integrity scores, they are pretty low, close to what the others average. The last point, Public Sector and integrity is more stable in democracies. Correlations over time are closer to one in democracies. A leader can last change the system than in the other. Thats either for good or bad because their current democracies like paraguay and new guinea that are stuck at low levels of publicsector integrity, others like denmark and new zealand democracies persist at high levels of integrity. And then, the very last two pages, the big question for us is why is democracy spreading. Why, from virtually none in 1802 now over, close to two thirds of the nations around the world. Was it just a fluke . Was it something we started learning. We would argue that theres probably more of a dog north institutional explanation based on opportunity cost, based on people becoming more productive, whether, whether its through trade, mobility, education, specialization that you have to give the populace more skin in the game if you are to realize greater gains and to avoid a quasi market for political control. They have looked at this recently. You cant find that relationship on a year year to year or decade to decade basis. You have to look over a longer time horizon. Its still an area we are investigating. The fundamental point governments by the people is not government for the people the last chapter talked about how to form a more perfect union, some potential thoughts, once we received what the colleague of internal study at the u. S. Postal service service. At the time 10 of of their routes were contracted out. 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 can insulate people for life, whether its term limits or other means. Richard johnson has looked at the Civil Service im a well lincoln came to office, the big surprise was all the Office Seekers that showed up. Like captain ron johnson, it was a attempt to focus more activities besides patron is them and filling office. He will argue it also became more insulated overtime with consequences. In the state of new york, over the past year end a half weve had both the number two and the number three legislator of policymaker lose office, one a democrat, won a republican, and both you could pin the story on how long they were in office, and some of the pitfalls that went with it. Curtailing supplyside monopolies, Grover Cleveland set a Public Office is a public trust. We do have to think about to what extent do we allow public trust. We have antitrust and pip privatesector marketplaces. Some of the same worries should motivate us on the supply side. In the clinical marketplace, especially because Public Employees get two bites at the apple. They not only get to collectively bargain but theres an electoral link i can also influence to make the agents the principles as opposed to the agents. Sarah will talk about how money starts flowing in the reverse direction you expected too. Institutional rules matter. Proportional democracies, government spend more, debts or higher per gdp, they lock in Interest Groups more easily emma they are less checks and balances in parliamentary democracies as opposed to president ial. You you get higher spending looking across time and nations. The further look for checks and balances, whether what what switzerlands done recently with the double majority, spending break role that is dramatically decrease the rate of spending relative to the rest of the europe and started to decrease their debt level relative to gdp. Facilitating benchmarking, groups like Transparency International, Economic Freedom of the world, international Economic Freedom should be applauded for starting to better keep track, and this was our founders intent in setting up individual states were experimentation comparisons could occur. While its, may be incredibly difficult to do but maybe some further thought about the possibility of buyouts, they look unseemly in the political world. Think about how much time and angst and resources we are devoting to north korea and the latest generation of kims. A lot of intolerance gets imported into the country while the rest of the country cant. Is there even a possibility of a thirdparty guaranty and what kind of payment would it take . Probably difficult to think of because power has some unique currency that is hard to replicate in the nonpolitical world. Thank you for the opportunity. I look forward to answering some questions. Thank you very much mark. Its fascinating. Next next we will hear from Jonathan Rauch. He is a graduate of Yale University who worked at winstonsalem journal in North Carolina for the National Journal magazine and later for the economist magazine as a freelance writer. He is currently a contributing editor of National Journal and the atlantic. He is the author of several books and many articles on public policy, culture and economics. He is also a guest a scholar a guest scholar at the Brookings Institution and governance studies and a Vice President of the independent gay form. He he is also the author of five books including kindly inquisitor, the new attack on free thought, expanded edition from cato and political realism, how hacks, machine, bigmoney and backroom deals can strengthen american democracy. I will turn it over now to jonathan. Thank you emily. Thank you mark and thank you all for coming. I was sent this book by john of cato who asked if i wanted to comment on it. I figured id glance at it and set it aside and get to it in a couple weeks. Three 1 2 and half hours later ive mostly finish the book and took lots of notes on it. This is a good book. This is a book to comment on. Its a short book, but its absolutely packed with information of hard thinking. It is examples, you can see they date from ancient time to modern. There is tons hear that you will learn in marks book. Forgive me if i mispronounce it, but there is tons. I can pronounce mark. There is tons you will learn from his book. With that said, because time is short and because it makes for better tv and more interesting dialogue, i want to focus on an i want to focus on an aspect of the book which i think is interesting. To some extent i may disagree with and it may challenge some of you in the audience. Thats a larger framework in which the book is embedded. There are two particular figures lurking in the background. One is mentioned and one is not. I think they are both important to triangulate the book against and understand where its coming from. The first of those is an economist, mr. Olson. He began his work in the 60s and continued through the 80s, a remarkable man who pointed out what happens to societies over time is they accumulate Interest Groups, cartels, what he called collective coalitions for collective action and they lock in subsidies and programs in overtime this will ostracize societies and historically the way societies get out of this is not very good. Tyrannical rule or wars. Overtime you would have a tendencies for economies to slow down and asked if i. Its an important theory. Instead the time fairly well if you look at countries like japan and places like the European Union and in some ways the United States, and of course, it heavily figures in the background in the kinds of theories that mark writes about. Mark, he takes the ideas that olsen pioneers on the demand side and looks at the supply side. He looks at how bureaucrats, Public Officials and others are part of this game, but its the same big story. I wrote a book about mr. Olsons work and why washington stopped working. A lot of people in this room are fans of olson, but there is an interesting difference, between olson and the structure of his book. Olson is a series of social development, not of social justice. There is no element in his book. He is talking about why economy slow down but hes not telling you thats particularly unjust or it betrays the Public Interest. He just thinks its a problem and its something we need to figure out how to deal with. You cant wish it away. He sees it as a fundamental change in society, not just things that people in government are doing. Not just what Interest Groups are doing. Its a change over time. Heres where we come to the second figure of the book, one that may surprise you and thats ralph nader. He is he is of course a leftwing progressive consumer activists on most, if not all respects, i think he would 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 100 years, and especially the last 40 or 50 years has penetrated libertarian world. So progressive thinking has the idea that there is something out there called the Public Interest. Not necessarily the same as the peoples will, but it is something that is good for society, and we should, if we were well informed and knew what was good for us, all agree on what the Public Interest is, and thats what government should serve, as opposed to being a big form for transactional politics or people do form for transactional politics or people do deals and try to cut compromises and get along. That is a fundamental point of the progressive rule view which, interestingly, i think a lot of the libertarian world simply absorbed and adopted without asking many questions. Now mark to pan and ralph nader would define the Public Interest in somewhat different ways. Marks definition is he said the Public Interest means maximizing societies net economic benefits. Many people would disagree with an accommodation of the Public Interest, but it is a definition, and i think most libertarians would tend to identify the Public Interest with the workings of free market forces, both unjust as grounds and efficient grounds. The Progressive Left would identify the Public Interest with egalitarianism and serving of larger social justice and being anticorporate and restraining the exes him of capitalism. Set that aside and you have the same basic idea which is theres a big abstract thing to which we should try to get governments to conform, and if it doesnt, we should be upset. This brings to marks book an element of moralism which is absent or largely absent in mr. Olsons. He compares rent seeking to crime. Thats an economic comparison, i understand, but also but also can buy engine conveys moral overtones. He also compares it to cancer. Again that can be used judgmentally but its a pretty strong image in todays world. The idea of the inside job which is the title of book is youve got get bad people getting away at the expense of everybody else. You get this kind of moralism about government on both sides of the line, and i would argue that is the prevalent paradigm for thinking about government in todays world. I would further argue that that is in some ways unfortunate. Now i have to step back and point out that i wrote a book called governments and which itself has the chapter titled the parasite economy. It likens rent seekers to parasites and set a lot of rents seeking will slow down economic growth. What ive learned since then is ive placed insufficient emphasis on the good side of the parasite economy. There are things that we needed to do, and it does have important social roles. Rent seeking has pluses as well as minuses. Its not a good thing in itself, its not that we should all go out and say lets seek more rent, thats a very bad idea. However, it does serve some needed functions. It stabilizes Society Society for example by creating states, people who are invested in getting stuff for government and from each other or people who are going to be involved in the clinical process. That tends to be stabilizing in countries that dont have that over time to have a lot of internal instability. Second, this allows for rent seeking, and its related phenomenon allows for transactional politics. Rents are things you can trade. Its hard to trade ideological goods like issues like abortion, but earmarks fine. That is the stuff that allows you to create compromise, to buy off opponents, and i would i would point out that if you wanted to do political reform to the kinds that are necessary to over master the courseforces in the government, if you want to pat a debt debt limit bill or restrain the growth of entitlement, if you want to do most of the things that free marketers in the current i just want to do, you you will have to offer some incentives to people are taking some very tough votes and can expect primaries in their district. That is something transactional politics is very good at. If you can get some entitlement reform at the cost of a new runway or a new post office in someones district, its a a good deal. When you take away those and begin to demonize those tools, you begin demonizing transactional politics itself. The result is not Smaller Government but government on autopilot. It grows and grows and gets more and more in the way. More fundamentally, ive also become a critic in my old age of the abstract notion of the Public Interest. Ive come to think that it does more harm than good and its probably just wrong. It attempts to make politics can form in that are not realistic. It legitimizes and demonizes legitimate disagreement. Of course course we dont agree of the goods of society and the things that we do and dont deserve. The idea that there is a Public Interest out there to which we all should conform essentially allows us to believe weve got the Public Interest in mind, the other person is selfseeking. That is bad for politics and d legitimizes important conversations. Second, Public Interest rhetoric empowers demagogues because they are the people who run around and claim to speak for the public. Some of you will note to whom im alluding but we dont need to get political in this talk. Again and again Public Interest is a dangerous idea in that sense. It has Unrealistic Expectations and leads people to believe if you elect better people and make changes instead of having messy government with compromise you will have something sleek and beautiful that will meet the expectations and solve problems and you get inspiration for reform in which smart people dream up ways to make the public forget about political incentives. The abolition of earmarks was something the conservatives were big fans of. Term limits will make these problems worse and not better by empowering lobbyists at the expense of wellinformed legislatures and so on. I dont want to exaggerate my disagreements. Its an admiral book and theyre so much we do agree on. Its such an important book and important corrective to those who believe the government is a transparent conveyor and market and gives us a better understanding of why thats not true. Some of his recommendations are smart, some not so smart, thats a different conversation. That said, i would would like to suggest in the big scheme of things we would be well advised to remember mr. Olson and take our cues from him and to remember to try to start our moralism aside when we focus on the problems and focus on realism. I think libertarian and freemarket ideas on the model of edgy government sort of progressive is a bad idea and likely to fail. Thank you. [applause] thank you jonathan. I had a chance to moderate and comment on the book so i will be changing rolls in that vein. I have a a phd in Political Science and my research focuses on Public Opinion research. I read this book through that unique lens of Public Opinion. I found the book absolutely fascinating and i took copious notes. There is so much to learn from this book and a lot of interesting facts throughout history of ancient regimes as well as the present. I highly recommend taking a look at the book and reading it. First i want to start by saying also how much i appreciate the framing of this book. Typically, when regular americans think about failures of democratic government to be responsive and accountable to the people, the assumption is that the problems come 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 and aggrandize themselves. That that is the common story. What mark does differently is 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 groups then exploiting government for their own purposes. Throughout the campaign he compelled many of his supporters by saying im so rich, nobody is going to buy me. People like that. A lot of people believe if only we could do a better job limiting campaign spending, Campaign Donations and Campaign Finance more generally, then finally we would make government more accountable and more responsive to the people. There are are some problems with this reasoning, however. The first is that Campaign Finance regulations often arent able to achieve what they hope to achieve. In some cases, risk compromising the freedom of expression thats essential to a functioning democracy. As a consequence, even if we were to completely damn about this problem and outside special in Interest Groups, mark points out we were still have a serious problem in which government would be able to use its power to benefit those on the inside. The interesting pieces of the book is that the more government is able to do in terms of regulations, the money it spends, the provisions and services it offers, the more opportunities there are for this to occur so, a striking example was the example mark gave of india that was particularly illustrative. It was was a large democracy that ranks poorly for doing business. It requires 60 state approvals in order to build a skyscraper. As a result that takes ten years to build. What might that incentivize, all that redtape, 60 state approval approvals . Bribery, illegal activity, and who does it benefit . It benefits the people who already have the resources and the connections that are able to access that. As market sites in a survey, 54 of surveyed indians report having paid a bribe in the past year. Thats not in just their lifetime, but in the last year that i thought was striking. It was even worse for the poor and the vulnerabl vulnerable. Those who were slum dwellers, 75 , three quarters said they had paid up bribe to obtain basic Services Like kerosene. There is a lot of focus on the book on both types of systems of government and those in between. Many people find it on remarkable that they fail to be responsive to the people and on the other hand, if its not the insider. [inaudible] i found it remarkable that the former leader of egypt had amassed a fortune of 70 billion. Thats a lot of money. We would expect that when they are not accountable. Someone might argue, if only we brought democracy to that problem, we could solve that problem because people could vote out of office those leaders trying to abuse the power. Market mark addresses this in his book where he argues that as you do transition you do get more count ability. In that equation that mark sets up and helps explain how they can profit, as accountability goes up with democracy its true there will be less to be gained. A study found that during a time that the political leaders, political districts shared the ethnicity of the political leader and they received five times the amount of Infrastructure Spending as political districts that did not share with the clinical leader. When you shift to democracy those evacuated and it became equitable what i found most remarkable was even democracies fail to be responsive, to create a system in which they are responsive and accountable to the people. This occurred for reasons entirely separate from special Interest Groups. Even if we were to solve the problem this was still exist in the insiders in the democratic government could cause more problems than the special Interest Groups. I think a little more detail could be spent. Maybe we can do that during q a to discuss and explain why the problems that are present persist even into a lesser exten extent in democratic regimes and why even democratic regimes fail to solve these problems. I thought some of the more compelling examples in the book included democracies like venezuela, argentina, greece, india, and what we have seen in those countries is that insiders nationalize the economy, they replace judges, they believe in Government Spending in debt and price controls on food and electricity, and the consequences are pretty predictable in that it goes down and inflation increases, there is rationing and shortages, and the people become poorer and there is more suffering. I think what was even more compelling are democracies that are more stable like the United States. The extent to which issues like this are government insiders were able to exploit for their own benefit. Some of the statistics provided in the book, we see u. S. Senators earn a rate of return on their investment at about 12. 3 . Members of the house of representatives earn a rate of interest six Percentage Points above the average, which is doing pretty well. Its probably not random chance. You give the example of president johnson who used his political clout to help his wife write application for radio and tv station in austin texas to be approved and used that political clout to channel or funnel clinical advertising to those radio stations, and was able to amass a fortune of about 100 million. That is far less than the 70 billion, but still its a fair amount of money, 100 million. You give a variety of examples, these are not random where we see examples were even in a stable democracy, political leaders, regulators, insiders, bureaucrats are able to use the system for their own benefit. The consequences are also dire. In the u. S. We have unfunded liabilities or unfunded promised benefits to Public Employees, things like pensions that we promise to pay people in the future, but right now have no way to pay them. That totals 5 trillion which is the same as 29 of the entire u. S. Gdp. If we were to take all of 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 allow 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 so at 50 of the cost of the u. S. Postal service. How come 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 in greater depth later on. I think what this shows is that democracy alone is insufficient to bring about accountability for government leaders, insiders, elected officials, regulators. The way i define it, democracy alone doesnt seem to be enough. I think 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 ive been talking about it gives the impression and i dont mean to suggest that the only reason. Far more often political leaders, elected officials are doing what theyre doing because they believe its the best thing for the American Public are they believe thats true. It doesnt mean it is but they have that Good Intention in min mind. In many cases the growth of government in terms of regulations, expanded Government Spending, hiring more workers to administer new Government Programs is all done under the banner of doing good for children, the poor, the elderly, the vulnerable, driven by a desire to help people and often is in line with what we think the public wants. An example of why venezuela and argentina, democratic elected leaders nationalized their country and set price controls but those very policies are actually in line with what many rank and File Americans would wish those types of policy controls and are in line with Many Americans say they might want. We talked about nationalizing Industries Like health care. Just the other day i was reading an article in which a professor advocate for the nationanationalization of facebook which was very surprising. Price control. How many people tell you they hate rent controlled building. I promise well tell you that. People living in them like price control buildings. We see price control in healthcare, in polling, when its not associated with cost, people like price controlling in healthcare even though price controls in healthcare cause massive distortions in the market and undermine the exchanges for americans. Spending in education, we have more than doubled spending for people one students over the past several decades, and have gotten basically no increase in test scores. However, a Kaiser Family foundation survey found 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 it has had no effect, no benefit. Part of what i am getting at is that democracy isnt very good at sorting out all the costs and benefits, and even though these policies may be desired when people are presented with the cost, they often turn against the policies. When government insiders pursue them, they may do so under the banner of saying this is what the people want. I believe this will help people, however Research Shows these very policies are the ones that damage, that slow economic growth, slow innovation, create stagnation and harm human flourishing. The reason i think this happens is because democracy, we are not able to have a good conversation about tradeoff and cost. If we have price control in healthcare or we have price control on gasoline, what, what are the effects of that . When politicians seek office, they usually dont talk about their policies in terms of the cost. Not necessarily because they are bad intentioned, but they nomight not know what the costs are. When we elect leaders emma we usually do so in that they are offering only benefits. In democracy, despite having more accountability fails to have total account guilty because people dont know what the costs are of what they are electing in office. Some political scientists will say, there is sufficient accountability in democracy to deal with this problem of insiders exploiting the system. They will say we have the party system and if things get bad enough, you can kick one party out of office and bring another party in. We have seen that happen over and over again. I would argue this is a flawed argument. What if the epa is doing an excellent job, but the department of housing and Human Development is doing a poor job . Who do i kick out of office . Its the same Political Party in the executive branch. Suppose, at the state level, my governmen governor is doing it at flint job dealing with public education, but has done nothing to deal with the un funding liability crisis. Do i vote her out of office or not. even a fully functioning democracy needs to address the problems of unresponsiveness and to bring greater accountability to a new 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 about ten minutes for q a. Im robert with the national investor. Im sorry i came in late. I hope that cato will have the slides available at some point. The internet is a great tool that could provide more transparency, is it possible if your book touches on this. Could it be brought to wear and announcing who the winner is, and after the fact, showing that that truly was the newest 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 possess it . The questions, yes, it promotes Greater Transparency and benchmarking. Theres a new book out arguing strongly that we should be optimistic on the broader basis the arab spring and social media and a measure of 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 government dod didnt award the contract to the lowest price bidder. You could measure price, but harder to pressure quality of service which ibm during those decades. What you want to bring to bear, knowledge and not just what data. So we make the best enveloped decisions. If its a blunt instrument, kellman at the harp Kennedy School would argue, Government Contracting shot itself in the foot for a number of decades, but focusing on whats the least cost bidder and you want the full performance, but its a great question. Actually, theres a question, i think, right over here. Maybe i didnt see that correctly. Do you have a question . Okay. This may be im thinking, could there be when youre talking about the in democracies, im thinking what could there be further outside injunctions that would help the democracy . Im thinking for some reason that its coming to my mind. Would there be some point that the concept of innovation [inaudible] could somehow be just into government processes that would make the inside of government more responsive. Its a great question, too. And cautiously optimistic, not just on the trend toward democracy, but there are ways even looking at groups like Transparency International of keeping score on a variety of dimensions that weve seen those institutions crop up over the last several decades. Big data can be harnessed to look at the efficiency of elk had delivery, educational delivery, in a recent book, terry moen and john argued that technology is going to be the solution and the educations here. I havent yet seen it, but there or as much as hopes in the books, but there are some glimmers there that would argue and give us cause for optimism and given we have more opportunities to experiment here, in keeping with our founding our founders, we want to promote that experimenttation and cross checking words and not working. Let me answer one thing, both jonathan, the image that came to mind in daniel daylewis movie about abraham lincoln, the passage of the 13th amendment was messy and yet, a good thing came out of that of people coming to that marketplace, quote, unquote, together. And at the same time, ill still keep coming back to the statistics that most in this room would agree, we want to provide opportunity. We want to steer income to less privileged folks to our society and her question is, suppose we agree a quarter of the federal governments tax takes, 1 trillion goes just below, just to people below the poverty line. If that happened, the average family of four would be making 120,000 a year below the poverty that are right now below the poverty line and the reason for her pointing that out is, yes the market, yes we should provide ownership, but when we look at actual outcomes, even in a wellfunctioning democracy, some of the intent, the progressive as it may be, if you want to promote trust, if we want to promote social ability, we ask questions how, is this the way the markets meeting that gets us to those goals. The question has been bugging me for a while and im hoping with an Intelligent Panel you might be able to answer it. Is it possible if anybody anybody does any work, the completely uncapturable government system . Impossible and undesirable. Its very important that government be captured and that not only includes constitutional means of the kind that matter, but includes social means of lots of people having lots of stake in the continuity of that government and thats one of the reasons its important we have the appropriation bills and all the committees and Interest Groups and lobbies swarming down here within reason to make sure they have skin in the game. And might not agree on the impossible part, but less so on the desirable part. And thats also a classic argument why you want to limit the scope of what government can do. Even if it does do the things that jonathan is describing, if its Still Limited in what its doing, and the number of provisions that it provides and services that it provides, if there are fewer of those, there are less opportunities for these types of problems to occur. Yeah, and i should say, thats a point of agreement among us. When you get into the frame work of should government be doing somewhat less, should it be more competitive and so on, i think youll find a lot of agreement on this panel and in this room. The trouble i have with the interest flaming that you also adopted it encourages this blue sky utopian thinking, with respect to the questioner i hear all the time. Could we imagine some other planet, some other government, something pristine and perfect that transmits the will of the people. The whole experiment blows us off course and gets us 0 of the real mission, which is to figure out how to get some gosh darn entitlement reforms through congress. Thats a transitional process, but thats where we need to be focused. A question right here. Thank you. My name is peter shutly and im a retired government bureaucrat. 24 years in the state department and 15 years at brookings teaching Government People how to work in congress. So lots of government experience. And two comments, one is, 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, if you want to feather your own nest, you go into business, you dont go into government. A second point and this is a question, two variables i think 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, the second one, a majority of republicans think that obama is a muslim. My point is that those absurdly wrong opinion polls changed the political process and affect congress and affect the system and cause all kinds of distortions and i didnt see that variable in your analysis at all. Maybe i misunderstood come of it, but to me thats a much billinger source of problem and lack of civic education. Thats a real huge problem which again, i didnt see in your analysis. Imperfectness of information does lead to diverse outcomes and we thank you for your service, but theres nothing that is intended, that people inside government and if anything would agree with you, government doesnt have the equity rewards that the business sector does. So what motivates people could argue its more nonpecunary than pecunary. Notwithstanding that Good Intention, we have to worry about when we insulate people on the supply side or structures. Are we doing right . Are we generating the best possible outcomes . And constantly raising the questions about to what extent is the system performing on the broader half of the public. So thank you, i think that concludes our book forum today. Thank you for coming and the author will be around for a few extra minutes to answers any questions you may have. Thank you. [applause]. [applause]. Book tv on cspan 2, television for serious readers. Here is our prime time lineup. At 6 p. M. Eastern, the Brookings Institution, Vanessa Williamson reports on americans feelings on paying taxes and then at 7 30, we hear from law professor who looks at how government officials avoid being held accountable by voters. And at 8 50, massachusetts senator Elizabeth Warren offers her thoughts on the state of the middle class. On book tvs after words, 10 p. M. Eastern, Ohio Governor john kasich reflects on his 2016 president ial run and partisan politics. At 11 00 we wrap up our saturday prime time lineup with journalist on the life and presidency of Richard Nixon and joined in the conversation by authority and journalist. That happens tonight and cspan 2s book tv. Let people walk away, especially staying in the United States. How did you i love this story, i mean, its somewhat disturbing at the same time. How did you convince the kgb to leave you alone . Okay, so, i had to figure out i wanted to make sure that they wouldnt come after me or possibly even do harm to my german family, so, i was racking my brain, what do i do, what do i do . I needed to tell them im not following orders so i wrote a dear john letter and it went something like, dear comrades, i, after i have to tell you that i decided to not to come back because i have contracted aids and the only place where i could get treatment is this country. And then, i added some supporting information and i actually traced it back to somebody i got the aids from and it worked. I know that they believed it. How do i know it . Because i also told them to give my drummond wife the money saved on my account and they did. And they told your german wife that you died of aids . Yes, they did. And i know that because my son now 33 years old. We have been in contact for the last five years, so he told me all of this story, what it was like to be at the other end. You can watch this and gher programs online at book tv. Org. Tv. Org. Hello, thank you for joining us tonight. An Award Winning writer, docume documenterian and also the author of destination mars, called the best recent overview of mars mission by the wagt