Sunday, April 18, 2010


clipped from

Glenn Reynolds, the blogger at, fired off an item saying, “Everyone should pay at least some income tax. And everyone’s tax bill should go up or down whenever federal spending does.”

Don’t hold your breath waiting for that to happen, but it got me thinking. Like everyone else, politicians respond to incentives, and the incentives they face are disastrously perverse.

When they cut spending, they’re penalized; their chances of re-election sink. When they open up the Treasury, their chances of re-election rise.

Is there a way to more closely align politicians’ incentives with the nation’s long-term financial interest? It’s a lot tougher than it sounds, because the incentives facing voters are perverse as well.

The problem is highlighted by a branch of economics called public choice theory, which analyzes the way people behave while making collective decisions, as opposed to how they behave in the marketplace.