Politics as the "Least Worst"

Bryan Caplan had an interesting argument in the NYT the other day. Pretty much, the chorus of economists were united around the notion that the gas tax holiday McCain and Clinton were recommending was stupid and would have zero effect on lowering prices. The problem, as everyone else has noticed, is demand is responsive to prices, but supply isn't, so when the tax goes away, prices fall, causing people to increase the amount of gas they consume, and since no one can expand production, all that happens is that gas companies ration the scarce gas with higher prices. But Caplan's take was more in line with his his public choice point of view - of all the really stupid, bad things politicians could do, this is actually one of the least harmful. Therefore, we should favor it - or at least I think he comes to something like that sort of conclusion. We should favor it because the alternative "solutions" to this gas price inflation will certainly be worse.

You have to give the public choice people credit for living in the real world. So often, economists are accused of living in make-believe worlds because they work with models. Some of that misses the point of what scientists do, at all (work with models that are inherently abstractions), but the public choice group goes further than the public finance people in terms of introducing realism. The public finance people talk just about efficiency, and treat government as a lever they can push or pull to get the efficient outcome. The public choice people point out the fact that the same utility-maximizing jerks that create the inefficiencies in the marketplace are sitting in office doing the same thing - maximizing their own utility. How we wish all they cared about was the common good, but in reality they're balancing numerous goals, or even simply seeking their own re-election. So, given the sheer amount of rational ignorance of economic theory on the part of the median American voter, we should probably be relieved that this was being favored by two of the leading Presidential candidates.