Friday, May 3, 2013

Favoritism, Politicians, and Us

An old lesson learned anew

Columnist Charles Lane reminded me that I struggled in graduate school. He didn't tell me directly, mind you; I don't know Mr. Lane. My recollection is that I was always smart – hopefully I still am – but never a good student. I graduated high school as a member of the National Honor Society, attended community college for two years while working 30 hours a week in retail, finished up my Bachelor's degree in two more years, and was accepted to graduate school in economics primarily on my quantitative abilities.

And that's where I hit a wall: I had never learned to study. Things came to me naturally, intrinsically. Grad school wanted more from me and I wasn't ready.

In a piece earlier this year, Mr. Lane invoked the name of institutional economist Mancur Olson. Professor Olson taught macroeconomics in my first year of grad school. Well, "taught" may be a stretch; the graduate assistants taught us macroeconomics while he lectured from his book, The Rise and Decline of Nations. I didn't get much out of his lectures; I don't think any of his first-year students did. We were too young and inexperienced to listen with seasoned ears. Now, Olson's lessons and wisdom speak volumes.

In The Rise and Decline of Nations, Professor Olson describes how special interest groups form over time within countries: farmers of certain crops, manufactures of certain products, labor unions representing specific sets of workers. These groups form lobbies and seek government favor to protect their interests, skew markets, and discourage innovation and productivity. The favoritism bestowed constrains national economic growth though the costs are spread thinly across the population. As a result, the favored group reaps benefits with little public resistance since the pain is incremental ("boiling the frog") and opaque. As time goes by, the number of favored groups grows until "everyone is special" and – Olson postulates – the nation falls into economic decline.

I suppose you could see Olson's hypothesis as cynical. Instead, I see it as an important warning that with 20/20 hindsight can result in a change in course against existing favoritism and put in place barriers to new favoritism. The challenge is having the political fortitude to do so.

Just as it took me time to hear Professor Olson's words, it takes time for political leaders to see the tipping point from general welfare toward corrosive favoritism. And because the public pain is diffuse, it takes political leadership to inform and steer policy away from favoritism. Unfortunately many politicians use favoritism to build a power base and grow financial support among favored groups rather than the broader electorate.

Now that I have the experience and wisdom to hear Olson's warnings, I won't forget. But I wonder if our elected officials have the incentive to listen and the courage to heed.