Michael Munger on Choosing in Groups
Feb 23 2015

Michael Munger of Duke University talks with EconTalk host Russ Roberts about his latest book (co-authored with Kevin Munger), Choosing in Groups. Munger lays out the challenges of group decision-making and the challenges of agreeing on constitutions or voting rules for group decision-making. The conversation highlights some of the challenges of majority rule and uses the Lewis and Clark expedition as an example.

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Explore audio transcript, further reading that will help you delve deeper into this week’s episode, and vigorous conversations in the form of our comments section below.


Greg G
Feb 23 2015 at 8:21am

Congratulations to Mike Munger for being the most popular EconTalk guest.

If I was to say that it is “the will of the people” that Mike be invited back frequently would that be so wrong?

I think that Mike’s selection is a great example of how voting is often the best way to settle things regardless of the technical shortcomings of the process.

Feb 23 2015 at 11:23am

There’s an insight of Edmond Jabès in The Book of Questions, on freedom and constraint, that you nearly discover, quote:

“Any coercion is a ferment of freedom,” Reb Idrash taught further. “How can you hope to be free if you are not bound with all our blood to your God and to man?”

And Reb Lima: “Freedom awakens gradually as we become conscious of our ties, like the sleeper of his senses. Then, finally, our actions have a name.”

A teaching which Reb Zale translated into this image: “You think it is the bird which is free. Wrong: it is the flower.”

And Reb Elat into this motto: “Love your ties to their last splendor, and you will be free.”

unquote. That unfreedom gives your actions a name is what makes freedom possible.

So consent may not be as deeply in the matter of freedom as it comes out in the podcast.

Michael Byrnes
Feb 23 2015 at 12:06pm

Another great episode – I thought the discussion about Condorcet’s paradox and the determinacy of the rules governing voting was most interesting. In his recent book on mathematics, “How Not to Be Wrong”, Jordan Ellenberg made a similar argument. He gave a hypothetical example of a 3-candidate election and outlined three different voting systems – each of which seemed logical and reasonable on its face but led to the election of a different candidate. Thus it is impossible to say which of the three candidates should have been elected according to “the will of the people”.

This idea is really quite frightening, because it seems so completely obvious that election winners are at least determined by “the will of the majority” if not “the will of the people”. Obvious, yet not necessarily true.

Cowboy Prof
Feb 23 2015 at 12:06pm

Best. EconTalk. Ever!

This podcast was a perfect summary of my political economy course and I will recommend it to students this term as well as require it in future iterations (thereby ensuring both voluntary and coercive means of listening).

Please do have “Choosing in Groups, Part II” soon as I think you can explore the voting problem a bit more. That section was cogent, but I do think it is worth an expanded discussion. It would be great to talk about Condorcet, Arrow, and Lewis Carroll/Charles Dodgson (there is a great deal of political choice through the looking glass).


Early in the podcast you were talking about clubs and pondering whether or not a swimming pool could be provided privately or if it was a club good that needed “jointness of supply” (or cooperative production). The discussion was a bit “black and white,” which is a problem that I run in when teaching about public and club goods. I think it could be clarified in noting that while a swimming pool could be provided privately, the quality of the good is enhanced by team (joint) production — i.e., an initial agreement to cooperate in its production. Both Russ and Mike get to this point a bit later by talking about the Coasian transaction costs, but my addition here is to think about the quality dimension of the good.

Larry Iannaccone explains this very well when talking about the club good nature of a church. While one person can sing a hymn and it may achieve its purpose of musical worship, many people jointly contributing makes the activity all the more enjoyable. There the good is the loudness of the music or the general festive mood of everybody singing (we’re all lovely when we sing together and it feels good).

For the swimming pool, an individual may provide it and decide to charge a club fee for profit, but the uncertainty around how many people would use it might lead him to build a pool without things that many people may want. However, if a group decides ahead of time to “tie themselves to the mast” and contribute to the pool, it may be possible to build a better or bigger pool with a water slide, diving board, and dedicated lap lanes.

The point here is that it is not an either/or public or club good, but rather there is a dimension of quality that can be enhanced with joint production (one of the more misunderstood characteristics of the public/club goods definition).

Cowboy Prof
Feb 23 2015 at 12:34pm

One correction: The Limits of Liberty as listed above is only solo authored by Buchanan. No Tullock in that one. It is one of my favorite books.

One thing that would be good to discuss with respect to Limits of Liberty is Buchanan’s discussion of culture and cultural change that occurs fairly early on in the book and almost seems like a throw-away. But Buchanan, I believe, was hinting at how much cultural norms and values can play in establishing implicit constitutional rules and how cultural shifts (which he mentioned was occurring in the 1960s/70s when he wrote that book) can be as “upsetting” to a constitution as an aggregation of hierarchical power.

See p. 20 of Limits of Liberty: “…some of the behavioral changes of the 1960s raise fundamental, and disturbing issues for social stability. As noted, individuals have lived, one with another, under implicit behavioral rules that were respected by all, or nearly all, persons in the community. But one of the instruments employed by the participants in the counterculture involved the explicit flaunting of traditional codes of conduct … This placed stresses on the ordered anarchy that still describes much of ordinary social life in our society, stresses which were evidenced by calls for ‘law and order,’ for formalization and enforcement of rules that were previously nonexistent” (Buchanan 1975, 20).

Question for Russ or Mike: Is there something to say or explore here with respect to cultural changes of informal norms leading to more formalized hierarchy?

[authorship fixed for Limits of Liberty. Thanks.–Econlib Ed.]

Steve Bacharach
Feb 23 2015 at 3:19pm

I joke in my house that each of my sons gets one vote, I get three, and my wife gets six.

Steve Bacharach
Feb 23 2015 at 3:21pm

Crucial omission from my comment as far as who can outvote whom: I have two sons.

Stéphane Couvreur
Feb 23 2015 at 7:04pm

Another great podcast!

The discussion on being free by committing oneself to rules made me think of Kant. From Wikipedia: The only source of law for a free will is that will itself. This is Kant’s notion of autonomy (nomos=rule). Thus, Kant’s notion of freedom of the will requires that are morally self legislating, that we impose the moral law on ourselves.

Russ mentions Dan Klein on coercive and voluntary: where can we find the reference?

Robert W
Feb 23 2015 at 7:24pm

Had an idle moment, so I looked over the top 10 lists for the last two years (couldn’t find the earlier ones) and found that 7 were in the first half of the year, and 14 in the second half.

The odds of 7 or fewer favourite episodes appearing in the first half of the year, if they were equally likely to appear in the first or second half, is 9.5%.

So there’s a bit of evidence that there is some edge from being a guest closer to the time that people have to vote.

No loss of pride for Munger though, as people could remember him talking about the sharing economy all the way back in July. 🙂

Michael Munger
Feb 23 2015 at 7:33pm

Thanks, all, for the comments.

1. rhhardin: Thanks for the quotes. Very interesting!

2. The Dan Klein piece is this: http://www.cato-unbound.org/2007/05/06/daniel-b-klein/economics-distinction-between-voluntary-coercive-action

3. To Cowboy Prof: I wonder. It may be exactly as you say. That is, when a cultural norm or traditional folkway is replaced, it may generally be by a rule that is (a) more formal and (b) more centralized. I’d be interested if anyone has thought about this more.

Feb 23 2015 at 9:35pm

Good ideas, but largely unknown to the public. Any plans on penetrating the popular news feeds with shorter and less academic articles? Perhaps picking up fights with the economists de jour (PK & JS) might work.

Keith Vertrees
Feb 23 2015 at 10:33pm

An imaginary lunch decision
Mike: Where should we go to lunch?
Milton: The food court.

Brant Gunther
Feb 24 2015 at 9:05am

A form of democracy does enter into military operations, peace time and war. As an infantry officer serving in both the aforementioned, it was not uncommon to gather the leadership of a unit and conduct a poll to help the leader make a course of action decision.

We were taught this in ROTC, the basic course, Ranger school, etc. No one person has a monopoly on intelligence or experience. Many times a young officer vitally needed input from the senior and junior NCOs. Sometimes, mainly in training, the poll was taken at an attempt to secure buy in from all the leaders. In combat, the poll was almost always “we’re in a situation, do you guys have any ideas?”

There was rarely a formal vote, with the results binding, but a smart leader could tell if they were going down the wrong track. The decision was still the leader’s to make, right or wrong, but it wasn’t always dictatorial.

At times the decision was made opposite of the majority. The success of these decisions are distributed according to variables such as the leaders intuition, experience level, the changing enemy situation and many times…luck.

The military is one of the few organizations that place their newest, youngest leaders at the head of a 32 person platoon, and his/her “deputy” is a senior NCO, likely at the end of their career. Some leaders saw this relationship as a mini totalitarian state, by “teaching the old guys something” and “that’s not by the book”. We called those bad leaders.

Good leaders viewed this relationship as a command team, that required trust and communication, to not only be successful, but save lives.

General Grant (as did many Civil War generals) held councils of war. A better historian can confirm, but I believe many votes were taken at these councils.

This comment hopefully gave some insight into a world not many are fortunate/unfortunate to roam. Mike Munger and Russ Roberts, as always… Awesome podcast.

Greg G
Feb 24 2015 at 9:27am

This podcast was packed with great insights so I think the love fest in the comments is well warranted. Even so, I believe there is a fundamental flaw in the libertarian argument made here that ought to be addressed.

Both Mike and Russ argue that the moral authority of the state is necessarily seriously compromised because it exercises coercive power over at least some individuals who have not consented to that. From that, they proceed to a discussion of voluntary clubs as the proper model for moral authority.

I want to argue that private clubs are a very poor analogy for the necessity of governments. Family is the best possible analogy.

We are all born into families and nations without choosing them. Nations are like families in many ways…and not always in the good ways. In both cases you will necessarily spend a period of time subject to decisions you may not agree with. In both cases you will receive benefits you could not receive otherwise. You can eventually reject your family and form a new one if you choose. And in constitutional democracies you can emigrate. It is not my intention to trivialize the difficulty of doing so. It is my intention to point out that these constraints are fundamental to being a member of a social species.

With formal clubs you have the option to choose none of the above. But it is an illusion to think that you really have the option to choose none of the above in “voluntary” social relationships. Even the worst sociopaths experience the absence of all human relationships as a kind of torture.

You have to choose among the “voluntary” relationships society has on offer. You have to choose among the options the market offers. You have to choose among the nations the world offers. In each case you may be disappointed with the choices available.

Feb 24 2015 at 10:11am

That was a great podcast. Thank you gentlemen.

I would add the following possibility regarding the Corps of Discovery election. Is it possible that Lewis and Clark had tried to make a decision but were not able to implement their desired course of action? Or did the captains suspect mutiny would occur if they tried to implement their desired action?

This is not to downplay the importance of buy in obtained by the group, but the relinquishing of power usually only happens because of necessity.

The rules established under almost any circumstances are subject to the market forces of the group members who in critical times ask themselves: Am I better off if I continue to follow the rules? Constant questioning by everyone does not appear to establish good productivity. The flip side is critical questioning leads to some of the most valuable products and results.

Feb 24 2015 at 2:02pm

I know this is along a bit of a tangential path, but I’ll make it anyways since this fallacy is a huge pet peeve of mine: vegetarianism is not, as suggested, a private choice, but fundamentally a collective choice.

Assuming the goal of vegetarians is to reduce the number of animals slaughtered for meat, becoming vegetarian individually has a ridiculously negligible impact for most people. Livestock are raised well in advance of consumption, and the number raised is determined by producers’ expectations of the future demand curve. However, the aggregate quantity of meat demanded is so large that the impact of an individual’s choice to consume meat is relatively miniscule and certainly imperceptible to breeders determining how much livestock to breed who deal with production scales several orders of magnitude larger than a single person’s consumption. Hence, even one who wants to reduce livestock slaughter is unable to do so. (Note there are some minor exceptions to this rule – a hermetic, self-sufficient farmer raising hog for personal consumption, perhaps, would eat it with little regard to market price)

Put differently, vegetarianism exhibits a tragedy of the commons dilemma, even when taking its premises for granted. It is therefore a collective decision, since we cannot expect the market to provision these animal lives it even if they are desired.

I think this is a crucial point that is especially relevant to the discussion of voting at the end of the podcast. Beyond the huge problems in voting suggested by Arrow’s Theorem, there is of course a humongous tragedy of the commons dilemma with voting. Recognizing this structure is key when considering problems in group decision making.

What I’ve found surprising is how many people, despite this, are still vegetarian and who still vote in large elections. The usual explanation I hear is that people engage in these practices to feel good about themselves and derive some sort of intrinsic utility. But, given that this internal satisfaction cannot be based on consequential effects, the justification for either practice collapses into deontological principles or arbitrary moral relativism – even when such people self-identify as consequentialists.

An interesting thought to say the least.

For reference:

So, if I choose, for example, to be a vegetarian inside my home, and the homeowners’ association says, ‘We just don’t like the idea that there are people who are vegetarians here,’ that’s going to make it, even though no one else can see it except maybe when I’m opening my car to take out the groceries; or vice versa, ‘We won’t have any meat-eaters here.’ I can understand why people might join together who want to eat a certain way. But those are private choices, fundamentally. Those are private choices.

Feb 24 2015 at 2:35pm

1. I wonder if attempting to un-bundle government a bit would help. So we could elect an execive of benevolence, an executive of defense etc. each with their own tax.

2. Voters are supported to make the decisions but the politicians hide things from them. Looking at how we tax it seems to me that much of what politicians do is hide the tax (cost) and trumpet the benefits. For example matching FICA drives me crazy, not because of the amount of the tax or because I do not like SS but because it is hidden from the voters. Many people do not even know they are paying it.

Walter Clark
Feb 24 2015 at 6:48pm

Maybe it’s in Mike’s book but I didn’t hear any discussion about the feeling of “belonging” voters get. Mike mentioned that clever political types can rig a vote (in a deliberative body) by being able to make the rules of voting. But it seems to me it is far easier as well as far more important for the clever political types to make sure what is voted on isn’t very important but still often enough to get them to feel involved; to feel attached to whatever those that occasionally organize a voting, come up with. Who it is that says “what counts is that you participated.” It is those that like government. I often hear fellow libertarians complain that no one has ever signed a social contract. Well the act of voting is sort of a “signing” for most people.

Walter Clark
Feb 25 2015 at 8:52am

I am cynical enough to observe that democracy mainly serves to get people to go along with the decision of the group even if they hate it. In that way it is more of a religion than a means of coming up with a good decision. But I have to concede a point I didn’t hear mentioned in the interview: that although the best choice is often not discovered in a democracy. . . isn’t it true that at least the worst one doesn’t get re-elected?

Adrian Ratnapala
Feb 25 2015 at 9:55am

Greg G makes a great point when noting “that private clubs are a very poor analogy for the necessity of governments.” However, while Mike and Russ do toy with that analogy, it is significant that they never quite endorse it.

Mike’s (or Buchanan’s) argument is that the “great vortex” of the state tends to take over choices that could be private, but (and here I interpolate) club-like institutions can preempt this process. Thus sub-state institutions are not an alternative to the state, or a model for it, but are bulwark against overreach.

That’s bog-standard Tocquevillianism, but Rousseau was dead-set against it. I find that leftists often channel Rousseau and his General Will when they talk about what “we” should do.

Daniel Barkalow
Feb 25 2015 at 2:20pm

I have a (rare) counterexample to the idea that governments (and groups) necessarily end up with single outcomes: in my city, whether cars are towed for being parked without a permit varies on a ward-by-ward basis, because the board found that there were different desires of the residents in different parts of the city based on different situations (in particular, there was one area where the residents were really unhappy about all of the parking being full of people from out of town who parked there and took the subway to the airport; elsewhere, violators were mainly guests and customers, and residents were more kindly disposed toward them).

It’s worth noting they city did still make the rules about how the rule for a particular street is determined. So they handled a certain amount of the complexity and transactions costs, while still allowing for flexibility in policy.

Greg G
Feb 25 2015 at 7:00pm


You make a good point about the role and value of club-like institutions but I want to take issue with your final point.

This libertarian fetish for quarreling about the use of the plural pronoun is deeply ironic. In English, the word “we” refers to the speaker and and one or more (perhaps many more) additional people. Which other people are meant to be included must be both conveyed and discovered by the context.

When the context is public policy and political controversy we know immediately that the speaker cannot possibly be suggesting unanimity since there would be no controversy if there was unanimity.

Language is THE most perfectly anarchistic and voluntaristic of all human practices. Each person gets to choose the meaning they attach to the words they use and the words they hear. Language is always changing in some way but some very durable bottom up patterns emerge from this system.

Like it or not, the bottom up emergent convention in English when advocating for a person’s preferred public policy is to casually refer to that policy as something “we” should enact. Regardless of political orientation this does not normally imply that the speaker is genuinely familiar with Rousseau, or channeling Rousseau about the actual reality of some metaphysical general will.

It does normally imply that the speaker thinks that constitutional democracy is better than the alternatives.

Feb 26 2015 at 12:30am

Your points regarding community provided goods such as Olympic-size swimming pools seem generally correct. Most such pools near my house are indeed provided by club-like organizations. That said, there are at least two for-profit health clubs within 5 miles or so of my house that offer Olympic sized pools as part of their rather expensive amenities. They’re the exception not the rule, but they do exist.

I say “at least two” because I haven’t gone looking for others, I merely stumbled across them. I’m not in a super-expensive city (Pittsburgh, PA), or even in one of the most exclusive or expensive neighborhoods either.

I believe that your general point is quite correct, but the specific could perhaps be improved.

Feb 26 2015 at 4:37am

People are sloppy with language all over the place. See the teleological language used to describe evolution. Striving to make language use more precise is not always effective, but does have value.
Some people really are blinded by their sloppy use of the word “we”.

Greg G
Feb 26 2015 at 7:44am


Let me confess here that I am not exactly sure what you even mean when you say, “Some people really are blinded by their sloppy use of the word ‘we’.”

Here are the possibilities that occur to me:

1) This blinding causes people to think there is unanimity on issues that are really controversial.

2) This blinding causes people to think that people’s collective will has some real metaphysical existence independent of the wills of the individuals in the relevant community.

3) This blinding is just another way of saying that some people are advocating policies you think are unwise.

It is not my intention to limit you to these options. They are just the only ones that occur to me right now. Please shed any additional light you can on your meaning and the process through which this blinding occurs.

At this point I am inclined to think that your complaint about other people’s use of the plural pronoun is itself the product of a sloppy use of language.

Feb 26 2015 at 12:07pm

Wow. My favorite econtalk episode of all time. The ideas need to be shared with the general public. Fascinating discussion guys, thanks for not keeping it brief

Feb 26 2015 at 6:54pm

This podcast is a game-changer. Great job Russ, Mike. Thank you both.

@Mike Munger

  • At many points throughout the interview, you distinguish between market decision tools and political decision tools. Is it a fair summary of your understanding that market decision tools produce superior outcomes versus political tools for all but public-good problems and that there is a break even point at which political tools begin to have negative returns at the margin which can be approximated by the point at which the size of the group grows larger than the, “…size of the externality or public good that you are trying to internalize?”

Around minute 9 Dr. Munger says, “if there is no way for me to exit this group, then I’m not really free.”

  • Ok, Mike, I buy it. But what about Obamacare’s requirement that I buy health insurance? I can avoid that requirement by paying a fine or else going to jail or else having my wages garnered. So there are—technically—exits from the individual mandate, but I still don’t feel free.

Mike Munger also said, “”The will of the group is not the outcome. The will of the group is the way that it constitutes itself to decide.”

  • So does that mean I can’t make the world a better place by selling a vision of a better world, since the outcome is not what binds people together? Does that also mean I CAN get there by selling the decision tools that allow for or point others towards that better world?

Cowboy Prof wrote, “The point here is that it is not an either/or public or club good, but rather there is a dimension of quality that can be enhanced with joint production (one of the more misunderstood characteristics of the public/club goods definition).”

  • Up to a point, I think what you say about “a dimension of quality” is absolutely true. But at some point, additional input leads to a DECREASE in quality. So two minds on a single problem are better than one because they bring more information to the table. A third mind adds even more quality/information but not as much as the second, and so on. [Law of Diminishing Returns]. It stands to reason that, at some natural breakeven point, adding another person to the “joint production” LOWERS the quality of the product. So the value of a club or family or government or business might simply derive from the fact that they are small, which might explain why Dr. Munger made such a big deal about the ability to exit from an association, since inability to exit will necessarily lead to a larger group size.
  • I recall an interesting example of this phenomenon from a Marketing course I took in undergrad. I was taught that performing surveys of groups of people is an effective way to gather information on individual preferences quicker and at lower cost than gathering information through individual surveys…up to a point. Presumably, when groups surveyed get larger than 13 people, individual preferences are lost and the views expressed begin to congeal around opinion leaders. Interestingly, the data gathered from these larger groups is not very helpful for predicting market behaviors.

@Keith Vertrees

  • That was really funny!

@Greg G, wrote, “…private clubs are a very poor analogy for the necessity of governments.”

  • I don’t think Munger was making an analogy. He was offering the club as an effective alternative to governments for making decisions about public goods and public-like goods.

@DB wrote, “vegetarianism is not, as suggested, a private choice, but fundamentally a collective choice.”

  • I think this is exactly what Mike Munger was getting at in the podcast when he says [around 38:24], “a group can’t have a will. Only individuals can have will.” Applied to your example, eating vegetarian is a private choice. Reducing the number of cows sacrificed in the world is also a private choice. There is no “collective” that chooses the larger outcome different from the smaller one. I get the impression you are insisting the two are identical. I think this is the same problem as the correlation/causal confusion or the datapoint/mean discontinuity. The error is to assume that two things are identical—when they are really different—and acting on that mistaken assumption. It might also qualify as one of Daniel Kahneman’s heuristics: The one where we answer a difficult question by substituting it with a simple one and treating the answer to the simple question as if it were the answer to the complex one.


  • Benevolence, so far as I know, is not a function of government. If there is an “Executive of Benevolence” then he is either not part of the government or his decisions are not benevolent.

@Adrian Ratnapala wrote, “…sub-state institutions are not an alternative to the state, or a model for it, but are bulwark against overreach.”

  • You are describing a model where non-state institutions compete with the government. I accept that. I believe increased competition in any market leads to improved outcomes. Perhaps individual-actors and club-institutions are not, per se, better actors than government but still produce better outcomes simply because they are more numerous.
Fred Giertz
Feb 26 2015 at 10:54pm

Cal Ripken as Odysseus:
“If I had a dollar for every time Cal worked me over, physically, I’d be a pretty wealthy guy. He still owes me a suit! He told me flat out, he said, ‘You are never to come past this point into the back of the plane, under no circumstances.’ So, I’m in my first suit that I paid for myself as a Major League player, feelin’ real frisky, and Cal says, ‘I need you to come here.’ And all of a sudden I crossed over that imaginary barrier line. He tackled me, wrestled me to the ground. They had just got done eating a bunch of blue crabs in the back of the plane, so there was nothing but mud and Old Bay seasoning everywhere. He throws me to the ground and he tears my suit off of me, and I’m like, ‘What are you doing?’ And he goes, ‘Remember when I said that under no circumstances do you come back here?’ I’m like, ‘Well you just told me to!’ ‘I said under no circumstances, and that includes when I ask you to come back here.”

Greg G
Feb 27 2015 at 7:03am

SaveyourSelf & Adrian,

This, from the transcript, is why I think an analogy really was unambiguously being made between government and private clubs:

>—Guest:…”We have to have actual consent. Not tacit consent. Which is why I’m not so sure that states and governments satisfy the conditions that I’m laying out. Because that’s just a whole different question. Russ: We’ll get to that. Guest: [?] Russ: Right now we’re really talking about Buchanan’s theory of clubs, right?”

It still reads that way to me. The argument here, as I read it, is that the moral foundations of government ought to be as solid as the moral foundations of private clubs…but they aren’t. That is the analogy. Obviously, all analogies are imperfect or they wouldn’t be analogies at all. They would be the thing itself.

Feb 27 2015 at 1:05pm

I want to take issue with Greg G who says “We are all born into families and nations without choosing them. Nations are like families in many ways…and not always in the good ways. In both cases you will necessarily spend a period of time subject to decisions you may not agree with. In both cases you will receive benefits you could not receive otherwise. You can eventually reject your family and form a new one if you choose. And in constitutional democracies you can emigrate. It is not my intention to trivialize the difficulty of doing so. It is my intention to point out that these constraints are fundamental to being a member of a social species.”

First, I don’t think nations and families are comparable. Nations threaten to lock you up in a cage if you don’t do what they want, and to shoot you if you try to escape being locked up in that cage. Not too many families I know of hold that sanction over their members’ heads. Nations (including the leading democracies) also regularly act belligerently with weapons towards other nations, leading to war, the worst possible thing there is. Most families I know do everything they can to avoid drawing their members unnecessarily into violence, and certainly don’t take trips to far off places to pick fights.

Second, to say you will receive benefits from a coercive institution such as the state that you would not otherwise receive shows a fundamental disregard for economics and individuals’ subjective preferences. With respect to the “benefits you would not otherwise receive”: (a) you would be getting these “benefits” from people who have no intimate knowledge of your situation and with few incentives to do the right thing by you, (b) you might not want these “benefits”, (c) you have to pay for them even if you don’t want them and (d) this ignores the trade-offs, namely, what you have to give up to get these things.

Third, moving is not a realistic option to escape from state coercion. States erect barriers, such as borders. Also, moving from one state to another simply means moving from one coercive institution to another. You can move out of a family, but your choice is not simply limited to moving into another family.

People who want to justify the coercive state are always trying to draw a favorable picture of this coercion by trying to find an analogy with other institutions, to attempt to convince us that the state is not so bad. The state comprises individuals who use force, or threaten the use of force, to coerce us to live the way they think we should live. That’s not what I would call “family”.

Don Rudolph
Feb 28 2015 at 12:24am

[Comment removed pending confirmation of email address. Email the webmaster@econlib.org to request restoring this comment. A valid email address is required to post comments on EconLog and EconTalk.–Econlib Ed.]

Michael Munger
Feb 28 2015 at 10:29am

A lot here to respond to, and I’m away from home with a bad connection.

But I’ll try to respond to the “club goods” thing, briefly.

It would be a mistake to treat the podcast as a sacred text, the final word on beliefs. I had thought we would come back to the clubs thing (though it is admittedly my fault that we didn’t!)

I did, after all, also write a BOOK, not an obscure book or an unmentioned book but the actual SUBJECT OF THE PODCAST, where the subject of clubs is discussed.

In the podcast, however, I do say that I don’t think that consent can be used to “justify” political authority. And I can say that consent CAN be used to oblige contractual claims in clubs. So political groups and clubs CANNOT be the same thing. Even if excerpting certain paragraphs from an informal verbal discussion might make it seem that way. That said, the passage that Greg G highlights from the podcast is, at the very best, ambiguous, and he is perfectly justified to highlight it. So, no one is right or wrong, and Greg G did a good job of highighting an important ambiguity, and possibly even contradiction, in the discussion.

So, thanks to Greg G. But given the chance to answer the question, I think clubs are an example of a contract that is binding, using non-market institutions. But this logic would not, in general, extend to states, or political authority. I’m not sure where the line is, UNLESS you grant that ACTUAL consent is the line. So actual consent is a sufficient condition for obligation. I don’t know what a necessary condition would be, and that’s a key question that Greg G has helped focus attention on.

Frederick Davies
Feb 28 2015 at 4:29pm

Great EconTalk; probably to be the favourite for 2015 unless Mr Munger takes part in another one…

As a suggestion, I believe it would be great if another talk could be made concentrating in the issues discussed in the last 15 minutes of this one, but including specific national systems. For example, what effect does the choice between Presidential (USA, France) and Parliamentarian (UK) systems cause in the political and economic outcomes? What are the long-term differences between proportional representation and first-past-the-post systems (yes, I am writing from UK)? Mr Munger said that purely majoritarian systems do not last long, but there are plenty of options to tie down the majority, and I have never heard of anyone discussing what those options (and consequences) are. Maybe an EconTalk titled “How to create a lasting political system: what to do and what not to do”.

Until such an EconTalk happens, I would like to ask if there are sources talking about those issues in a practical way (examples from real nations and their outcomes, not theory) out there.

Again, great EconTalk this week.


Mar 2 2015 at 12:18pm

Another quote, from sociologist Erving Goffman in _Asylums_, suggesting that freedom comes after your ties rather than before, quote

The simplest sociological view of the individual and his self is that he is to himself what his place in an organization defines him to be. When pressed, a sociologist modifies this model by granting certain complications : the self may be not yet formed or may exhibit conflicting dedications. Perhaps we should further complicate the construct by elevating these qualifications to a central place, initially defining the individual, for sociological purposes, as a stance-taking entity, a something that takes up a position somewhere between identificaiton with an organization and opposition to it, and is ready at the slightest pressure to regain its balance by shifting its involvement to either direction. It is thus _against something_ that the self can emerge. This has been appreciated by students of totalitarianism …

I have argued the same case in regard to total institutions. May this not be the situation, however, in free society, too?

Without something to belong to, we have no stable self, and yet total commitment and attachment to any social unit implies a kind of selflessness. Our sense of being a person can come from being drawn into a wider social unit ; our sense of selfhood can arise through the little ways in which we resist the pull. Our status is backed by the solid buildings of the world, while our sense of personality identity often resides in the cracks.


Goffman _Asylums_ “The Underlife of a Public Institution” p.320

Goffman was one of the few sociologists who could write. He worked largely by irony, which is to say that he was sensitive to things that worked backwards from what you’d think.

Mar 2 2015 at 7:13pm

1. I like Mike’s point about the size of the group corresponding directly to the size of the associated positive externality. I feel like a big issue is left out here, though.

What if my town wants a fire truck, but can’t afford one? In the world that Munger and Roberts seem to think is best, this town wouldn’t get one, because no bigger body should impose a decision on this group. But then you are completely ignoring distributional issues, no?

2. I really enjoyed the distinction Russ made between non-profit and for profit groups and their ability (or lack of ability) to price discriminate.

As someone who works at a non-profit, I have never really been clear as to the distinction between non-profit and for profit enterprises. Maybe we could continue this discussion here, or this could even be fodder for a future podcast. What are the philosophical distinctions that lead us to this separation?

Michael Munger
Mar 4 2015 at 5:31pm

Dear all:

Several great questions here. I’m in I’m in Banská Bystrica, in central Slovakia. At the University Mateja Bela. I’ll try to respond after I get back. But there are at least two, and maybe three, excellent discussions for future EconTalks here.

John Strong
Mar 5 2015 at 9:31pm

Negative rules that proscribe interference (for instance, a rule that disallows restraint of trade) are different from multi-party contracts to build things like olympic swimming pools. The former constitute a promise not to regard outcomes, while the latter have no purpose beyond the sought outcome.

Andrew McDowell
Mar 7 2015 at 6:28am

This was a very good podcast, and I would be very interested to hear a second podcast covering optimistic ideas for improvements to existing voting systems and constitutions, whether alternatives to first past the post, or rules that allow assemblies such as congress and parliament to function equitably and avoid deadlock.

If such information continues to highlight logical limitations such as Arrow’s theorem, my hopes will rest on the exchange of ideas and possible shifting of positions in the preceding debates, and the hope that we can use imperfect electoral systems to at least get rid of the more unreasonable of our elected officials.

Don Rudolph
Mar 7 2015 at 1:22pm

When I buy something in the market place there is a cost to my decision. When I buy an item, I forgo all alternative purchases. In politics there is no cost, to me, for my purchase. Others are made to pay for what I want.

Since some decisions need to be made politically I suggest the political arena be made to better reflect the market place. Maybe we should get a purse full of votes and use them on issues that concern us. Maybe we should be able to check off the services we want and the taxes we are willing to pay and then be forced to balance the discrepancy.

Ron Crossland
Mar 10 2015 at 9:20am

Stimulating, discursive discussion. The fact that an hour was insufficient to get past the first chapter indicates the idea density of the subject.

Using a myth to make a point is a daring act. One could see Odysseus’ choice as an exercise of absolute power. One he uses to teach his men that he can cause them to overturn the rules in order for the privileged Odysseus to enjoy an adventure, with dire risks to the collective, for his interest to have an exclusive experience.

Looking at the voting data that shows how tremendously unlikely the votes of the masses ever overturn the votes of the privileged seems a modern day equivalent.

Eric S. Harris
Mar 21 2015 at 10:12pm

Deciding how to decide can put a group into an awkward and irremediable position, if the process isn’t carefully thought out. Here’s an example from my own experience.

We had a problem with poor attendance in our organization. People would become members, and then over time show up less and less frequently. Eventually, we had so few people attending, we rarely had a quorum, and couldn’t officially conduct business.

For a time, we tried using proxies. As long as enough people were in attendance, representing themselves and others by proxy, we could do business. But that was always some bad combination of complicated or undemocratic.

We could amend the organization’s constitution so failure to attend recently would remove that member from the proxy calculation. But in order to pass the amendment, we would need a quorum.

Fortunately, the first few meetings after election of new members were well-attended, and such an amendment was passed.

Eric S. Harris
Mar 21 2015 at 10:52pm

It is possible to put contracts between multiple parties into the bitcoin blockchain. (I’d offer details, but I’ve probably already been slightly inaccurate.)

In light of my experience with “you can’t amend the constitution to adjust the quorum requirements to allow amending the constitution until you have a quorum”, the algorithms behind such blockchain contracts and transactions will need to be carefully constructed and verified.

I foresee some new occupations: blockchain algorithm designer and blockchain algorithm tester, among others.

Without careful effort being taken, a blockchain-defined contract/transaction/business/partnership might end up in some awful deadlock / “deadly embrace” condition where it can’t go forward, can’t go back, and can’t be altered.

Those bitcoins (or car titles or futures contracts or stock shares) could end up stuck in limbo forever. Or until a majority of the nodes in the bitcoin network agree to make an exception to the rules, for this one instance, or set of instances. That would require special-case coding for them.

If this sort of thing became a common occurrence on the bitcoin blockchain (or some other blockchain), it might make sense to define a pre-coded transaction type to allow appropriately-confirmed “undo” transactions to occur.

I think. Maybe you could get somebody from Ethereum or some other bitcoin outfit as a guest, who could bring more actual knowledge to the matter.

Comments are closed.


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Podcast Episode Highlights
0:33Intro. [Recording date: February 10, 2015.] Russ: [EconTalk Survey results summary]
2:30Russ: So, it's very appropriate that the number 1 episode was Michael Munger on the Sharing Economy because today's guest is Michael Munger of Duke University, his latest book, Choosing in Groups: Analytical Politics Revisited, written with his son, Kevin Munger, is the subject of today's episode. Mike, welcome back to EconTalk. Guest: It is as always a pleasure and I am humbled and honored to have won. Russ: Well, I don't know if you should be. It probably was rigged. Guest: I do want to thank my mom for voting 400 times. Russ: I think there's some--it could just be hacking. I don't know if it was literally rigged. We did have an interesting issue: about halfway through the survey a respondent pointed out that I had left out, through a weird typographical editing error, one of the episodes. So I put that back in at that point. So the final totals are pro-rated by percentage rather than by the actual number of votes. Price Waterhouse is probably not going to sign off on this. There are some issues. But, how appropriate! Because today's topic is how we choose in groups. Let's talk about that. To start with, why is that a challenge, choosing in groups? We choose in groups all the time. We figure out where to go out for dinner with a group of friends. We figure out what movie to watch, where to go on vacation with my family. Seems pretty straightforward. What are the challenges? Guest: We do it all the time. And like so many things that Hayek talked about, sometimes when we do something that we do all the time, we don't realize the sort of genius that's involved and take for granted. So, we as human beings do this really smoothly. And the more I thought about it, the more I thought that choosing in groups, or what I would call politics--I think my definition of politics is different from most people's, but politics is something that just comes really naturally to human beings, so it's almost on a par with Hayek's observation that if people actually understood markets they would think of it as being one of the greatest of human achievements; but instead we take them for granted. Choosing in groups is something like the same thing: we do this really smoothly. We are naturally cooperators and rule-followers and the rules that we've come up with that we don't even think much about are terrific. Russ: And that's the marvelous part. But what's the hard part? What's the big deal? Why do you need a whole book to talk about it? Guest: I would need more than just one to talk about it. I want to give credit to one of the philosophers about whom I feel most ambivalent, and that's Jean-Jacques Rousseau. He asked this great question, and that is: How can a man be both free and yet bound by wills not his own? Because when you choose in a group, unless the group is unanimous, it's likely that sometimes you are going to disagree with what they do. If you can only do one thing, even if it's going out for lunch, we can only do one thing and we are going to choose as a group, we might well choose a place that's not my most preferred. So, am I enslaved somehow by membership in this group? Now, I think that Rousseau's answer is terrifying, and the answer himself that he ends up giving is a recipe for totalitarianism. Russ: You're such a nitpicker. Guest: But that's a great question: how do people-- Russ: Sorry. Go ahead. Guest: The point is, it's a great question. So, what I want to define politics as, is, the will of the group is not the outcome. The will of the group is the way that it constitutes itself to decide. And politics is making a choice as a group and then following those rules, that we agreed on in advance, and then accepting the outcome because we followed the rules. So, it's a mistake to say--and this is close to what Rousseau said, but then he went on, and said that there's this genie called 'the general will' that we're actually bound by it, and if I disagree with that, I'm mistaken. Whereas, in fact, sometimes I don't want to do w hat the group wants, and I have to try to decide whether I still want to be a member of the group. But a group that constitutes itself chooses two things: We're going to decide as a group; and, here's how we're going to decide how to decide. That's what a constitution is--with a small 'c'. And I should give credit--this is actually James M. Buchanan's definition. It took me 20 years to understand the sort of complexity and depth of Buchanan's later work on constitutions--again, small-c constitutions. I am converted. Now I'm a Buchananite. Russ: It's with work with Tullock, also, to be clear, right? You are talking about The Calculus of Consent, 1962. Guest: The Calculus of Consent was the optimistic part. The part after that, The Limits of Liberty, Buchanan had several more books by himself, including the book with Congleton, Politics, by Principle not design, was a landmark. And it was Buchanan himself who kind of went off in a different direction. Tullock gives us a lot of the idea of people as rational and problems that you would have. But Buchanan retained a kind of optimism, and this is what in this book I would want to share: Don't throw out the fact that people choosing in groups can make themselves better off than people choosing as individuals. So, the problem was, public choice often seems to boil down to the idea that voters and politicians are just as self-interested as consumers and the CEOs (Chief Executive Officers) of corporations. That's true. But we also need to think of what Buchanan--and this was just Buchanan--called 'politics as exchange.' That we need a separate, different kinds of institutions to cooperate in groups, because bilateral or even corporate contracting doesn't work. We need politics.
8:57Russ: So, you just said a lot there. And we might end up spending the rest of the time--I'm trying to unpack some of that. I want to go back and have you repeat your definition of a constitution--small c--meaning a set of rules. That's the small c rather than capital c, which might be a particular constitution, a document, like the U.S. Constitution. I want to go back to that, and I want to go back to this issue of the will of the people, because you said something very subtle there. And it's an issue that comes up now and then on EconTalk, and I have a lot of listeners who get upset when I refuse to accept that political outcomes for the will of the people. So, I want to dawdle on that for as long as we need to. So, go back and describe again what a constitution is. Guest: I want to argue that a constitution has two main parts. I break it down quite a bit more in the book. But the two main parts are membership--that is, becoming a group, a collection of individuals, have a kind of contractual relationship where it's an agreement, that they will become a group. They'll choose as a group. And they'll accept the outcomes. Second, they choose a set of rules by which they'll make choices. And there needs to be in the first part some provision for entry and exit. So, if there is no way for me to exit this group, then I'm not really free. When you think of most of the groups that we talk about, going to lunch, I can say that I don't like the place. I'm not going. Russ: [?] myself, or I want to go with a different group of friends today, we'll go next Wednesday to my place. And of course someone who always does that, doesn't find him or herself in very many groups. Because-- Guest: And some people don't value being in groups very much. But most of us do. We actually would prefer to go with ones with other people instead of going by ourselves. So if for no other reason than company. But there are other reasons why participating in a group matters. And the contract part of this is really important. So, let me say, briefly, that what struck me was that without the ability to be coerced, voluntarily, I'm not free. And we always think this is obvious when it comes to bilateral contracts. I want someone to come fix my roof. Then, operating in the background is machinery and architecture of enforcement. So, I write a contract; I give you $1000 in advance to buy the shingles. You come a couple of days later; you put the roof on; I owe you another $8000 and I pay you. And if either of us had violated the terms of the contract, there would be coercive forces brought to bear. Some of it would be lawyers; but some of it would be men with guns. Now, it doesn't have to be the State. The thing is, it doesn't have to be the State. But there has to be some recourse to punishment. Russ: For failure to comply with the terms of the contract. Guest: And if I can't do that, we couldn't sign the contract in the first place. So, I actually want that. I want there to be some easy way of enforcing this contract without me, personally, having to go after you with a baseball bat or you coming after me with a knife. We don't want to have to enforce things that way. We want recourse to some enforcement mechanism. And in equilibrium, meaning that if we both behave knowing that that's going to happen, it never happens. Because we both obey the terms of the contract. Now it also could be that there are social sanctions. I would know that other people would say that he's a cheater: don't trade with him. But that's, in a way that's coercion, too, because business and benefits are being withheld to me, because I violated the terms of this contract. So, in bilateral exchange we're sort of used to that. Buchanan's genius insight was that you can extend this to contracts that are not bilateral. And the examples that he gives were simple. But it tended to be his experience living in a rural area. Mosquito control. If all I do is get rid of all the old tires and mud puddles on my property, there's still a lot of mosquitoes because they can breed otherwise and they fly. So, the entire neighborhood has to do this. Each of us can free-ride. What we'd like to do is have an agreement. But the agreement is not enough. Hobbes was right when he said that covenants without the sword are but words. Madison was right when he said that these kind of contracts are just parchment barriers. We need some kind of enforcement mechanism, just like we need in bilateral exchange. And in fact, that's the only way that we can be free. The paradox is, recourse to voluntary terms under which we'll be coerced are the only terms under which we can be truly free, because then we can write contracts that can be enforced. The difference is that a constitution--finally answering your question--is an agreement among a group. It's not bilateral. There's not prices. What there is instead is an agreement about performance. And it may be that if we're producing public goods, we have an obligation to pay what looks like a tax, but is actually our contribution to the performance of the contract. And, I need to have some way that I can leave--just like when we are going to lunch. There needs to be some way that I can get out. You can't just say, well, you living here is tacit consent; it's as if you signed the contract. We have to have actual consent. Not tacit consent. Which is why I'm not so sure that states and governments satisfy the conditions that I'm laying out. Because that's just a whole different question. Russ: We'll get to that. Guest: [?] Russ: Right now we're really talking about Buchanan's theory of clubs, right? I join a club, and I submit to the rules of the club, which include, probably, a membership fee, which I pay voluntarily but coercively. I accept the fact that if I don't pay, enjoy the services that there could be a punishment for that. It could be that I'm going to be taken to court; it could be I'll be shunned, like you said. It could be social. But in addition to that obviously example where I have a membership fee, there are rules of behavior within the club that I accept when I join the club. To take a silly example, I might have to wear a shirt if I'm in the restaurant of a literal club. And in that case, you could say, well, you can't tell me what to do. And your point is that you're not telling me what to do. I chose, freely, to submit myself to the coercion that if I want to eat in the cafe of the club, I have to wear a shirt. Guest: Just like the roofer is telling you what to do, you really do have to pay him. And you somewhere call the police--you are trying to steal $8000 from me. No, I fixed your roof and you agreed to pay me. We have a contract. So, yes, he's telling you what to do, but it takes place after what Oliver Williamson called the 'Fundamental Transformation.' So, we have a contract. Before the contract I can choose all sorts of things. After the contract, I'm bound by my agreement. And it's actually important to be able to achieve liberty that I can make those sorts of agreements by which I will be bound. The thing about clubs--it's an important example, and again it is Buchanan's work, as you said. The thing about clubs is, those are excludable but nonrival. Which means, in technical economic terms, it's possible to withhold if you don't pay, but the good itself is nonrival. And an example is swimming pools. So, a lot of communities have swimming pools, but you could have a guy at the gate: Are you a member, not a member? But I couldn't have an Olympic-size swimming pool by myself. We need 100 people or more to have this large facility. So it's not something that the market could provide. What Buchanan says is, the market can't provide it, perhaps; but you don't need the state because these hybrid organizations, clubs, groups, can constitute themselves to provide this. It's not true that things that have the aspect of public goods can only be provided by the state.
17:26Guest: The mosquito example is interesting because it's not excludable. Russ: Yeah--I don't understand that. Guest: Come again? Russ: Finish up and I'll come back. Guest: The mosquito example, I don't have a guy at the gate saying okay, this guy didn't pay so these mosquitoes can't go onto his property. Russ: Or have to go. Guest: Forgive me: this guy did do the work; the mosquitoes can't go onto his property. You didn't pay, so the mosquitoes can go onto yours. So, the difficult problem is, how can we constitute ourselves on things that are closer to public goods but in ways that still don't require state provision. Russ: I don't understand the Olympic size swimming pool. Obviously I can build an Olympic size swimming pool and charge people to come use it. So, I don't see that really as--why is that not a market? Why is there a problem with the market providing it? Guest: The group of people--that could happen. It almost never does, because it's risky. I might not get enough members. Whereas the group is providing an enhancement to their--Buchanan's argument was, at least, and in fact we actually see this happen a lot. Very many neighborhoods have this sort of semi-private swimming pool arrangement. It improves the value of the property of everyone around. I guess I see this more as an empirical argument. It turns out, given the transactions costs of different contracting arrangements, we just do not see private swimming pools. We do see a lot of semi-public club swimming pools. And it must be--and I'm just making an ex-post Coasean argument, it must be that that's because that's the lowest transactions cost arrangement. Russ: Yeah. I just want to push a semantic issue here, which is that we just made a distinction between three types of activities: market, state, and then this club. But to me, I like to think of the club as a different kind of market solution, and by market solution. Guest: Because you're from [the U. of] Chicago. That's the way you Chicago people think. Russ: Because it's not--I don't want to just use the word 'market' to describe profitable activities. I want to allow it to include voluntary activities. Because as I've learned from my friend Dan Klein, I think the distinction between voluntary and coercive is extremely useful. So, if I purchase a pool membership from a private, profit-maximizing actor, I don't see that as being much different from a group of us--not a group of us, because the group gets going and then after a while I just choose to join or not; there's a fee. The group isn't doing this, perhaps, to make money; but they are doing it to solve a problem. And that's the way I like to think about it. There are different ways to solve problems. Some involve profit. Some are non-profit--which could be more of a club or co-op. And some are coercive, requiring taxation. Guest: So, Gene Fama has a great paper--who won the Nobel Prize recently and who is an avid listener to EconTalk--so, Gene, if you're listening, Hello! He has a couple of papers in 1983 about the choice of institutional form as a way of making firms better able to provide these kinds of services. And I think in that sense it's fair to say it's a market. Maybe we shouldn't get hung up on this. But the series of papers that Fama wrote also said that you want to take this out of the for-profit zone just because people are more willing to make donations--for whatever reason--when they have a membership stake rather than an equity stake. Russ: What you're really doing there is you are price discriminating. What you really want to do in some of these situations is charge a really high fee to some people because they value it a lot, or they just like the whole enterprise. And that's awkward to post those. So what they do instead is they post a relatively low fee to get a lot of members--and religious institutions do this all the time; and schools do it, that are privately run--and then they collect larger amounts from certain people, using social pressure, using rewards, using the desire of people to be lovely. And they are able to then get different amounts from different people the way they would not normally in a for-profit situation. Guest: Yeah. Well, I think you have now clarified that this is--I shouldn't say only a semantic distinction, because definitions are important. I think there's a public/private difference. You might say a voluntary, coercive, or state market difference--we agree it's private. And the private, voluntary part is what's interesting. Russ: Yeah. Yeah, I like that. Agreed. Guest: So we might agree on that.
22:24Russ: Let's take one more example that you use in the book to help clarify this, which is the classical example of Ulysses and the Sirens. Talk about that as an example of coercion and freedom. Set that story up. Guest: It didn't occur to me for a long time, but this is actually an illustration of Oliver Williamson's Fundamental Transformation. There is--two--I prefer the Greek 'Odysseus': 'Ulysses' is a later Roman bastardization of it. So I'm going to go with The Odyssey. Odysseus knew that in the future he was going to want to do something other than what he wants himself to do now. So, Odysseus I is trying to come up with a set of rules, knowing that he himself, Odysseus II, is going to try to break those rules. Now, the particular story, and this is from--Circe was warning the men that were sailing on Odysseus's ship: You are going to go by the Island of the Sirens, and these are beautiful women and they sing a song that's so seductive you will lose your senses; you will swim, you will jump overboard; your ship will be dashed on the rocks. And all the rocks around the islands of the sirens are covered with the bones and wreckage of sailors and ships that were unable to resist this very seductive song. So, your sailors block up their ears with wax and cotton so that they won't be able to hear, but you-- Russ: At Odysseus's suggestion, right? Guest: Yes. Russ: Not Circe. Guest: Well, first--but Circe says: This is what you need to do. Russ: Okay. Guest: And then, yeah, Odysseus does it. But the reason I'm sending it up this way is, let's remember, Odysseus is the one giving orders. Now, that's a perfectly plausible order: 'Okay, you guys, we are going into a dangerous place; block up your ears with wax and cotton.' Fair enough: 'Okay, we'll do that.' But then he gives them a weird order: 'Second, disobey my orders. I order you to disobey my orders.' 'Wait, what? You're the Captain. If we disobey your orders, this will be mutiny.' 'Nope. I mean it. You must disobey my orders. Because I know the future Odysseus will be unable to resist this.' So, this is before and after the contract. I know that before, I want everybody to pay taxes. I also know that afterwards, I might want to cheat, if there's not some arrangement for making sure that I--and everyone else--also pays their taxes. So, the interesting thing is, this looks coercive. Suppose you were on another ship. So, what Circe said was, 'Bid your men, when you start telling them to set you free, to bind you ever more tightly.' So, when you order them to untie you, tell them if anything tie you more tightly. Because you'll be struggling to escape. Russ: Yeah; you left out the part that--Odysseus himself, using the prerogative of the Captain, left the wax out of his ears, because he wanted to hear the song. But then instructed his men to lash him to the mast so that he would not be free to steer the boat toward the rocks because of the seductiveness of the singing. Guest: And he won't jump overboard. Russ: Correct. So, he's telling them in advance: Tie me up, and if I struggle, make sure that the ropes hold tight and don't listen to my orders to untie me; which I will probably give. Guest: Disobey my orders. Russ: Which, by the way reminds me of one of my favorite scenes in Young Frankenstein, when Gene Wilder says, 'No matter how much I beg, don't open that door.' And when the moment comes, of course, he's desperately begging and pleading. Teri Garr is filing her nails, and Igor is whistling or something; and they ignore him, because he told them to. Guest: Yeah. He orders them to. Russ: That's Frederick Frankenstein 2.0; and it's too bad, because 1.0 said 'Don't open the door.' Guest: Yeah. So that's the symbol--if you look at the cover of the journal that Buchanan started, Constitutional Political Economy, there is Odysseus bound to the mast. So, the question is, can we come up with a set of rules that will bind us after we decide we don't want to follow them any more? Maybe because we disagree with the outcome. Because if we can't, we won't really be free. Odysseus would not have been free--they would have had to take a different route if he couldn't have done this. Or, he would have had to put wax and cotton in his own ears; he wouldn't have had the option, which he wanted, was to hear the song and not die.
27:11Russ: So, let's now get to the will of the people. I'm going back to your earlier comment that started this conversation, piece of the conversation off. Basically you are arguing if I'm in a group--and I want to emphasize this because I want to come back to this point in a second--if I voluntarily accept membership in the group--this could be a contract in a bilateral exchange, but we're talking about politics so it's not bilateral, typically. It's a group of people. We constitute the group. I choose a set of rules--we, excuse me--we choose a set of rules. And then, even if I don't like the outcome, which some of the people almost by definition will not, I abide by the rules, by the outcome, certainly. But you are also suggesting it has some sense of capturing our will. And I'm going fight you on that for a little bit. So, try to make the case. Guest: Again, it's the Fundamental Transformation. I start out as an individual. Now, if we're talking about states, I really don't. I would have to be a member of some group because I can't possibly survive on my own. And so we usually tell this mythology about tacit consent, when it's a state, that if I live within a state then I am agreeing to its rules. And David Hume compared that to, if I'm drugged and taken aboard a ship and then I wake up the next morning and we're a hundred miles out at sea and you say, 'Well, you don't have to stay on this ship. You could jump overboard and be devoured by creatures of the sea.' That's not really consent. I was taken aboard without my consent. What I want to argue is: I don't have to board this ship. I can board other ships. Or I can survive on my own. It's my choice to say, 'Looking at these rules, I'm going to accept these outcomes.' And that's the agreement that I sign. Now I admit that that's a pretty difficult condition to meet, and many of the groups that we might think of as being coercive, that condition might not be met. But my point is there's an existence proof. The will is to say, 'I think I'm going to be better off being a member of this group'. And one of the things I would want to know are: What are the exit provisions? What do I have to do to get out? So, the sort of example that we might worry about is, a homeowner's association in a neighborhood. And we start out, we have a set of rules for the homeowners' association. It happens where I live there are rules where you can't plant a tree or cut down a tree, you can't paint your house without permission from the homeowners' association. But I knew that coming in; and that was the agreement that I accepted when I purchased the house--maybe because I don't want other people to have that right, either. So, it's a solution to what might an externalities problem: We don't want people doing bizarre things to their houses and hurting property values; but it means that I'm bound by that, also. Now the neighborhood association changes the rules and says, 'We're going to have much more restrictive decisions; and you can't change the color of your curtains. We can see those through the window and you can't change the color of your curtains without our permission.' In the first case, the will of the group was actually met by agreeing to the rules. In the second case it's not so clear because we're changing the rules in the middle. So, what I want to say--this isn't me; this is Buchanan's claim--the consent is not to outcomes. The consent, the will, the collective will, is to the constitution. And oftentimes if you change the rules, that's coercion that wasn't consented to. So, that distinction may seem too subtle, but it means that we might be able to get consent; and that's the will of the group, the will of the individuals who make up the group, can be embodied in the constitution. Not in the rules when we change the rules. Russ: So it seems to me there's two things that are left off of the earlier, two-part description of a small-c constitution. So, I think--correct me if I get it wrong--you said, Issue Number 1 is who is in the group; and Issue Number 2 is how do we decide--what are the rules by which we make group decisions? Correct? Guest: Yes. Russ: So I would say there are two more things that have to be made clear. One is, what are the rules for changing the rules? And in the United States we have two ways to do that. We have the Amendment Process to the Constitution; and then we have the opportunity to call a Constitutional Convention. Which has not been invoked. But it could be. Guest: Well, it did happen once. And it turned out pretty--they changed a lot. So we may not want to do that. Russ: Right, so we did that once. But we haven't done it since. So: Who is in the group? What are the rules for making decisions? What are the rules for changing the rules? And I'm going to add-- Guest: That's part of 2. Russ: That's kind of--I know. Guest: Divided. There's actually 5. But if you divide it into 2, the rules have to include rules for changing the rules. But you're still right. That's very important. Russ: And then the 4th thing I would add, which to me is central: and if we look at the evolution of the political process in the United States, to me, to be, is the central thing. The central thing that we haven't talked about yet is: What is ¬allowed? And I understand this is really part of the rules, but I'm just breaking it out. What is allowed to be decided on? Is everything up for grabs? Because that's obviously--there's two points to be made there. One is, that's going to affect my willingness to join the group. And secondly, how much leeway is there in the actual outcomes relative to the rules? Because we know the rules can specify all situations. So, there's some dimension of discretion on the part of the officers/politicians/whatever it is, about what the rules actually are. Because we don't want to write a set of rules that cover every conceivable situation. That would be impossible--because of the knowledge problem, information, transactions costs. Guest: It would be expensive to try. And we'd fail.
33:50Russ: So, by definition, so if the rule says that the homeowners' association has the right to decide aesthetics, physical attractiveness, which means, would allow, say, a cutting-of-the-lawn requirement or painting peeling paint, etc. But does it allow curtains? At the time, everybody said, 'Of course not' when they created the agreement. But a later Head of the Homeowners' Association, who has got this thing for curtains, suddenly he decides that's part of the aesthetics; and there's a case to be made. So there's this--to me, there's a big range of discretion, uncertainty, that, possibly when the group is first constituted it's pretty unanimous. There's a real consensus about what falls within the rules. But there's some slippage over time. And I see that when I look at the U.S. Constitution. And I of course totally agree with you, as I think every listener will imagine, that I don't see the U.S. political system as a consensual act on my part--I'm a Humean there. The Constitution seems to have drifted. What would have been allowed in 1850 isn't allowed or is allowed in 1950. And as a result, the authority of the state has been expanded. Includes what I drink, what I do in my bedroom, my kitchen, etc., etc. Those extensions or changes seem to me to be the challenge that any of this noble, overarching story has to do with reality, is that it sounds good, that we agree to the rules, but the rules don't always--it's not exactly what the rules apply to. Guest: There's two responses that I have. And I'll try to be brief. First, many of the issues that you're talking about apply equally well to any kind of complex, over-time contract between two individuals. So, the hold-up problem, the kind of Klein, Crawford, and Alchian, [Benjamin Klein, Armen Alchian, Harold Demsetz] Alchian-and-Demsetz problems, for a theory of the firm, we can't write a complete contract there, either. And so we need some way of adjudicating disputes. Maybe we can try to write it into the contract, but it's too hard to specify everything. So, if it's a long-term contract, one of the things that you might see is Coase-Theorem sorts of results where it might be easier for me to acquire my supplier rather than be subject to holdup problems. And so there's a question about the optimal size of the group. Even in private, bi-lateral contracts. So, that's always a problem of having slippage if it's a long term rather than one-off contract. That doesn't mean that it's easily solved. But it's not unique to choosing in groups. Russ: That's correct. Guest: Beckons[?] your example elides over into, say: Well, what about the state? And neither Buchanan nor I would want to argue that this is a way of justifying the stand. I don't think you can. What I do want to say is there are things that are private, and voluntary, but don't rely primarily, look like market institutions but use some sort of collective choice--voting or other way of aggregating the views of the people who are members, that nonetheless can serve the interests of the members in the group. And people will find themselves better off signing these sorts of contracts. Russ: Explain. Guest: So if anything--if anything, if groups of us--and this is the way the Lewis and Clark example that is in the book: Groups may use, not bidding but some sort of voting mechanism for trying to get information about what they should do because they are not sure. Individuals have views on this; we have to choose as a group. And so we use institutions. There's all kinds of ways of voting. It doesn't have to be majority rule. But they use some mechanism for voting, a non-market way of choosing. Which is a discovery process. Markets use prices as a discovery process for trying to decide the relative value of resources. Politics using voting as a discovery process to illuminate the relative value of different alternatives. And no individual in the group may know which one the group thinks is the right one to do. Does it work perfectly? No. But in many settings it may be only choice that we have.
38:24Russ: So, let's turn to voting. Which--and the example you start with in the book is really a beautiful one. It's a little bit complicated. But the gist of it is, is that Lewis and Clark, and their expedition, which starts off as their being all men but they later add Sacajawea, a woman, but it's mostly men. This group ends up at the Pacific Ocean, near the boundary of current-day Washington State and Oregon State. And it's unbelievably miserable; and it's not clear they are going to make it back alive. They have weather threats, they have Indian threats; they have a problem that they may not have enough food. So, it's a really important decision to decide what to do now that they've reached the ocean: Should they--and their three choices are, if I have this correct: Head north, head south, or head inland. Is that correct? Guest: Yes. Russ: And so, what's fascinating to me--and I read Undaunted Courage, or I listened to it on tape; it's one of the best, most engrossing things I've ever listened to, or I'll call it read--it's an incredible, incredible book, and it's worth reading-- Guest: Stephen Ambrose wrote it, for listeners. Russ: And it's worth reading, even, if just for the ending, for the post-expedition ending. Unbelievable story. So, throughout the expedition, Lewis and Clark, they're the boss. There's two of them, the two of them. How many men start off on the trip? Was it 39, something? 40? Guest: Including hangers' on, 45. Russ: Okay. So, throughout the trip, they've been--it's not a democracy. They whip people, who don't obey decisions. Guest: Well, it's a constituted group that is not a democracy because it's a military hierarchy. Lewis and Clark are Captains; and the others, the highest rank is Sergeant. And there's no question what happens when an enlisted man disobeys an officer, in what in effect is wartime--in hostile territory. Russ: And so they come to this point and they do something surprising, you point out. So, describe what they do. Guest: Well, one bit of background: my co-author on a couple of earlier books was Melvin Hinich. And he and I were going to do a new edition of this book. It would have been very different. He called me on a Sunday and said, 'I think Lewis and Clark actually voted; and they had more than two alternatives'--which for technical reasons, people who study social choice, that's potentially interesting--'You should go look this up.' And so I said I would and we would talk later in the week. But the next morning, Mel fell down the stairs at his house, broke his neck, and died. Didn't survive the fall. His wife found him at the bottom of the stairs. That was the last conversation I ever had with Mel. And I wrote a very different book. I didn't write anything for a while. I kind of shut down. But that example was something that Mel pointed me to. And what's interesting about it was that it was a choice that had an interesting structure because there's three alternatives with no majority in favor of any of them. But what's more interesting is what you've already alluded to. This was a military group. Lewis and Clark in the past had been the only people in the entire expedition that thought what turned out to be the South Fork of the Missouri River was in fact the Missouri River. All the men wanted to go north. Only Lewis and Clark said, nope, nope, we're going to take this south one; it looks like the Missouri to us; that's the one that's going to lead us to the Shoshoni. And the men said, 'Okay, you guys are the boss.' Because they were. Now it may have helped that Lewis and Clark were correct, and it was in fact the correct fork of the Missouri. So, it was not true that Lewis and Clark were in any way afraid of exercising their obligation to make choices and be responsible for them. They were perfectly happy to be in charge. Not one qualm in the world. Nonetheless, in this case they voted. So I think the first thing: they asked for a vote. So I think the first thing that's interesting about this is, Lewis and Clark themselves must not have had very strong views. They weren't sure which one was the right thing to do. They wanted information and they wanted to have, I think, the participants feel like they'd had some stake in the outcome. And those two are the reason that I think we often conduct votes. In groups, we might have informal--things that are not formally required by the rules--we still might ask everybody what they think. Now, maybe we count votes, or maybe it's just a deliberative process where everybody expresses their views. But there's something fundamentally human about those two ideas: let's see what everybody thinks so that we can get information: Maybe we're wrong. And second, we get a sort of affirmation that this is what we want to do with all of the problems of attributing will to a group. Because a group can't have a will. Only individuals can have will. But this is what we as a group are deciding to do, and the chance to express it publicly like that--there's something very human. I describe in the book what the scene must have been like: It's 45 degrees; it's raining; it's been raining for 6 days. They're not in a hotel--they're in tents. Russ: They don't have any Gore-Tex, either. Guest: This is bad. Their clothes are rotting. They have to get this right. And so, each of them in turn says, 'This is what I think.' And then a decision was made. They went to Fort Clatsop, and now you're back to the story that Ambrose tells so well. But in this one brief choice, they re-constituted themselves, as a different kind of group. Not a democracy exactly, but as a group where each person's opinion counted the same and tried to say, 'Well, what should we do?'
44:50Russ: Now, I just want to make one cynical remark about voting, and then we'll go on and talk a little more about Lewis and Clark. Of course, we don't know--I don't think we know; correct me if I'm wrong--it's possible that Lewis and Clark had informally canvassed the group and they knew what the vote would be. And this happens in organizations all the time. It's true that the vote decides things, but there are people in charge of when to vote, and so that decision of when to vote and knowing the vote in advance can effectively give the illusion of a group decision when in fact it was really the decision-makers at the top, who, if they didn't like the way the vote was looking they just would have said, No, there's no vote; we're going to Fort Clatsop anyway. It's also possible they could have come out for Fort Clatsop, they could have said, 'We still don't agree with you.' So there's a certain romance about this--it's very moving actually because of the situation that they were in. The point I want to make though is that I think the information provision of voting is overrated. James Surowiecki in a wonderful book called The Wisdom of Crowds talked about the different ways that knowledge gets aggregated through various surveys, voting, etc. And I'm skeptical about a lot of that. Often in voting, the fact that people have limited incentive to vote wisely seems to me very destructive of providing and producing information. In this particular case, though, the fact that it was probably life or death, probably did 'concentrate the mind wonderfully'--to quote Samuel Johnson. And so maybe they paid a little more attention to what they voted on, and maybe they spent a lot of energy arguing with each other to try to help produce that information about what was the best choice. But I'm a little bit skeptical of voting, when there's not that much incentive to be informed. Guest: Sure. The problem is, compared to what? The impulse that you mentioned: voting can certainly be manipulated, and that's what the rest of the book is about-- Russ: Yeah; we're going to talk about that. Guest: But what's interesting is that in spite of that, how often do we use it? Is our faith in voting or some kind of expression of preferences misplaced? And a lot of times I don't know what else you would do. Five of us want to go to lunch; somebody says, 'Where do we want to go?' Well, they don't really mean that. What they mean is 'Where do you want to go; where do you want to go; where do you want to go?' It may turn out we all have the same view. We probably don't. And so the first thing we're doing is collecting information about what people want. And that's not voting exactly. That clearly provides information. Then, though, we have to say, All right, given that, what are we going to do? The problem with voting is that it collapses the information-gathering and the authoritative result into one. And often it's in groups that are so large the incentives to actually get information about the outcomes is limited. I may just say, 'This is my opinion,' in hopes that--people will think me lovely, because I'm saying something that sounds charitable, knowing that my vote can't possibly influence the outcome. And so, Geoff Brennan and Loren Lomasky have a great book, Democracy and Decision, where they say, in groups that are larger than just very small ones, there's no reason to expect the views that people express to have anything to do with what they would actually pick. But in this group, for Lewis and Clark, it was striking that they had chosen to have a vote. And I think the thing that's important to remember about Lewis and Clark is that it turns out that Fort Clatsop, the choice they actually made, was really only tied with the next best choice, which was to go north. So, there was no big dispositive outcome. And Stephen Ambrose, in his account of this, I wouldn't say that he gets it wrong, but he has the wrong emphasis. And everybody has the wrong emphasis. They over-romanticize this. So the sort of trick about using this example is, yes, it's great that they had this vote, but it didn't settle anything. Probably what Lewis and Clark thought was, 'Darn; now we have to decide.' Because there's no majority in favor of anything. And according to one of the accounts, depending on how you count the votes, it's really either a tie or very close to a tie. There's no majority. What I thought was cool was that there were 3 alternatives. Why? Nobody said: There's going to be three alternatives. It was because there were actually people advocating for each of these three and so they narrowed it down to that, because those were the 3 camps or factions. Russ: Yeah; they could have made it four. They could have said: Camp on the beach and keep a 24-hour guard to see if a ship shows up. There could have been many. Guest: Yep. But nobody was advocating for that. So there's an endogeneity to this decision structure that I just think is fascinating--that a group of people struggling with a difficult problem tried this. And you could easily imagine if they had chosen a different way of approaching it, they would have gotten a different outcome. Russ: Yeah; we'll talk about it in a sec. I just want to emphasize the exit part again. In this particular case it's probably, as clear as possibly can be, that if you disagreed with the choice and you said, 'I didn't vote for Fort Clatsop. I voted for heading inland for the winter because I thought game would be more plentiful there,' a person said, 'so I'm going off on my own'--it's like Hume on the boat--he's probably not going to make it. The exit opportunities here are very limited. And, it's possible, by the way--I don't think you wrote about this--that Lewis and Clark--not only would one of the people die if they went off on their own, but maybe many of the group would die if some of them went off on their own. You could have had a subgroup, say, 8 people or 10 or 12 people go off in some of the boats: 'We don't like Fort Clatsop. We're going off on our own.' And the answer was: 'Well, then we're all going to die.' Because there's economies of scale in hunting and provisioning, etc. Guest: Well, defense. You have to be a large enough group that if you come upon a group of-- Russ: Fighting. Guest: Yeah.
51:18Russ: The other point, going back to the lunch. I think it's really important to think--and for me, this is a way I often just think about what belongs in the political sphere and what belongs in the private sphere--you don't want too much stuff in the political sphere, that, when it's possible to choose on your own and not be harmed--right? So, if I choose, for example, to be a vegetarian inside my home, and the homeowners' association says, 'We just don't like the idea that there are people who are vegetarians here,' that's going to make it, even though no one else can see it except maybe when I'm opening my car to take out the groceries; or vice versa, 'We won't have any meat-eaters here.' I can understand why people might join together who want to eat a certain way. But those are private choices, fundamentally. Those are private choices. And the more we-- Guest: By 'private' you mean individual. Russ: Yes. Guest: Because it could be--the homeowners' association is a private association, but it's still a group. So, you mean an individual choice. Russ: What I really want to say is, a homeowners' association that wants to dictate everything I eat is no longer what we would think of as a homeowners' association. It's a--what'd you call it? What do you call a group of people who live on their own and have really strict rules? Not a cult, but it's close to a cult. What's the word I'm looking for? There's a word for it, when a group of people go off and live on their own under very strict rules, right? As a group. It will come to me later, maybe. Guest: I think it's a sociology department. Wait--that's not right. No, never mind. Russ: That's a cheap shot. A terrible thing to say. Russ: I'm thinking of a commune. That's the word I'm thinking of. A commune says, basically: I choose to be in a group where an enormous range of my behavior is dictated. It might include how I raise my kids. Guest: Russ, what are you doing here? [?] Russ: What? Guest: Let's say, we're platting out a new neighborhood. We've paid to have the roads built. We're developers. But we want people to keep kosher. Or we want people to be vegans. So, in the initial agreement to sign up, it says, 'Only vegans can buy these houses. And you agree, if you live in this house, to be a vegan.' Isn't it different if I'm looking around at different neighborhoods and I see this one and I say, 'Oh, that's right, I'd like to be a member of that kind of community because that's a group of people joining into a group, constituting themselves voluntarily, with foreknowledge, that's different--full stop--from the homeowners' association that's taken over by a majority of vegans and adds this now to their constitution. Russ: No, I totally agree. And maybe I'm going down a bad path here. What I really want to say is, in the political, public solution, the more things we put into the public sphere--which are, by definition, as you say, not voluntary--right? I'm not really voluntarily joining the group called The United States; I'm born into it. In that world, I think, I'm very eager to limit the things we put into the political process, limit it to those things that are not what I would call easily solved by private choices. That is, what I do on a Wednesday morning, what time I wake up, etc., etc., what I eat for lunch. And I think to the extent that we, that certain groups push toward making public those decisions, we get discord. And the example I wanted to use with lunch is, yeah, well, if the group always goes to the same place for lunch--and there are groups that do that; they have a regular lunch meeting--that tends to attract people who want to do that. And that's great! There's nothing wrong with that. As we said before, it's not coercive. And some people might drop out of the group after a while, because they're sick of going to the same Chinese restaurant. Guest: At Mercatus, people say, 'No, Tyler. I don't want to go to Mala Tang again. Russ: And there's back and forth, and there's discussion and negotiation and consensus comes about again; and some people move in and out of the group. But that's a really different situation from the political process of a national government where you, if you dictate things that don't need to be dictated--in other words, life or death, it probably is a good thing that we coerce ourselves. It's probably a good thing that there is a defense budget. It may be bigger than I'd like; it may do things that I don't like with it; but I can see that there's a real public-ness to defense. And maybe even to mosquito abatement. But then, once you start moving into other things, to me all the logic falls apart. Guest: And that--I do want to keep defending Buchanan. What Buchanan's worried about is a monolithic Leviathan. Because he thought, once you have a state, it will just eat all of the other choices. It will pull all of them inside, like a sort of great vortex. All of the choices will become public because that's the way that states work. That's the logic, is to expand. Which is why he wanted private groups. So, a private group is one that can say--we want to have a commune. And you can join if you want. Maybe [?] require that there's some sort of exit provision. But if people sign up and there is no exit provision, maybe that's on them. Maybe we can have a legal system that allows them to leave under some circumstances, for breach of contract. But allow any sort of private group that you want. As a group, choosing as a group, not contracting through markets. But that's actually the way that we can limit the size of the state, and say, if you want to do that, form your own group. Don't force everyone to have it. Because that's coercive.
57:19Russ: That comes back to an argument we're not going to get into, but what's the correct size of the body politic and the advantages of a state system or pushing things down to the local level rather than having them be imposed across all districts. Guest: Yeah. Russ: And there are a lot of advantages to, just trial and error advantages to just having lots of districts and less national political solutions, for sure. Guest: And so, Buchanan was a Federalist for that reason. But since we're not going to get to it, let me just put in a plug for Vincent Ostrom and polycentrism. Where you have this reflective, adaptive set of changes. Where you recognize that the size of the group should correspond with the size of the externality or public good that you are trying to internalize. Russ: That's what I wanted to say. My long rambling comment of a minute ago. Say that again. And for the listeners who don't know what you mean by 'internalize' is we had a--in the Alex Tabarrok episode he talked about how a private developer can internalize externalities. So, that's a phrase that slips easily off our lips. So, go back and explain the Vincent Ostrom example. Guest: Well, what Ostrom argued for was what he called polycentricity. And he thought that states and public organizations are really bad at matching the size of the decision body to the size of the problem that they are trying to deal with. And so the problem might be mosquito abatement, which is relatively local. Or the problem might be national defense. Which is, by definition going to be pretty large-- Russ: national, pretty national-- Guest: And so the least protection, maybe that's larger fire protection's relatively local. Maybe you can handle that with small volunteer fire departments. What Ostrom was preaching was a sort of Hayekian ignorance. I'm not sure of what the right scope of this should be. So, let's try to match the size of the group that decides with the size--and I'm using air-quotes--the 'size' of the problem. And by size I mean, what's the extent of it? Is it a neighborhood? Well, let the neighborhood work on it. Why would the state dictate to neighborhoods? This is a neighborhood problem. Let's let them choose. So, we're not sure about this match-up. And by 'internalize,' all we mean is a way of solving the problem that the group would be satisfied with. And so we are back to the Buchanan and Tullock distinction, which Vincent Ostrom took and ran with: If the decision group is larger than the size of the problem, you are going to impose, unnecessarily, a uniformity of choice when you could have diversity of choice. This neighborhood wants to do this, this neighborhood wants to do this: why have a one size fits all solution when the different groups in choosing, all of them could be better off because they don't have to accept a single outcome? Which is what states do. That's really all states can do, is say, 'Here's what we think.' And that's just not true. We don't think that. Russ: And just as we don't go out to have lunch with 2000 people every day, there's some optimal size of the group with an understanding that not every day you might be happy but most of the days you would be, and your willing to enjoy the company of the group. You're willing to go to a place you don't love because you enjoy the company of the group, if it's special enough to you. Guest: It's also hard to talk if there's 20 of us. If there is 20, we'll probably break into 2. And we just do that naturally. We figure this out. And so, Vincent Ostrom is hard to read but the insight of Polycentricity is brilliant. Because it means that we're not sure and we may have to adjust it over time. So, now that we didn't talk about it, we talked about it. Russ: Yeah. And I'm going to just add that when you just said in passing, maybe fire departments could be voluntary--and I'm sure some listeners said that's a wacky utopian idea. But of course in many times throughout the world, voluntary fire departments have been effective. I'll put up an essay from the Library of Economics and Liberty--I think it's by Fred McChesney--on this. Hope I have that right.
1:01:44Russ: Well, we've gone for about an hour, Mike. We're about a chapter into your book. What I would like to do is very quickly lay out--and by quickly I mean in a minute or two--some of the issues that arise. We've just gotten to, some might say, the interesting part, which is voting, and what are the consequences of particular rules? And you raised a tantalizing example of when there are three things to choose from, things get surprisingly complicated. So, just very quickly lay out some of the issues that arise with voting and then maybe we can have another episode of EconTalk to talk about how voting works and doesn't work. Guest: The difficult thing about specifying rules to decide about how we're going to decide is, one thing we have to do is decide how to change the rules. As you already said. But the problem with deciding how to change the rules is that people will want to select rules based on what they think the outcomes will be. And so if we disagree about outcomes, we'll disagree about rules. And that means it may be difficult for us to make a decision that's actually defensible. The difficulty with using majority rule, or what many people would call democracy, actually to decide things and particularly to attach moral force to it--and I see this all the time: people say, 'Well that's what the majority wants.' Who cares? Why would you expect rectitude from the multitude? Why would you expect one person, who you think selfish and I can't trust, if you put him together into a mob, why would I say, 'Okay, that I trust'? 'If it's a mob, a bunch of people. I trust them.' The thing is, there's an additional technical difficulty that I don't know why isn't taught in high school, and that's what often is called Condorcet's Paradox, although in the book we document the fact that it dates to the 11th century. Interestingly. It's a very old result. And the simple version is that if there's 3 choices, 3 choosers, and disagreement, democracy may be radically indeterminate. So, if there's 3 choices, 3 choosers, and disagreement, democracy may be radically indeterminate in the sense that the sequence, the rules, all of those things have more to say in determining the outcome than the preferences that we think we are trying to aggregate. The problem--real problem--is that that will not be apparent to the participants. So, it looks like-- Russ: Unless they read your book. Guest: And then they should absolutely all buy the book. I actually, I've made presentations to groups of visiting scholars from India, China--and they hear this and say, 'This can't be true. No one ever told us this before.' Well, it doesn't follow. I'm trying to tell you now. So, what that means is, this is actually terrifying. Democracy is radically indeterminate. The outcome can be manipulated. But that manipulation will not be apparent to people unless they have seen this technical result. Which means that you sort of--you can have shamans, people who know the rules, be in charge in ways that are tantamount to dictatorship. So, we should be very skeptical about claims that 'this is what the people want.' I think ontologically, that is, in terms of existence, the idea of the will of the people is a genie or will o' the wisp, that we shouldn't really believe in. But for technical reasons, that notion of outcomes being the will of the people, we should be very skeptical about. Russ: So, rather than postpone this other episode, now that you've launched into this so eloquently, why don't you talk about--what do you mean, 'indeterminate'? What do mean? You have a vote; you get an outcome. What's the big deal? Guest: The way that you just said it is correct and if that's all people would interpret it as, then I would agree. So, here's what I would say: Individuals have wills. Now they may be confused--there's behavioral economics that say maybe my preferences can be manipulated. But I have objectives; people act purposively. If I have better information then I'll make better choices. So I know what it means to say an individual has a will. Maybe I have competing wills; but economics is about tradeoffs. So, I want to lose weight and I want to eat donuts: I'll work that out somehow. But why would you expect that a group has a will? And James Buchanan in his famous review of Kenneth Arrow's first book on social choice in 1954 in the Journal of Political Economy has just a remarkable insight. Of course you would expect democracy to be indeterminate if people disagree. How could you possibly come up with a consensus out of disagreement? It would be magic. And unless you believe in magic you shouldn't expect that. So, individuals have wills; groups have choices. And choices depend on decision rules. And that's why Buchanan wrote about choosing how to choose. The Calculus of Consent was mostly: How should we pick rules knowing that rules really, really matter? So, what I mean by 'indeterminate' is: given a set of preferences--you have a group of people; they disagree but they want to choose as a group, maybe because it's like Lewis and Clark, they know that they can't split up. They actually have to stick together. We're just going to have one choice here. But we disagree. What rule should we pick? It turns out that different rules may imply different outcomes. And when you say that, it doesn't seem like a big deal. But of course it is. The same preferences with different rules give you different outcomes. Well, if that's true, the choice of rules is tantamount to dictatorship. Whoever can make the rules that they want can get the outcome that they want. So what I mean by indeterminate-- Russ: And if people don't know that, they are very vulnerable. Guest: Well, and the people who make rules would always say, 'We're going to do what people want. And here's the way that we're going to decide that.' So, the difficulty, when I say democracy is indeterminate, we tend to think of voting procedures as being epistemology--that is, knowledge. We know that the voters want something and we're just going to use voting procedures to try to figure out what that is. That, on its face, sounds like it makes sense. It just turns out not to be true. Often, a majority is opposed to every alternative. Which means that we are basically playing rock, paper, scissors. So if you have 3 alternatives, there's 3 different majorities. If you say, democracy is doing what the people want--well, do you want the majority that thinks A is better than B, the majority that thinks B is better than C, or the majority that thinks C is better than A? Because you can't have all of them. You are going to have to violate the will of one of those majorities. So there are internal multiple majorities. And what I think is remarkable is you read the Federalist Papers, you read Madison--they had a sort of inchoate understanding, an intuition about this. So, if you look at the design principles of most constitutions, they recognize that this is a problem that they have to solve. The people who didn't recognize this problem--we talk about it in the book quite a bit--was the French; and the period after the French Revolution, 1792-1794, you actually see the indeterminacy of democracy at work, with all the chaos and killing that that would imply. So it's literally indeterminate in the sense that they couldn't make a decision and stick to it. And the result was revolution and dictatorship, in the form of Napoleon.
1:09:34Russ: So, this example--and this arises typically with three or more choices--I'm sure some listener is going, 'What are you talking about?' One way to see it is, it matters, the order in which you vote. So, if you vote A against B and then the winner of that goes against C, you might get a very different outcome if you voted A against C and then the winner goes against B. And there's some nice examples in the book of how that can happen. What that means is, when you said there are different rules that lead to different outcomes--what do you mean, 'different rules?' Sure, voting is going to be different than the strongest person gets to decide, say. Or the tallest person, or the richest person. These are just standard majority voting procedures that really have very unattractive aspects when there's more than 2 things to choose from. Guest: I often--if I talk to, go to a retirement home or something, I'll just say, let's try this voting rule. And people say, 'All right. That makes sense.' Assuming that it's neutral. But it's not. So this is not yet trial by strength or a 5-mile race. These are different, apparently equally-plausible voting rules. The differences should be innocuous. But they are actually determinate. So, if the choice of rules is determinate, the choice of preferences can't be. Which is why I say democracy is indeterminate. We want to go from what the people want to what the government does. But what the people want is not determinate, because it depends on the rules. Russ: Which allows, say, a Chair of a meeting who decides what the order of the vote is--which seems totally innocuous--to actually control what the outcome is. If the Chair knows enough. Guest: Or, the alternative that some people will say when I make that argument, that seems bad--if the Chair can use what looks like democracy to pick the outcome, that's not really democracy. But they still--'Wait, but people can vote strategically'--Wait. What you're saying is that the voters can lie about what they want and thwart the will of the Chair--that can't possibly be what you mean by democracy. Voters lie in order to prevent being manipulated by a dictator. That just sounds like dictatorship to me. Russ: And of course, political institutions in most situations, in fact almost every situation--it's never as simple as, we'll just have a vote and we'll abide by the vote. Occasionally in life--and I gave the example of Lewis and Clark that they could have changed their mind about the legitimacy of the vote if they didn't like the outcome. Similarly in a family, I can have my children vote; if I don't like the outcome I can just say, 'I'm in charge here.' But in fact, in most political realities, we don't use majority rule. We have a very complicated layering of institutional complexity interacting with majority rule. Right? So we have two-thirds; we have committees; we have multiple houses; we have a veto; we have the Electoral College. So, the United States is not a very majoritarian place, even though I think in the public[?] mind-- Guest: No place is. No place that survives is majoritarian. That's what is striking, is, all countries that survive have what are in effect ways of controlling this problem. And so the insight that comes from this is, you can explain what look like odd institutions because--no one may have understood it. This is a very Hayekian point--no one may have understood that they are getting stability from this. They are getting a determinate choice. Now, it may be arbitrary. But they are getting what looks like a determinate choice because the alternative is chaos. Russ: Endless cycling; things being put up for a vote again with a different outcome. Guest: Yeah. You probably wouldn't get cycling. What you would get is revolution, because it doesn't seem legitimate. So we almost never observe endless cycling. What we do observe is a democracy where people say, 'I didn't agree to abide by this outcome' followed by revolution. So, France, in the 18th century, and Egypt in the last 5 years. Both have gone from democracies to dictatorships, partly because of their inability to come up with institutions that people accepted as legitimate. It's a harder problem than we act like it is. The United States just tells other countries, Oh, you should become a democracy. Well, that's not what we did. What we did was we chose a set of pretty strongly anti-majoritarian institutions. Russ: Yeah.