Book Review: Ideas, Interests & Consequences by Andrew Gamble, et al.

London: Institute of Economic Affairs; North American Distributor: Arias Foundation, 4210 Roberts Road, Fairfax, VA • 22032 • 1989 • 133 pages • $15.00 paper

This collection of essays from a Liberty Fund symposium held at Windsor Castle on June 26-29, 1989, addresses one of the most important theoretical and practical problems of our day. If political decisions are largely the outcome of interest-group pressure, then what role is left for ideas in changing the polity? Do ideas make a difference? All six authors—Andrew Gamble, Mancur Olson, Norman Barry, Arthur Seldon, Max Hartwell, and Andrew Melnyk—address this problem from various historical, theoretical, philosophical, and practical perspectives.

John Maynard Keynes concludes his General Theory of Employment, Interest and Money with the famous statement that

[t]he ideas of economists and political philosophers, both when they are fight and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. (emphasis added)

But can we be so sure? Consider the so-called Thatcher and Reagan popular free-market “revolutions.” Neither constituted any fundamental change in the basic institutions of the polity or instituted constitutional changes in the rules. As a result, despite whatever short-term gains, with regard to releasing the power of free markets, might have been achieved—a very doubtful proposition even at that level—the long-term prospect is simply more of the same welfare/warfare policies that preceded Thatcher and Reagan. It is “policy within politics” as usual.

The evidence from these “revolutions” suggests the analytical power and empirical relevance of the extreme interpretation of public choice economics. This argument stated in the extreme proclaims the victory of interests over ideas. Indeed, the world is ruled by little else. Politicians are vote-seeking “entrepreneurs,” and most voters are rationally ignorant of the preponderance of issues—concentrating instead on only those issues that are of special interest to them. The interaction between rationally ignorant voters and vote-seeking politicians produces a bias in government decision-making toward policies that yield short-term and easily identifiable benefits at the expense of long-term and hidden costs. This usually produces policies that result in concentrated benefits to well-informed and well-organized interest groups, with costs dispersed among the ill-informed and ill-organized mass of voters.

This public choice argument is a powerful one, but one that is generally misunderstood. It is not the case that interests rule out the influence of ideas, just that within any existing polity interests have certain advantages over rational argument when it comes to satisfying the demands of political actors. But ideas can and do make a difference.

Political actors must make decisions concerning their political future within a climate of opinion. If the climate of opinion were one that questioned redistribution of income, then politicians who were exposed as advocates of redistribution would be easily challenged. On the other hand, if the climate of opinion were such that collectivist policies and redistribution were the accepted norm, then a politician favoring individual freedom and free markets would be considered reactionary and suffer at the voting booth. Ideas matter in changing the constraints in which political actors seek to maximize their personal gains in terms of votes, campaign contributions, and prestige.

Organizations such as FEE, therefore, are not assigned a negligible role in society. Instead, they assume a role of fundamental importance by influencing the climate of opinion. But in addition to determining the climate of opinion, ideas also play an extremely important role within the political economy.

Most scholars and intellectuals misunderstand the methodological perspective of public choice economics, and particularly the branch of public choice economics termed constitutional political economy. Public choice scholars, such as the 1986 Nobel Laureate James Buchanan, want to examine decision-making at both the pre- and post-constitutional level. The pre-constitutional level deals with ideas concerning good and appropriate rules by which to Organize society. Post-constitutional analysis, on the other hand, seeks to understand and explain the various strategies actors will employ within an already existing set of institutions or rules. The weaving together of pre- and post-constitutional analyses to tackle the problems at hand constitutes the method of the constitutional political economist.

The extreme variant of the public choice argument presented above is a correct representation of the role of interests in the political processes that occur in the post-constitutional arena. Ideas con-cerning what is moral and good, or simply what would be the most effective way to organize society, affect the rules of social interaction. Intellectual advances and the promotion of ideas represent remote stages in a time structure of production that eventually produces public policies. The investments in ideas are capital investments, which can yield great returns for those investors in the long run. It is in the interest of some to invest in ideas. Depending on the nature of those ideas—liberalism or socialism, for example—their impact can be of great benefit.

In the end, therefore, Keynes’s statement contains great truth. The individual papers in this volume all demonstrate this with notable clarity. On the surface the paradox between interests and ideas confronts a serious problem to liberalism—pointing out its inherent fragility in the face of interest-group pressure. But, the problem, while serious, is not so deadly as one might suspect. An Understanding of the role of interests is fundamental to developing ideas that can protect us from the rule of special interests. At the constitutional level, as the American founders sought to do, we can establish rules that reduce the negative role of interests. To do that requires a victory in the battle of ideas: both in the academic community where social philosophy emerges and in the general populace where the climate of opinion is formed. Ideas can and do make a difference, they do have consequences, as this volume of essays conveys with force. []

Peter J. Boettke is a professor of economics at New York University and author of The Political Economy of Soviet Socialism: The Formative Years, 1918-1928 (Kluwer Academic Publishers, 1990).