The Myth of Democratic Failure: Why Political Institutions Are Efficient (American Politics and Political Economy Series) (Paperback)

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Product Description

This book refutes one of the cornerstone beliefs of economics and political science: that economic markets are more efficient than the processes and institutions of democratic government.

Wittman first considers the characteristic of efficient markets--informed, rational participants competing for well-defined and easily transferred property rights--and explains how they operate in democratic politics. He then analyzes how specific political institutions are organized to operate efficiently. "Markets" such as the the Congress in the United States, bureaucracies, and pressure groups, he demonstrates, contribute to efficient political outcomes. He also provides a theory of institutional design to explain how these political "markets" arise. Finally, Wittman addresses the methodological shortcomings of analyses of political market failure, and offers his own suggestions for a more effective research strategy.

Ultimately, he demonstrates that nearly all of the arguments claiming that economic markets are efficient apply equally well to democratic political markets; and, conversely, that economic models of political failure are not more valid than the analogous arguments for economic market failure.

From the Back Cover

Winner of the American Political Science Association Best Book in Political Economy Award for 1994-96

"It is useful that we have economists such as Donald Wittman ... who push their enterprise to maximal limits. James Buchanan --This text refers to the Hardcover edition.

Product Details

• Paperback: 240 pages
• Publisher: University Of Chicago Press (January 1, 1997)
• Language: English
• ISBN-10: 0226904237
• ISBN-13: 978-0226904238
• Product Dimensions: 9 x 6 x 0.6 inches
• Shipping Weight: 15 ounces (View shipping rates and policies)
• Average Customer Review: 1.7 out of 5 stars  See all reviews (3 customer reviews)
• Amazon.com Sales Rank: #1,356,088 in Books (See Bestsellers in Books)

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Most Helpful Customer Reviews

20 of 22 people found the following review helpful:

1.0 out of 5 stars The Myth of Democratic Efficiency, January 1, 2003

By	D. W. MacKenzie (New London CT) - See all my reviews (REAL NAME)

"The Myth of Dmocratic Failure" fails utterly to demonstrate the efficiency of democratic institutions and procedures. There are several problems with Wittman's analysis. First, Wittman addresses only the easiest scenarios in the analysis of democracy. In looking at voting, he considers only a simple single peaked left-right issue space. Once we allow for multiple issue dimensions and multi peaked distributions, his faith in democratic efficiency becomes untenable. Second, he advances empirical propositions as if they were logical proofs. Wittman's arguments consist of a series of possibility theorems (John Lotts review of this book points this out). Unlike logical proofs, possibility theorems require empirical evidence to be taken seriously. Rather than dealing with relevant empirical evidence, Wittman ignores most of it.

The most obvious failure of this book is that it ignores most of the literature on special interest groups. Wittman's chapter on this is only ten pages long. Worse still, he ignores most of the work that Mancur Olson did on this subject. Olson published detailed and insightful comparisons of autocratic and democratic government. Wittman seems to be unaware of this work. This is an unforgivbale error. Wittman claims that small ethnic and relirious groups are often victimized, and that this disproves the idea of special interest bias. The fact is that such small groups (like the Chinese minority in Indonesia) start out as classic examples of politically influential pressure groups, before mob violence breaks out against them.

Wittman claims that people will get political information at a low cost, and will therefore will be well informed. He suggests that people can pass information by word of mouth, and that adverstising by candidates and parties is a reliable and sufficient source of information. These arguments do no prove that voters are well informed. They only suggest that they might be. Empirical evidence shows that voters are not very well informed about the particulars of politics- not even knowing the names of elected representatives. This does not refute Wittman's argument, since he claims that party lables are enough. But, this argument seems to fall out of his acceptance of a single issue dimension. Real politics is far more complex that Wittman's chosen paradigms indicate. The unreal character of this approach makes his arguments hard to be taken as proof. Voters might have 'enough' information, but he does not prove this.

Wittman claims that we should expect democratic societies to adopt rules to limit wasteful democratic practices. He believes that democracies maximize wealth. However, the historical and statistical record indicates quite clearly that the economic performance of democracies varies greatly. There are huge differences between the US, Switzerland, and India. Why does India have so much poverty if, as a democracy, it maximizes wealth? The fact is that countries that are relatively undemocratic often outperform democratic countries. The US developed rapidly during the 19th century, when it was much less democratic than it is now. Germany and Hong Kong developed rapidly following WW2- under foreign rather than democratic control. Since becoming more democratic in the 1960's, German economic performance has deteriorated. South Korea developed rapidly under a dictator as well. The newly democratic nations of Eastern Europe have seen less than stellar success as well. Wittman simply ignores the varied performance of democracies, as well as the economic success of non democracies.

Wittman also claims that bureaucracies are not too large and wasteful. Once again, he advances some theoretical possibilities on how bureaucracies might not be wasteful, and simply ignores the empirical realities that refute his arguments.

Wittman also pays little attention to ideology. Democracies are susceptible to ideological movements in the electorate. Many democracies have entered into pointless wars and adopted and maintained wasteful welfare states simply because of nationalistic and socialistic ideologies that make no sense at all. Democracy is biased towards the expression of such ideological sentiments (see Brennan and Lomasky in "Democracy and Decision" available at amazon.com). This is a serious problem with democracy- one that Wittman does not deal with.

Also, Wittman passes over the subjects of constitutional and institutional reform only very briefly. These are matters about which voters and interests group members know little. Such ignorance is unlikely to lead to efficiency in reform processes.

This book presents a highly misleading view of democracy. For those who are familiar with the Public Choice arguments that he attacks, this book fails utterly. People who want to believe that democracy is simply wonderful will enjoy reading this book. For those who want to take a serious look at democracy, try reading Mancur Olson's Logic of Collective Action or Rise and Decline of Nations, Tullock's Primer in Public Choice, or the Brennan and Lomasky book mentioned above.

16 of 20 people found the following review helpful:

2.0 out of 5 stars unfortunate attempt by theorist to reach broader audience, July 19, 1999

By A Customer

Don Wittman has written several academic papers challenging many of the basic results in Public Choice that government intervention is inefficient and democracy is dominated by special interests and rent-seekers. His theoretical models are very involved and difficult to follow.

This book represents an attempt to discuss his main points without the use of hard-core models and notation. He fails. Wittman makes many broad sweeping statements, then repeatedly states he has just proven something, when it was nothing more than a statement. And not very convinving.

This is a shame, as he plays a very important role in offering counters to traditional public choice theory dominated by libertarian ideology. But his arguments here are just not convincing.

5 of 6 people found the following review helpful:

2.0 out of 5 stars Wittman's basic assumptions are flawed, December 9, 2007

By	Howie (North by Northwest) - See all my reviews

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Wittman's argument is that democracy generates efficient outcome, and it is based on the following premises: 1. politics has low transaction costs, 2. the political arena is just as competitive as markets, 3. political information is cheaply (even mostly freely) available and voters are rational (in the "rational expectations" sense, see below).

There are many flaws of this book, but I will focus on two. First, from the get-go, Wittman confuses the definition of "Pareto efficiency" with "wealth maximization". Although he devotes a section justifying his using "wealth maximization" as a proxy for Pareto optimality (Ch. 1), but most economics students know that they are not equivalent. "Wealth maximization" is at best a proxy for Kaldor-Hicks efficiency, and as Hammond (in his critique of Posner) pointed out, even these two are not equivalent.

Worse, if you read his book carefully, sometimes he even abandons "wealth maximization" and claims a situation is efficient if it is the best of available alternatives (second-best), for example, in his discussion of bureaucracy (Ch. 8), he makes such claims repeatedly, though somewhat subtly. But in Ch. 13, he explicitly states "So 'inefficient' outcomes may support the efficiency hypothesis if they are not too inefficient". One can't help but be appalled by such conclusion: so how do you prove that a situation is "inefficient"? You can always say it is not *too* inefficient and turn around to claim that, aha, it is efficient.

The second flaw is that Wittman takes the rational expectation (RE) hypothesis too far. The original Lucas Critique may have had some merits (it pointed out the implausibility of assuming people can be constantly fooled by policy manipulations). But sometimes the distance between truth and absurdity is just half a step: RE quickly became plainly silly, it postulates that on average, the populace have expectations that coincide with the true economic (or political, or whatever) model, albeit with higher variance. As one opponent economist quipped: how can the general public know the "true model" when economists are still searching for it? Yet Wittman uses it as a cornerstone of his thesis and ignores (or downplays) the different incentive structure between politics and markets, thus Wittman's castle is really built on sand.

On the positive side, I appreciate that his books (though unintentionally) gives a pretty comprehensive overview of the public choice literature, with pointers to a good collection of empirical as well as theoretical papers.