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Elections: The Ultimate Sinkhole

Mises Daily: Monday, December 20, 2004 by

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George W. Bush received endorsement from a meager 28% of the nation's voting-aged population, while his challenger, John F. Kerry, was backed by some 27% of eligible voters. The guy with the higher number runs the country and more. What was the cost connected with this result?

The Campaign Finance Institute estimated total outlays to the two major parties to total some $685 million, of which $30 million came directly out of the pockets of taxpayers.

This is only the seen cost. All decisions bear within them quantifiable expenses and revenues, those resource outlays and profits that one may measure cardinally, and the unmeasurable benefits and costs, the fruits of subjective valuation of the individual actors.

In the realm of sacrifices associated with a decision are opportunity expenses and costs, namely the foregone revenues and benefits that one would have realized by acting on the next best alternative.

Thoroughly evaluating the presidential election in the context of these largely unseen results is the only way in which to gauge the burdens the process places on the shoulders of market participants, who, in the end, involuntarily finance much of the procedure.

Of these explicit expenses, one may ponder what implicit opportunity expenses accompanied these expenditures, in other words: what could this money have done otherwise?

For example, within the labor market, all that was spent on the election could have hired nearly 34,000 employees at $7 an hour for full-time work for a year, an especially interesting inquiry given both of the candidates' fervor for producing jobs.

One might also attempt to estimate by how much the "economy" would "grow" had the financial resources pumped into the election process been saved, invested, or even spent on consumption in the market, another concept that the candidates seemed to fancy in their campaigns.

The point here is not to estimate actual growth or employment rates, but rather to depict the toll that the election took on the market. Namely, finances went to non-productive uses, "rent-seeking," lobbying, and campaigning, rather than to producing wealth by satisfying the demands of consumers and investors alike.

The costs of the election process include not only alternative uses of money, such as the investment, spending, and savings that would have taken place in the private sector, but also consist of the depletion of other resources that were devoted to campaigning and the election throughout the last few years.

Certainly in the marketplace wherein resources are expended to contribute to the well-being of oneself through trade with others, namely "creating wealth," one would not speak of depletion when referring to these productive, voluntary uses. However, when resources are appropriated from the private sector and allocated to the political process, they indeed leave private individuals, and the market, worse off.

Hence, the end consequences are the same as those of all government consumption: prices are bid-up for private parties because there is less of the good remaining, as, all the while, these same private parties are flipping the bill either through a greater direct tax burden in the short-run, or suffering the repercussions of inflation, the disguised tax, in the long-run.

While these resources include all of the tangible materials and goods used in the undertaking, the labor hours or human capital expended on the election arguably bear the largest opportunity price tag. It is difficult to fathom the magnitude of effort put forth by the legions of individuals whose focus was diverted away from solving problems and producing for trade. These human costs are so detrimental because man's productive nature, creativity, and reason are indeed the sources of all of the goods and services made available for the satisfaction of wants.

The human capital expenditure in this case is not merely nonproductive, as it would be when sedentary for a time or partaking in leisure, but it is indeed counter-productive having been expended on perpetuating a cause that actually robs from productive capacity—the political process.

For those economists and lay-folk fond of aggregates and GDP measures, drawing the election process out to its logical ends depicts this opportunity expense appropriately.

Assuming away all of the immediate demands of the campaigning parties, those expenses and costs previously recognized, suppose every individual of the voting-age population turned out to the polls on election day, thereby achieving the theoretical fulfillment of the democratic political process.

Given the extraordinary turnout virtually all productive activity within the economy would cease for at least one full day, or would sum to such a total given early-bird voting hours. Of the $11 trillion GDP the United States currently produces, that one election day would have a price tag of over $30 billion!       

A defense of the democratic election process might be argued as follows: "Voluntary campaign financing, the gifts, grants, and donations which account for the vast majority of funding, are conducive to market activity by virtue of the voluntary nature with which they are bestowed." 

While this justification may seem valid at first, thereby reducing much of the contentions about the costs of the election to the relatively small pool of tax dollars allotted to the major political parties, under further examination the argument is wrong. Within the non-"positive-sum game" political process composed of, at the least, stealing from the losers to give to the winners, private entities have indeed been all but frugal with their time and money outlays to those candidates who make the highest bids for their support, pledging tax-cuts and policy tailoring.

Given these inherent truths of the political process, campaign financing takes on the form of either a defensive bargain, in which the financer is being aggressed against, or an offensive bribe, in which the financer is the aggressor, neither of which can legitimately be characterized as "voluntary" or non-coercive as activities are in the marketplace. The latter is noticeably of a coercive nature, and is essentially no different from hiring a hit-man to murder or steal on the financer's behalf.

For although both trades involve the sale of criminal acts, only one is presently outlawed while the other is protected under the guise of a 'greater good,' which could be more accurately called the 'majority good.' The former vein of campaign financing, spawned as an act of defense, also fails to be voluntary because of the coercive nature with which the act was summoned. To label the defensive campaign funding as a voluntary phenomena would be equivalent to arguing that the rape victim "voluntarily" fights off the rapist, or, more appropriately pays the rapist not to rape, which is certainly not "voluntary" in the pure sense of the word, given that the attack was not voluntarily welcomed to begin with.

As it turns out, however, history has failed to bear more than a handful of politicians, political parties, and constituencies that legitimately stood for the property rights and civil and economic liberties necessary to justify such defensive financing.

Given the intrinsic differences between the market and political processes, and the expansive authority that public offices now hold, it is obvious why campaign financing has become so substantial and the resources allocated to the election so considerable. 

While there is indeed much debate surrounding the legitimate existence of government and the functions it is to serve, one undeniable fact of the political process is that there are scores of inescapable costs and expenses that accompany the process, and these, being anti-productive non-market phenomena, are arguably the most burdensome.

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Erich Mattei is a graduate student in economics at the University of Georgia. ehmattei@loyno.eduSee his archive. Comment on this article on the blog.