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Matt LoBelloDecember 15, 2013Political EconomyProfessor Wurth

Enabling The Voice of The People

Politics and economics are inextricably interwoven. We have seen during events such as

The Great Recession, that the actions, ideologies, and practices of one can have a monumental

impact on the other. However, there are distinct differences that recently have driven one to be

successful and prosperous, and the other to become stagnant and idle. The word compromise is a

founding principle that is expected to be synonymous with our government. The foundation of

the American political system is based upon political parties, the idea that the best decisions

emerge from different viewpoints and philosophies. Yet, that has been lost in modern day

politics, replaced, not by efficiency and productivity, but by sluggishness and incompetency.

Recently, it appears that American politics has been characterized by a political party victory—

and not what is best for the people and nation.

In a representative democracy, elected legislatures are supposed to be an accurate

representation of the American people. In his book The Semisovereign People, political scientist

E.E. Schattschneider believes the basis for democracy#1 is “liberty,” “leadership,” and “a way

that the public can participate in the decision-making process” (pg. 138). However, current

legislatures have been characterized by hypocrisy. During recent governmental deliberation, did

politicians believe the best course of action for American citizens was shutting down the

government? Did they believe the same individuals who elected them, who have supported and

donated to their campaigns would be content losing their jobs? Following the failed negotiation

that led to the government shutdown, a majority of politicians simply began bickering and

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criticizing the opposition for their own failures. Democrats and Republicans were using issues

such as the debt ceiling and the Affordable Care Act as commodities to seemingly bargain with

in their political game. This dynamic is similar to the one that American political scientist and

economist Herbert A. Simon describes in his academic piece Organizations and Markets as the

gap between ownership and control#2. In reference to organizations, he evidences the

discrepancies between the goal of ownership (profit) and managers (personal status, wealth,

career). Similarly, politicians and voters have different ambitions in our system. The voters are

striving for what’s best for the nation and themselves, while the representatives seem to be

caught up in political game theory.

On March 23, 2010, President Obama signed into law the Affordable Care Act, the

largest overhaul of the United States healthcare system since the creation of Medicare and

Medicaid. The bill would mandate healthcare for millions of Americans, while making it illegal

for insurance companies to deny individuals based upon pre-existing conditions or gender.

During this time, there were looming debt-ceiling negotiations to continue funding a government

that was already trillions of dollars in debt. For weeks, politicians had been negotiating a

potential extension, but always seemed to hit an impasse involving the friction between funding

the government and the Affordable Care Act. In this illustration, the debt-ceiling and Affordable

Care Act will serve as what Schattschneider calls the “lines of cleavage.” “Every shift of the line

of cleavage affects the nature of the conflict, produces a new set of winners and losers and a new

kind of result” (pg. 61). These lines of cleavage#3, represented the political and economic

controversy, as one line of cleavage shifts, it alters how the other is perceived, creating a

“reorganization of political alignments”. Schattschneider describes this as a displacement of

conflict#4. If the Democratic Party were to stand by the Affordable Care Act, they would “win”

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by protecting health care legislation, but “lose” by not instilling favorable economic policies.

That is precisely what happened and subsequently led to a government shutdown.

Critics have met the Affordable Care Act with great question and resistance. Among

other issues, the opposition is concerned with the contract theory and economic problem of

asymmetry of information#5. As mentioned by American economist George A. Akerlof in his

scholarly piece, The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,

asymmetry of information occurs when one party has a greater knowledge or extent of

information than another party during negotiation. With that asymmetry of information an

individual or firm can engage in adverse selection. For example, before the Affordable Care Act,

an individual could potentially conceal parts of their medical history to prevent denial of medical

coverage or higher premiums. As a result, insurance companies face a problem of adverse

selection#6, because health insurance is more appealing to the sick or ill. This can in turn raise

rates for all consumers, even though the healthy are not as reliant upon insurance as the sick are.

Consequently, insurance companies will then engage in the business practice of cream

skimming#7, resulting in only the high-value or low-cost consumers receiving medical insurance.

These actions reduce the transaction cost#8, or the potential cost that is associated with

providing health care, which results from market imperfection. This is a classic example of what

Akerlof would describe as a result of a “lemon”#9, or the bad (in this case the sick) driving out

the good (the healthy).

However, many citizens are also in favor of the Affordable Care Act because it provides

consumers with something that has been absent within health care, a guarantee#10. As Akerlof

illustrates, “Numerous institutions arise to counteract the effects of quality uncertainty. One

obvious institution is guarantees” (pg. 499). This legislation provides users with a level of

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assurance, that no matter your medical history, no matter your social problems, you will be

covered and have a reasonable expectation of medical support.

During this period, Democrats maintained their unwavering commitment to the

Affordable Care Act, while Republicans were insistent upon significantly reducing government

spending. Neither side was willing to compromise, which led to a government shutdown.

Schattschneider would describe this dynamic as the contagiousness of conflict#11. “Nothing

attracts a crowd so quickly as a fight. Nothing is so contagious… At the root of all politics is the

universal language of conflict.” (pg. 1). As Schattschneider illustrates, the contagiousness of

conflict is the attraction or magnetism to clashes, the human nature to be drawn to controversy.

This has been evidenced through right wing Tea Party members such as Ted Cruz, who is

seemingly steadfast and unwavering in his refusal to agree to any compromise with Democrats.

Consequently, other political representatives are the “spectators” as Schattschneider would say,

who are drawn to the fight, but do not intervene. This unwavering and firm stance on politics can

be categorized as a special interest#12. Tea Party members are justifying their severely biased

actions as public interest. In reality, however, this is an attempt to project their personal

motivations and draw attention to their cause. Actions by Cruz such as his twenty-one hour

filibuster against the Affordable Care Act, is an ideal example of what John Gaventa describes in

his book Power and Powerless as the second dimension of power#13, which seeks to influence

decision making by shaping the agenda. Cruz’s actions, while not successful, brought negative

publicity to the Affordable Care Act. Moreover, even the name Obamacare, which has become

synonymous with the Affordable Care Act, attaches President Obama’s name to the bill, further

evidencing an agenda-setting theory and Gaventa’s second dimension of power.

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Recently, Speaker of the House of Representatives John Boehner addressed a very

similar issue regarding the leadership and following of Tea Party members. “Well frankly, I

think they are misleading their followers. I think they’re pushing our members in places where

they don’t want to be. And frankly, I just think that they’ve lost all credibility.” These strong

words by the Speaker evidence the dissatisfaction that politicians have towards the movement.

Boehner is a Republican, just like representatives of the Tea Party. However, he is strongly

denouncing their cause and condemning their manipulation of the American people. The use of

the words, “lost all credibility” is his attempt to illustrate the outrage from politicians, and a

warning to citizens to question the actions and motivations of the organization.

A key issue that is currently evident in American politics, as Simon would describe, is the

principal-agent#14 problem. The principal-agent problem explores the relationship between the

principal, or the American people, and the agent, the politicians. I would argue that the

motivations of both the principal and the agent are very different, which is drawing us into this

political ineptitude. I believe the motivation that is resulting in shirking#15, or this slighting of

responsibility, loyalty, and leadership by politicians within government, is economically based.

The economic motivations that are evident within politics are both apparent and

questionable. Campaigns have emerged into large-scale auctions in which corporations spend

millions of dollars donating to political parties with the hope of achieving a political advantage

or preference for their organization. Schattschneider illustrates this dynamic between pressure

politics vs. party politics#16 when he says, “It cannot really be said that we have seen a subject

until we have seen its outer limits and thus are able to draw a line between one subject and

another” (pg. 22). These “outer limits” that the author illustrates are becoming harder and harder

to identify. Political parties view these corporations as an opportunity to generate money, which

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in turn, can provide them with more advertisements to win the election. At the same time,

corporations favor this process because they can influence the political spectrum, political

campaigns, and elected officials.

So, applying Schattschneider’s assessment of politics to this situation, “Every political

party consists of discordant elements which are restrained by the fact that unity is the price of

victory. The question always is: Which battle do we want most to win?” (pg. 65). Politics has

become a game, a game in which one party wins, and the other loses. The goals of productivity

and efficiency within government have been replaced by a quest for dominance and political

power. As a result, the answer to Schattschneider’s question, ‘Which battles do we want most to

win?’ is a political party victory.

To clarify, I don’t believe this assessment applies to all representatives and campaigns. I

believe legislators attempt to do what is best for the nation; however, some get personal

motivations attached to those goals, which lead to the inefficiency and negative governmental

stigmas. In fact, in recent days, our government has showed great progress. On Wednesday,

bicameral legislation came together to avert another government shutdown as well as a potential

fiscal crisis. These actions show compromise within Washington, and prove to the American

citizens that cooperation is possible. So how do we improve upon these events?

As English economist E.J. Mishan demonstrates in his scholarly piece Pangloss on

Pollution, we need to establish a degree of liability#17 between the people and elected officials.

We must hold these politicians to a higher standard. This will result from citizens directly

addressing government about inefficiencies. It is our government and, as Albert Hirschman

evidences in his book Exit, Voice, and Loyalty, we have to voice#18 our displeasure, to bring our

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feelings and attitudes to the forefront of political deliberation. These actions will force

government, just like management, to reflect upon their hardships and cultivate solutions.

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