Vote Launched Big Govt, Economist Argues

Women's Vote Launched Big Govt, Economist Argues
By Fred Lucas
CNSNews.com Staff Writer
August 24, 2007

(CNSNews.com) - John Lott's latest book, "Freedomnomics: Why the Free Market Works and Other Half-Baked Theories Don't," praises free enterprise and scolds government ineptitude in certain areas.

Lott, an economist and senior research scientist at the University of Maryland, stoked controversy in the past with his book "More Guns, Less Crime." And in his latest, he doesn't shy away from tackling contentious issues, such as election reform, problematic public schools, the apparent link between abortion and crime and affirmative action.

In the second part of a two-part interview with Cybercast News Service, Lott discussed the assertions made in his new book and responded to some of his critics.

Cybercast News Service: In your book, you discuss a correlation between granting women the right to vote and the growth of government -- could you explain?

John Lott: There's been a puzzle that's been around academics for decades about why government started to grow when it did. From the beginning of the country to the 1920s, the federal government had been about 2 to 3 percent of GNP. You'd have a war sometimes and it would go up. After the war was over, government would go back down to where had been previously. But it began to grow through the 20s and the 30s and 40s.

You see a phenomenon that's true around the world, during about 50 years of time in which government began to grow. I've noticed from looking around at these countries that the government growth seemed to coincide with when women were given the right to vote in these places.

I looked at where women were given right to vote in the United States from the first state in 1868 to the last state in 1920, with the passage of the 19th Amendment to the Constitution. One of the interesting things here is that some states voluntarily gave women the right to vote, and some were forced to because of the 19th Amendment. ...Is it the fact that you gave women the right to vote that caused the government to grow, or is it that the state was more liberal and wanted to give women the right to vote at the same time they wanted government to get bigger?

The fact that you see this growth in the states that voluntarily gave women the right to vote before the ones that were forced to indicates that it was giving women the right to vote and not just some other factor changing at the same time.

The effect is dramatic. If you look at 10 years prior to when a state gives women the right to vote, you find expenditures and revenues were flat. Once women were given the right to vote, the next year you see an increase in government expenditures. It keeps going up dramatically. In 10 years, government expenditures and revenue doubled in real terms. That growth follows closely with the percent of voters who were women.

After that you basically get to the 1960s, and what happens then is you have a big increase in divorce, and divorce tends to make women a lot more liberal than they were previously. They are more likely to depend on the government for some safety net or protection. We see this in how women's political views change over a lifetime.

Young single women are more liberal than young single men. When they get married, about half that gap disappears. When they have kids, about half of the remaining gap disappears, so about 75 percent of the original gap. If they get divorced, they become much more liberal than they were to begin with. Men pretty much stay in the same place all their life.

When a woman is on her own, she's more likely to support a more progressive income tax. But if she gets married and has kids, she's more likely to oppose those sorts of taxes. There would be similar changes to other types of social programs. Women tend to be more risk averse and more likely to turn to the government for these government programs.

The discussion about divorce is itself driven a lot by government. One of the big changes we had in the 1960s and 1970s was the movement from at-fault to no-fault divorce. When you had at-fault divorce, women were much more protected. If a man wanted to get a divorce, he had to get the wife to agree to a divorce. He had to pay her off, and give her more assets to get her to agree. So her investment in maybe staying home a lot and taking care of the family were much more likely to be protected than they are now.

Now when you have no-fault, if a man wants to get a divorce, the woman almost has to pay him in order to stay in the relationship. Many women are more reticent to stay at home and take care of kids. In this case, they have a big incentive to (work) in case there is a divorce later on-they can have a job and an income they can depend on. Not only do these (divorce) laws, explain why women become more liberal, but they also explain why women are having fewer kids.

Cybercast News Service: You contend in your book that campaign finance reform laws don't work. Why?

John Lott: When you look at the reasons for why campaign finance regulations are put in place to begin with, there is a range of benefits talked about. They're supposed to make it easier to defeat incumbents. The claim was it would encourage more people to run for office. It would take wealthy people out of the equation so they wouldn't be as important as they were before. And it would encourage more people to vote.

In fact, when you look at the evidence, the opposite is true in each case. You see incumbent election rates going up. You see fewer candidates running for office. You see wealthier candidates being more likely to be elected to office, and fewer people vote. It's very simple to explain all of those things.

Take one type of campaign finance rule we're all familiar with: donation limits. An incumbent whose been in office for 10, 12, 14 years, or whatever -- it's more likely they have a longer list of potential donors than some challenger whose running for the first time. It's just a lot easier for the incumbent to raise a small amount from a lot of potential donors than the challenger, and that ends up giving the incumbent a real advantage.

Incumbents are less likely to be challenged, and more likely to run unopposed-and even when they do run opposed their win margins are much bigger, and the rate at which they are defeated is cut in half after campaign finance regulations are put in place.

A wealthier candidate is the one guy who can benefit from these rules. They can finance their own campaigns. They don't have to go out and raise a small amount of money from a lot of potential donors. That saves their time from having to go and raise the money; they can spend that time on other candidate-activities and be more productive. That doesn't mean they're the best candidate.

The reason you have fewer voters vote after campaign finance regulations is because you have fewer contested elections. If an incumbent isn't being challenged or the race isn't very close, fewer people vote.

Cybercast News Service: What impact do anti-voter fraud measures have on voting?

John Lott:One of the big problems you have with the voter fraud discussion is how do you measure how much fraud you have?

The debate between Republicans and Democrats in some ways is more similar than people might have first realized. Republicans say if you have voter ID and other types of things, you'll prevent voter fraud and you'll reduce the number of recorded votes -- and the reason is there are certain votes that shouldn't be taking place that you would be stopping. Democrats say you go and impose voter ID requirements, and the people who are going be stopped from voting are legitimate voters. Both sides agree if you impose the rules you're going to see fewer votes being recorded.

There's a third option. That is, when you go and impose these rules you could actually see an increase in the rate at which people vote.

Look at Mexico. Mexico in 1991 introduced sweeping election reforms; photo IDs, tamper-proof features, thumbprint, other biometric information put into the card, and they got rid of absentee ballots. For getting the voter ID card you had to go in twice to the voter registration place to get it. You might have to travel 100 miles in some places to get it; once to register to begin with, once to pick up the card. They wouldn't even mail out the voter registration card to you in order to try to prevent fraud. And you would think with all these costs to voting there would be a big drop in the rate at which people voted. It made it a lot more difficult to go and vote.

Yet there was something like a 26 percentage point increase in the rate at which people voted in the next presidential election -- after these election reforms were put in place. The question is why? The big reason seems to be that people thought their votes were more likely to count. There had been so much vote fraud it didn't make any difference whether people voted beforehand because the government essentially controlled the voting process and made sure their candidate won. So why bother and vote? Now, when it looked like vote fraud had been controlled, people realized their vote could count.

The question is how do you disentangle the different effects and see how important they might be in the United States? It could affect the outcome of elections. I don't think we have vote fraud anywhere near as extreme or as extensive as in Mexico, but you might still find some effects that are there.

So, I looked at the impact across all the counties in the U.S. as a result of these regulations, but I also looked at the counties where there was said to be a lot of vote fraud. What you find is that if you compare those two sets of counties, the anti-fraud regulations -- when they did reduce voter turnout -- tended to reduce it only in counties where there was said to be a lot of fraud. That seems consistent with the Republican type of story there. Because if it was just these voting regulations that made it more difficult for people to vote, that should be true in any county. It wasn't.

Cybercast News Service: The market does seem to work better than government in many areas but are there times, such as a crisis, when the government must step in with a solution?

John Lott: It's not really clear to me when you have a crisis and you're trying to rush a decision that the government is going to be any better in making the decisions on these things. They have to go and figure out how to solve these problems also.

One example where it took the market a while to figure out how to do things was with the radio -- go back about 90 years. For the first 27 years after we had radio, we had two different types of stations, either purely amateur stations where nobody got a salary or government-run stations.

Even as late as the early 1920s, people thought there was no way radio could be made to pay for itself because anybody could listen to your signal; they just had to buy a radio set or make one. And they could listen to the signals that you put out. So while everybody thought there was this huge benefit from having radio, it wasn't clear how you could actually get it to pay for itself.

How do you get those people who want to listen to pay for it? Britain, for example, went to where you have a tax on each radio set and the government would pay for the programs that were there. You had people in our government talking about doing the same thing in order to solve the problem. Even the secretary of commerce in 1922, Herbert Hoover, was saying he thought we'd likely have to have government involved in order to have radio that people benefit from.

It seemed like the classic example of market failure that people would point to. But people figured out shortly after that how to solve the problem. It was advertising. It seems incredibly obvious and trivial at this point. But it took a while for somebody to figure out that they could actually make money by putting advertising on the radio.

Maybe the government could have rushed to solve the problem by putting a tax on each radio set and later each TV set to fund it. But my guess is we would have a dramatically different type of radio market today and television market if we had done that. I assume a lot of people think we'd be missing out on a lot of the vibrancy in terms of competition and different formats and quality of the program if you had some government bureaucrat deciding what program should be on the air.

So, is it true that maybe the government could have solved that problem faster than the market could have? They may have been able to in that case. That doesn't mean that solution would have been the right solution. If the government had stepped in, its involvement would have produced a deadening impact on people's incentive to try to figure out other ways of solving that problem.

See Related Story:
Price Controls Wrong Prescription for Low-Cost Drugs, Economist Warns

Author Touts Market Solutions Over Government
By Fred Lucas
CNSNews.com Staff Writer
August 23, 2007

http://www.cnsnews.com/ViewCulture.asp?Page=/Culture/archive/200708/CUL20070823a.html

(CNSNews.com) - John Lott's latest book, "Freedomnomics: Why the Free Market Works and Other Half-Baked Theories Don't, praises free enterprise and scolds government ineptitude in certain areas.

Lott, an economist and senior research scientist at the University of Maryland, stoked controversy in the past with his book "More Guns, Less Crime." And in his latest, he doesn't shy away from tackling contentious issues, such as election reform, problematic public schools, the apparent link between abortion and crime and affirmative action.

In the first of a two-part interview with Cybercast News Service, Lott discussed the assertions made in his new book and responded to some of his critics.

Cybercast News Service: When people say 'government must play a role in health care,' how do you respond?

John Lott: First a general comment: People will go and claim the market fails in some way and so the government should go ahead and try to solve that problem. No doubt, the market is not perfect in lots of ways. People buy products and regret it. It's a long way from saying you should have the government go solve it. Many of the same problems exist in spades with the government dealing with the problem.

Having information to know what people want for their product and services is very difficult for government to figure out. One of the beauties about the market is that it concentrates the costs and benefits on decision-makers. When you're dealing with the government doing something, you have some bureaucrats in Washington, D.C., whose salary doesn't vary based on whether they make the decision correctly. The bureaucrat may deal with a billion dollars, tens of billions, or hundreds of billions. Whether he makes right or wrong decisions has very little, if any, effect on his bottom line.

But whether talking about hospitals in the private sector or running corporations in general, the reason markets pay executives the way they do is because they want them to face the costs and benefits they impose on the company as a whole.

Look at how people view health care. Surveys say 90 percent of Americans are happy with their own health care. But only 44 percent are happy with health care in general. People are concerned about the uninsured and worried themselves about becoming uninsured.

If we switch to a government system, we may actually make not only the insured people more unhappy with their system -- because a single-payer system would have less competition -- but uninsured people, the whole motivation of making change, would also be less happy.

We see debates with pharmaceuticals where all of the Democratic (presidential) candidates are arguing for some kind of price controls. We understand the motivation behind that: They want to make it inexpensive or cheap for people to buy drugs. But the problem is that that type of government intervention, where we are essentially making companies that provide the product provide the altruism the rest of like to have done, is actually going to result in people dying.

There is a reason we give a patent to companies: So they can recoup the huge investment in developing a drug of $800 million or $1 billion in costs. If you don't allow them to recoup that, they are not going to go in and develop a drug to begin with. ... What happens is you are not going to be able to recoup all those development costs? There will not be any new drugs out there.

The very threat of those new controls means that people are going to die. If I thought there was a 100 percent chance Democrats would win and impose those controls, and you're deciding today whether to produce a new drug, there's no way you're going to start now. It will take 10 years to develop a drug and within two to three years you're going to have all these price controls.

Cybercast News Service: What about education? Some people say government must play a role in education.

John Lott: In the case of education, people will argue that certain benefits are produced other than just for the person being educated. Therefore, the government has to be involved.

Still, that doesn't imply you have to have the government provide those services because the government might not be as efficient as a private company might be. You look at the cost of public education compared to private schools and it's often twice as high. If you can get the same thing at lower cost and higher quality, why not go that route if you could have subsidies or vouchers?

Cybercast News Service: What would you say to those who say government must play a role in consumer protection?

John Lott: We're all concerned about fraud, and companies taking advantage of customers. The question is, how can we deter them from doing that? A lot of people think very narrowly. You take a company to court and place a sanction on them. That plays some role, but I think it's a lot smaller role than some people might think.

When I was chief economist for the U.S. Sentencing Commission, we were looking at issues of fraud. One of the things that we quickly noticed was simply accusing a firm of fraud had a big effect on the value of its stock. Only about 2 percent of the drop in the firm's stock could be explained by the penalties the courts imposed. The vast majority, 98 percent, came from customers who would shy away from buying those firms' products.

If you think about all the attention that's given to the fines to a firm for fraud, you can imagine a penalty 50 times bigger imposed by customers. Even a 10 or 20 or 30 percent drop in sales could make a huge difference in whether a company is financially viable or not. You look at this recent discussion with China and issues about lead paint. It's pretty easy to find lots of stories on the news about the money Chinese manufacturers are losing right now because of lost sales and the fact that you can find stories about customers looking to see where the product is made before they go and buy toys for their kids. I think they're going to face huge reputational penalties for that.

Cybercast News Service: Shouldn't the government provide environmental protection?

John Lott:The environment is kind of a classic case of saying someone's actions affect other people, so government must be involved there to protect people from those effects.

In theory, your actions affect other people; therefore, the government should come in and put a tax on something to make it so you take into account the cost you're imposing on others. But there is a huge gap between the theoretical discussion and actually figuring out how to put the tax on and what the tax should be. You have to measure what the cost is that is being imposed on others. That's a hard thing to do to begin with.

Even if you measure it properly, the government has to agree on putting on the right tax. Having too much of a tax could be just as bad as having too little of a tax. Somebody could point to something like carbon emissions. We already have a really high tax on gasoline. People say carbon emissions, global warming, that means we need more of a tax on gas. Maybe the tax you already have is too high. It's so much of this seat-of-the-pants type hypothesizing that you could actually make things worse off.

Cybercast News Service:Is there any function government must do that the free market can't do?

John Lott: The most obvious is probably national defense, and other types of law enforcement. You want to try to have a protection of property. There could be certain types of charity or something like that you want to have on occasion.

The bottom line I'm trying to get at is trying to make people think through what they're saying because so much of the discussion today seems to be, there's a problem therefore the government ought to do something. There are a lot of problems and a lot of difficulties with the government figuring out what to do. Yet hardly any discussion about public policy these days seems to ask the question: Can the government do a good job on this?

Look at all the types of government regulation we have on consumer product safety, on fraud, on everything from banking to cars to the environment, the list seems to be endless, on medical care, what have you. And the assumption seems to be that if markets aren't working in some perfect way we should have the government go and do it. Even if you accept that, you have to figure out: How does the government figure out what it's supposed to do? It's not just saying there's something to be fixed. How much should the government do? How big should the tax be? How big should the subsidy be? How big should the criminal penalty be?

I kind of learned this the hard way when I was chief economist with the U.S. Sentencing Commission where I would go and talk to commissioners and tell them theories I learned in graduate school for what criminal penalties should be. They would say, "That's great, how do we do it?"

Because the penalties you talk about are based on the probability of catching a criminal, of figuring out if they had done the crime, the loss from the crime. Trying to measure the probability that you are even going to catch someone who commits a crime, that's a really hard problem. In academia we just kind of fluff off the hard problems that are there. We just say "in theory, you put this tax on," or "in theory you just put this criminal penalty on."

If you're in a private firm, you see the real world. You see a real problem and say, how do I know what the customers want? How do I get that product to the customers? You can't just say, well, I'll just assume I have the right product here for the customers because, if you don't, you're going to go out of business.

But, so often in government when they do things, they just have these theories. The difficult parts, they just wave their hands and don't deal with it, and say, "Let's just pick something." I would be in meetings with commissioners and rather than going and trying to figure out what the right penalty would be in any meaningful way, someone would say, "How about a $1 million penalty?" Then someone else would say, "How about $2 million?" Then someone else would say, "how about $5 million?"

It's like they were just pulling the numbers out of the air to put in there. Maybe they're right. Maybe they're wrong. But it seems to me if I were to be running a company like that, in terms of products I would be providing to people, I would be out of business rather quickly. If I got it wrong, I would surely be out of business. But you don't see that same type of constraint in government bureaucrats when they make decisions about things.

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