In Reviving Political Economy, Arnold Kling argues that economists need to get past the naive assumption that their job is dispensing policy “prescriptions” for well-intentioned politicians:
The public choice theory of the political process is that it involves the supply and demand for subsidies, tax breaks, and regulatory protection. Politicians are on the supply side. Interest groups are on the demand side. The interest groups are trying to maintain or augment economic advantages, which the theory calls ‘rents.’ The attempt by interest groups to obtain political favors is termed ‘rent-seeking.’ The economist most associated with this theory of the political process is Nobel Laureate James M. Buchanan, Jr.Of course, it should not take a Nobel Prize-winner to notice that there are special interests in politics. However, the layman’s view of special interests is that they are an arbitrary evil force, to be opposed by the forces of good. Instead, according to public choice theory, interest groups emerge naturally in an environment in which government has the power to subsidize, tax, and regulate.
The layman’s view of corruption is that it is a problem of the wrong people holding office, and the solution is to elect better people. The public choice view of corruption is that is systemic, and that individual politicians make little difference.
According to public choice theory, bad government is a natural equilibrium. To stay in power, politicians must placate rent-seeking interest groups. Only when the forces of supply and demand shift does one observe policy change, such as tax reform.
[...]
I believe that our government is better than most. However, I think that there is a general tendency to over-rate the quality of our government.Government services are more popular than they deserve to be. Most people believe that government schools serve the public interest. I believe that our current system primarily benefits the teachers’ unions.
Most people believe that government regulation is based on public need and high principles. I believe that regulation tends to serve narrow interests. For example, professional regulation in medical practice protects the incomes of health care providers more than it protects the public.
A big reason that people over-rate government is that they treat favors to special interests, bureaucratic failures, and ordinary human incompetence as aberrations. Instead, we need to recognize that these are embedded characteristics of government, not accidents. In the private sector, the forces of competition serve to drive out the worst firms, but government enjoys a monopoly.