Public choice economics is a discipline at the intersection of political science and economics, which applies the tools of economics to analysing human behaviour in political systems. It is often criticised for ignoring ideology as a politicial motivator, but does serve to bring important material motivations to light.

It is contrary to the public interest theory of government, which holds that while rational actors in private markets are subject to imperfect information and self interest, governments are able to intervene in private markets on behalf of voters without such impediments.

On the public choice view, voters, interest groups and elected officials all operate with all the same abilities and incentives in political markets as they do in private markets.

Voters, for their part, are rational to realise that that becoming informed about politics and comes at a marginal cost, being the time and possibly other expenses required to gather and process information about politics. They also realise that the marginal benefit of doing so is zero, because more informed voters cannot be awarded additional votes in a democracy. As a result they are irrational to spend any time whatsoever informing themselves about their voting options -a phenomenon known as rational ignorance.*

Of course, voters are not totally ignorant of their voting options. Peer pressure, or a sense of duty motivates most to become somewhat informed. However, there is a disconnect between the consequences of political decisions and the incentives individual voters have to inform themselves. This is a market failure in political markets.

For interest groups, however, the marginal benefit of influencing the political process by voting and campaigning often does exceed its marginal cost. A classic example is the military industrial complex.

When the defense department is considering a new project, the benefits per person for those involved in the defense industry can be very high if the contract goes ahead. Whereas, the cost per person to voters in terms of paying more tax or forgoing other government services is relatively small -because there are a lot more voters sharing the cost than defense contractors deriving the benefit.

As a result, defense contractors are more likely to enter the political debate over the new contract than are voters. This is a problem for the Public Interest Theory of government. It would hold that a decision like this one would be made according to the best wishes of the average voter, however the average voter has a much smaller personal incentive to influence the decision than the interest group.

For their part, elected representatives have one overriding incentive, which is to be elected. The Public Interest theory would have it that politicians are best to do this by delivering results that suit the average voter. However, on the public choice view, they are likely to be confronted with a largely uninterested average voter, and a highly interested special interest groups. The result is a cynical political calculus used by most politicians that is not in the public good.

Known as concentrated benefits and dispersed costs, the incentive of politicians is to redistribute privileges in some form from a large group to a small group. This is because average voters do not find that the marginal benefit of reclaiming their dispersed costs through political action exceeds its marginal cost, whereas the opposite applies to the average interest group member.

So how does this relate to the current VSM debate?

A casual observer might look at the respective Facebook groups of pro and anti VSM campaigns and notice that the anti-VSM group had more than twice as many members as the the pro-VSM group. They might conclude that, small and self-selecting nature of the sample aside, most students want to be forced to join an association.

On the Public Choice view, several things have to be considered. First of all, only 600 students have joined the two groups so far, while Facebook registers 175,000 18-21 year olds in New Zealand. Making the conservative assumption that half of them are at a tertiary institution, combined group membership is about 2/3 of one percent.

Perhaps the extremely low interest could be explained by the fact that it takes time for viral messages to spread through Facebook. We shall see in the coming days. However, these percentages are not too far out of line with the turnout rates for student executive elections, which are almost invariably less than 5%.

A more likely explanation is that most students are rationally ignoring the issue. For any rational individual, investing THEIR own time in becoming aware of VSM and joining a VSM campaign will make only a marginal difference to the debate. Even if it did, their reward would be the $150 or so of compulsory student union fees, fees which are generally discounted heavily because they will actually be paid as student loan repayments in the distant future.

The incredible thing is that ANYBODY has joined the pro-VSM group whatsoever.

That people have joined the Anti-VSM group, however, is less surprising. These are the recipients of the concentrated benefits. A look at the founders of the group reveals that they are all past of current student executive members. They are all people who have most likely been paid honorariums for executive positions, been on funded trips to meet with other student politicians, and received training for what many of them perceive to be a career path in politics, usually through the Labour party. All of these concentrated benefits, of course, are a dispersed cost for students through compulsory union dues.

On the public choice view, the case for Voluntary Student Membership is the same as the one of the main arguments that student unions use to justify their existence: Students as individuals lack the incentive to take political action on issues that affect them, so they require collective action. However within student unions, the members lack the ability to organise against executives which often waste their money** and misrepresent their political views***. No individual student has the incentive to collect 10,000 signatures and wage a campaign against the interests of Union insiders****.

The right to "vote with their feet" and "take the money and run" is something that puts an individual student back on an even footing with the concentrated interests of the Association. The decision of whether to keep their money in the Association is worth thinking about, so is more likely to express the student's true wishes than a political process.

Of course, this post began with the admission that Public Choice economics fails to consider the role of ideology. That fact that this post exists demonstrates that people are not purely motivated by material considerations in politics. The same must surely be true of compulsion advocates. Many of them genuinely believe the world would be a better place if the prevailing beliefs were more akin to their own.

Nevertheless, a public choice analysis demonstrates that the current regime stacks the dynamics of material interests and political action heavily against the individual student.

Notes:
*Recently, George Mason University economist Bryan Caplan has argued in his book "Myth of the Rational Voter." That voters do hold political views to some extent, but they are likely to be irrational views. He arrives at this conclusion from the observation that people tend to be attached to the views they hold, and bear a psychic cost in changing their mind. However for the same reason as becoming more informed about voting options is irrational, voters are irrational to rationalise their views for zero marginal benefit. This gives rise to the confusing but nevertheless consistent phenomenon of rational irrationality with respect to voters' political views.
**See the spate of fraud scandals involving student money over the last decade as tracked by Student Choice.
*** See for example the 2002 endorsement of the Alliance Party by NZUSA, despite almost no students actually voting for it.
****In 2003, AUSA and NZUSA together spent $22,000 in their failed attempt to bring compulsory membership back to the University of Auckland,