 The title of my talk is The Economics of Winning an Election. I've given talks like this about voting and elections in a few different venues, and once I was addressing some students who were not Austrian. And one of the students came up ahead of time and said, he's very excited about my talk because he's running for office. I told him he might be disappointed in what I have to say. And I told him I'm not providing advice. This is not prescriptive. This is attempting to analyze how they win elections, not telling you about the appropriate behavior to win elections. We probably recognize the many quotes by the Austrians questioning the moral integrity of elected officials and bureaucrats. We probably don't need to beat this to death, right? So we have Murray Rothbard's well-known quote that the state is a gang of these writ large. We have Friedrich Hayek's chapter in Road to Serfdom, why the worst get on top, explaining why the bad people rise in politics. We have lots of other examples. We have a great example in Hans Hoppe's book Democracy, the God that Failed. Hoppe says prime ministers and presidents are selected for their proven efficiency as morally uninhibited demagogues. Thus democracy virtually assures that only bad and dangerous men will ever rise to the top of government. A wonderful quote. But the question is why do we elect these men? Why do we elect bad and dangerous men? What is the mechanics of elections that leads to us voting for these people? In order to win an election, it's important to understand the nature of an election. One way to think about the nature of an election is to compare political democracy to market democracy. And this will illustrate some differences and allow us to think clearly about these issues. You know, you know, political democracy. You gain power by acquiring enough votes, either a majority or plurality of votes. And for the purposes of today's talk, we're assuming the elections are free and fair, which over the years I've become more skeptical about this claim in the US. We're assuming the votes are counted accurately. People vote once and they're not coerced in any manner. Of course, if the election's rigged, it doesn't really matter. It's rigged in your favor. It doesn't really matter what you do to any election. All right, but market democracy is quite different. Mises mentions this in multiple places here in socialism. He says, when we call a capitalist society a consumer's democracy, we mean that the power to dispose of the means of production, which belongs to the entrepreneurs and capitalists, so the entrepreneurs have the power, but they're given the power by the consumer votes. So this power can only be acquired by means of the consumer's ballot held daily in the marketplace. So the consumer simply votes. He buys the red shirt. He's voting for the red shirt. And then Mises goes on and says that the consumers, by their buying or abstention from buying, are as supreme in the market as the citizens through their voting in plebiscites or in the election of officers are supreme in the conduct of the affairs of state. And furthermore, in the market, only the wants and wishes of the majority are taken into account, but not only the wishes of the majority are taken into account, but also those of minorities provided that they are not entirely insignificant in numbers. So let's spend very few seconds just thinking about market democracy. So, you know, I go to Target and I get a shopping cart and I put things in the cart, pay for them and I walk out and I voted in this manner. Well, I get to vote as often as I want to. I get to vote frequently. I can buy the red shirt this week and I can buy the blue shirt next week. I get what I vote for. Like if I buy the red shirt, they don't give me a can of peaches when I walk out. I get their red shirt. My vote matters. It sounds odd to say maybe, but I don't vote for things I don't want. You'll see why this is important. So I don't just put things in my cart. I want half of them and I don't want the other half. Everybody can vote differently. Everybody gets to vote. You know, nobody's really angry. No one sends me an email telling me how to vote whether to buy the red shirt or the blue shirt. Both parties email me telling me how to vote in elections. And I have an incentive to be informed about the items because they make a difference to me. I have an incentive to, especially if I'm going to spend a lot of money, I have an incentive to do some research and make a good decision here. So I don't want to go into too much detail. Things are quite different in political democracy. So political democracy is like walking into target. And there's already two shopping carts full of policies and promises. And you're going to walk home with one of those carts whoever wins the election. But it's different than market democracy. Suppose you want cart A to win the election and suppose it does win the election. That doesn't mean you get that cart. As soon as the election is over, the candidate can say, I've changed my mind. The press can say, CNN can say they've grown in office. Whenever they grow in office, hold onto your wallets. But anyway, they don't have to keep their promises. You're allowed to vote. The voting is infrequent. The cart might change. The promises and policies that they promise, the candidates in favor of might change. Everybody gets the same cart. This is the source of, one of the main sources of all the conflict in politics is we all end up with the same elected officials. You vote oddly enough. One of the inefficiencies of voting is you vote for things you really don't want. So you support cart A because it's maybe the lesser of two evils. But that candidate probably says things you don't agree with, that you vote for him anyway. You prefer a candidate. And it's a bundled choice. So you can't unbundle it like you can in market democracy. Your vote doesn't matter. If you vote for cart A, you get cart A. If you vote for cart B, you get cart A. If you vote for minor cart C, you get cart A. If you don't vote, you get cart A. It's quite different here. And of course, since your vote doesn't matter, you have a little incentive to be informed. At least regarding voting, you have a little incentive to be informed. That doesn't mean we should have uninformed citizens because uninformed citizens might change the way the promises the candidates make. So there's a reason to have informed citizens. It's just being informed doesn't really help you as far as voting because your vote doesn't matter. So regarding voting, you don't have an incentive to be informed. You might have an incentive for other reasons. All right. So there's a lot of issues here. Let's, we only have a few minutes. So let's consider two main issues. You're the candidate and you're making a series of promises and policies you support and promises you're making to the voters. And so you're thinking to yourself, what should I promise? What's this bundle of promises that I should make? What should be contained in the bundle? And remember, you can change the bundle immediately if you win the election. Sorry. You're just thinking, how do I win the election? And then another issue is how do you get, what do you tell your supporters in order to get them to show up and vote in spite of the fact their vote doesn't matter? And a lot of voters, I think realize their vote doesn't matter. I know people who vote and realize their vote really doesn't affect the outcome of the election. All right. So how should we think about this? Which bundle will attract a majority of voters? Let's, let's think about a spectrum of voters from the far left to the far right. I know it's much more complicated. It should be multi-dimensional, but just consider a spectrum of voters. And generally there's not a lot of voters on the extremes. And there's a bundle of voters. No, I shouldn't have said a bundle. There's a different bundle here. And there's a block of voters somewhere in the middle. And isn't that the set of voters you want to attract? So in the public choice theory, they say there's the median voter theorem. It says, if you attract the median voter, you win the election. And I mean, this, this theorem suffers from a false precision. You're not really trying, trying to attract the exact median voter, but there is a block of voters somewhere. I mean, you don't want to be painted as an extremist. I mean, both candidates are going to paint the other guys as an extremist that he's not, you know, more or less in the middle of the spectrum. So I think there's something to say. I think there's some truth in this median voter theorem idea. So one implication of this median voter theorem is that candidates often agree on things, which you might think is not the case this year, but it might be less so this year. But I think it was the 2012 election. One of the news sources after one of the debates listed all the things that candidates agree on. And they were just surprised the candidates agree on so much. But even this year, they're going to, I mean, both candidates are going to support a massive amount of military spending, maybe a trillion dollars a year. They're both going to say entitlements such as social security and Medicare and Medicaid are off the table, budget-wise. They're sacrosanct and cannot be touched. They're both going to be in favor of easy monetary policy, regardless of who's running this year. They would have been in favor of these things. They're both going to be in favor of easy monetary policy, especially in the face of high unemployment. They're both would be in favor of massive stimulus packages to fight recessions. Whoever wins the election, I suspect, is not going to pay a lot of attention to the debt because voters really don't want them to. So even this year, I think there's a list of things that candidates might agree on because they're really trying to attract some of the same voters. There is one issue here for the candidates, and that is that if you have to win the primary and then the general election, then there's kind of a problem here because there's a different median voter in the primary and in the general election. So you have to plan this out ahead of time or you have your campaign manager do it. So when you make these promises and statements in the primary, you know you're going to flip-flop and change your mind and attract a different median voter. So you want to give yourself plausible deniability. You want to say, I didn't say that. When your opponent puts up the YouTube videos of you saying one thing and saying something different three months later, you want to deny it. I was misquoted or something. I'm a straight talker. My bus says straight talker. One of the candidates 12 years ago, or straight talk maybe, I would never change my mind. Of course, you always want to accuse the other guy of flip-flopping. He probably has. Probably have a point there. All right. So what appeals to the median voter? Just think of it in terms of costs and benefits. So we don't elect these people just because we enjoy voting for morally corrupt people. We can probably say there's other reasons we elect morally corrupt people. So if we just think of it in terms of costs and benefits to the voters, then things kind of fall into place. So what do voters want? Well, they want benefits for supporting you. What do they want? Other people's money. This is what people want. So the key is to provide these concentrated benefits to special interests. To get the elderly, to get the retirees to vote for you by saying social security is off the table budget-wise. You get the farmers to vote for you by saying you support price supports and higher food prices. You get the steel industry to support you by saying you're protecting them from foreign competition. And then you give them these concentrated benefits. And of course, both candidates, they do, all candidates do this, all the major candidates. One way to do this is just through direct transfer payments where the government takes some people's money on this side of the aisle and gives bags of cash to you guys. And this is budget-wise, this is mainly what the federal government does. So for the 2020 Economic Report of the President, it says federal purchases were $1,295 billion, $1.3 trillion. But spending was $4.4 trillion, overall spending. But they only spent $1.3 trillion actually buying anything. The rest of it, they were just shifting dollars around from one group to another. So 71% of federal spending was, there were no purchases involved. There were no goods and services being produced. This last statement says, I think they're lying to you about spending. I'll return to this in a moment. But if you look at the Daily Treasury statements, it says withdrawals from all government accounts in fiscal year 2019 were almost $16 trillion. And shouldn't all withdrawals be called spending? Yes, they should. They don't count debt payments as spending. I'll return to this in a moment. All right, you can also transfer wealth just through regulatory transfers. So price floors on soybeans, transfer wealth from people who eat food that contain soybeans, who pay higher prices for this food, transfers the wealth to soybean growers, trade restrictions. I'll talk about this on Friday. Transfer wealth, again, if you protect the steel industry, you're transferring wealth away from consumers who buy products made of domestic steel to the steel industry in the U.S. So you can do a tremendous amount of wealth transfers just through regulatory transfers. And another way to transfer wealth is I think through the debt. So I realize there's a resource issue here. But in some sense, there's a wealth transfer going on with the debt. So when I put up the debt numbers historically to my classes, sometimes I'll tell them, look what's happened the last 20 years. The baby boomers have had the government borrow lots of money providing this with lots of benefits and promises. They're promising us even more benefits in the future. And you get to pay for it. And I thank them. I say thank you for doing this. And thank you for your support. And some of them are irritated by this. And I tell them, that's the way, that's democracy. That's democracy at work. You get to vote yourself other people's wealth. All right. The downside of doing this, of course, is that you are taking away some people's wealth. So the key here is to take away their wealth without them being too angry at you. All right. One thing that they talk about quite a bit, people that write about these things, is that you should disperse the costs. So you want to make everybody that buys products with softwood, they're made of softwood lumber, pay slightly higher prices, because we keep the price of softwood lumber in the U.S. above the price it otherwise would be, if we allowed the free exchange of softwood lumber from Canada. So everybody pays higher prices, but everybody pays a little bit higher prices. You need to disperse the costs. No one's too angry about it, and most of them don't know about it at all. And that's the second key. You want to hide the costs as much as possible. So you don't want to go around telling people during the campaign, yes, you pay higher food prices, yes, you pay higher prices for products made of softwood lumber, yes, you pay higher prices for products made of steel. You want to not make this apparent. I'll return to one issue that I think I'm the only person concerned about this issue, but I get to say it. All right. So within the daily treasury statements for fiscal year 2019, they have a line in the accounting statement called public debt cash redemptions, $10,959 billion, $11 trillion. They don't count this as spending, by the way. I'm going to tell you that spending is $4.4 trillion. So what is this? Debt redemptions. This is the money. They're spending making the debt payments. So they're borrowing $11 trillion last year because they're rolling over the debt so fast. So they borrow $11 trillion, pay off $11 trillion of debt, and they say that's not spending. But I think they're hiding it from us. I think some people would be angry to know that this is occurring, and I think it's very dangerous. I think it's... Our government needs to borrow over $11 trillion this year just to maintain their budget. They need to borrow $11 trillion plus pay for the deficit. They're going to borrow more than $12 trillion. But they just don't tell us about that. They say it's not spending. Of course, no household or business doesn't count their debt payments and say, well, that's not spending. If you pay off your student loans, are you saying, well, that's not spending? That's not part of my budget. That's not spending. All right, here's another way they hide things from us. Every agency of the federal government is required to turn in a financial audit every fiscal year. So the fiscal year ends September 30th. They have six months to turn in the audit to April 1st, and then they put the various statements together and it's called the Consolidated Financial Statement. And I've been watching this happen since the 1990s. A lot of times an agency just doesn't turn in anything. And sometimes Congress gives them more money for accountants when they do this. And then most of the time, the statements they turn in do not meet minimal accounting standards and they're unreadable. And so the state, and then every year the GAO puts out a statement saying it's a mess, basically. So here's part of their statement this year. This year they put out the statement regarding the 2019 Consolidated Financial Statement. And the GAO said, we audit the financial statements in that report each year, but we haven't yet been able to determine if the statements fairly present the government's finances. This year it was due in part to serious financial management problems at Department of Defense, inadequate accounting for balances between federal agencies and weaknesses in the process for preparing statements. And that's the big one. The statements are generally unreadable. And every year the GAO complains about it. But they never, I mean, if the agency says they need more money, they just give them more money for your accounting. And so it never ends. I kind of got off track there for a couple of slides, but the point is hiding things from us is an effective political tactic. All right, so now you've provided your supporters with benefits through wealth transfers. Hopefully they'll support you for that. But you also want to tell them there's a huge cost if you lose the election. Now, do you want to provide them with sober analysis regarding the other candidate's policies in doing this? I say no. Fear. Fear is the key. Fear trumps logic. Make the voters fear the other candidate. In one of the elections, not the 2016 election, one of the elections before then, one of the news sources, I think it was CNN, they went to a political rally for one of the candidates and then they interviewed the supporters and they put together the clips of how the supporters were scared to death of the other candidate. And then they went to the other candidate's rally and did the same thing. They interviewed supporters and the supporters were just terribly fearful of what would happen to the country if the other candidate won. So that's what you want to do. You want to tell people how fearful they should be if the other candidate wins the election. And of course, you could write the campaign speeches years in advance here. But if I'm not elected, you might die from a terrorist attack or a virus. If I'm not elected, your taxes will be raised. That's likely a true statement. If I'm not elected, you may lose your job. Your children won't get a good education. You may not get health care. The environment will be destroyed and we will run out of energy. Even though in a lot of these things, the candidates really agree on a lot of these issues. But anyway, this works. All right. So what's the first lesson here? If you're morally opposed to taking away people's property, maybe politics is not your... shouldn't be your preferred career. I mean, you're at a political disadvantage. If you're morally opposed to it, you either have to live with this moral dissonance while you're doing it or you just have to not do it and not get elected. All right. But suppose you're not morally opposed to it. You're willing to engage in this to try to get elected. So now you've made a bunch of promises and supported policies that you think will generate political support. The next question is how do you get voters to show up and vote? So let's spend a minute on your vote doesn't matter just to make sure we're on the same page. So when could your vote matter? Well, if there's an even number of voters, say 10, by the way, there's no recounts here. So when there's recounts, it came out after the 2000 election, recounts mean your vote matters less. So in spite of what the commentator said at the time that Florida approves your vote matters, right? Statistically speaking, recounts mean your vote matters less. But suppose there's no recounts. So if there's 10 voters, the only time your vote might matter is if you create a tie. So if you don't vote, your candidate loses by one vote. He has 0% chance of winning the election. But because you voted, it's a tie. So you've increased his odds to 50%. I mean, he still might lose, right? And then if you there's an odd number of voters, you know, if there's 11 voters, the only time your vote matters is if it breaks a tie. And then it might not matter anyway. You didn't vote. There was a tie. Your candidate might have won anyway depending on how they break ties. So there might have been a 50% chance of your candidate winning. You voted he won. So there's a lot of statistical analysis on this. This is very roughly speaking. According to the literature I've read the odds of affecting an election with your vote are 1 over N, where N is the number of voters. So let's let's just say there's 100 million voters. There's going to be more this fall. So your odds are roughly 1 in 100 million of determining who the president is and realize there's an electoral college and everything. But there's other factors involved in whether or not your votes matters. There's many other factors. So generally they say you could move the decimal point one either direction. So for 100 million maybe your vote matters 1 in 10 million times. If you voted in every election for 40 million years your vote might matter once. But if you're in Washington DC it's your chance of affecting the election is something like 1 in 4.5 billion because they all vote for the same party and they have one electoral vote. It depends on which state you're in. All right, I teach in Michigan my students love this next statement. So I tell them their vote doesn't matter and I've looked at every election since 1900 and this article is out there somewhere and some states since 1900 the whole state has never mattered in any election. Michigan is one of those states if every voter in Michigan had voted for the loser for the last 120 years the winner still would have won the election. Not only does I tell my students not only does your vote not matter Michigan's votes don't matter. Sometimes a whole state matters but not Michigan. All right, so we're fond of saying things like you're more likely to get hit by lightning than have your vote matter or you're more likely to die driving to the polls in a car wreck than having your vote determine who the president is. There's a wonderful article 2008 Journal of American Medical Association looking at the Tuesdays the four Tuesdays before and after the election and pointing out the odds of dying driving on election day and they argue that there's a 28% spike in deaths on the highways on election day. So even if there wasn't the spike the odds of greater odds of dying while driving on election day than affecting who the president is. But the Journal of American Medical Association has looked at the data on this. The article at the end says you should vote anyway, but that's of course they do. All right so now what do candidates say to get voters to show up in spite of their vote in spite of the fact their vote doesn't matter? Tell them their vote matters. Haven't you seen candidates of course you've seen candidates do this haven't you? I've seen candidates say your vote you know Ohio matters therefore your vote matters. I get emails from both parties one of them told me the outcome hinges on your vote. No it doesn't. The outcome does not hinge on my vote. I've already heard this a lot this year this is the most important election ever every election is the most important election ever. But that doesn't even if it is the most important election that doesn't imply that you should vote I mean suppose it is the most important election my vote doesn't matter so why it's a just a logical leap from it's the most important election ever therefore you should vote it's just it doesn't make any sense and the frequent if you don't vote you can't complain the the faculty at Ferris State University where I'm at have a political engagement project and we hand out flyers telling to vote and all of these fallacies are on the flyers. If you don't vote you can't complain there's no statement more false I mean there are false there's nothing more false than this statement right this is if I say I'm 12 foot tall that's false it's not more false than if you if you don't vote you can't complain you can complain I made a career out of complaining so of course you can complain no one's ever said did you vote all right but maybe they mean if you don't vote you have no moral right to complain is that what it means there's an ethical issue here so maybe there's two classes people the voters and the non-voters and only the voters have the right to complain but if we're going to do this class analysis I think everybody has a right to complain we're going to do this class analysis isn't it the voters that shouldn't complain it's their fault I mean we should blame these people the vote the non-voters are not at fault it seems like they have a greater right to complain than the voters they often point out a lot of votes make a difference so when I say your vote doesn't matter a lot of times people say well what if a lot of people believe that wouldn't that matter the fact that a lot of votes might matter doesn't imply your vote matters this is a basic fallacy and logic and first semester logic fallacy of division I mean voters don't know logic but you might be able to squeeze this by them but what else do they do they always talk in terms of we we need to win the election like we're a team so this is why the one party kept asking me for $3 they must have asked me like 50 times to give them $3 and my $3 doesn't matter but if I give them $3 I'm on the team so I'm more likely to vote because I've got money so my analogy is with like attending a football game and there's 80,000 people at the stadium here cheering on the team I've been in those crowds and we're yelling to disrupt the opposing quarterback and I know my vote doesn't matter I know my yelling doesn't affect the decibel level but I yell anyway don't you because you're on the team and you're voting so they try to talk in terms of pronouns like we they say it's a civic duty I don't have time to attack this one but not voting is one of the sins democracy as a civic religion there are certain sins as far as not saying the national anthem not saying the Pledge of Allegiance not standing for the national anthem not voting so it's a moral imperative I don't have time to say what I think about this one so you should be proud to vote you get to wear the sticker or at least where I'm at everybody wears the stickers I voted I wear the I have a sticker with the American flag it says I did not vote one election day I was at the library and the librarian commended me about what a wonderful human being I am because I voted and I said it actually says I did not vote and then you know she was very disappointed and treated me like a subhuman or something I gotta say one more thing I might run out of time but once I was wearing the sticker it makes people my skull angry the sticker does so one guy approached me in the hall and showed me how disappointed he was with my I did not vote sticker and I was just trying to joke around I didn't want to argue with the guy and I told him I support our highest goal diversity shouldn't we have a diverse faculty some vote and some don't vote because diversity trumps democracy so alright you might think that these are silly statements but the voters have been in public schools forever and they hear these things in the in high school and junior high in colleges we tell them that at my school and so when the candidate says these things you might think well my ninth grade teacher said it she was a nice lady it's probably true so maybe I should vote so anyway it's reinforced throughout the government school system alright so it looks here like the candidates have an opportunity in what I've been saying today the opportunity is to be deceptive doesn't it doesn't look like I've been saying if you want to win the election opportunities arise for you to not vote out the truth at least certainly you don't want to go around as a candidate just blurting out the truth your vote doesn't matter of course I'm catering to special interests of course I flip flopped change my mind to attract different voters of course my message changes from state to state you know you want to deny all of that but I for instance I've said things today you get to promise one bundle policies and promises and then you can immediately you don't have to deliver on it we don't have to beat this to death this is an obvious point I think in the 2008 election Obama kept attacking Bush on the deficit and saying he was going to get this under control and I never believed him I didn't think he had any inclination to try to balance the budget or anything but you don't have to deliver on what you're going to say I'm not trying to single out Obama for my students the Democrats think I'm talking about Republicans and the Republicans think I'm talking about Democrats here that's not the case you know you want to cater to special interests have policies with concentrated benefits these are usually destructive policies but of course you want to say it strengthens America or something talking some cliche or platitude about made in America or make America great or something and then you might flip-flop from the primary to the general election and you might tell all sorts of deceptions regarding voting like your vote doesn't matter so what about this deceptiveness I mean when we realize the candidates are deceptive we might not care a lot of voters if it's your candidate do you really care if he's deceptive not so much you're more worried about the other guy being deceptive and lying but you're more likely to get away with being deceptive in the political sector than the private sector so if I'm selling you a product in the private sector and I tell you that if you buy my product all your dreams will come true and you buy my product and all your dreams don't come true and you realize well that's not a truthful statement so in the political sector you tend to get away with it and the reason you tend to get away with it is voters are ignorant voters are rationally ignorant it's rational for most politicians to pay attention to politics because the costs are too high and the benefits are low because their vote doesn't matter it's pretty difficult to win elections appealing to informed voters because there's just not enough of them you have to appeal to uninformed voters to ignorant voters at least ignorant about political issues and one reason they're ignorant I say ignorant because that's the phrase we use in economics it's kind of a brutal phrase I think is that they they don't want us to know what they're doing as I pointed out earlier but let me talk about a couple of other stories here about rationally ignorant voters I haven't seen the numbers for a few years I've looked for them but at one time there was they had put the State of the Union speeches in one of those programs that determine the comprehension level and like around 1980 it was about a 10th or 11th grade level or something and they said well the president is speaking to a congressman and if you want to talk to congressmen you need to talk to them like they're in high school or 11th or 12th grade or something but then by 2013 the comprehension level was 8th grade because the president is talking to voters now and he gives the State of the Union a speech if you want to talk to voters you need to talk to them about comprehension level of about 8th grade because you want to say make America strong and jobs it's for the children anything that's for the children voters will throw money at you for the children so one other story you may have seen this although it was years ago I think it was 2011 it was a political rally and I think it was in Washington DC and they put up a sign that said Obama equals Keynesian and they just turned on the cameras and people would walk by and just scream at them and they would say Obama is not Keynesian he was born in the US he showed you his birth certificate you people are crazy and the guy with the microphone would say that proves he's not Keynesian yes it does you saw his birth certificate and they would just lose their minds but of course do you expect voters to know that they're Keynesian I have students that take macro and they still don't know what Keynesian is at the end so anyway I don't expect voters to know this alright it looks like we have a second lesson candidates that are averse to being deceptive or at a political disadvantage again if you insist on walking around blurting out the truth and refusing to take away people's money I recommend the private sector for you alright so in conclusion I'll cite an authority on all of this myself therefore candidates who are willing to violate property rights to steal and be deceptive have an advantage over candidates with stronger moral convictions so of course elected officials are corrupt candidates with moral integrity are at a severe disadvantage in the political sphere thank you