The field of economics has had an interesting history in that the principles developed during its evolution have been widely applied to many other fields, one of them being politics. Nowhere today does the economic principle of transaction costs reveal more about politics than in California.
In 1937 Ronald Coase published “The Nature of the Firm,” a seminal paper introducing the concept of “transaction costs.” It revolutionized economics and won Coase the Nobel Prize in 1991.
Transaction costs, he argued, are those costs associated with consummating a trade. For example, if you want to buy a used car there are certain things you must do that involve a sacrifice of your time or money. You must find someone willing to sell a car, you must find a car in your price range, you must find the color you like, and so on. In other words, buying or selling a good is not a painless process. There are personal costs incurred.
Just as in the market for goods, making political decisions involves sacrifices for the voter. He must expend energy informing himself about the issues and candidates if he is determined to make an informed decision about whether a piece of legislation or a politician is worthy of his support.
Recently, Charlotte Twight examined the effects of transaction costs on politics in her book Dependent on D.C. She observes that political transaction costs can be varied. They include the complexity of legislation under consideration, coverage or noncoverage in the media of political activity, and the degree of difficulty in instituting change in government.
Twight’s astounding thesis is that these transaction costs are consciously manipulated by politicians. She documents cases where politicians openly discuss what wording for unpopular legislation would be most palatable to the public, how programs such as income-withholding are implemented with the intent of making it more difficult to ascertain the true cost of government, and when officials simply lie to the public.
However, there are few programs in government that institute political transaction costs more openly than ballot-access laws. Plain and simple, those in power make the average citizen jump through enormous and costly hoops if he wishes to run for office. Sometimes, the obstacles placed in the way are almost insurmountable, especially for the poor.
For instance, in Virginia an aspiring candidate for statewide office (including U.S. president) is required to obtain 10,000 signatures from registered Virginia voters in order to appear on the ballot. The state recommends that the candidate gather between 15,000 and 20,000 signatures because of discrepancies, such as invalid addresses or unreadable handwriting, which disqualify a large percentage of the signatures.
If this requirement isn’t tough enough, Virginia also requires that 400 signatures come from each of Virginia’s 11 congressional districts. So a candidate cannot just petition around his hometown; he must travel all across the state in order to secure his signatures — a state that is more than 400 miles wide in some places.
This is a daunting task for the average Joe. Someone without a political machine to aid him would have to work full-time for months just to get the necessary signatures. He might even have to quit his job, and there aren’t many who can afford to do that. And this is all before he is even allowed to campaign as an official candidate.
These rules were implemented with the purported intention of “protecting” us from the chaos of an election open to anyone who desires to run for office. One must be truly naïve to believe this. There is only one reason for these regulatory encumbrances, and that is to make it much harder for anyone to dethrone those in power.
The recall election proceeding in California is a testament to how well open elections really work and what the true nature of representative democracy is. True, some transaction costs remain for candidates to overcome, but they are minor and that is why there are now more than 130 candidates on the ballot. It is true that there are strippers, comedians, and actors running for office but so what? As recent polls show, the political marketplace sorts out who rises to the top and who doesn’t.
Besides, who’s to say that these amateur politicians wouldn’t make good leaders? Unfortunately, because of the high transaction costs that our representatives have imposed on potential candidates, they make it almost impossible for us to find out.
