Economics

The Joyful Contrarianism of Gordon Tullock

Meet the economist who understood NASCAR crashes, the sale of indulgences, and the feeding habits of coal tits.

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What kind of crank wants to put bayonets in steering wheels, praises political corruption as "working out rather well," and thinks that competition can be harmful and should be discouraged? Gordon Tullock, the late George Mason University professor of law and economics, made all those arguments with a (more or less) straight face, while also helping invent the then-new discipline of sociobiology. His insights have proven to be more durable, and more sensible, than his many critics expected.

To be fair, economists tend to value counterintuitive arguments, where surprising conclusions emerge from innocuous assumptions. In 2019, we will pass the 70th anniversary of the Communist takeover of China, an event that Tullock witnessed in person from the vantage point of his diplomatic post in Tientsin. That experience launched his thinking about the problem of governance, anarchy, and the importance of rules. Looking back, many of the insights that powered his work from that time—once dismissed not just as counterintuitive but as outlandish—have now become conventional wisdom.

There are lots of contributions worth examining, including his work on voting, bureaucracy, and constitutional theory. But those fit reasonably well into the "public choice" tradition, which Tullock helped found, and are easily accessible to those interested in that approach. I will consider three of Tullock's less well-known, but probably even more important, insights—regarding safety regulation, corruption, and the rationality of evolved behaviors—and see how this work has stood the test of time. The three are very different, but they are unified by one feature that is the hallmark of the economic approach: In every case, Tullock reached a conclusion but pressed further to ask, "And then what?"

Safety Regulations

Should governments mandate more safety in products? The usual terms of debate weigh reduced injuries—the "human toll"—against increased cost, with only heartless "rational choice" trolls actually worrying much about costs. The idea that perfect safety is morally undesirable, because such policies have enormous opportunity costs, is obviously, annoyingly important—and a big part of the reason economists often end up standing alone at parties, studying the wallpaper pattern.

Safety is valuable, of course. But economists pitch their arguments "at the margin," meaning for the last increment. The first improvements in safety are cheap and uncontroversial: reliable brakes, turn signals, seat belts, safety glass in windshields. The next increment—airbags, anti-lock braking systems—comes at much greater cost and with a smaller associated reduction in injuries. Ultimately, the only way to make cars completely safe is to park them and throw away the keys. Driving is dangerous.

Tullock's contribution was to ask, "And then what?" The problem is worse, actually much worse, than the increasing marginal cost of safety improvements. The safety of the car, after all, is just one factor; drivers and their attitudes toward danger are the key missing variable. The state can only mandate the safety of the car. Ultimately, the driver's behavior determines the risk of driving.

This observation is now sometimes called the "Peltzman Effect," after the University of Chicago economist Sam Peltzman, but Tullock had argued some versions of it for decades. As the University of California, Irvine economist Richard McKenzie recalls it, Tullock noticed that safer cars reduced the costs of accidents for drivers. If the government "subsidizes" accidents by mandating airbags, there will be more accidents. Worse, because of increased automobile speed and recklessness, there will be more pedestrian injuries and deaths. Safer cars mean more injuries.

Tullock's famous counterproposal was to place a long, sharp dagger firmly in the center of the steering column. His earliest notion of this was to have the tip pointing back and locked one inch from the driver's chest. By the time I talked to him about it, in the 1990s, the idea had evolved to work more like an airbag, so that the dagger would be hidden but would deploy with explosive force in the event of an accident.

Calling this conclusion counterintuitive is an understatement—but there is an important insight underlying Tullock's drollery. The risk of injury is jointly determined by the behavior of all the people who are driving in a particular area. If I'm aggressive and cause a wreck, I've imposed additional risk on you. If safety "improvements" subsidize risk-taking, and some—not all, necessarily, just some—people drive more aggressively, then the observed reductions in injuries from safer cars will be much less than regulators expect. Worse, no individual driver can, by behaving safely, escape these bad effects. Safety regulations have negative externalities.

The most annoying thing about Tullock was that he was usually right. He was even right about car safety regulation (though maybe not about the dagger!): According to the American Automobile Association, there have been substantial increases in driver aggressiveness since 2000, with eight out of 10 drivers admitting to having intentionally tailgated another car and nearly half saying they have bumped, rammed, or gotten out of their cars to threaten the occupants of another vehicle. While the direct causal mechanism is complex, this increase in aggressiveness tracks the imposition of universal requirements for airbags and anti-lock brake systems in 1998.

This problem is borne out in the real "national sport" of America, NASCAR. Starting in 1988, the racing entity imposed "restrictor plates" as a safety measure, limiting the airflow into an engine (and therefore the horsepower, and speed, of cars). Restrictors were required in response to the horrific "going airborne" May 1987 accident of Bobby Allison at Talladega, where the car flew into the upper restraining fence and disintegrated, injuring five spectators, including one who lost his eye. But two refereed journal articles, one in the Southern Economic Journal in 2004 by J.B. O'Roark and W.C. Wood, and one in 2010 in Public Choice by A.T. Pope and R.D. Tollison, concluded that safety improvements had increased the number of crashes and multi-car pileups in the sport (though they had not affected the total number of deaths).

That is what you would expect. If speeds are suppressed and safety equipment is improved, the risks of death and serious injury are lowered. The result should be increases in risky behavior by drivers, including close drafting and "trading paint," the euphemism NASCAR uses for high-speed bumping.

In February 2018, NASCAR switched from restrictor plates to the more precise and consistent "tapered spacers," which have the same effect and the same "safety" rationale. The 2018 NASCAR "Cup Series" champion, Joey Logano, was clear about the likely outcome: "I totally expect to crash more cars," the Associated Press quoted him saying. "As cars are closer and drivers are more aggressive, a mistake will create a bigger crash. We can't get away from it."

Of course, Tullock would ask, "And then what?" NASCAR is not stupid; it may not be an accident (sorry) that there are more crashes with the same level of driver safety. That may very well be the point: NASCAR fans come for the racin', but they stay for the wreckin'. Using a "safety" rationale—particularly one that really does reduce injuries slightly—as a means of increasing the number of wrecks makes a lot of economic sense. If the authorities really wanted to prevent accidents, NASCAR would put big daggers in steering columns, not little tapered spacers in carburetors.

Corruption

Corruption may or may not be illegal, but it's always a bad thing. Isn't it?

Some think of corruption—the misuse of public trust in the powers of political office for private gain—as comparing (a) the honest services and choices of a public official with (b) actions "corrupted" by considerations that are not legitimate. Harvard law professor Lawrence Lessig has claimed that a decision is corrupt if the official is improperly, even if only subtly, influenced by the anticipation of some sort of economic gain or loss. Fordham University law professor Zephyr Teachout has claimed that if a public official acts in consideration of a private benefit outside of the standard compensation for his or her office, the action is automatically corrupt.

Suppose, though, you are an entrepreneur in a developing nation and you have a good idea for a new company. It normally takes six months to have a telephone or internet line set up, because the state monopoly utility company is notoriously inefficient. But if you pay lagay ("speed money" in Tagalog), or if you khilana para ("feed him" in Hindi), a happily willing, competent work crew will be there tomorrow. Who will actually cough up the cash? Whoever values the service most. Which means that the most economically productive firms and the best new ideas will get to jump the queue.

In a system with bad rules or limited state capacity, tacit endorsement of corruption improves the working of the system. The more inefficient the system, the greater the efficiency increase in the near term, as scarce resources are directed first to higher-value uses.

But as Tullock asks, "And then what?" In this case, two things happen. First, because the scarcity of the resources is artificial and discretionary, the state actors who formally and informally control those resources will adjust access strategically so as to increase the quantity of "rents" (i.e., undeserved benefits) they receive. In my example, the phone company might announce a mandatory two-year waiting period, increasing the value of access to the "informal" workaround of bribes. Second, those with control over the resources and thus access to the rents will start competing—very likely by offering bribes of their own—to maintain their lucrative positions.

Tullock noticed this phenomenon for himself at several points during his career. When he was briefly in private practice as an attorney in Chicago, his job as a junior associate involved paying bribes to minor officials in the Kelly-Nash political machine to ensure that his firm had fast access to records that might otherwise take weeks to secure through normal channels. Later, while working for the U.S. Foreign Service in Tientsin, China, he had the experience of being there on the ground during the Communist takeover of 1948–49.

Tullock was struck by a presentation from an academic who decried the corrupt practices of the Chiang Kai-shek regime in Taiwan but lauded the new Communist regime on the mainland. In particular, the academic pooh-poohed the supposedly "restrictive" travel policies of the Communists, noting that it was easy to bribe officials to obtain passes.

To Tullock, both regimes seemed corrupt. But he also realized that corruption, far from being an immediate problem, was the only thing that made the cumbersome Rube Goldberg governing mechanisms work at all. "While corruption usually meets with disapproval," he wrote in Contemporary Economic Policy in 1996, "it may have some redeeming features. It may make possible smaller or no salary payments to officials who, if carefully supervised, will still carry out their functions on a fee-for-service basis. The purchase of government jobs usually is thought to be corrupt, but in some cases, it has worked out quite well."

He filed this lesson away in the late 1940s and often came back to puzzle over it for the next 65 years. If corruption is actually a benefit—at least in countries with bad institutions or sharply limited state capacity—then what is the problem? All we need to do is suggest that developing nations cultivate corrupt systems and voilà! Problem solved.

Of course, that's not right, and this realization is what led Tullock to his signature contribution to the study of public policy: the problem of "rent-seeking." In China, he said, officials write laws with the explicit expectation of selling "permits" that would exempt the "customers" from having to obey the regulation. In addition, officials may purposely limit the total number of exemptions so they can auction them off to the highest bidder. In the short term, corruption is a workaround for bad government, but in the long run corruption locks in bad government and encourages abuses of state power.

Tullock used the example of an official in Fukien (now Fujian), a province from which many citizens illegally traveled to Indonesia to work, returning with substantial sums of cash and goods. Local officials set up elaborate programs under which going abroad to work was technically not allowed but in fact actively encouraged for those who could expect to earn good wages. Officials charged licensing fees that were high enough to substantially enrich the "sellers," but they made sure the cost was not so high that it would deter workers from traveling abroad in the first place.

The problem is that the system became firmly entrenched, and the bribes came to be capitalized in the "prices" for getting a job as a local official in Fukien. In fact, the "salaries" of government officials could be rendered as negative numbers. The opportunity to collect bribes was so lucrative that the positions were essentially sold as franchises, with officials paying their superiors, who paid their superiors, and so on.

This system, once in place, is nearly impossible to root out. In open, noncorrupt systems, parents might save or borrow to pay for law school or some other training for their children. But in a corrupt system, people save or borrow to pay the bribes necessary to get the kinds of jobs where bribes from citizens provide a good living. If a new, reform-oriented government comes into office, the reaction from government officials is likely to be fierce, possibly violent. After all, they paid for their corrupt jobs fair and square, and they expect to be able to collect.

"Evidence suggests that officials tended to draw a large part of their personal income from bribes," Tullock wrote in his 1996 paper. "Indeed, it is almost certain that once a government structure has been set up so various people make profits, changing the structure in such a way to shrink the profits will be extremely hard, regardless of whether the profits are legal or not. Firing civil servants may be even harder than firing college professors."

A passage from a recent New York Times article on illegal "sand-mining" in India puts the situation in stark relief: "Construction is the business where criminals have the best opportunities to launder the most money, [one real estate agent] explained, and a cascade of bribes go 'to the topmost levels in the government.'…You pay 6 percent in bribes up front. Then, after the first payment, you pay another 7 percent, half of which goes to the state's top politicians. The development authority's junior engineer gets 3 percent. The associate engineer gets 1.5 percent. The senior manager gets 3 percent, and so on—until the total reached an astonishing 30 percent."

For Tullock, the really interesting question is not why so many governments are corrupt. Instead, the puzzle is how any government manages to solve this problem and avoid corruption. The benefits, to those in power, of creating arbitrary restrictions and then selling indulgences to exempt the wealthy and powerful seem irresistible. The U.S. Internal Revenue Code is replete with relatively high income tax rates, at least on paper. But as each industry or investment group pays its "bribe" to Congress by organizing voting support, making campaign contributions, and the like, the actual rates to which it is subject are reduced, often sharply, via esoteric subsidies, tax credits, or deductions.

In the early 16th century, Martin Luther recognized this kind of corruption in the Catholic Church. In his "Thesis 27," Luther complained of priests "who say that as soon as the coin jingles into the money box, the soul flies out of purgatory." He was referring to an actual jingle, dating to long before Mad Men—perhaps the first ever used in advertising. A little rhyme, attributed to a German monk named Johann Tetzel (1465–1519), translates to: "As soon as the money in the chest rings, a soul from purgatory to heaven springs." The very idea of judgment had been hijacked by some members of the Church as a way to increase their revenue, selling "Get out of purgatory" cards.

A lot of work has been done since Tullock first wrote about this problem. Our understanding of the temptations of corruption, especially in developing nations—he called it "the transitional gains trap" in a famous article in 1975—is now standard economics. But Tullock saw the problem clearly in the 1950s.

Bio-Economics

Many scholars—think of Karl Marx, F.A. Hayek, Ronald Coase, Douglass North, and Elinor Ostrom, just to start—have claimed that human societies are complex adaptive systems that are subject to evolutionary processes. Evolution requires at a minimum two dynamic forces: a source of variation and a source of selection. In biology, variation comes from genetic mutations, while selection comes from predation and competition for space and resources, both within and across species. But in market systems, the source of variation is entrepreneurial energy and creativity, and the source of selection is the requirement that private organizations must cover their cost of operations—the "profit and loss" test explained so clearly by Ludwig von Mises.

Evolved systems are internally coherent, sometimes so much so that they may appear to have been designed. The Anglican clergyman William Paley famously argued in Natural Theology (1902) that the extraordinarily complex structures we call "eyes" demonstrate the existence of a designer. Paley famously used the metaphor of a watchmaker: If someone finds a watch, it's only sensible to conclude that there must be a watchmaker to design such a complex and highly functional instrument.

Yet the "coherence" produced by evolution is not the same as efficiency, equity, or any other admirable property. One of the most coherent, and persistent, arrangements of matter on Earth are the insects called "cockroaches." No one would claim they are good. They just are. The same thing might well be said about the outcomes of public choice processes. It is perfectly true that institutional structures of domination and control may be persistent features of political economies that survive. But that tells us nothing about whether these features are desirable.

In economics, evolutionary forces are conceived as operating through markets. Yet for nonhuman species, markets are not available as an institutional context for interaction. That would appear to imply that biology and economics are separate, and cannot be approached with any similar models. If you want to study biology, you have to stop being an economist.

Tullock thought that was wrong. It's true that Darwin's "natural selection" takes the form of profit in markets and survival in biology, but a closer look shows surprising similarities. "Indeed, it could be argued that I have never left economics," he wrote in 1979, "that all of my 'biological' articles are simply economics articles in which I have rather unusual sets of entities maximizing a rather unusual utility function." In other words, economists can study the efficient allocation of resources among competing desirable ends, regardless of whether those maximizing choices are being made by consumers or animals and plants.

As early as 1971, Tullock, in a letter to the editor of The American Naturalist, recognized that biological optimization could be achieved even in "social" or behavioral patterns, rather than just in physical shape or function. He was notorious for reading obscure things that would trigger his future work. In this case, I'm afraid the explanation for his interest in the subject may have been the title of an article he cited in his letter: "Tits and Their Food Supply in English Pine Woods: A Problem in Applied Ornithology." Admit it. That title caught your eye, too, didn't it?

It turns out that the article, by J. Gibb, dealt with "coal tits," a small perching bird common in much of Europe. Tullock noticed that there was a figure describing the "shopping behavior" (Tullock's description, not Gibb's) of coal tits in finding the eucosmid moths that were one of their primary food sources. The pattern of search used by the coal tit was very close to an optimizing "comparison shopping" algorithm that could have only been the result of a clever application of calculus.

Except, of course, that birds don't know calculus—they don't even know about "shopping." Tullock's point was that evolution selected for behavior that is clever "as if" the creatures were clever, even though they were not. Thus, it's not just an animal's shape, such as efficient wings or beaks adapted to particular food sources, but also behavior, even complex behavior, that can be passed on as part of a genetic lineage. As Tullock put it, "We need not, of course, argue that the coal tits have thought the matter out in the same way that human beings would. Presumably, they have inherited an efficient pattern of behavior resulting from natural selection which would eliminate inefficient heritable behavior patterns."

Tullock noted that the analogy he was using—birds doing comparison shopping based on price as a mechanism for minimizing energy expenditure in finding and eating moths—may appear to be "bizarre." But he argued convincingly for the value of the theory as a means of making predictions, and he was quite right.

The next question, as always, is "And then what?" Tullock thought that creatures which have developed highly specialized, precisely adapted behaviors may be more fragile, in the sense that they may have limited ability to adjust even to small changes in the environment. That's why the coal tit's decision rule was so interesting. The key variable in his analysis was energy expenditure, because "search" was expensive: Flying around looking for moth grubs in places where there are none uses up a lot of energy. Even if the coal tit did find a new source of food, it was likely no better than the sources it had already found. So according to Tullock, the coal tits adopted a "strategy" that involved always going back to the same place, but with an apparently random element in which they sometimes—it's not clear why—looked somewhere else. That strategy is both efficient and robust with respect to changes in the environment, because the search combines known solutions and a random component for searching out new solutions.

Specifically, the coal tit was a "careful shopper" in the sense that it had an optimal pattern for finding nourishing grubs hiding in pine cones. The birds weren't looking for lower prices, as a human shopper would. Instead, they were "hungry, lazy, and curious." This approach meant that a change in the environment—say, a favorite copse of pine trees getting bulldozed—was not catastrophic, because the birds had pursued what game theorists call a "mixed" strategy: usually searching in places that have proved grub-dense but sometimes looking elsewhere.

In another paper, called "The Edge of the Jungle" (2005), Tullock explored how the "discipline of continuous dealings" undergirds the fundamental institutions of social order. To illustrate the problem of competition over scarce resources, he used the example of a pride of lions. It turns out smaller lions often engage in threatening behavior toward larger lions in an attempt to secure food. As Tullock pointed out, such behavior can only successfully deter larger lions if the smaller lion is prepared to fight, at least on occasion, if the larger lion does not give way. But this is problematic: If the larger lion "calls the bluff," engaging in the fight is likely to end badly for the smaller lion.

What, then, leads smaller lions (sometimes) to not back down? "The mechanism which makes this possible, I believe, is 'loss of temper,'" Tullock wrote. "Individuals make threatening noises about things that they want for rational calculations. The actual serious fighting…however, requires temporarily behaving in what is an irrational way. You threaten your opponent with irrational behavior on your part and the threat is indeed rational. Therefore, a built-in, hereditary reaction pattern such that you will, on occasion, behave irrationally may be quite rational in the long run." The passage anticipates one of the central insights of evolutionary psychology: "Hard-wired" emotional responses can allow animals to engage in behavior that is evolutionarily advantageous but difficult to sustain under a regime of purely "rational" decision making in any particular situation.

If I fight, I might get hurt. But if the larger animal thinks I might go crazy and fight anyway, he'll leave me alone.

This kind of argument was also developed by Friedrich Hayek, particularly in his book Law, Legislation, and Liberty. It relies on the existence of an evolutionary process that selects at the level of institutions or group norms rather than genes. As the sociobiologist E.O. Wilson famously (and controversially) said, "The competition between [selfishness and altruism] can be succinctly expressed as follows: Within groups, selfish individuals beat altruistic individuals, but groups of altruists beat groups of selfish individuals. Or, risking oversimplification, individual selection promoted sin, while group selection promoted virtue."

Emotions allow us to suspend our rationality and act in the interests of the group. If you see someone violate group norms (say, cutting in line at a ticket counter), your rational mind might say, "Let it go. You might get hurt." But your evolved, emotional brain screams, "NO! YOU MUST FIGHT NOW!" even though cutting in line is a dumb thing to fight over.

On the other side, someone who tries to cut in line will likely experience shame—a physical reaction involving blushing and increased heart rate. Those negative feelings cause us to consider the reactions of others, even if we would rather not. Consequently, the group norm of queueing is supported even if there are no police around.

Tullock recognized this tendency even in himself. I say "even" because he saw himself, with some cause, as an extremist intent on choosing only the most rational course of action in any situation. But when he arrived on the Normandy beachhead as part of a replacement rifle detachment just seven days after the initial "D-Day" landing, Tullock was quite content simply to follow orders. He later wondered at this, because his rational mind thought the invasion was a bad idea: He saw the war as "three-sided" and worried that a defeat of Germany would leave a dangerous power vacuum. "I suspected that the end would leave Russia without any European country to hold them in check," he wrote in 2002. "Nevertheless I had no particular doubts about going forward and perhaps being killed….I was clearly not selfishly maximizing."

Notice the nuance in this account, which for Tullock amounted to an embarrassing tell-all of a moral failure. Not selfishly maximizing? Horrors. He was not a member of a rifle company because he was a slave fearful of punishment. Rather, his sense of belonging to a group, and his (acquired) respect for the norms of that group—ranging from patriotism when he was young to military training once he joined the Army—had been internalized.

This capacity for human social cooperation is what makes civilization possible, but it is also a psychological hook that demagogues can use to catch mass populations. As Napoleon is said to have bragged, his particular genius lay in his ability to make men willing to die for little pieces of ribbon. If he had had more ribbon, he claimed, he could have won more battles. Patriotism explains some of the best, and most of the worst, human behavior. And it's a product of evolution, not reason.

'And Then What?'

If we had to select a single question to always be asking politicians and regulators, Tullock's "And then what?" would be a strong candidate. Some of Tullock's work has been misinterpreted, perhaps willfully, to try to portray his perspective as extreme. He did not believe that it was descriptively accurate to claim that all creatures, including humans, always act to further only their own narrow self-interest. In fact, he believed that much of what determines whether people act virtuously or viciously depends on the system of rules in which they operate. And he certainly didn't believe, as some have claimed, that people should act only in their self-interest, a common mischaracterization of the public choice school.

But it is true that he could be abrasive and enjoyed shocking his audience, either in lectures or in print. He did not cultivate a following, and in fact he could be rather hard on his friends. The last time I saw Tullock was at the 2008 Public Choice Society meetings. He wasn't getting around very well, and his voice had lost its strength. He walked up and stared at me sideways through thick glasses, wheezing: "You don't make sense."

Here we go. "Why don't I make sense, Gordon?"

"Because you have long hair. So you must be a leftist. But you are carrying an umbrella. So you must be a conservative. You don't make sense."

A crowd was gathering; I had to get out of this. "Yeah, well, Gordon, maybe I'm just complicated!" I exclaimed.

"No, no, no. I've read your work. It's not complicated, just incoherent. There's a big difference." Then Tullock walked off, shaking his head with exaggerated pity. The onlookers, as the Brits say, fell about.

That abrasiveness was of a piece with Tullock's view of rules and institutions. We can't rely on love and mutual good feeling to guide the way we govern ourselves. If we do, there's no way to handle sudden changes in the environment. To make the system robust, we have to design rule structures as if they were going to be operated by fools or knaves. Because as Tullock well knew, they almost certainly will be.