Who maximizes what?

When attempting to teach economic principles we always try and determine the objective functions of market participants. In this way, we can predict what individuals are likely to do in certain circumstances.

For example, we assume that firms will attempt to maximize profits, or equivalently minimize costs. From this we can predict how they will behave when faced with rising input prices, rising output prices, the imposition of taxes and government regulations.

Individuals, on the other hand, are assumed to maximize utility, an abstract measure of happiness or satisfaction. From this we can predict how they will behave to changing incomes, prices, tastes and information.

What then, do governments maximize? We would like to believe that they maximize social welfare or economic growth or employment or something along that line. However, evidence seems to suggest that our politicians are actually vote maximizers. They tend to do or say whatever is required to get elected or re-elected. We offer some recent evidence from the state of Kentucky where, in a matter of a few days, they introduced a series of bills that will leave you shaking your head.

The first article (click here) relates to a proposal to make it illegal to smoke in a car where a minor (person under 17) is present.

A second article (click here) reports that Republican representative Lonnie Napier wants all recipients of state funding, including welfare, to be subjected to random drug testing. Those found testing positive for illicit drugs would lose their state benefits. One can't help wondering if this applies to the elected representatives as well. At the same time another bill being introduced reduces the severity of punishment for the possession of illegal drugs (click here). A cynical person would suggest that both measures are simply designed to save money and have nothing to do with the question of illegal drugs.

The third article (click here) relates to a proposal to “exempt Kentucky-made guns and ammunition from federal background checks, dealer licenses and other national regulations if the items remain in the state.” From http://www.lcav.org: “Kentucky does not impose criminal liability for negligent storage of a firearm, even if a child gains access to the firearm and causes an injury or death.” Clearly, at least in Kentucky, cigarettes and welfare recipients on drugs are more dangerous than firearms.

In no way are we critical of the citizens of the fine state of Kentucky. Their politicians are doing exactly what they think the citizens want. The only reason this blog is specific to Kentucky is because all of the articles came out in the same week.