Exit and Voice Papers from a Revisionist Public Choice Perspective Brad R. Taylor July 2014 A thesis submitted for the degree of Doctor of Philosophy of The Australian National University ii DECLARATION With the exception of chapters 7 and 8, I declare that this thesis is entirely my own work. Chapters 7 and 8 were co-authored with Patri Friedman. The original concepts of both papers were Friedman’s. I drafted the first versions of both papers, and revisions were made collaboratively. Brad R. Taylor July 2014 iii Table of Contents Declaration .............................................................................................................. ii Acknowledgements ............................................................................................... iv Abstract ................................................................................................................... v Chapter 1 Introduction .......................................................................................... 1 Chapter 2 Rational Irrationality as Dual Process Theory ................................ 40 Chapter 3 Exit and the Epistemic Quality of Voice ........................................... 58 Chapter 4 Strategic and Expressive Voting ........................................................ 74 Chapter 5 Children’s Rights with Endogenous Fertility ................................... 87 Chapter 6 Analytic Radicalism .......................................................................... 115 Chapter 7 Entry Barriers and Tiebout Competition (co-authored with Patri Friedman) ............................................................................................................ 121 Chapter 8 Seasteading: Competitive Governments on the Ocean (co-authored with Patri Friedman) .......................................................................................... 139 Chapter 9 Conclusion ......................................................................................... 156 References ............................................................................................................ 197 iv Acknowledgements This thesis could not have happened without the help and support of many people. My largest and most direct is to my supervisor Keith Dowding, whose open but incisive mind forced me to refine the ideas presented here and abandon many others which failed to make the cut. Keith achieved the impossible trinity of being simultaneously critical, encouraging, and practical. I am also indebted to Geoff Brennan for his advisory services. As an originator of the methodological approach I take in this thesis, having Geoff on my panel has been invaluable. I also thank Mike Miller for his brief but useful tenure on my advisory panel. I am grateful to Patri Friedman for his collaboration on chapters seven and eight, as well as for the countless words of discussion on Tiebout competition and public choice theory more generally. Will Bosworth has provided extremely useful comments on this thesis from a philosophical perspective, and our beer-fuelled discussions have both broadened and refined my thinking on epistemic rationality. Eric Crampton also deserves special mention, not only for his insightful comments on various parts of this thesis, but also for introducing me to public choice theory and encouraging my early efforts in the area. In addition, a number of others have provided valuable suggestions on various aspects of this thesis or otherwise indirectly contributed through comments and discussion, including Scott Adler, Tom W. Bell, Mhairi Cowden, Michael Dalvean, Ayre Hillman, Andrew Hindmoor, Daniel Holt, Yusaku Horiuchi, John Humphreys, Toshihiro Ihori, Christopher Kam, Andrew Klassen, Matthew Laing, Kevin Lyons, Phil Magness, Adam Masters, Trent McDonald, David Monk, Ryan Murphy, Adam Packer, Jason Potts, Ben Powell, Joe Quirk, Jeremy Shearmur, Jill Sheppard, Ed Stringham, Michael Strong, Marija Taflaga, and Evan Williams. I also thank the editors of the various journals to which I have submitted these papers and to the anonymous referees who have provided useful comments. I am also grateful to the generous financial support of The Institute for Humane Studies and the Australian taxpayer, as well as to The Seasteading Institute for allowing me to draft the initial work which would form the basis of chapters seven and eight. Finally, I would like to thank my family, Christine, Bob, Jolene, and Rosie, for their unwavering support during my many years of education and my wife Hayley for enduring the poverty, stress, and uncertainty which has accompanied graduate school and the beginning of an academic career. v Abstract This thesis by papers uses rational choice theory to consider the relative performance of individual exit and collective voice in politics, as well as the causal relationships between exit and voice as individual strategies and institutionalised means of controlling government behaviour. Following the methodological approach of Geoffrey Brennan and Alan Hamlin, the papers of this thesis are examples of ‘revisionist public choice theory,’ retaining the broad framework of rational choice while relaxing one or more of the standard assumptions generally made by economists. In particular, the papers of this thesis consider other- regarding preferences, non-instrumental preferences, dispositional choice, epistemic rationality, non-efficiency evaluative standards, and non-equilibrium dynamics. By taking a revisionist approach, I am able to steer a path between the excessive abstraction of much public choice theory and the insufficient rigour of much normative political theory. Jointly, the papers of this thesis contribute to broad debates over the relative value of exit and voice in political settings, with relevance to questions of democracy versus the market, centralism versus localism, and bureaucracy versus market-like modes of governance. Though I cover a range of diverse topics in this thesis, I generally argue for a strongly revisionist approach to political analysis which sees significant behavioural differences between individual and collective decisions while grounding all action in common motivational assumptions. vi 1 1. Introduction 1.1. Introduction When an individual is dissatisfied with a good or service they consume, an organisation to which they belong, or a jurisdiction in which they reside, they have two broad strategies of seeking improvement: exit and voice. In political contexts, individuals exercise voice when they sign a petition, protest a policy, or vote in an election. Individuals exercise exit when they choose between public providers, forgo public provision of some service and seek a private-sector alternative, or leave one jurisdiction to move to another. The contrast between exit and voice as responses to dissatisfaction is due to Hirschman (1970), though there are a number of important precursors. 1 Since the publication of Hirschman’s book, a number of political scientists, public choice scholars, and political philosophers have used the distinction and refined Hirschman’s model in various ways (Dowding, John, Mergoupis, & Van Vugt, 2000; Dowding & John, 2012, Chapter 2).2 This thesis is not a critique, extension, or refinement of Hirschman’s idea. Rather it unapologetically borrows exit and voice as analytic concepts and puts them to its own use. Most obviously, I completely ignore loyalty. Further, where Hirschman was primarily interested in the reciprocal relationship between exit and voice, my interests are often more comparative, though I will on occasion deal more directly with Hirschman’s central argument. The approach I take is grounded in the methodology of rational choice theory, though it is ‘revisionist’ in a number of respects. Conventional public choice theory generally makes a number of strong assumptions about human behaviour, and this has generated a great deal of criticism (J. Friedman, 1996; Green & Shapiro, 1994). Critics accuse rational choice theorists of making unrealistic 1 Buchanan’s (1954a) comparison of market and democratic choice and Tiebout’s (1956) model of jurisdictional exit are the most obvious examples from a rational choice perspective. While Hirschman is to my knowledge the first to investigate the casual interrelationships between exit and voice options, these earlier works made fairly explicit comparative analyses of exit and voice as individual decision making processes. 2 According to Google Scholar, Exit, Voice and Loyalty has been cited 14,414 times as of July 2014. This is a popular book by any standard. 2 assumptions and ignoring a number of causally and normatively important factors. While I am sympathetic to such criticisms in many cases, in accepting them we need not abandon rational choice theory altogether. The development of a ‘revisionist public choice theory’ (G. Brennan & Hamlin, 2008) considering the non-material incentives which motivate actors, paying careful attention to the costs of decision making and the strategies used to economise on such costs, and also connecting itself more explicitly to questions in normative political theory allows us to use economic tools such as game theory and price theory without ignoring important human motivations or taking the normative agnosticism of positive theory to mean that we cannot ‘as scientists’ connect positive results to normative concerns. Each chapter of this thesis is revisionist in its own way. While the assumptions of conventional public choice theory have