February 11, 2021 Reading Time: 4 minutes

On February 8th, 2021 AIER Editorial Associate, Ethan Yang, was awarded the 13th Annual International Vernon Smith Prize, for his participation in an international essay competition for young writers held by the European Center of Austrian Economics Foundation. His essay was awarded First Place with the subsequent awards going to other talented writers from Poland, Venezuela, and Nepal. The topic of this year’s competition was the question, is the public interest really in the public’s interest? The question refers to the age-old problem of the usage of the term to refer to a variety of political causes without any sort of consistent foundation. Why is banning plastic in the public interest when so many people like using plastic? Why is banning cigarettes and other restrictions on personal freedoms in the public interest when so many people like cigarettes and prohibitions historically lead to bad outcomes? Since when did a society as diverse as the United States, or any society really, all suddenly agree on what was in their collective interest? Finally, given all the limitations of state power, how can we be sure that whatever is carried out in the “public interest” is going to lead to better outcomes over market solutions, which are oftentimes characterized as “private interests?”

In his essay, Yang dives into the current ambiguity surrounding the term public interest to conclude that the term is among many ambiguous phrases often leveraged by politicians. Furthermore, he explains that even if we take the best-case interpretation of the term public interest, which would simply be the popular will of the people, that in effect is mob rule, which often leads to negative consequences. Yang then proceeds to dive deeper into the use of the term public interest in historical practice. He explains that in the US legal tradition, the term public interest has been used to describe actions that go against perceived large economic interests. In particular, former US Supreme Court Justices Brandeis and Marshall viewed the public interest as the expansion of state power to correct flaws they saw in the private sector. In effect, the idea of the public interest has an inherently statist bias. It is rooted in the belief that the state must and can apply itself to correct what it deems to be market failures. Today we can see this bias exhibited in the fact that public interest groups tend to use the political process to accomplish their goals such as the employment of lobbying and litigation. The list of public interest initiatives spans too far into the controversial realm of partisan politics to be appropriately labeled as such. Groups that advance causes such as abortion access, gun control, environmental regulation, labor unions, and so on are all considered public interest groups but the topics they work in are extremely contentious. There isn’t anything inherently good or bad about these causes but to claim that the solutions they propose will surely be in the interests of the public is a failing proposition. These shortcomings could arise from a lack of consensus as in the case of abortion and gun control, or it could be from a lack of economic analysis as in the case of certain forms of environmental regulation. In short, these so-called public interest groups cannot claim they speak for everyone, and sometimes their ideas might make things worse. 

After establishing that the public interest in practice is inherently a pro-state intervention as well as a collectivist ideology, Yang then proceeds to explain how fundamental economic principles undermine its promise to serve the public. He cites Public Choice Theory, which is simply the common-sense recognition that government agents are not gods, they are human beings with human impulses. Just because the government is empowered to solve a problem does not mean that it has the ability to. The same applies to the general population when it raises its voice in favor of a political cause. Furthermore, the incentive structures within government are arranged in a manner where it is possible that government agents will simply just use the opportunity to enrich themselves. Another core concept he cites is the Knowledge Problem, which refers to the fact that nobody can know everything and that knowledge is dispersed at the local level. This could refer to the physical limitations on the state to decide what’s best for businesses when creating regulation. It can also refer to balancing recreation and public health, as in the case of vice controls surrounding cigarettes, alcohol, and other recreational drugs. Individual freedom and voluntary private transactions are often far superior in solving these questions than state or mob-based solutions. Finally, he cites the Economic Calculation Problem, which refers to the need for prices and private property for calculated decision making in society. Public interest initiatives oftentimes are fueled not by price calculation but simply political passion which falls short of being able to enable complicated interactions to be processed in a productive and timely manner. Is building a new school or a new office more important? The market process oftentimes removes the arbitrary nature of this debate and leads to greater outcomes for more people as well as more efficient use of resources. Sometimes, it’s just none of our business what someone does with their plot of land. However, such a profit-motivated approach would never be categorized in the public interest even though it may lead to outcomes in the interest of the public.

Yang’s conclusion to the paradox surrounding the term public interest is to simply stop assigning so much weight to the phrase. It is clear that it is not only a vague term but its application in practice tends to simply be a euphemism for one’s political goals. It would be best to stop attempting to use the word as a varnish for political causes and simply examine the ideas for what they are worth. Once upon a time, it was in the public interest to own slaves and prevent certain people from obtaining rights. The fact that something is popular doesn’t mean it is right or even beneficial. A better way forward is to simply lay out arguments in full, detailing why and how such proposals would result in the best outcomes for the most people while being prepared to own the consequences. This discussion should be accepting of contributions from all backgrounds and specializations and be open to hearing all solutions, state or market-based.


AIER Staff

Founded in 1933, The American Institute for Economic Research (AIER) educates people on the value of personal freedom, free enterprise, property rights, limited government, and sound money. AIER’s ongoing scientific research demonstrates the importance of these principles in advancing peace, prosperity, and human progress.

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