Contentious public finance: how entanglement shapes the costs of resisting elitist budgetary preferences

Abstract

Entangled political economy views societal phenomena as featuring substantial interaction between economic and political entities, but questions have been raised about the conceptual properties of entanglement. The political economist Randall Holcombe has raised questions concerning the economic influences affecting uneven patterns of entanglement between entities. Drawing upon his own transaction costs-based framework of political stratification, Holcombe suggests that political elites incur relatively low transaction costs associated with bargaining over policies, whereas non-elites incur relatively high costs. This suggests that elites actively participate in policy design and implementation and can outmaneuver the non-elite public to externalize the costs of political decisions, yielding noticeable clustering effects within entangled network structures. This article seeks to build upon Holcombe’s insights, as well as the transaction cost politics of Charlotte Twight, illustrating how groups engaging in political processes attempt to manipulate transaction costs to secure favorable outcomes. Transaction cost manipulation by elites to secure advantages is commonly studied, but less so is how non-elitists succeed in adjusting the transaction costs of political exchanges to help prevent fiscal exploitation by elitists. The public finance case of Colorado’s Taxpayer’s Bill of Rights is used to illustrate how dynamic entanglements between elites and non-elites delivered institutional change better aligning with non-elite fiscal preferences.