Politics and Gains from Trade

One of the fundamental insights of economics is that trade is mutually beneficial and that there are gains from trade.  Couple that with the idea that individuals are rationally self-interested and you have the concept that individual engage in exchanges that they think will improve their own well being.  Public choice theory tells us that individuals behave the same in the public arena as they do in the private arena.  Politicians are rationally self-interested and as such look for ways to make beneficial exchanges.  Log-rolling a.k.a. vote trading is one way that we see these exchanges play out in the political world e.g. "cornhusker kickback".  Thus, should any of us be surprised when we hear of corruption in politics where back-room deals are cut that benefit the parties involved.  The most recent example is the trial of former Governor Rod Blagojevich of Illinois who is accused of "trying to sell or trade an appointment to the Senate seat President Barack Obama left behind after his election to the White House." according to Blagojevich's brother Robert no wrong doing was done it was simply "Two politicians trying to work a political deal. ... That's what politicians do."  Whether or not the former governor from Illinois is guilty it should remind us that markets emerge in all environments.  The point to understand is that the outcomes are different depending on the institutional framework that markets are operating within.