Public choice
Part of a series on |
Economics |
---|
Part of the Politics series |
Politics |
---|
Politics portal |
Public choice, or public choice theory, is "the use of
In popular use, "public choice" is often used as a shorthand for components of modern public choice theory that focus on how elected officials, bureaucrats, and other government agents can be influenced by their own perceived self-interest when making decisions in their official roles. Economist James M. Buchanan received the 1986 Nobel Memorial Prize in Economic Sciences "for his development of the contractual and constitutional bases for the theory of economic and political decision-making" in this space.[3]
Public choice analysis has roots in positive analysis ("what is") but is sometimes used for normative purposes ("what ought to be") in order to identify a problem or to suggest improvements to constitutional rules (as in constitutional economics).[1][4][5] However, the normative economics of social decision-making is typically placed under the closely-related field of social choice theory, which takes a mathematical approach to the aggregation of individual interests, welfares, or votes.[6] Much early work had aspects of both, and both fields use the tools of economics and game theory. Since voter behavior influences the behavior of public officials, public-choice theory often uses results from social-choice theory. General treatments of public choice may also be classified under public economics.[7]
Building upon economic theory, public choice has some core tenets that are predominantly adhered to. Due to this there is no decision made by an aggregate whole. Rather, decisions are made by the combined choices of the individuals. The second is the use of markets in the political system, which was argued to be a return to true economics.[8] The final is the self-interested nature of all individuals within the political system. However, as Buchanan and Tullock argued, "the ultimate defense of the economic-individualist behavioral assumption must be empirical[...] The only final test of a model lies in its ability to assist in understanding real phenomena."[9]
Background and development
History of social choice and public choice theory
An early precursor of modern public choice theory was the work of Swedish economist Knut Wicksell (1896),[10] which treated government as political exchange, a quid pro quo, in formulating a benefit principle linking taxes and expenditures.[11] American statesman and political theorist John C. Calhoun is also seen as a precursor to modern public choice theory.[12] His writings on political economy anticipate the "public choice revolution" in modern economics and political science.[12]
Some subsequent economic analysis has been described as treating government as though it attempted "to maximize some kind sort of welfare function for society" and as distinct from characterizations of self-interested
Modern public choice theory
Modern public choice theory uses the basic assumptions, principles and methods of microeconomics as an analytical tool to study and portray the behavior of subjects in political markets and the operation of political markets. Public choice refers to the behavior and process of what public goods are provided, how they are provided and distributed, and the corresponding matching rules are established. Public choice theory expects to study and influence people's public choice processes to maximize their social utility.
Modern public-choice theory, and especially election theory, has been dated from the work of
Somewhat later, the
Constitutional economics
Constitutional economics is a research program in economics and constitutionalism that has been described as extending beyond the definition of "the economic analysis of constitutional law" in explaining the choice "of alternative sets of legal-institutional-constitutional rules that constrain the choices and activities of economic and political agents." This is distinct from explaining the choices of economic and political agents within those rules, a subject of "orthodox" economics.[23]
Constitutional economics studies the "compatibility of effective economic decisions with the existing constitutional framework and the limitations or the favorable conditions created by that framework,"[24] It has been characterized as a practical approach to apply of the tools of economics to constitutional matters.[25] For example, a major concern of every nation is the proper allocation of available national economic and financial resources. The legal solution to this problem falls within the scope of constitutional economics.
Constitutional economics takes into account the significant impacts of political economic decisions as opposed to limiting analysis to economic relationships as functions of the dynamics of distribution of "marketable" goods and services. "The political economist who seeks to offer normative advice, must, of necessity, concentrate on the process or structure within which political decisions are observed to be made. Existing constitutions, or structures or rules, are the subject of critical scrutiny. "[26]
Decision-making processes and the state
One way to organize the subject matter studied by public choice theorists is to begin with, the state's foundations. According to this procedure, the most fundamental subject is the origin of government. Although some work has been done on anarchy, autocracy, revolution, and even war, the bulk of the study in this area has concerned with the fundamental problem of collectively choosing constitutional rules. Much of this study on constitutional rules is based on work by James M. Buchanan. This work assumes a group of individuals who aim to form a government, then it focuses on the problem of hiring the agents required to carry out government functions agreed upon by the members.[27]
Bureaucracy
Another major sub-field is the study of
The anthropological study of bureaucracy has mostly contributed to our understanding of how various institutions of governance actually operate, why they achieve the outcomes they do, and what their work cultures are. In this sense, the state and its various branches, including village councils and courts of law, have gotten special consideration. A focus has also been placed on non-state welfare and humanitarian organisations, ranging in size from tiny NGOs to significant supranational institutions like the United Nations.[28]
"Expressive interests" and democratic irrationality
Geoffrey Brennan and Loren Lomasky claim that democratic policy is biased to favor "expressive interests" and neglect practical and utilitarian considerations. Brennan and Lomasky differentiate between instrumental interests (any kind of practical benefit, both monetary and non-monetary) and expressive interests (forms of expression like applause). According to Brennan and Lomasky, the paradox of voting can be resolved by differentiating between expressive and instrumental interests.
This argument has led some public choice scholars to claim that politics is plagued by irrationality. In articles published in the Econ Journal Watch, economist Bryan Caplan contended that voter choices and government economic decisions are inherently irrational.[29][30] Caplan's ideas are more fully developed in his book The Myth of the Rational Voter (Princeton University Press 2007). Countering Donald Wittman's arguments in The Myth of Democratic Failure, Caplan claims that politics is biased in favor of irrational beliefs.
According to Caplan, democracy effectively subsidizes irrational beliefs. Anyone who derives utility from potentially irrational policies like protectionism can receive private benefits while imposing the costs of such beliefs on the general public. Were people to bear the full costs of their "irrational beliefs", they would lobby for them optimally, taking into account both their instrumental consequences and their expressive appeal. Instead, democracy oversupplies policies based on irrational beliefs. Caplan defines rationality mainly in terms of mainstream price theory, pointing out that mainstream economists tend to oppose protectionism and government regulation more than the general population, and that more educated people are closer to economists on this score, even after controlling for confounding factors such as income, wealth or political affiliation. One criticism is that many economists do not share Caplan's views on the nature of public choice. However, Caplan does have data to support his position. Economists have, in fact, often been frustrated by public opposition to economic reasoning. As Sam Peltzman puts it:
Economists know what steps would improve the efficiency of HSE [health, safety, and environmental] regulation, and they have not been bashful advocates of them. These steps include substituting markets in property rights, such as emission rights, for command and control ... The real problem lies deeper than any lack of reform proposals or failure to press them. It is our inability to understand their lack of political appeal.[31]
Public choice's application to government regulation was developed by George Stigler (1971) and Sam Peltzman (1976).
Special interests
Public choice theory is often used to explain how political decision-making results in outcomes that conflict with the preferences of the general public. For example, many
Everyone involved has rational incentives to do exactly what they are doing, even though the desire of the general constituency is opposite. Costs are diffused, while benefits are concentrated. The voices of vocal minorities with much to gain are heard over those of indifferent majorities with little to individually lose.
While good government tends to be a pure
Rent-seeking
A field closely related to public choice is the study of rent-seeking. This field combines the study of a market economy with that of government. Thus, one might regard it as a new political economy. Its basic thesis is that when both a market economy and government are present, government agents may rent or sell their influence (i.e., a vote) to those who are seeking input into the lawmaking process. The government agent stands to benefit from support from the party seeking influence, while the party seeks to gain benefit by implementing public policy that benefits them. This essentially results in the capture and reallocation of benefits, wasting the benefit and any resources used from being put to a productive use in society. This is since that the party attempting to acquire the benefit will spend up to or more than the benefit accrued, resulting in a zero-sum gain, or a negative sum gain. The real gain is the gain over the competition. This political action will then be used to keep competition out of the market due to a lack of real or political capital.
Rent-seeking is broader than public choice in that it applies to autocracies as well as democracies and, therefore, is not directly concerned with collective decision making. However, the obvious pressures it exerts on legislators, executives, bureaucrats, and even judges are factors that public choice theory must account for when analysis of collective decision-making rules and institutions. Moreover, the members of a collective who are planning a government would be wise to take prospective rent-seeking into account.[33]
Another major claim is that much of political activity is a form of rent-seeking that wastes resources. Gordon Tullock, Jagdish Bhagwati, and Anne Osborn Krueger have argued that rent-seeking has caused considerable waste.[33]
Political stance
From such results it is sometimes asserted that public choice theory has an anti-state tilt. But there is ideological diversity among public choice theorists.
The British journalist, Alistair Cooke, commenting on the Nobel Memorial Prize awarded to James M. Buchanan in 1986, reportedly summarized the public choice view of politicians by saying, "Public choice embodies the homely but important truth that politicians are, after all, no less selfish than the rest of us."[36]
Recognition
Several notable public choice scholars have been awarded the
Limitations and critiques
Buchanan and Tullock themselves outline methodological qualifications of the approach developed in their work The Calculus of Consent (1962), p. 30:
- [E]ven if the model [with its rational self-interest assumptions] proves to be useful in explaining an important element of politics, it does not imply that all individuals act in accordance with the behavioral assumption made or that any one individual acts in this way at all times ... the theory of collective choice can explain only some undetermined fraction of collective action. However, so long as some part of all individual behavior ... is, in fact, motivated by utility maximization, and so long as the identification of the individual with the group does not extend to the point of making all individual utility functions identical, an economic-individualist model of political activity should be of some positive worth.
Further,
As for critiques concerning voter behavior, it is argued that public choice is unable to explain why people vote due to limitations in
See also
- Abilene paradox – False consensus due to communication failure
- Choice modelling – Method for analyzing revealed preferences
- Economics empiricism– Social science
- Fiscal illusion – Failure to accurately perceive the amount of government expenditure
- Flipism – Pseudophilosophy under which all decisions are made by flipping a coin
- Flypaper effect – Grant municipality increase level of public spending more than income of equivalent size
- Free-rider problem – Market failure benefitting non-paying users
- Political economy – Study of the development of social production
- New institutional economics – Economic perspective
- Prisoner's dilemma – Standard example in game theory
- Rational choice theory – Sociological theory
- Realpolitik – Politics based on practical considerations, rather than ideals
- Regulatory capture – Form of political corruption
- Sortition – Selection of decision-makers by random sample
- Socialist calculation debate – Discourse on the applicability of central planning without capital markets
- Subsidiarity – Principle of social organization
- Tax choice – belief that taxpayers should be able to choose what their taxes are used for
References
- ^ [1987] 2008, "public choice," The New Palgrave Dictionary of Economics. .
- ^ Alberto Alesina, Torsten Persson, Guido Tabellini, 2006. “Reply to Blankart and Koester's Political Economics versus Public Choice Two Views of Political Economy in Competition,” Kyklos, 59(2), pp. 201–208
- ^ "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1986". Nobel Foundation. Archived from the original on 2008-10-12. Retrieved 2008-10-14.
- ^ James M. Buchanan, 1990. "The Domain of Constitutional Economics," Constitutional Political Economy, 1(1), pp. 1–18.
- Dennis C. Mueller, 2008. "constitutions, economic approach to," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract: "The economic approach to constitutions applies the methodology of economics to the study of constitutions. This entry reviews the normative literature on constitutions, which assumes a two-stage collective decision process, and the positive literature that examines the decisions made by constitutional conventions and their economic consequences."
- ^ Found in the JEL classification codes at JEL: D71.
- ^ At JEL: HO – General of the JEL classification codes and as in The New Palgrave Dictionary of Economics, v. 8, p. 864 and Online.
- JSTOR 1055931.
- ^ James M. Buchanan and Gordon Tullock, 1962. The Calculus of Consent. Ann Arbor: University of Michigan Press, pp. 28; cf. ibid., 21
- Richard A. Musgrave and Alan T. Peacock, ed. (1958). Classics in the Theory of Public Finance, Palgrave Macmillan, an essay from Wicksell (1896), Finanzthcoretische Untersuchungen, Jena: Gustav Fischer.
- JSTOR 1804093.
- ^ JSTOR 40751557.
- ^ a b c William A. Niskanen ([1971] 1994). Bureaucracy and Public Economics, Elgar. Expanded ed. Description and review links Archived 2013-04-02 at the Wayback Machine and review excerpts.
- ^ Charles K. Rowley (2008). "Duncan Black (1908–1991," ch. 4 in Readings in Public Choice and Constitutional Political Economy, Springer, p. 83.
- ^ Duncan Black (1958). The Theory of Committees and Elections, 2nd rev. ed, 1998, Springer. Description and preview.
- JSTOR 2226793
- ^ .
- ^ Bernard Grofman ([1987] 2008). "Black, Duncan (1908–1991)", The New Palgrave Dictionary of Economics, 2nd Edition. Preview link.
- ^ ISSN 1573-7101.
- ^ a b c Mancur Olson, Jr. ([1965] 1971). The Logic of Collective Action: Public Goods and the Theory of Groups, 2nd ed. Harvard University Press, Description, Table of Contents, and preview.
- ISBN 978-0-472-06100-6.
- ^ Peter J. Coughlin (1991). Probabilistic Voting Theory, Cambridge. Description and chapter-preview links.
- ISBN 9781845425500.
- ISSN 0304-405X.
- ISBN 978-0-19-870893-3, retrieved 2022-04-29
- ^ "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1986". NobelPrize.org. Retrieved 2022-04-29.
- ISBN 978-0-306-47828-4.
- . Retrieved 26 May 2023.
- ^ "Nothing here". www.econjournalwatch.org.[permanent dead link]
- ^ http://www.econjournalwatch.org/pdf/CaplanRejoinderAugust2005.pdf Archived 2008-05-11 at the Wayback Machine [bare URL PDF]
- ^ "George Stigler's Contribution to the Economic Analysis of Regulation" 101 J. Pol. Econ. 818, 830 (October 1993)
- ^ Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," Quarterly Journal of Economics, 98(3), pp. 371–400..
•_____, 1985. "Public Policies, Pressure Groups, and Dead-weight Costs," Journal of Public Economics, 28(3), pp. 329–347. Abstract and reprinted in George J. Stigler, ed., 1988, Chicago Studies in Political Economy, pp. 85–105 - ^ JSTOR 1837129.
- ^ A Better Kind of Violence: The Chicago School of Political Economy, Public Choice, and The Quest for an Ultimate Theory of Power. Cooper-Wolfling Press, 2016
- ^ Buchanan, 2003
- ^ Russ Roberts (23 November 2015). "Michael Munger on EconTalk's 500th Episode". EconTalk.org (Podcast). Library of Economics and Liberty. Retrieved 22 December 2015.
- ^ "About".
- ^ a b c d e Pressman, Steven (2004) "What is wrong with public choice", Journal of Post Keynesian Economics, 27:1, 3–18
- ^ a b Pressman, Steven (2004) What is wrong with public choice, Journal of Post Keynesian Economics, 27:1, 3–18, [11]
- ^ a b Aldrich, J. “Rational Choice and Turnout.” American Journal of Political Science, 1993, 37 (1), 246–278.
- ^ Downs, A. An Economic Theory of Democracy. New York: Harper & Row, 1957 [ISBN missing][page needed]
- ^ Fiorina, M. “Information and Rationality in Election.” In J.A. Ferejohn and J.H.Kuklinski (eds.), Information and Democratic Processes. Urbana: University of Illinois Press, 1990, pp. 329–342.
- ^ Tullock, G. Towards a Mathematics of Politics. Ann Arbor: University of Michigan Press, 1967.
Bibliography
- Arrow, Kenneth J. (1951, 2nd ed., 1963). Social Choice and Individual Values
- Black, Duncan (1958). The Theory of Committees and Elections. Cambridge: Cambridge University Press.
- Buchanan, James M. (1967). Public Finance in Democratic Process: Fiscal Institutions and Individual Choice, UNC Press. Description Archived 2013-06-06 at the Wayback Machine, scrollable preview, back cover
- _____ (1968). The Demand and Supply of Public Goods. Rand McNally.
- _____ (1986). "The Constitution of Economic Policy, Nobel Prize lecture. Republished in 1987, American Economic Review, 77(3), pp. 243–250. JSTOR 1804093
- _____ (2003). "Public Choice: The Origins and Development of a Research Program," Center for Study of Public Choice at George Mason University, Fairfax: Virginia.
- _____, and Gordon Tullock (1962). The Calculus of Consent. Ann Arbor: University of Michigan Press.
- Buchanan, James M. and Richard A. Musgrave (1999). Public Finance and Public Choice: Two Contrasting Visions of the State, MIT Press. Description and scrollable preview links.
- Downs, Anthony. (1957). An Economic Theory of Democracy. Cambridge: York: Cambridge University Press.
- Hansjürgens, Bernd – The influence of Knut Wicksell on Richard Musgrave and James Buchanan
- Holcombe, R. G. (1989). "The Median Voter Model in Public Choice Theory", Public Choice 61, 115–125
- McKelvey, R. D. (1976). "Intransitivities in Multi Dimensional Voting Models and some Implications for Agenda Control", Journal of Economic Theory 12(3) 472–482
- MacKenzie, D. W. (2008). The Use of Knowledge about Society. Journal of Economic Behavior and Organization.
- _____ (2008). Politics and Knowledge: Expectations formation in Democracy. Working paper, Presented at the Southern Economics Association Conference in 2005.
- Mueller, Dennis C. (1976). "Public Choice: A Survey," Journal of Economic Literature, 14(2), pp. 395–433.
- _____ (2003). Public Choice III. Cambridge: Cambridge University Press. Description and preview.
- Niskanen, William A. (1987). "Bureaucracy." In Charles K. Rowley, ed. Democracy and Public Choice. Oxford: Basil Blackwell.
- Olson, Mancur, Jr. (1965, 2nd ed., 1971). The Logic of Collective Action. Cambridge: Harvard University Press. Description and chapter-previews links, pp. ix–x.
- ISBN 9780521405997.
- _____ (2010). "Beyond Markets and States: Polycentric Governance of Complex Economic Systems," American Economic Review, 100(3), pp. 641–672.
- Ostrom, Vincent (1986). The Theory of the Compound Republic. Lincoln, Nebraska: University of Nebraska Press. Second edition.
- Palda, Filip (2016). A Better Kind of Violence: The Chicago School of Political Economy, Public Choice, and The Quest for an Ultimate Theory of Power. Cooper-Wolfling Press.
- Riker, William H. (1962). The Theory of Political Coalitions. New Haven and London: Yale University Press.
- Romer, T. & Rosenthal, H. (1979). "The Elusive Median Voter", Journal of Public Economics 12(2) 143–170
- Rowley, Charles K., and Friedrich Schneider, ed. (2004). The Encyclopedia of Public Choice, 2 v. Springer. Description, v. 1, chapter abstract and preview links, and review JSTOR 30026602
- _____ and _____, eds. (2008). Readings in Public Choice and Constitutional Political Economy, Springer. Description and chapter-preview links.
- _____ and Laura Razzolini, eds. (2001). The Elgar Companion to Public Choice. Northampton, Mass.: Edward Elgar, Description.
- Richard A. Musgrave and Alan T. Peacock, ed., Classics in the Theory of Public Finance, Palgrave Macmillan.
Further reading
- Borcherding, T. E.; Dillon, P. & Willett, T. D. (1998). "Henry George: Precursor to public choice analysis". .
- Hafer, Catherine; Landa, Dimitri (August 2007). "Public goods in Federal systems". .
- Tullock, Gordon; Seldon, Arthur; Brady, Gordon L. (2002). Government failure : a primer in public choice. Washington, DC: Cato Institute. ISBN 1-930865-20-1.
- Butler, Eamonn (2012). Public choice : a primer. London: Institute of Economic Affairs. ISBN 978-0-255-36650-2.
- OCLC 750831024.