Public Choice
Public choice theory began with the formation of the Public Choice Society in the United Statesin 1969. It was a reaction to government policies recommended by economists during the fifty orso years that preceded it. Policy-oriented microeconomists had used [[Pigouvian welfareeconomics]] as a basis for recommending market intervention and post-war macroeconomists used
Keynesian models to give policy advice to the government and central bank. These policyeconomists implicitly assumed that the government was both a benevolent and, to some degree,omnipotent despot. The founders of the Public Choice Society focused on the assumption ofbenevolence. Recognizing the complexity of political decision-making in a democracy, theysought to explain how decisions are actually made by governments. They hoped that an improvedunderstanding of democratic decision-making would show why sound economic advice wastypically not followed and why, when it was followed, if often had effects that were contrary tothose predicted by
economic models. In addition to studying how laws and policies in ademocracy are actually made and implemented, the early theorists also examined proceduralrules and consitutions.
The loci of the Society became its journal Public Choice and its annual meetings. The journal andmeetings mainly attracted economists and political scientists. The economists brought theirchoice-based, model-building skill. The political scientists brought their broad knowledge of differentpolitical systems and detailed knowledge of institutions and political interaction. Scholars in relatedfields also contributed. The result was an eclectic group that, in general, conformed to the singledefinition that public choice is the study of collective decision-making on the basis of the assumptionthat actors are self-interested.
One way to organize the subject matter studied by Public Choice theorists is to begin with the foundations of government itself. 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 the fundamental problem of collectively choosing
constitutional rules. 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.
The main questions are: (1) how to hire competent and trustworthy individuals to whom day-to-day decision-making can be delegated and (2) how to set up an effective system of oversight and sanctions for such individuals. To answer these questions it is necessary to assess the effects of creating different loci of power and decision-making within a government; to examine voting and the various means of selecting candidates and choosing winners in
elections; to assess various behavioral rules that might be established to influence the behavior of elected and appointed government officials; and to evaluate alternative constitutional and legal
rights that could be reserved for citizens, especially rights relating to citizen oversight and the avoidance of harm due to the coercive power of government agents.
These are difficult assessments to make. In practice, most work in the field of Public Choice has dealt with more limited issues. Extensive work has been done on different
voting systems and, more generally, on how to transform what voters are assumed to want into a coherent "collective preference." Of some interest has been the discovery that a unique collective preference cannot be derived from even mildly diverse individual preferences. This is often called
Arrow's impossibility theorem. The theorem suggests that members of a collective have no reason to expect that even the best rules for making collective decisions will lead to results that can unambiguously be regarded as in the collective interest.
Much work has been done on the loose connection between decisions that we can imagine being made by a full contingent of citizens with zero collective decision-making costs and those made by legislators representing different voting
constituencies. Of special concern has been
logrolling and other negotiations carried out by legislators in exercising their law-making powers. Important factors in such legislative decisions are
political parties and
pressure groups. Accordingly, Public Choicers have studied these institutions extensively. The study of how legislatures make decisions and how various constitutional rules can constrain legislative decisions is a major sub-field in Public Choice.
Another major sub-field is the study of
bureaucracy. The usual model depicts the top bureaucrats as being chosen by the chief executive and legislature, depending on whether the democratic system is presidential or parliamentary. (See also
presidential system and
parliamentary system.) The typical image of a bureau chief is a person on a fixed salary who is concerned with pleasing those who appointed him. The latter have the power to hire and fire him more or less at will. The bulk of the
bureaucrats, however, are civil servants whose jobs and pay are protected by a civil service system against major changes by their appointed bureau chiefs. This image is often compared with that of a business owner whose profit varies with the success of her production and sales, who aims to maximize profit, and who can hire and fire her employees at will.
A field that is closely related to public choice is "
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 are a source of numerous special market privileges. Both the government agents and self-interested market participants seek these privileges in order to partake in the monopoly rent that they provide. When such privileges are granted, they reduce the efficiency of the economic system. In addition, the rent-seekers use resources that could otherwise be used to produce goods that are valued by consumers.
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 Choicers must account for in their effort to understand and assess 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.
See also
public choice theoryArrow, Kenneth J. (1951, 2nd ed., 1963),
Social Choice and Individual ValuesBuchanan, James M. and Gordon Tullock. (1962)
The Calculus of Consent. Ann Arbor: University of Michigan Press.
Downs, Anthony. (1957)
An Economic Theory of Democracy. New York: Harper.
Mueller, Dennis C. (1989)
Public Choice II. Cambridge: York: Cambridge University Press.
Niskanen, W. A. (1987) "Bureaucracy." In Charles K. Rowley (Ed. ).
Democracy and Public Choice. Oxford: Basil Blackwell.
Olson, M. Jr. (1965)
The Logic of Collective Action. Cambridge: Harvard University Press.
Ostrom, Vincent. (1986)
The Theory of the Compound Republic. Lincoln, Nebraska: University of Nebraska Press. Second edition.
Riker, William H. (1962)
The Theory of Political Coalitions. New Haven and London: Yale University Press.
Tullock, Gordon. (1989)
The Economics of Special Privilege and Rent-Seeking. Boston & Dordrecht, Netherlands: Kluwer Academic Publishers.
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The Field of Public Choice by Pat Gunning
