Public Choice Theory

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Public choice in economic theory is the use of modern economic tools to study problems that are traditionally in the province of political science. It is dedicated to the proposition that political actors are self interested and provides some of the foundations for neoliberal economic ideas which favour market mechanisms over rational planning. It believes that democracy is a myth and that most decisions should be left to the market to decide

In particular, it studies the behavior of voters, politicians, and government officials as (mostly) self-interested agents and their interactions in the social system either as such or under alternative constitutional rules. These can be represented a number of ways, including standard constrained utility maximization, game theory, or decision theory. Public choice analysis has roots in positive analysis ("what is") but is often used for normative purposes ("what ought to be"), to identify a problem or suggest how a system could be improved by changes in constitutional rules (Tullock, 1987, pp. 1040–41). A key formulation of public choice theory is in terms of rational choice, the agent-based proportioning of scarce means to given ends. An overlapping formulation with a different focus is positive political theory. Another related field is social choice theory.

Origins and formation

The modern literature in Public Choice began with Duncan Black, who in 1948 identified the underlying concepts of what would become median voter theory. He also wrote The Theory of Committees and Elections in 1958. Gordon Tullock[1] refers to him as the "father of public choice theory".

James M. Buchanan and Gordon Tullock coauthored The Calculus of Consent: Logical Foundations of Constitutional Democracy (1962), considered one of the landmark works that founded the discipline of public choice theory. In particular (1962, p. v), the book is about the political organization of a free society. But its method, conceptual apparatus, and analytics "are derived, essentially, from the discipline that has as its subject the economic organization of such a society." The book focuses on positive-economic analysis as to the development of constitutional democracy but in an ethical context of consent. The consent takes the form of a compensation principle like Pareto efficiency for making a policy change and unanimity at least no opposition as a point of departure for social choice.

Kenneth Arrow's Social Choice and Individual Values (1951) influenced formulation of the theory. Among other important works are Anthony Downs's An Economic Theory of Democracy (1957) and Mancur Olson's The Logic of Collective Action (1965).

Public choice theory is commonly associated with George Mason University, where Tullock and Buchanan are currently faculty members. Their early work took place at the University of Virginia and Virginia Polytechnic Institute and State University, hence identification of a Virginia school of political economy.

People

Public choice's application to government regulation was developed by George Stigler (1971) and Sam Peltzman (1976). William Niskanen is generally considered the founder of Public Choice literature on the bureaucracy.

Several notable Public Choice scholars have been awarded the Nobel Prize in Economics, including James Buchanan (1986), Stigler (1982), and Gary Becker (1992). In addition, Vernon Smith (2002) was President of Public Choice Society from 1988 to 1990.

Reading

Literature of Public Choice

Most public choice articles in the JEL classification codes fall under JEL D72 (Economic Models of Political Processes: Rent-Seeking, Elections, Legislatures, and Voting Behavior).

  • 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. (2003). "Public Choice: The Origins and Development of a Research Program," Fairfax, Va.: Center for Study of Public Choice, George Mason University.
  • Buchanan, James M. and Gordon Tullock. (1962), The Calculus of Consent. Ann Arbor: University of Michigan Press.
  • Cameron, David R. 1978. "The Expansion of the Public Economy," American Political Science Review 72 (December): 1243-61.
  • Conte, Michael A. and A. F. Darrat. 1988. "Economic Growth and the Expanding Public Sector: A Reexamination," Review of Economics and Statistics 70 (May): 322-30.
  • Downs, Anthony. (1957), An Economic Theory of Democracy. Cambridge: York: Cambridge University Press.
  • Higgs, Robert. 1987. Crisis and Leviathan. Critical Episodes in the Growth of American Government. New York: Oxford University Press
  • Isani, Muzaffar Ali. (1982), An Economic Approach to Politics in Developing Countries. Unpublished Ph.D. Dissertation, Georgetown University, Washington, D.C.
  • Larkey, Patrick D. et al. 1984. "Why Does Government Grow?" in Trudi C. Miller, ed., Public Sector Performance. Baltimore: The Johns Hopkins University Press.
  • Lowery, David and W. D. Berry. 1983. "The Growth of Government in the United States," American Journal of Political Science 27 (November): 665-94.
  • MacKenzie, DW. (2008), The Use of Knowledge about Society. Journal of Economic Behavior and Organization.
  • MacKenzie, DW. (2008), Politics and Knowledge: Expectations formation in Democracy. Working paper, Presented at the Southern Economics Association Conference in 2005.
  • Mills, Edwin S. 1986. The Burden of Government. Stanford: Stanford University Press. (pro-public choice for the most part)
  • Mueller, Dennis C. 1989. Public Choice II. New York: Cambridge University Press.
  • Musgrave, Richard A. 1981. "Leviathan Cometh--or Does He?" in Helen F. Ladd and T. N. Tideman, eds., Tax and Expenditure Limitations. Washington: The Urban Institute Press. This may be the best critique, by the father of modern public finance
  • Niskanen, W. A. (1987) “Bureaucracy." In Charles K. Rowley (Ed. ). Democracy and Public Choice. Oxford: Basil Blackwell.
  • Olson, Mancur, 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.
  • Peltzman, Sam. 1980. "The Growth of Government," Journal of Law and Economics 23 (October): 209-87.
  • Ram, Rati. 1986. "Government Size and Economic Growth," American Economic Review 76 (March): 191-203.
  • Riker, William H. (1962), The Theory of Political Coalitions. New Haven and London: Yale University Press.
  • Savage, James D. 1988. Balanced Budgets & American Politics. Ithaca: Cornell University Press.
  • Schram, Sanford F. and Brian Caterino (2006eds.). Making Political Science Matter: Debating Knowledge, Research, and Method. New York and London: New York University Press.
  • Tollison, Robert D. 1982. "Rent Seeking: A Survey," Kyklos 35 (Fasc. 4): 575-602
  • Tullock, Gordon (1987), “public choice," The New Palgrave: A Dictionary of Economics, v. 3, pp. 1040–44.
  • _____ (1989), The Economics of Special Privilege and Rent-Seeking. Boston & Dordrecht, Netherlands: Kluwer Academic Publishers.

Critiques of Public Choice theory

External links

Notes

  1. ↑ 1987, p. 1040
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