Public choice
Public choice, or public choice theory, is "the use of economic tools to deal with traditional problems of political science."[1] Its content includes the study of political behavior. In political science, it is the subset of positive political theory that studies self-interested agents (voters, politicians, bureaucrats) and their interactions, which can be represented in a number of ways—using (for example) standard constrained utility maximization, game theory, or decision theory.[1] It is the origin and intellectual foundation of contemporary work in political economy.[2]
Not to be confused with Social choice theory.
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]
Decision-making processes and the state[edit]
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[edit]
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. The typical image of a bureau chief is a person on a fixed salary who is concerned with pleasing those who appointed him or her. The latter has the power to hire and fire him or her 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 production and sales, who aims to maximize profit, and who can in an ideal system hire and fire employees at will.[13] William Niskanen is generally considered the founder of public choice literature on the bureaucracy.[13]
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]
Special interests[edit]
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 advocacy group and pork barrel projects are not the desire of the overall democracy. However, it makes sense for politicians to support these projects. It may make them feel powerful and important. It can also benefit them financially by opening the door to future wealth as lobbyists. The project may be of interest to the politician's local constituency, increasing district votes or campaign contributions. The politician pays little or no cost to gain these benefits, as he is spending public money. Special-interest lobbyists are also behaving rationally. They can gain government favors worth millions or billions for relatively small investments. They face a risk of losing out to their competitors if they don't seek these favors. The taxpayer is also behaving rationally. The cost of defeating any one government give-away is very high, while the benefits to the individual taxpayer are very small. Each citizen pays only a few pennies or a few dollars for any given government favor, while the costs of ending that favor would be many times higher.
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.[32][33] However the notion that groups with concentrated interests will dominate politics is incomplete because it is only one half of political equilibrium. Something must incite those preyed upon to resist even the best organized concentrated interests. In his article on interest groups Gary Becker identified this countervailing force as being the deadweight loss from predation. His views capped what has come to be known as the Chicago school of political economy and it has come in sharp conflict with the so-called Virginia faction of public choice due to the former's assertion that politics will tend towards efficiency due to nonlinear deadweight losses and due to its claim that political efficiency renders policy advice irrelevant.[34]
While good government tends to be a pure public good for the mass of voters, there may be many advocacy groups that have strong incentives for lobbying the government to implement specific policies that would benefit them, potentially at the expense of the general public. For example, lobbying by the sugar manufacturers might result in an inefficient subsidy for the production of sugar, either directly or by protectionist measures. The costs of such inefficient policies are dispersed over all citizens, and therefore unnoticeable to each individual. On the other hand, the benefits are shared by a small special-interest group with a strong incentive to perpetuate the policy by further lobbying. Due to rational ignorance, the vast majority of voters will be unaware of the effort; in fact, although voters may be aware of special-interest lobbying efforts, this may merely select for policies which are even harder to evaluate by the general public, rather than improving their overall efficiency. Even if the public were able to evaluate policy proposals effectively, they would find it infeasible to engage in collective action in order to defend their diffuse interest. Therefore, theorists expect that numerous special interests will be able to successfully lobby for various inefficient policies. In public choice theory, such scenarios of inefficient government policies are referred to as government failure – a term akin to market failure from earlier theoretical welfare economics.[32]
Rent-seeking[edit]
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[edit]
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. Mancur Olson for example was an advocate of a strong state and instead opposed political interest group lobbying.[20] More generally, James Buchanan has suggested that public choice theory be interpreted as "politics without romance," a critical approach to a pervasive earlier notion of idealized politics set against market failure.[35]
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[edit]
Several notable public choice scholars have been awarded the Nobel Prize in Economics, including Kenneth Arrow (1972), James M. Buchanan (1986), George Stigler (1982), Gary Becker (1992), Amartya Sen (1998), Vernon Smith (2002) and Elinor Ostrom (2009). In addition, James Buchanan, Vernon Smith, and Elinor Ostrom were former presidents of the Public Choice Society.[37]