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Public Choice - A Primer
'Market failure' is a term widely used by politicians, journalists and university and A-level economics students and teachers. However, those who use the term often lack any sense of proportion about the ability of government to correct market failures. This arises partly from the lack of general knowledge -- and lack of coverage in economics syllabuses -- of Public Choice economics. Public Choice economics applies realistic insights about human behaviour to the process of government, and it is extremely helpful for all those who have an interest in -- or work in -- public policy to understand this discipline. If we assume that at least some of those involved in the political process -- whether elected representatives, bureaucrats, regulators, public sector workers or electors -- will act in their own self-interest rather than in the general public interest, it should give us much less confidence that government can 'correct' market failure. This complex area of economics has been summarised in a very clear primer by Eamonn Butler. The author helps the reader to understand the limits of the government's ability to correct market failure and also explains the implications of public choice economics for the design of systems of government -- a topic that is highly relevant in contemporary political debate. This text is an important contribution for all who seek to understand better the role that government should play in economic life.
135 pages, Paperback
First published March 25, 2012
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Displaying 1 - 8 of 8 reviews
March 11, 2018
I had to do a report for my history of economic thought class. I was assigned public choice economics. With some digging, I came across this text. It was perfect for my needs. It's not too long and it covered broadly the theories and results of public choice. I also was pointed to Munger's "Choosing in Groups" which was a fine text on its own, but for my time this was a more useful tool as a jumping off point.
February 3, 2014
A solid if biased introduction to public choice theory.
It does give some time to its critics, but the focus is on well-researched, no-apologies liberal propaganda against democracy, bureaucracy and state regulation.
The book makes the case that politicians and bureaucrats do politics like self-serving individuals that they are. It also highlights some of the problems well-meaning regulators and collective decision making procedures inevitably face, starting from designing the optimal voting system and ending with corruption and special interest machinations. Such issues are standard knowledge amongst people in politics, but it is good to be reminded what the science is behind the controversy.
The book succeeds in being more than a pro-market pamphlet by being pretty evenhanded about pointing out the shortcomings and empirical failures of the public choice approach. That is why it is important to study the public sector using a wide variety of tools: psychology, sociology, political science, philosophy, economics, statistics, cultural studies, etc.
Broadening one's perspective, it is clearly possible to provide mutually contradictory analyses of the public sector.
Thus, it's not as if public choice theory is true and "naive democratic idealism" is false. Sometimes democratic decision making is both fair and efficient; and sometimes democratic politics actually satisfied democratic aspirations. Empirical factors, i.e. just how corrupt politics is, and how little it reflects individuals' preferences, also vary based on circumstance and culture.
That said, the great teaching of public choice theory is that politics is not the working ground of angels, either. That is why the correct answer to a perceived "market failure" is not automatically more state regulation. The balance between democracy and the markets must be maintained.
Public choice theory, then, is not Newtonian science, nor incontrovertible truth, but an important tool, nonetheless, in understanding some of the complexities of the real world. It can teach us how politics theoretically can, and empirically does, run into difficulties - and how it can, and cannot, rise above them.
It does give some time to its critics, but the focus is on well-researched, no-apologies liberal propaganda against democracy, bureaucracy and state regulation.
The book makes the case that politicians and bureaucrats do politics like self-serving individuals that they are. It also highlights some of the problems well-meaning regulators and collective decision making procedures inevitably face, starting from designing the optimal voting system and ending with corruption and special interest machinations. Such issues are standard knowledge amongst people in politics, but it is good to be reminded what the science is behind the controversy.
The book succeeds in being more than a pro-market pamphlet by being pretty evenhanded about pointing out the shortcomings and empirical failures of the public choice approach. That is why it is important to study the public sector using a wide variety of tools: psychology, sociology, political science, philosophy, economics, statistics, cultural studies, etc.
Broadening one's perspective, it is clearly possible to provide mutually contradictory analyses of the public sector.
Thus, it's not as if public choice theory is true and "naive democratic idealism" is false. Sometimes democratic decision making is both fair and efficient; and sometimes democratic politics actually satisfied democratic aspirations. Empirical factors, i.e. just how corrupt politics is, and how little it reflects individuals' preferences, also vary based on circumstance and culture.
That said, the great teaching of public choice theory is that politics is not the working ground of angels, either. That is why the correct answer to a perceived "market failure" is not automatically more state regulation. The balance between democracy and the markets must be maintained.
Public choice theory, then, is not Newtonian science, nor incontrovertible truth, but an important tool, nonetheless, in understanding some of the complexities of the real world. It can teach us how politics theoretically can, and empirically does, run into difficulties - and how it can, and cannot, rise above them.
November 2, 2023
When people make choices, they are governed by rationality and their self-interest. While this is considered true for individuals it is also true for politics and governments. Applying the methods of economics to politics and government to understand the motivations that drive their choices is the study of Public Choice. Pioneered by James Buchanan this branch is essentially an approach to understanding political science. This approach gives us important insights into the nature of democratic decision-making.
It is considered that the government should intervene when there is a market failure and take corrective action in the public interest. This argument is rejected as governments are populated by individuals and individuals do not suddenly become angels when they get into government. Public Choice, then, looks at how the motivations of individuals affect the outcome of their collective decision-making in the government. Just as free markets are identified by competition, demand, supply, and addressing customer choices, governments also must contend with competing welfare goals, demanding interest groups, political interests, desire for capturing and retaining power, interests of the bureaucrats, interests of minorities, demands of majority, etc. Thus, Public Choice looks at how the motivations of individuals affect the outcome of their collective decision-making. It rejects the idea that politics is a process by which we discover what is truly in the ‘public interest’.
Public Choice has made a big difference in how economists, political scientists, and perhaps even the public view the workings of the political process. It has successfully challenged economists’ assumption that government intervention is a perfect solution to ‘market failure’. It reminds us that there is ‘government failure’ too; and those shortcomings such as monopolies, imperfect information, and the fact that some actions have adverse effects on people at large are more common in politics than in markets. The very process of government decision-making is imperfect, being distorted by the oddities of electoral systems, tactical voting, the power of interest-group coalitions, and the personal interests of legislators and officials. In many cases, we might be better simply to accept the market reality and not use the apparatus of the state to intervene at all. However strong this sentiment may be, Public Choice scholars explain as to why we need government in the first place. Anarchy, they say, is an undesirable state. Weak individuals would find themselves being abused by the strong, while even the strong would prefer a productive peace to the constant, destructive threat of hostility from others.
If the markets, government, and politics are governed by incentives and rational self-interests how are we to safeguard the polity from the outcomes of the decisions taken by these institutions? There are three schools of Public Choice. ‘Virginia School’ was founded by Buchanan and focuses on constitutional theory and real-world political institutions. There is the ‘Rochester School’, which applies statistics and mathematical techniques to Public Choice studies. Finally, there is the ‘Chicago School’, which concentrates more on the pure economic theory of collective decision-making.
Virginia School branch of the Public Choice approach gives particular emphasis to the role of the constitutional framework, arrived at after near-unanimous consensus, as a means by which people can protect themselves against abuse. It suggests checks and balances to restrain or limit the power of government and the executive while instituting regulatory mechanisms to ensure free market conditions.
Chicago School, on the other hand, focuses more on the pure economics of government. It analyses Public Choice issues in terms of pure microeconomic theory – applying the tools of neoclassical price theory, equilibrium analysis, and rational choice. It avoids making value judgments about the nature of public decision-making processes, viewing government instead as a ‘political market’, through which rational, self-interested ‘economic’ agents pursue their own interests and seek to redistribute wealth across the community. It sees policy decisions, as the ‘price’ that balances the supply of government laws and regulations with the ‘demand’ for them from the public. Its concern is how well these political markets work, and to what extent they are technically efficient.
For a lay person who is witness to the daily social and political goings-on affecting his life in so many ways, Public Choice theory gives an intelligible framework to understand an otherwise chaotic world. However, one can question whether the rational individualism that underpins the Public Choice is a good description of human personality. Most of the time our motivations, what we do, and think are shaped by our social context. Many, of the choices we make are instinctive, or the natural outcome of years of social pressure, rather than the product of rational calculation. It is not uncommon that human actions are quite irrational! In response, Public Choice scholars would argue that it does not matter exactly how and from where people’s motives originate. The important thing is that we do have values, motives, and desires and that we seek to maximize them. By pursuing those aims, we are in fact serving our own desires and our own interests. Smart response, but not very convincing. Some of these questions may be addressed in the contemporary Public Choice theory which is a field by itself. But, for an in-depth study, one has to go beyond a Primer!
For a Primer, this book gives a reasonably good idea of Public Choice.
It is considered that the government should intervene when there is a market failure and take corrective action in the public interest. This argument is rejected as governments are populated by individuals and individuals do not suddenly become angels when they get into government. Public Choice, then, looks at how the motivations of individuals affect the outcome of their collective decision-making in the government. Just as free markets are identified by competition, demand, supply, and addressing customer choices, governments also must contend with competing welfare goals, demanding interest groups, political interests, desire for capturing and retaining power, interests of the bureaucrats, interests of minorities, demands of majority, etc. Thus, Public Choice looks at how the motivations of individuals affect the outcome of their collective decision-making. It rejects the idea that politics is a process by which we discover what is truly in the ‘public interest’.
Public Choice has made a big difference in how economists, political scientists, and perhaps even the public view the workings of the political process. It has successfully challenged economists’ assumption that government intervention is a perfect solution to ‘market failure’. It reminds us that there is ‘government failure’ too; and those shortcomings such as monopolies, imperfect information, and the fact that some actions have adverse effects on people at large are more common in politics than in markets. The very process of government decision-making is imperfect, being distorted by the oddities of electoral systems, tactical voting, the power of interest-group coalitions, and the personal interests of legislators and officials. In many cases, we might be better simply to accept the market reality and not use the apparatus of the state to intervene at all. However strong this sentiment may be, Public Choice scholars explain as to why we need government in the first place. Anarchy, they say, is an undesirable state. Weak individuals would find themselves being abused by the strong, while even the strong would prefer a productive peace to the constant, destructive threat of hostility from others.
If the markets, government, and politics are governed by incentives and rational self-interests how are we to safeguard the polity from the outcomes of the decisions taken by these institutions? There are three schools of Public Choice. ‘Virginia School’ was founded by Buchanan and focuses on constitutional theory and real-world political institutions. There is the ‘Rochester School’, which applies statistics and mathematical techniques to Public Choice studies. Finally, there is the ‘Chicago School’, which concentrates more on the pure economic theory of collective decision-making.
Virginia School branch of the Public Choice approach gives particular emphasis to the role of the constitutional framework, arrived at after near-unanimous consensus, as a means by which people can protect themselves against abuse. It suggests checks and balances to restrain or limit the power of government and the executive while instituting regulatory mechanisms to ensure free market conditions.
Chicago School, on the other hand, focuses more on the pure economics of government. It analyses Public Choice issues in terms of pure microeconomic theory – applying the tools of neoclassical price theory, equilibrium analysis, and rational choice. It avoids making value judgments about the nature of public decision-making processes, viewing government instead as a ‘political market’, through which rational, self-interested ‘economic’ agents pursue their own interests and seek to redistribute wealth across the community. It sees policy decisions, as the ‘price’ that balances the supply of government laws and regulations with the ‘demand’ for them from the public. Its concern is how well these political markets work, and to what extent they are technically efficient.
For a lay person who is witness to the daily social and political goings-on affecting his life in so many ways, Public Choice theory gives an intelligible framework to understand an otherwise chaotic world. However, one can question whether the rational individualism that underpins the Public Choice is a good description of human personality. Most of the time our motivations, what we do, and think are shaped by our social context. Many, of the choices we make are instinctive, or the natural outcome of years of social pressure, rather than the product of rational calculation. It is not uncommon that human actions are quite irrational! In response, Public Choice scholars would argue that it does not matter exactly how and from where people’s motives originate. The important thing is that we do have values, motives, and desires and that we seek to maximize them. By pursuing those aims, we are in fact serving our own desires and our own interests. Smart response, but not very convincing. Some of these questions may be addressed in the contemporary Public Choice theory which is a field by itself. But, for an in-depth study, one has to go beyond a Primer!
For a Primer, this book gives a reasonably good idea of Public Choice.
January 7, 2020
Great introduction to public choice economics
February 11, 2024
If only all textbooks were this approachable. Public choice theory as a lens is uniquely positioned to understand individual choices and how these snowball into literal constitutions, governments, free markets and everything else. Understanding individual incentive is important to understand how governments work (or don't work). As they say if you like law or sausage, don't see either getting made. Public choice theory makes seeing the former slightly more comprehensive and throws light on what might otherwise be a black box for the individual voter/citizen
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January 10, 2017A very good and concise introduction to Public Choice concepts and thinkers.
September 23, 2020
A concise overview of the discipline of public choice and the author tried to be as informative and unbiased as possible. Theories were presented and what the exponents and detractors have said was laid out plainly. Surprisingly engaging for a factual text.
Some prose could perhaps be better presented as tiered lists.
Some prose could perhaps be better presented as tiered lists.
April 6, 2017
fairly well written book and one of edible food for thoughts.
Displaying 1 - 8 of 8 reviews