# Think Tank > Austrian Economics / Economic Theory >  Public Choice Theory

## timosman

http://www.econlib.org/library/Enc1/...iceTheory.html




> Public choice theory is a branch of economics that developed from the study of taxation and public spending. It emerged in the fifties and received widespread public attention in 1986, when James Buchanan, one of its two leading architects (the other was his colleague Gordon Tullock), was awarded the Nobel Prize in economics. Buchanan started the Center for Study of Public Choice at George Mason University, and it remains the best-known locus of public choice research. Others include Florida State University, Washington University (St. Louis), Montana State University, the California Institute of Technology, and the University of Rochester.
> Public choice takes the same principles that economists use to analyze people's actions in the marketplace and applies them to people's actions in collective decision making. Economists who study behavior in the private marketplace assume that people are motivated mainly by self-interest. Although most people base some of their actions on their concern for others, the dominant motive in people's actions in the marketplacewhether they are employers, employees, or consumersis a concern for themselves. Public choice economists make the same assumptionthat although people acting in the political marketplace have some concern for others, their main motive, whether they are voters, politicians, lobbyists, or bureaucrats, is self-interest. In Buchanan's words the theory "replaces... romantic and illusory... notions about the workings of governments [with]... notions that embody more skepticism."
> 
> In the past many economists have argued that the way to rein in "market failures" such as monopolies is to introduce government action. But public choice economists point out that there also is such a thing as "government failure." That is, there are reasons why government intervention does not achieve the desired effect. For example, the Justice Department has responsibility for reducing monopoly power in noncompetitive industries. But a 1973 study by William F. Long, Richard Schramm, and Robert Tollison concluded that actual anti-competitive behavior played only a minor role in decisions by the Justice Department to bring antimonopoly suits. Instead, they found, the larger the industry, the more likely were firms in it to be sued. Similarly, Congress has frequently passed laws that are supposed to protect people against environmental pollution. But Robert Crandall has shown that congressional representatives from northern industrial states used the 1977 Clean Air Act amendments to reduce competition by curbing economic growth in the Sunbelt. The amendments required tighter emissions standards in undeveloped areas than in the more developed and more polluted areas, which tend to be in the East and Midwest.
> 
> One of the chief underpinnings of public choice theory is the lack of incentives for voters to monitor government effectively. Anthony Downs, in one of the earliest public choice books, An Economic Theory of Democracy, pointed out that the voter is largely ignorant of political issues and that this ignorance is rational. Even though the result of an election may be very important, an individual's vote rarely decides an election. Thus, the direct impact of casting a well-informed vote is almost nil; the voter has virtually no chance to determine the outcome of the election. So spending time following the issues is not personally worthwhile for the voter. Evidence for this claim is found in the fact that public opinion polls consistently find that less than half of all voting-age Americans can name their own congressional representative.
> 
> Public choice economists point out that this incentive to be ignorant is rare in the private sector. Someone who buys a car typically wants to be well informed about the car he or she selects. That is because the car buyer's choice is decisivehe or she pays only for the one chosen. If the choice is wise, the buyer will benefit; if it is unwise, the buyer will suffer directly. Voting lacks that kind of direct result. Therefore, most voters are largely ignorant about the positions of the people for whom they vote. Except for a few highly publicized issues, they do not pay a lot of attention to what legislative bodies do, and even when they do pay attention, they have little incentive to gain the background knowledge and analytic skill needed to understand the issues.
> 
> ...

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## otherone

LOL
Academia mathematically deduces that:
1) Voting doesn't matter
2) Legislators don't give a fukk about you
3) Only local government can be be controlled by the community
4) The only just decisions are unanimous

Frikkin Genius.

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## osan

> http://www.econlib.org/library/Enc1/...iceTheory.html





> Public choice takes the same principles that economists use to analyze people's actions in the marketplace and applies them to people's actions in _collective decision making_.


 

It would be of some value to have a precise definition of the term.




> Economists who study behavior in the private marketplace assume that people are motivated mainly by self-interest. Although most people base some of their actions on their _concern for others_, the dominant motive in people's actions in the marketplace—whether they are employers, employees, or consumers—is a concern for themselves.


Concern for others can be strongly argued as concern for themselves.  People seek comfort, and if concern for the welfare of others constitutes an element of a given man's comfort, he will pursue it.

I have argued in the past, and maintain the position that there is no such thing as a "selfless act".  The very concept of atruism is self contradicting (not to mention disgusting) because all such transactions are two-way affairs.  There is always a payoff of one sort or another, where human action is concerned, save in those instances of pure accident.  The so-called "altruist" lies to himself and others when he says he gives with no expectation of a return.  It is not just a lie, but a damned one.  The altruist does in fact get a payoff for his choices.  If nothing else, he walks away with the satisfaction of feeling he did something praiseworthy.  I also have noticed how often these paragons of selfless conduct remain in the vicinity of their acts long enough to be recognized for them, all the while going "oh pish-posh, it was nothing... really..."  To be frank, I find such people to be some of the most irritatingly disingenuous this world has to offer.




> Public choice economists make the same assumption—that although people acting in the political marketplace have some concern for others, their main motive, whether they are voters, politicians, lobbyists, or bureaucrats, is self-interest. In Buchanan's words the theory "replaces... romantic and illusory... notions about the workings of governments [with]... notions that embody more skepticism."




Of course it is.  This is nothing new and is, IMO, glaringly obvious.  No payoff -> no action, save by sheer accident.




> In the past many economists have argued that the way to rein in "market failures" such as monopolies is to introduce government action.


 

This is amusing, mainly because I do not believe that free markets fail, all else equal.  The failures I have observed in markets have been universally attributable to governmental distortion through interference, however indirectly in some cases.  Think "butterfly effect".  We could go chapter and verse down the rabbit hole, pointing out the connections between the most significant market blow-outs and the underlying government hand that lead to them.




> But public choice economists point out that there also is such a thing as "_government failure_."


Department of Redundancy Department.




> That is, there are reasons why government intervention does not achieve the desired effect. For example, the Justice Department has responsibility for reducing monopoly power in noncompetitive industries. But a 1973 study by William F. Long, Richard Schramm, and Robert Tollison concluded that actual anti-competitive behavior played only a minor role in decisions by the Justice Department to bring antimonopoly suits. Instead, they found, the larger the industry, the more likely were firms in it to be sued. Similarly, Congress has frequently passed laws that are supposed to protect people against environmental pollution. But Robert Crandall has shown that congressional representatives from northern industrial states used the 1977 Clean Air Act amendments to reduce competition by curbing economic growth in the Sunbelt. The amendments required tighter emissions standards in undeveloped areas than in the more developed and more polluted areas, which tend to be in the East and Midwest.




Gee, how surprising.  I'm not quite getting how all this required special study to figure it out.




> One of the chief underpinnings of public choice theory is the lack of incentives for voters to monitor government effectively. Anthony Downs, in one of the earliest public choice books, An Economic Theory of Democracy, pointed out that the voter is largely ignorant of political issues and that this ignorance is rational. Even though the result of an election may be very important, an individual's vote rarely decides an election. Thus, the direct impact of casting a well-informed vote is almost nil; the voter has virtually no chance to determine the outcome of the election. So spending time following the issues is not personally worthwhile for the voter. Evidence for this claim is found in the fact that public opinion polls consistently find that less than half of all voting-age Americans can name their own congressional representative.


I don't suppose there is a message in all that, telling us that the "system" is hosed.  Nah... nothing to see there.




> Voting lacks that kind of direct result. Therefore, most voters are largely ignorant about the positions of the people for whom they vote.


Heaven forbid the voter educate himself in the basics, come to broad accord with his fellows and work with intelligently unbending intent to architect a reality that stands in better concordance with human nature and the pursuits that arise therefrom.  Oh no no no... perish the thought.  Just go on with the same of $#@!, leaving responsibility in the hands of those one knows cannot be trusted to the door to do the right and intelligent things.




> More recently, Olson wrote The Rise and Decline of Nations, which concludes that Germany and Japan thrived after World War II because the war destroyed the power of special interests to stifle entrepreneurship and economic exchange. *But Olson still favors a strong government*.


So the take away here is that Olson is a dishonest nitwit who, despite acknowledging the empirically observed results, clings nevertheless to that which clearly produces the very problems of which he issues complaint.

Brilliant.

Some interesting points in all of it, but at the end of the day most people still end up dumbasses.

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## r3volution 3.0

> Although most people base some of their actions on their concern for  others, the dominant motive in people's actions in the  marketplace—whether they are employers, employees, or consumers—is a  concern for themselves. Public choice economists make the same  assumption—that although people acting in the political marketplace have  some concern for others, their main motive, whether they are voters,  politicians, lobbyists, or bureaucrats, is self-interest. In Buchanan's  words the theory "replaces... romantic and illusory... notions about the  workings of governments [with]... notions that embody more skepticism."


The importance of Public Choice Theory can't be overstated.

It's recognized that it goes a long to explaining the failures of democratic government.

It's not (yet) widely recognized that it also points to the solution...




> Public choice economists also examine the actions of legislators.  Although legislators are expected to pursue the "public interest," they  make decisions on how to use other people's resources, not their own.  Furthermore, these resources must be provided by taxpayers and by those  hurt by regulations whether they want to provide them or not.  Politicians may intend to spend taxpayer money wisely. Efficient  decisions, however, will neither save their own money nor give them any  proportion of the wealth they save for citizens. There is no direct  reward for fighting powerful interest groups in order to confer benefits  on a public that is not even aware of the benefits or of who conferred  them. Thus, the incentives for good management in the public interest  are weak. In contrast, interest groups are organized by people with very  strong gains to be made from governmental action. They provide  politicians with campaign funds and campaign workers. In return they  receive at least the "ear" of the politician and often gain support for  their goals.


Is there, perhaps, another form of government wherein the politicians _would_ own the resources they're expending?

So that the externalities of both good and bad policy _would_ be internalized?

...a form of government where the rulers own the state, rather than manage it on behalf of voters.

...hmmm

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## timosman

> The importance of Public Choice Theory can't be overstated.
> 
> It's recognized that it goes a long to explaining the failures of democratic government.
> 
> It's not (yet) widely recognized that it also points to the solution...
> 
> 
> 
> Is there, perhaps, another form of government wherein the politicians _would_ own the resources they're expending?
> ...

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## otherone

> The importance of Public Choice Theory can't be overstated.
> 
> It's recognized that it goes a long to explaining the failures of democratic government.
> 
> It's not (yet) widely recognized that it also points to the solution...
> 
> 
> 
> Is there, perhaps, another form of government wherein the politicians _would_ own the resources they're expending?
> ...


anarchy

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## r3volution 3.0

> 


The Queen of Saxe-Coburg und Gotha.

...not the Queen of England.

Swell, but not a real sovereign as I was describing.

Mere constitutional monarchy....

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## r3volution 3.0

> anarchy


cognac rain

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## timosman

> Mere constitutional monarchy....


That's what they want you to think.

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