Economics

Economics

Introduction

Public choice theory is the application of economic principles to politics. It is most often considered to be an area of study lying between market exchange “economics” and “political science” ideologies, although some scholars consider it to be more a branch of economics. Public choice theory's main tenet is that voters, politicians, and government officials are motivated by the same basic economic factors as market actors and as a result do not always operate in the public's best general interest. Legislators are considered to make decisions with tax payers'money to advance predominantly (if not exclusively) their own self-interests and are primarily interested in their own power, prestige, advancement, reputation, status, income, and perquisites. Public choice theory offers a critical examination of the decisions made and roles played by voters, legislators, regulators, lobbyists, and various special interest groups, and the subsequent positive and negative impact of these decisions on the general public interest. It is predominantly a skeptical, cynical, and less naive view of democratic government and also offers suggestions for the improvement of modern political governance systems. The view applies purely positive economics (how people behave) and eschews normative economics (what should be).

History of Public Choice Theory

The application of economic principles to political processes began in the 1940s and 1950s. The approach grew out of an awareness of the deficiencies (or inefficiencies and injustices) of current governments in “curing” existing social ills and in addressing effectively the concerns of the “general public.” Government had been perceived as the panacea for addressing market failures, market inefficiencies, and social inequities and was considered to be an infallible controller of the public interest, with noble ideologies and perfect information. In addition to a reaction against this widely held perception, public choice theory also grew out of both the public's and scholars' increased awareness of the growing size of the federal government (through expanding taxation and expenditures), which began to equal or surpass the size of the private market sector.

Public choice theorists indicate that they simply attempted to provide a coherent understanding and interpretation of what everyone could allegedly readily observe about governments at the time—most notably that

collectivist schemes (governments) were failing,

little correction of social ills was occurring, and

governments were growing and making things worse.

Public choice theory applied the economic concepts of self-interest, market exchange, and methodological individualism to the main players involved in and responsible for the public interest, including voters, legislators, regulators and other bureaucrats, special interest groups, lobbyists, public action committees, trade associations, and more recently the media. Public choice theory states that it takes common economic principles of behavior in the marketplace and assumes that these selfinterest motives are the same motives operating in the political arena for the above organized constituents.

Rational Ignorance of Voters

A fundamental premise of public choice theory is that efficient, effective, and “just” government policies and activities in democracies are an underprovided public good. An important reason for this “failure of government” is the “rational ignorance” of voters. Voters understand that an individual vote has ...