Public choice, or public choice theory, is "the use of economic tools to deal with traditional problems of political science". It 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. It is the origin and intellectual foundation of contemporary work in political economics. 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' perceived self-interest can influence their decisions. 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". Public choice analysis has roots in positive analysis ("what is") but is sometimes used for normative purposes ("what ought to be") to identify a problem or suggest improvements to constitutional rules (as in constitutional economics). But 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, welfare, or votes. Much early work had aspects of both, and both fields use the tools of economics and game theory. Since voter behavior influences public officials' behavior, public-choice theory often uses results from social-choice theory. General treatments of public choice may also be classified under public economics. Building upon economic theory, public choice has a few core tenets. One is that no decision is made by an aggregate whole. Rather, decisions are made by combined individual choices. A second is the use of markets in the political system. A third is the self-interested nature of everyone in a political system. But as Buchanan and Gordon Tullock argue, "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".
Background and development
History of social choice and public choice theory
A 19th-century precursor of modern public choice theory was the work of Swedish economist Knut Wicksell, which treated government as political exchange, a quid pro quo, in formulating a benefit principle linking taxes and expenditures. American statesman and political theorist John C. Calhoun is also seen as a precursor to modern public choice theory. His writings on political economy anticipate the "public choice revolution" in modern economics and political science. Some subsequent economic analysis has been described as treating government as though it attempted "to maximize some kind sort of welfare function for society" and as distinct from characterizations of self-interested economic agents, such as those in business. This is a clear dichotomy, as one can be self-interested in one area but altruistic in another. By contrast, public choice theory models government as made up of officials who, besides pursuing the public interest, may act to benefit themselves, for example in the budget-maximizing model of bureaucracy, possibly at the cost of efficiency.
Modern public choice theory Modern public choice theory uses the basic assumptions, principles, and methods of microeconomics as analytical tools to study and portray the behavior of subjects in political markets and the operation of political markets. Public choice refers to the process of what public goods are provided, how they are provided and distributed, and the corresponding matching rules that are established. Public choice theory expects to study and influence people's public choice processes to maximize their social utility. Modern public-choice theory, and especially election theory, has been dated to the work of Duncan Black, sometimes called "the founding father of public choice". In a series of papers from 1948, which culminated in The Theory of Committees and Elections (1958), Black outlined a program of unification toward a more general "Theory of Economic and Political Choices" based on common formal methods, developed underlying concepts of what became median voter theory, and rediscovered earlier work on voting theory. His work also included the possibility of entirely random outcomes in a voting structure, where the only determinant of an outcome is where a particular motion falls in a given sequence. Kenneth J. Arrow's Social Choice and Individual Values (1951) influenced the theory of public choice and election theory. Building on Black's theory, Arrow concluded that in a non-dictatorial setting, no predictable outcome or preference order can be discerned for a set of possible distributions. Among other important works are Anthony Downs's An Economic Theory of Democracy (1957) and Mancur Olson's The Logic of Collective Action (1965), which was fundamental in beginning the study of special interests. In it, Olson raises questions about the nature of groups. Concentrated groups' (such as farmers') incentive to act in their own interest paired with a lack of organization of large groups (such as the public as a whole) often results in legislation that benefits a small group rather than the general public.
… excerpt ends here. Continue reading the full article.
