The Theory of Public Choice

Public choice theory points out reasons why government might be inefficient in providing public goods and services. This is a theory developed from the study of taxation and public spending. It studies the decision-making behavior of voters, politicians and government officials from the viewpoint of economic theory. It can be considered as a bridge between economics and political science.

Public choice theory argues that governments fail to do right. The theory supposes that politicians, bureaucrats, citizens, and states do something totally from a self-interested point of view using their power and the authority of government for their own self ends.

Before the coming of the public choice theory, economists generally used to accept government’s role as “unquestionable controller with perfect information and unlimited power”, a “bureaucrat god”. However, in practice bureaucrats and politicians are only humans, and they often face incentives/motivations that pull them to decisions that produce inefficient outcomes. The basic assumption of the public choice theory is that humans are rational beings that act in a self-interested way. Therefore, public choice theorists say that the economic analysis of the political decision-making process might in fact tell/reveal certain systematic trends towards inefficient government policies.

Supporters of public choice theory argue that:
  • Citizens use political influence to get special benefits called “rents” from government policies (e.g., import licenses or rationed foreign exchange) that limit right of entry to important resources.
  • Politicians use government resources to strengthen and maintain positions of power and authority.
  • Bureaucrats and public officials use their positions to obtain bribes from rent-seeking citizens and to carry out protected businesses on the side.
  • States use their power to seize/capture private property from individuals. The net result is not only a misallocation of resources but also a general reduction in individual freedoms.
The supporters of the public choice theory have developed their arguments on different bases.

1) Voters’ ignorance

The most important opinions of public choice theory are the lack of incentives for voters to monitor government effectively. Public choice promoters point out that voters are 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 nothing; the voter has virtually/realistically no chance to determine the outcome of the election. Spending decisions which are made by the politicians following the election is not personally useful for the voter.

Public choice economists point out that the incentive to be ignorant is rare in the private sector. Someone who buys a car naturally wants to be well informed about the car he or she selects. That is because the car buyer’s choice is decisive; he/she pays only for the one chosen. If the choice is wise/sensible, 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/revealed issues, they do not pay a lot of attention to what legislative bodies do; they have little incentive to get the background knowledge and analytic skill needed to understand the issues.

2) Interest groups and lobbying

Even if good government tends to be a pure public good for the mass of voters, there exists various interest groups that have strong motivations for lobbying the government to make inefficient policy-decisions that would benefit them at the cost of the general public. For example, lobbying by the sugar manufactures might result in an inefficient subsidy for the production of sugar, either direct or by protectionist measures. The costs of such inefficient policy fall over all citizens, and therefore unseen to each individual. On the other hand, the benefits are shared by a very small special interest group, who has very strong incentives to continue or keep alive the policy by further lobbying. The large majority of voters will be fully ignorant of the whole affair due to the tendency of rational ignorance. Therefore, it can be expected that numerous special interests groups will be able to successfully lobby for various inefficient policies.

3) Actions of legislators

Public choice economists also examine the actions of legislators. Although legislators are expected to work on 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. Politicians may try/seek to spend taxpayers money wisely. There is no direct reward for fighting powerful interest groups in order to give benefits on a public that is not even conscious of the benefits or of who provided 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. In other words, because legislators have the power to tax and to get resources in other coercive (using force) ways, and because voters monitor their behavior poorly, legislators behave in ways that are costly to citizens.

4) The role of bureaucrats

Public choice theorists have also analyzed the role of bureaucrats in government. Their incentives explain why many regulatory agencies appear to be “captured” by special interests. Bureaucrats are captured by the government because they are appointed by the government for particular goal or mission. They depend on the government for their budgets, and mostly the people who will benefit from their mission can influence the government body to provide more funds. Thus, interest groups become important to them. Such interrelationships can lead to bureaucrats being captured by interest groups.

With all these points of argument the public choice theory points out the case of government failure-a term similar to the market failure scenarios familiar from the traditional economic theory. The conclusion of the public choice theory is that self-interest guides all individual behavior and the behavior of the government also; governments are inefficient and corrupt because people use government to engage in (carry out) their own agendas. So, free market systems are supposed more efficient and more just. The suggestion, therefore, is that minimal government is the best government.

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