Friday, February 25, 2011
Public Choice Theory is economists, not the most successfully predictive science but far better than the political sort, applying their rules to the problems of government. It seems to work much better:
"As James Buchanan artfully defined it, public choice is “politics without romance.” The wishful thinking it displaced presumes that participants in the political sphere aspire to promote the common good. In the conventional “public interest” view, public officials are portrayed as benevolent “public servants” who faithfully carry out the “will of the people.” In tending to the public’s business, voters, politicians, and policymakers are supposed somehow to rise above their own parochial concerns.
In modeling the behavior of individuals as driven by the goal of utility maximization—economics jargon for a personal sense of well-being—economists do not deny that people care about their families, friends, and community. But public choice, like the economic model of rational behavior on which it rests, assumes that people are guided chiefly by their own self-interests and, more important, that the motivations of people in the political process are no different from those of people in the steak, housing, or car market. They are the same human beings, after all. As such, voters “vote their pocketbooks,” supporting candidates and ballot propositions they think will make them personally better off; bureaucrats strive to advance their own careers; and politicians seek election or reelection to office. Public choice, in other words, simply transfers the rational actor model of economic theory to the realm of politics.
Two insights follow immediately from economists’ study of collective choice processes. First, the individual becomes the fundamental unit of analysis. Public choice rejects the construction of organic decision-making units, such as “the people,” “the community,” or “society.” Groups do not make choices; only individuals do. The problem then becomes how to model the ways in which the diverse and often conflicting preferences of self-interested individuals get expressed and collated when decisions are made collectively.
Second, public and private choice processes differ, not because the motivations of actors are different, but because of stark differences in the incentives and constraints that channel the pursuit of self-interest in the two settings. A prospective home buyer, for example, chooses among the available alternatives in light of his personal circumstances and fully captures the benefits and bears the costs of his own choice. The purchase decision is voluntary, and a bargain will be struck only if both buyer and seller are made better off. If, on the other hand, a politician proposes a project that promises to protect the new homeowner’s community from flooding, action depends on at least some of his neighbors voting for a tax on themselves and others. Because the project’s benefits and costs will be shared, there is no guarantee that everyone’s welfare will be improved. Support for the project will likely be forthcoming from the owners of houses located on the floodplain, who expect to benefit the most. Their support will be strengthened if taxes are assessed uniformly on the community as a whole. Homeowners far from the floodplain, for whom the costs of the project exceed expected benefits, rationally will vote against the proposal; if they find themselves in the minority, they will be coerced into paying for it. Unless the voting rule requires unanimous consent, which allows any individual to veto a proposal that would harm him, or unless those harmed can relocate easily to another political jurisdiction, collective decision-making processes allow the majority to impose its preferences on the minority. Public choice scholars have identified even deeper problems with democratic decision-making processes, however." ctd