PUBLIC CHOICE THEORY
Oh, No!Another unseen hand metaphor
All your life, you’ve been taught
• Democratic governments try to improve society
• A responsible electorate can toss the bums out
• Poor leadership is to blame for political apathy
• You should vote and participate in the political process
Public choice economistssay
All this good government stuff is
bunk!
Except for the extreme factions,
There’s no difference between the political
parties
Special interests will prevail over the public interest
It is not rational to vote
Bureaucrats are inefficient
Churchill says -
“Democracy is the worst form of government…
except for the
alternatives”
4 KEY IDEAS IN PUBLIC-CHOICE
ECONOMICS
1. Is it rational for government
leaders to favor special interests over the general public interest?
• Special interests have a big stake in government
• So they take a big interest in government• When they give contributions, politicians
know it• Each member of the public may lose only
a little bit, when a special interest gets what it wants –
so the public doesn’t pay attention
•The public tends to be ignorant
•Lobbyists make themselves experts
The more concentrated the benefit,
andThe more diffuse the cost
The more likely the special
interest gets its way
2. Why are politicians mainly in the middle of
the road?
The median-voter
hypothesis
Prediction #1 – in primaries, candidates take a more extreme position, appealing to the median voter of
their party
Prediction #2 – in general elections, candidates
take a middle of the road position, appealing to the
median voter of the general population
3. Are people rational or irrational when they
spend little time evaluating candidates before they vote and
when they don’t vote?
Rational Ignorance
Why spend the time to be informed when your
single vote counts so little?
Why do people even vote at all?
Voting is a consumption activity –
It provides a feeling of civic dutyand
You can complain without feeling guilty
4. What is the effect of bureaucratic
entrepreneurs on government?
A business is successful
If it can maximize profit
A bureaucrat is successful
If she or he can maximize power
Bureaucrats have a smaller department if they become more
efficient
Bureaucrats are rewarded When they expand
the duties and clientele of their departments
With a larger department comes• A larger office• A higher salary• A larger pension