Public Choice – A Primer

Politicians are always exhorting us to take more interest in our community, in the government of our country, and the ongoing debates about schools or hospitals or roads. But few of us do. Politics has become a big turn-off. Fewer and few of us even bother to vote.

You are more likely to be run over on your way to the polling station than for your vote to make a difference. And you may figure that, even if it did make a difference, the politicians who you elected would do pretty much the same anyway. Like pre-revolution France or Russia, we are ruled by a separate political class of politicians, journalists and officials, whose interests seem very far from ours. They pander to the interest groups and the lobbyists, but hardly seem to acknowledge that the silent majority exits.

To an economist, that is not so surprising. Economists see the marketplace as a forum in which people haggle and bargain to promote their own interests – and see the political marketplace as pretty similar. Indeed, there is a whole school of economists who study this problem – the Public Choice School, subject of my new IEA primer.

Elections are sold to us as exercises in which we express our preferences, which allow decision-makers to understand what is in the ‘public interest’ and then to get on with doing it. Wrong on both counts. For a start, there is no single ‘public interest’. We all have different and indeed competing interests. When two wolves and a sheep vote on what to have for dinner, there is no collective ‘interest’ but two starkly opposite ones. The majority wins, but the result is messy.

And do politicians actually act as the majority want anyway? Hardly. After all, politicians have their self-interest to consider too. Even the most virtuous of them need votes to do anything at all: so votes are what they pursue. That makes them prey to lobby groups, who again have their own very specific interests to promote. It is worth donating a few pounds to party funds if in return you can make politicians grant you subsidies or special regulatory privileges that boost your income and keep out competitors. The economists even have a name for it: rent seeking.

Markets are not perfect, of course, and the existence of market failure prompts us to make decisions collectively instead. But whoever thought the political process was perfect – or even rational? Quite often, we would probably be better off accepting the market failure rather than landing ourselves with government failure, which is even worse.

We can improve the quality of public decision making, say the Public Choice School, by voting system that do not allow the wolves to exploit the sheep, and by other methods that reduce the power of politicians and officials. The one thing we can never do, though, is to make public decisions perfect. It is astonishing that, for so long, many economists thought we could.

Dr Eamonn Butler is Director of the Adam Smith Institute. His new book for the IEA, Public Choice – A Primer, is available as a free download. 

The only way to improve politics is to remove power from politicians. Return power to the people, or to a "lower" (more local) political body, through devolution, secession, and the return of local decisions to local people. Also, institute checks and balances so that no one person has full control.
Perfect pitch, perfect timing. I am surprised, however, how little public choice theory has impacted the teaching of politics both at secondary school and in higher education. My son is currently studying A level politics and there is only passing (and oblique) reference to public choice theory. I was tlaking to a chap recently who was studying politics at university and he knew nothing of public choice theory. Eamonn, is this assumption fair and, if so, why has Public Choice had so little apparent impact on both political science and conventional thinking about politics?

@Tony - Based on my own experience, I think you're correct about widespread ignorance of public choice theory, not just among students of politics but also those studying economics or PPE (although some universities are better than others in this regard). Perhaps public choice raises too many awkward questions for academics with a statist mindset.

I'm in my second year doing PPE at York, and they have not taught Public Choice so far. Sadly enough, I wrote an assessed essay that brought PCT in, and it didn't go down well with the marker....
@Tony: I agree with you about formal tuition, but don't underestimate the effect of Public Choice Theory on the wider public conscience. Consider the shift in the public consciousness over the past 50 years from a docile belief in the efficiency and efficacy of elected politicians to a position of broad scepticism (albeit often a belief that "this lot" are the problem rather than all politics in general). The way this has been achieved is both remarkable and unusual: I imagine that Yes Minister (which I believe was directly influenced by Public Choice Economics) played a significant role in that change; and the extent to which the public are aware - and sceptical - of the way political decisions emerge is clear from the popular press and the reactions one gets from talking to members of the public. ---- My one criticism of Public Choice Theory is that I do think it's stronger on the problems than on the solution - the Virginia School notwithstanding - but maybe that is an inevitable consequence of its being a fairly young science.
The economists (left or right leaning) of the pasts devised open ended systems that would carry us to extremes if we employed them blindly, instead we should use them to centralise the economy of a country and alter our behaviour when it becomes centralised. But what we have is an economy that sea-saws on the change of government where politicians irrationally try to assert doctrine and party policy than to respond correctly to the current situation, there for it is not just that we don't have real choice, much of the time we are reacting to counter balance the economic and other extremes. These extremes giving justification to the politicians break promises and lead us away from centralising measures.
@Tom - perhaps there are no "solutions" as such: just ways of mitigating the problems. After all, we have government intervention because the application of self interest in the market will not always bring about the results that we would like to see. As soon as you drop the assumption of omniscience and beneficence amongst the political class it undermines one particular set of "solutions" (government action by a benevolent dictator) and just takes us back to the real world.
Part of the problem, perhaps, is the terminology. If you hadn't come across the terms before, would you be able to guess what "Public Choice Theory" and "rent seeking" meant? I wouldn't - and I'm absolutely certain that 90+ of the population don't. Simpler clearer terminology is needed which immediately conveys to the public (most of whom have little direct interest in economics and politics) the issue that is being discussed or the point that is being made. The Americans perhaps are slightly better at this with the term "pork barrel politics", but it still doesn't quite convey the whole issue. Given the clarity and simplicity of Madsen's 'Economics is fun' videos (and excusing his dodgy T-shirts) perhaps he should be set on the job?

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