The Importance of Public Choice Theory
Ask yourself, how many times have you seen or heard about something that is wrong in the world and also heard someone say, “the government should do something about that”? If you live in a democratic country, particularly one in the West, you probably see or hear this quite often. Whether it’s issues like climate change, the ‘fight’ for $15 minimum wage, or the latest social justice cause, cries for governmental or authoritative intervention are routine. Indeed, activists like Greta Thunberg campaign for governments around the world to intervene on behalf of the things they deem important.
There is a tendency, especially for those who live in free and open democratic nations, to believe government has the power to fix any and all social ills.
“The world’s oceans are disappearing? Make the government find a way to fix it, there’s no way they can’t do it! The ozone layer is disappearing? Make the government tax billionaires to fund a new climate program, that can fix it. Women aren’t getting paid enough? There has to be a new law for that.”
Any and all problems within our society ought to, and can, be solved via government. To say this is wishful thinking is an understatement. The idea that government can or ought to solve all societal and economic ills is not only misguided, but downright dangerous. Public Choice Theory can explain why this is so.
What is Public Choice Theory?
Developed by Nobel Prize winning economist James Buchanan and economist Gordon Tullock, Public Choice Theory is the school of economics that tackles “the application of economic methods to the study of political processes.” What exactly are economic methods? Well, economists are interested in the study of human action, which can be simplified as saying they study the choices humans make, given finite economic resources. The presence of choice implicitly suggests that there is always something else a person could have done in a given situation, or in other words, a tradeoff. In the context of everyday decisions, this looks like a person choosing to order Chinese food when they could have chosen to save money and cook the food they already had in the fridge (the ground beef’s gonna go bad, dude…). The application of this sort of thinking to a broader, more collective context of decision making is where Public Choice Theory comes in.
Economists often ask the question, “compared to what?” when analyzing the choices individuals make in the economy. Public Choice Theorists (who are also economists) ask this same question, but in the context of comparing outcomes in the market versus the outcomes of political decisions. Why the distinction? As mentioned above, when something goes wrong people tend to say, “government should step in!” Government “stepping in” is usually desired in the form of some kind of policy or law, which will then (at least, in theory) solve the issue at hand. In other words, people often think in terms of what the best policy should be in any given situation, as opposed to what motivates a government or public institution’s decision making. Public Choice Theory sets out to understand the motivations and desires of those who hold public office.
How We Think Government Works
Many people tend to hold at least two very important assumptions the abilities of government:
Government and its representatives have the power to fix most if not all social ills
Government is a benevolent entity, and therefore should use its power to fix most if not all social ills.
Public Choice Theory offers many ideas and explanations for why these two assumptions, especially in western democracies, are just not true.
When someone asks, “what should the government do?”, this question assumes that government is an individual agent with the power or ability to do whatever it chooses to. There is no shortage of people who think this way. In countries with a dictator at the helm, who’s power is concentrated sole in his or her hands, this description would be very accurate. The leader of North Korea, Kim Jong-Un, is a person with virtual absolute power over the people of his country. Whatever he says goes, regardless of the whims of the people he claims to serve. He uses this power solely for the benefit of himself and those close to him, completely disregarding the rest of the people of his country.
In contrast, western democracies (the United States in particular) tend to have a much more decentralized distribution of power, which means that elected officials are severely limited in what they can do. Term limits are one of the most obvious examples of this limitation on power, which government officials like dictators do not have.
Asking “what should government do?” also suggests that politicians are motivated by the good of the public. According to Public Choice Theory, this is a critical mistake. In economics we assume that people and individuals are self-interested. Why then, are politicians considered to be any different? While becoming a successful politician is no easy feat, those who do see success certainly don’t go hungry. They achieve power, sometimes fame, and more often times than not, become wealthy. Far wealthier, one could say, than the average person would assume.
In democratic countries, political leaders are subject to elections. It is in their best interest to implement policies that will get or keep them elected, regardless of whether these policies are actually beneficial to the public at large. The “good” of the public or others comes second before their own well-being as politicians.
Why PCT Is Important
Intuitively, many people know that politicians have a capacity for corruption and greed. There is no shortage of articles that malign and shame those caught with their hands in the cookie jar. Political corruption is a tale old as civilization itself, yet it happens routinely in all and every form of governance around the world. But why?
Public Choice Theory can tell us why. PCT can give us tools for properly evaluating how our government functions free of any illusions or wishful thinking. PCT forces us to look at politicians and government officials as they really are; regular people with the same motivations and desires as everyone else.
Public Choice Theorists ask, “what policy is likely to emerge from real-world democratic politics?”, and it is through this understanding of political process that we may better understand why we end up with the laws and regulations that we do.
I’ll be writing more on Public Choice Theory in detail, with more examples and concepts to make the bigger picture ideas more clear. Stick around!