PUBLIC CHOICE THEORY

Oh, No!
Another unseen hand metaphor
All your life, youve 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 economists
say

All this good

government stuff is
bunk!
Except for the extreme factions,

Theres 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 doesnt pay attention
The public tends
to be ignorant
Lobbyists make
themselves
experts
The more concentrated
the benefit,
and
The 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 dont 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 duty

and
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