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Forms of state failure

Up until this point the argument has been sustained at the most general of levels. I now want to look at four specific accounts of state failure developed by public choice theorists over the last forty or so years.

These four accounts, it should be emphasized, look at vary different areas of the state’s activities. The first, rent-seeking, examines the interaction between pressure groups and the state. The second, political business cycles, looks at the way in which competitive elections encourage incumbent politicians to manipulate the economy to their own electoral advantage. The third, on vote-swapping or trading, shows, in a more abstract way, how politicians might make deals with each other that benefit their constituents but harm the country. The fourth, on budget-maximizing, shows why public sector workers, or bureaucrats, often have an incentive to try and extract more and more money from their political masters.

This list of state failures is far from constituting an exhaustive review of public choice theory. Theorists have identified dozens of reasons why the state might fail. The examples considered here may however be considered representative. They all assume the existence of a ‘Western’ liberal democracy in which there are regular elections and a mixed economy. They all assume state actors rigorously pursue and protect their individual self-interest and that this generates economic inefficiencies. As I will also go on to show, they argue that these inefficiencies can be related to the existence of monopoly, public goods and externalities within the state as well as market sectors.

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Source: Hay Colin, Lister Michael, Marsh David (eds.). The State: Theories and Issues. Palgrave,2005. — 336 p.. 2005

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