Public choice

Public choice involves the application of the methods of economics to the study of politics (Mueller 2003: 1). By this I mean two things. First, that public choice theorists, like economists, assume that people, all people, are rational, self-interested utility-maximizers.

Second, that public choice theorists, like economists, use this assumption to construct models from which can be deduced explanations and predictions of actors’ behaviour. Before going on to discuss each of these in turn I will clarify one point. I have, so far, referred to public choice theory as being both a method and a theory. It is a method because it requires practitioners to study politics in a particular way using particular assumptions and techniques. It is a theory because the application of that method has resulted in the development of an intellectually coherent set of arguments about the state. As a method, public choice might be compared and contrasted with methods like interpre- tivism and institutionalism. As a theory, public choice might be compared and contrasted with pluralism, elitism and Marxism.

As it is interpreted by public choice theorists, rationality requires people to have (i) complete, and (ii) transitive preferences which (iii) they act upon. If there are just three available options, A, B and C, a person’s preferences are complete if they either prefer one option to another or are indifferent between them. A person’s preferences are transitive if they are ordered in such a way that if, for example, they prefer A to B and B to C that they also prefer A to C. A person can be said to have acted upon their preferences if, when given a choice, they choose the option they most prefer. Because the satisfaction of preferences is a source of personal welfare or utility, a person who consistently chooses the option they most prefer can be described as a utility-maximizer.

Although I will not pursue the argument here, the assumption of utility-maximization is a contentious one. Amartya Sen (2002: 2-15) argues that whether out of a sense of duty, solidarity or love, people frequently do things they do not ‘really’ want to do. They visit elderly relatives when they would rather go to the pub, and cook themselves healthy meals when they would rather eat junk food. The real sticking-point for public choice’s critics is however the assumption of selfinterest. In itself there is nothing in the assumption of utility maximization which implies that actors must be self-interested. A person who prefers giving money to charity to spending it upon themselves is maximizing their utility if, when given the choice, they donate money to charity. But public choice theorists routinely assert that the preferences people have are nearly always reflective of and derived from their self-interest. Gordon Tullock (1976: 5), whose work on ‘rent-seeking’ is examined shortly, is typical in claiming that 95 per cent of all behaviour is self-interested. As we will soon see, it is the assumption of self-interest which underpins public choice theory’s hostility toward the state.

Turning now to the second part of the definition, public choice theorists, like economists, use the assumption of self-interested behaviour to construct stripped-down models of political processes from which they deduce predictions and explanations about behaviour and outcomes. These explanations are, I now want to emphasize, of a very general sort. They relate to the behaviour of a particular class or ‘type’ of actor rather than named individuals. Consider the decision of Labour’s incoming Chancellor, Gordon Brown, to give the Bank of England operational independence in May 1997. A political biographer or historian might try to explain this decision in terms of particular features of Gordon Brown’s background and personality such as his determination to assert authority over domestic policy-making or his political friendship with American economists and politicians who had previously extolled to him the virtues of the independent American Federal Reserve (Rawnsley 1998: 31-49; Routledge 1998: 292-6).

Alternatively, they might focus upon particular features of the situation in which Gordon Brown found himself, such as the need to reassure financial markets of New Labour’s fiscal prudence after eighteen years in opposition. It is possible that a series of such studies into the decision to give different central banks their independence in a number of different countries might reveal a consistent pattern. It might, for example, turn out that political parties are more likely to give central banks independence after a long period in opposition. But such comparative explanations would have to be build inductively from the ‘ground up’. What then of public choice theory? Its basic explanation for central bank independence runs as follows (Rogoff 1985). Financial markets consider promises made by central bankers about inflation to be more credible than those of elected politicians. They therefore ‘reward’ countries that have independent banks with lower interest rates. Vote-maximizing politicians know that voters prefer lower interest rates and therefore have an incentive to give central banks independence. From this general argument we can of course then derive an explanation of why Gordon Brown gave the Bank of England independence. Public choice is not the only political science theory to attempt such ‘top-down’ deductive explanations. The combination of this approach with the assumption of self-interested behaviour is however distinctive to public choice.

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

Public choice

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