Public Choice Theory

I argue that much current thinking on externalities—at least among “lay political economists” (but even, on occasion, among professional economists)—is saddled with two analytical errors. The first is what I call coextensivism: the conflation of public goods and externalities. The second error is what I call externality profligacy: the conflation of economic and “social” externalities. The principal dangers presented by these two “dogmas on externalities” are that, while in their grips, we are under-disposed to seek negotiated, market-based solutions (of a (...) broadly Coasean nature) to challenges posed by economic externalities, and over-disposed to seek coercive, state-based solutions (of a broadly Pigouvian nature) to challenges posed by social externalities. (shrink)

We propose a new single-winner voting system using ranked ballots: Stable Voting. The motivating principle of Stable Voting is that if a candidate A would win without another candidate B in the election, and A beats B in a head-to-head majority comparison, then A should still win in the election with B included (unless there is another candidate A' who has the same kind of claim to winning, in which case a tiebreaker may choose between such candidates). We call this (...) principle Stability for Winners (with Tiebreaking). Stable Voting satisfies this principle while also having a remarkable ability to avoid tied outcomes in elections even with small numbers of voters. (shrink)

The article addresses critical discourses pertaining to triangulation methodology as a step forward in dealing with policy formulation, particularly at the Bank of Sierra Leone. Alternative prescriptive measure like critical discourse analysis have been proposed as a means to the cutting head development in bridging the gap between orthodox and heterodox views of economic sciences investigations.

O Judiciário moderno constitui um sistema hierarquizado e centralizado, em que cortes superiores, com um número pequeno de membros, têm a função de “dar a última palavra” para resolver desacordos doutrinários entre instâncias inferiores – e inclusive rever decisões das demais autoridades. Essa estrutura hierárquica implica uma fonte peculiar de instabilidade: o tribunal superior se torna como que um “ponto único de falha” suscetível à captura, à pressão indevida, à sobrecarga, e até a súbitas mudanças doutrinárias – pondo em risco (...) seu alegado papel de estabilizador do regime democrático. Isso é salientado quando tais cortes sofrem pressão, ou quando há reviravoltas decorrentes de uma maioria frágil no tribunal – a exemplo do debate sobre a prisão em segunda instância no Brasil. Analiso como o desenvolvimento tecnologias de informação e comunicação (TICs) poderia mitigar este problema por meio de um sistema que agregue decisões judiciais de instâncias inferiores a fim de resolver conflitos de jurisprudência numa determinada jurisdição; isso equivaleria a um sistema de votação que substituiria a atuação da corte de última instância na unificação de jurisprudência – como se a última instância fosse, na realidade, composta pelo judiciário como um todo. Isso alteraria a estrutura de decisão hierarquizada do judiciário, no que diz respeito a divergências entre magistrados, aumentando a descentralização do sistema – associada ao ideal da tradição de common law. Embora original, a proposta é modesta, e poderia ser atingida por meio de mudanças incrementais, sem ruptura institucional, a partir de práticas e tecnologias já existentes – e uso como exemplo ferramentas de legal analytics e o sistema de “repercussão geral de recursos extraordinários” do Brasil, no qual se utiliza processamento de linguagem natural para filtrar e classificar processos de acordo com o tema. Ao final, discutem-se possíveis vantagens e desvantagens dessa proposta, como características epistêmicas da descentralização e o risco de “rigidez” na evolução da doutrina jurídica – em especial no que se refere aos longos mandatos de membros de tribunais superiores. Concluímos que a descentralização da unificação da jurisprudência pode contribuir para mitigar o risco de, com o desenvolvimento da tecnologia, maior concentração de poder. (shrink)

This monograph evaluates public policy responses to the Covid-19 pandemic through a public choice lens. The book compares two prominent, albeit mutually exclusive, theories in social sciences—public interest theory and public choice theory—and explores how their predictions perform within the framework of the Covid-19 pandemic. The chapters present different pandemic policies alongside empirical data in order to draw conclusions about their efficacy, and, in turn, draw conclusions about the veracity of each theory. By the end of the volume, the reader (...) will be able to draw their own conclusions about whether the pandemic policy responses served the public interest, as public interest theory suggests, or the personal interests of the politicians who implemented them, as public choice theory holds. (shrink)

During the Covid-19 pandemic, public policy was not driven by findings from public health research, but by politicians’ desire to pursue their own interests. The media and politicians inflamed mass hysteria and then imposed ill-considered lockdowns to “solve” the problem. Lockdowns not only failed to protect those at risk from the virus, but also caused enormous collateral damage. Public choice theory helps explaining this decision-making. -/- .

Proponents of the public goods argument ('PGA') seek to ground the authority of the state on its putative indispensability as a means of providing public goods. But many of the things we take to be public goods – including many of the goods commonly invoked in support of the PGA – are actually what we might term publicized goods. A publicized good is any whose ‘public’ character results only from a policy decision to make some good freely and universally available. (...) This fact poses complications for the PGA, insofar as the set of possible publicized goods is quite extensive indeed. (shrink)

To demonstrate their appreciation for the inevitability of choice on the educational landscape, the authors acknowledge: the moral and legal right of parents to choose an education they think ‘best’ for their own child; the necessity of plural educational provision in a liberal democratic society; the legitimate concerns many parents have about the quality of education on offer; and even the (not occasional) success of copious educational alternatives, which may or may not foster innovation. So far so good. But a (...) number of difficulties quickly come into view. (shrink)

Democratic institutions are appealing means of making publicly justified social choices. By allowing participation by all citizens, democracy can accommodate diversity among citizens, and by considering the perspectives of all, via ballots or debate, democratic results can approximate what the balance of reasons favors. I consider whether, and under what conditions, democratic institutions might reliably make publicly justified social decisions. I argue that conventional accounts of democracy, constituted by voting or deliberation, are unlikely to be effective public justification mechanisms. I (...) conclude that the limitations of conventional mechanisms can be ameliorated through the use of lotteries instead of elections. (shrink)

The social welfare functional approach to social choice theory fails to distinguish a genuine change in individual well-beings from a merely representational change due to the use of different measurement scales. A generalization of the concept of a social welfare functional is introduced that explicitly takes account of the scales that are used to measure well-beings so as to distinguish between these two kinds of changes. This generalization of the standard theoretical framework results in a more satisfactory formulation of welfarism, (...) the doctrine that social alternatives are evaluated and socially ranked solely in terms of the well-beings of the relevant individuals. This scale-dependent form of welfarism is axiomatized using this framework. The implications of this approach for characterizing classes of social welfare orderings are also considered. (shrink)

The term neoclassical economics delineates a distinct and relatively homogenous school of thought in economic theory that became prominent in the late nineteenth century and that now dominates mainstream economics. The term was originally introduced by Thorstein Veblen to describe developments in the discipline (of which Veblen did not entirely approve) associated with the work of such figures as William Jevons, Carl Menger, and Leon Walras. The ambition of these figures, the first neoclassicists, was to formalize and mathematize the subject (...) in the aftermath of the so-called marginalist revolution. Economics is, according to one definition, the science that studies human behavior as a relationship between ends and scarce means that have alternative uses. Neoclassical economics pursues this study by means of supply and demand models that determine prices based on the subjective preferences of producers and consumers. Neoclassical economics relies on subjective preferences for determining prices in order to escape from the so-called objective value theory of classical economics, according to which the value of goods could be established by reference to some basic commodity (usually corn) or the labor input required to produce a good. Neoclassicists hoped that by jettisoning objective value, economics could be placed on a more scientific basis as an essentially descriptive and predictive theory of human behavior. Political theory, by contrast, involves both positive and normative elements. It is a positive science to the extent to which it aims to describe and predict political behavior. It is a normative science to the extent to which it prescribes how agents should behave in the political arena and what the best political institutions are. Neoclassical economics is relevant to both of these elements. (shrink)

Gary Becker´s 1956 paper about free banking was originally intended as a reaction to the 100-percent reserve proposals that were then popular at the University of Chicago. Today the original paper clearly illustrates how considerably our views and theories about free banking have evolved in the past 50 years. This development is to a considerable extent the result of the work and the writings of economists of the Austrian School. Pascal Salin is one of the most prominent members of the (...) Austrian Free Banking School. In a new introduction to the 1956 paper written especially for the Festschrift in honor of Pascal Salin, Gary Becker partly repudiates and mitigates some of his previous conclusions. This event offers a fitting opportunity to review some developments in the theory of free banking and related issues and to add a few clarifications concerning the present “state of the art” as regards an acceptable and adequate concept of free banking. (shrink)

Following Amartya Sen’s insistence to expand the framework of rational choice theory by taking into account ‘non-utility information,’ economists, political scientists and philosophers have recently concentrated their efforts in analysing the issues related to rights, freedom, diversity intentions and equality. Thomas Boylan and Ruvin Gekker have gathered essays that reflect this trend. The particular themes addressed in this volume include: the measurement of diversity and freedom, formal analysis of individual rights and intentions, judgment aggregation under constraints and strategic manipulation in (...) fuzzy environments. Some papers in the volume also deal with philosophical aspects of normative social choice. (shrink)

Colorado’s Amendment 36 proposed to switch Colorado’s representation in the Electoral College from winner-takes-all to proportionality. We evaluate unilateral and uniform switches to proportionality both from Colorado’s perspective and from an impartial perspective on the basis of a priori and a posteriori voting power measures. The present system is to be preferred to a unilateral switch from any perspective on any measure. A uniform switch is to be preferred to the present system from Colorado’s perspective on an a priori measure, (...) and from an impartial perspective on an a posteriori measure. The present system is to be preferred to a uniform switch from Colorado’s perspective on an a posteriori measure (with some qualifications), and from an impartial perspective on an a priori measure. We conclude with a discussion of the appropriateness of these measures. (shrink)

How is a person's freedom related to his or her preferences? Liberal theorists of negative freedom have generally taken the view that the desire of a person to do or not do something is irrelevant to the question of whether he is free to do it. Supporters of the “pure negative” conception of freedom have advocated this view in its starkest form: they maintain that a person is unfree to Φ if and only if he is prevented from Φ-ing by (...) the conduct or dispositions of some other person. This definition of freedom is value-neutral in the sense that no reference is made to preferences over options or indeed to any other indicators of the values of options, either in the characterization of “Φ-ing” itself or in the characterization of the way in which Φ-ing can be constrained. (shrink)

We consider a decision board with representatives who vote on proposals on behalf of their constituencies. We look for decision rules that realize utilitarian and (welfarist) egalitarian ideals. We set up a simple model and obtain roughly the following results. If the interests of people from the same constituency are uncorrelated, then a weighted rule with square root weights does best in terms of both ideals. If there are perfect correlations, then the utilitarian ideal requires proportional weights, whereas the egalitarian (...) ideal requires equal weights. We investigate correlations that are in between these extremes and provide analytic arguments to connect our results to Barberà and Jackson (J Polit Econ 114(2):317–339, 2006) and to Banzhaf voting power. (shrink)

Consider the following two seemingly unrelated questions. First, why does Rousseau (1993 [1762]) believe that the formation of factions or partial associations is not conducive to the general will in Du Contrat Social, II, 3? Second, why do federal assemblies typically strive for some form of degressive proportionality, i.e. a balance between equal and proportional representation, for the countries in the federation? We will show that there is a surprising connection between these questions. We turn to our first question. It (...) is often thought that Rousseau’s opposition to factions can be interpreted in reference to the Condorcet Jury Theorem. The Condorcet Jury Theorem states that if voters are more likely to be right on some issue than not and cast their votes independently, then the chance that the majority is correct converges to one as the number of voters goes to infinity. This interpretation is tempting, but it is inconsistent with some crucial textual evidence. We turn to our second question. Consider a federation of countries with a decision-making assembly in which each country casts a block vote. On equal representation, the vote of each country has the same weight. On proportional representation, the weights of the votes are proportional to the countries’ population sizes. In between these extremes, we can let the weights increase as a function of population sizes, but smaller countries receive greater weights and larger countries receive lesser weights than proportionality would warrant. Such weightings are called degressively proportional weightings. How can degressive proportionality be justified? And does this justification provide us any guidance as to how these weights should be set? A correct understanding of Rousseau’s misgivings about the formation of factions will hold the key to these questions. (shrink)

This paper concerns voting with logical consequences, which means that anybody voting for an alternative x should vote for the logical consequences of x as well. Similarly, the social choice set is also supposed to be closed under logical consequences. The central result of the paper is that, given a set of fairly natural conditions, the only social choice functions that satisfy social logical closure are oligarchic (where a subset of the voters are decisive for the social choice). The set (...) of conditions needed for the proof include a version of Independence of Irrelevant Alternatives that also plays a central role in Arrow's impossibility theorem. (Published Online July 11 2006) Footnotes1 Much of this article was written while the author was a fellow at the Swedish Collegium for Advanced Study in the Social Sciences (SCASSS) in Uppsala. I want to thank the Collegium for providing me with excellent working conditions. Wlodek Rabinowicz and other fellows gave me valuable comments at a seminar at SCASSS when an early version of the paper was presented. I also want to thank Luc Bovens, Franz Dietrich, Christian List and an anonymous referee for their excellent comments on a later version. The final version was prepared during a stay at Oxford University for which I am grateful to the British Academy. (shrink)

Much management literature depends on the philosophical writings of F A Hayek and James M Buchanan. As such it is recognisably not Marxist but is in fact antithetical to Marxism. But there is a small, significant body of literature which attempts to recruit the ideas of writers in the field of ‘Public Choice’ (pre-eminently Buchanan) to the service of updated Marxist thinking about management. In this paper I argue that this endeavour, although it illustrates the common origins of neoliberalism and (...) Marxism, cannot succeed without doing violence to the original and perhaps fundamental concepts of Marxist thought. (shrink)

Increasingly in the modern world, incentives are becoming the tool we reach for when we wish to bring about change. In government, in education, in health care, between and within institutions of all sorts, incentives are offered to steer people's choices in certain directions. But despite the increasing interest in ethics and economics, the ethics of the use of incentives has raised very little concern. From a certain point of view, this is not surprising. When incentives are viewed from the (...) perspective of market economics, they appear to be entirely unproblematic. An incentive is an offer of something of value, sometimes with a cash equivalent and sometimes not, meant to influence the payoff structure of a utility calculation so as to alter a person's course of action. In other words, the person offering the incentive means to make one choice more attractive to the person responding to the incentive than any other alternative. Both parties stand to gain from the resulting choice. In effect, it is a form of trade, and as such, it meets certain ethical requirements by definition. A trade involves voluntary action by all parties concerned to bring about a result that is beneficial to all parties concerned. If these conditions were not met, the trade would simply not occur. And as inducements in a voluntary transaction, incentives certainly have the moral high ground over coercion as an alternative. (shrink)

This paper is about the relevance, to the definition of freedom, of values or goods other than freedom. In this respect,its subject matter is not at all new. However, I do believe that new light can be thrown on the nature of this relationship by paying more attention to another relationship – one which exists within the concept of freedom itself. There are two senses in which we can be said to possess freedom. Firstly, there is the sense in which (...) we can be said to be free to do a certain particular thing. Secondly,there is the sense in which we can be said to possess a certain ‘amount’,‘degree’ or ‘quantity’ of freedom, in some overall sense. 1 I believe that most recent accounts of the relationship between freedom and other goods are inconsistent, because they see those other goods as affecting the truth value of claims about freedom in the second sense, but not in the first. (shrink)

Benefit/cost analysis is a technique for evaluating programs, procedures, and actions; it is not a moral theory. There is significant controversy over the moral justification of benefit/cost analysis. When a procedure for evaluating social policy is challenged on moral grounds, defenders frequently seek a justification by construing the procedure as the practical embodiment of a correct moral theory. This has the apparent advantage of avoiding difficult empirical questions concerning such matters as the consequences of using the procedure. So, for example, (...) defenders of benefit/cost analysis (BCA) are frequently tempted to argue that this procedurejust isthe calculation of moral Tightness – perhaps that what itmeansfor an action to be morally right is just for it to have the best benefit-to-cost ratio given the accounts of “benefit” and “cost” that BCA employs. They suggest, in defense of BCA, that they have found the moral calculus – Bentham's “unabashed arithmetic of morals.” To defend BCA in this manner is to commit oneself to one member of a family of moral theories (let us call thembenefit/cost moral theoriesorB/C moral theories) and, also, to the view that if a procedure is (so to speak) the direct implementation of a correct moral theory, then it is a justified procedure. Neither of these commitments is desirable, and so the temptation to justify BCA by direct appeal to a B/C moral theory should be resisted; it constitutes an unwarranted short cut to moral foundations – in this case, an unsound foundation. Critics of BCA are quick to point out the flaws of B/C moral theories, and to conclude that these undermine the justification of BCA. But the failure to justify BCA by a direct appeal to B/C moral theory does not show that the technique is unjustified. There is hope for BCA, even if it does not lie with B/C moral theory. (shrink)

The notion of a spontaneous social order, an order in human affairs which operates without the intervention of any directly ordering mind, has a natural fascination for social and political theorists. This paper provides a taxonomy under which there are two broadly contrasting sorts of spontaneous social order. One is the familiar invisible hand; the other is an arrangement that we describe as the intangible hand. The paper is designed to serve two main purposes. First, to provide a pure account (...) of the invisible hand, with some indication of the varieties of invisible hand (and, indeed, backhand) available. Second, to develop and motivate the unfamiliar conception of the intangible backhand. We believe that a recognition of the availability of this latter sort of spontaneous organising mechanism — and the mechanism is implicitly recognised in many traditions — is of great importance in political theory; it is of particular importance nowadays when the usual focus is entirely on the invisible hand. (shrink)

It is commonplace to suppose that the theory of individual rational choice is considerably less problematic than the theory of collective rational choice. In particular, it is often assumed by philosophers, economists, and other social scientists that an individual's choices among outcomes accurately reflect that individual's underlying preferences or values. Further, it is now well known that if an individual's choices among outcomes satisfy certain plausible axioms of rationality or consistency, that individual's choice-behavior can be interpreted as maximizing expected utility (...) on a utility scale that is unique up to a linear transformation. Hence, there is, in principle, an empirically respectable method of measuring individuals' values and a single unified schema for explaining their actions as value maximizing. (shrink)

The Scylla and Charybdis of institutions of cooperative enterprises are the potential for free riders, on the one hand, and the fact that some people may not value certain public goods. If we go to the one side, we encourage people who do value the public goods but whom cannot be excluded from enjoying them, to refuse to pay their share of the costs of providing them; if we go to the other side and force everyone to pay for them, (...) we make people who do not value the public goods subsidize those who do and who perhaps have gained special control over the agenda of selecting which public goods are to be required. (shrink)