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Public Choice Theory

8 min read

Part of Elections and politics.

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Every episode (19)

Who argued it

Mike Munger ×3 · Ilya Somin ×2 · Dick Carpenter · Thomas DiLorenzo · Scott Lincicome · Jeffrey Singer · Ryan Young · Brent Orrell · John Tamny · Alex Tabarrok · Brian D. Kelly · Jonathan Rothwell

COVID-19 · Economics · Federalism · Regulatory Capture · Occupational Licensing · First Amendment · Free Speech · Democracy

Background: Public Choice

Definition and origins

Mike Munger describes Public Choice as an approach to political science rather than to economics, one that holds that we cannot assume virtue and good action on the part of the state and that we have to have rules that prevent bad action even when people who work for the government lack a strong moral sense. He dates its devising to the late ’50s and early ’60s, as a response to a functional theory in political science that the President serves us one way and the Congress another. Public Choice, he says, insisted that government is not aggregate institutions but individual people with their own goals and incentives. Mike Munger is Taking Public Choice Seriously (2019)

Munger characterizes the field as the study of the interaction between rules for choosing and the likely behavior of the very real human beings who occupy those offices, merging psychology, political science and economics. A big concept in Public Choice, he says, is aggregation: what are the aggregate consequences of all these individuals acting according to their self-interest? The market is an aggregation process in which the baker and the butcher, each acting in his own interest, benefit other people through the price mechanism; Public Choice asks whether the same is true in politics, and Munger’s answer is generally no, unless you have good rules. He credits the US Constitution, with its protections for political and economic rights, with a set of rules that generally led even politicians acting in their own self-interest to benefit the public interest. Mike Munger is Taking Public Choice Seriously (2019)

Bob Zadek asks Munger to explain James Buchanan’s Public Choice theory as a separate matter, calling it revolutionary at the time and yet so obvious. Munger’s simple characterization is that you cannot simply assume that the self-interest of members of the government and the public interest of citizens are identical. Mike Munger is Taking Public Choice Seriously (2019)

Cronyism, bribery and the availability of favors

Zadek proposes equating crony capitalism with bribery writ large, describing a driver offering a policeman a bribe to escape a speeding ticket, or bribing a building inspector for a certificate of occupancy, as a criminal act that does not indict an economic system. Munger rejects the equation: bribery is illegal, cronyism is not illegal, it is just immoral. He agrees with Zadek’s underlying point that the problem is that government makes these favors legally available, and that democratic governments in particular do so. Mike Munger is Taking Public Choice Seriously (2019)

Munger frames the resulting paradox: for the policeman not to accept the bribe, for the member of Congress not to accept the campaign contribution, would require good people, and that is the one thing Public Choice tells us we cannot assume. He says the first priority of elected officials is service to themselves, to benefit their own careers and pad their own pockets, and that this is just the nature of politics. Zadek interjects that this is not per se bad; Munger agrees that people operating in their own self-interest in a system that causes that self-interest to operate for the public good is not per se bad, and that assuming people will be altruistic is the path to destruction. Mike Munger is Taking Public Choice Seriously (2019)

Concentrated benefits and diffuse costs

In a later episode, Zadek lays out the concept of concentrated benefits and diffuse detriments, using the Chicago Teachers Union vote for remote learning as his case. For each teacher the perceived benefit is dramatic and concentrated, while the detriment is spread over large numbers of parents and students, hard to measure and therefore hard to organize against. He generalizes to lobbying: lobbyists spend money for favors because the benefit to the recipient of a tax benefit or grant is substantial while the detriment to the average citizen is about a penny. Troubleshooting the Constitution (2022)

Munger takes up the same mechanism as the segue into Public Choice, arguing that if you think the government does what the people want you are mistaken, because politics runs through elections and elections work through coalitions with very specific interests, so small concentrated groups always defeat large diffuse groups. The result, he says, is that relying on political processes produces what is good for corporations, unions, and groups with concentrated interests that can organize. Troubleshooting the Constitution (2022)

Munger also applies the theory to the phrase “follow the science,” which Zadek calls a platitude nobody could quarrel with. Munger warns that economists are not immune to scientism, citing Jerome Powell, chair of the Federal Reserve Board, as seeming to want to follow the science on inflation and the rate of growth of the money supply. He invokes David Hume’s insistence that any sensible person proportions belief to the evidence, and argues that restrictions on tests, work and schooling forgo production and learning that are hard to measure because they did not happen. Zadek connects this to Frédéric Bastiat’s warning about the unseen, and Munger agrees, noting Bastiat wrote it in 1850 and that we have learned nothing. Troubleshooting the Constitution (2022)

The Munger Test

Munger offers what he calls the Munger Test as the essence of Public Choice: when someone says the state should be in charge of something, he takes out the word state and puts in Donald Trump or Nancy Pelosi, not to make a partisan point but because there is no state — what there is, is individual politicians with incentives created by the system of politics, and those incentives reward organized interest groups. Troubleshooting the Constitution (2022)

Across episodes: constitutional design

Ilan Wurman brings Public Choice into constitutional drafting. He notes that libertarians love public choice theory, and draws on its insight that factions remain good at getting their policies enacted because a faction is intensely interested in one issue while the general public is only diffusely interested, so a legislator takes money from the intense faction and votes its way. Wurman says he has no illusions that his proposed senators would stop engaging in rent-seeking and bullying people into giving campaign finance contributions, but hopes an oath to promote the common good and long-term welfare of the nation, rather than the interests of any party or class, puts a thumb on the scale. He also cites Madison in Federalist 10 on the problem of faction and the extended republic, and suggests Madison might have been wrong. The Conservative Constitution (2021)

The treatment develops across the three episodes: Munger supplies the definition, the Buchanan attribution and the concentrated-benefits mechanism in the 2019 and 2022 episodes, while Wurman in 2021 moves from diagnosis to remedy, proposing institutional devices — a small Senate, no reelection, secret deliberation, an oath — as nudges against the public choice problem. The Conservative Constitution (2021)

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