Monday, February 11, 2013

Did public choice theory give economics a new theory or a new research agenda

The question is inspired by this post from Jonathan Catalan.

I opt for the latter, not the former. Far from saying something innovative, public choice theory actually says something people have known for a long time - and it fails to mention a lot of other things we've known about the behavior of public officials.

So it doesn't seem right to say it's a theoretical contribution. It's not.

It is a group of economists who said "we're going to talk about something not as many people are talking about". It was a research agenda push.

Of course there was always a political economy literature, so it's not even a brand new research agenda contribution. But it's better to think about it as that than as a theoretical contribution.

Did economics suffer when it did not consider this research agenda before? I think this case is overblown, in an effort to advertise for public choice theory. "Benevolent dictators" are a way of saying "we are not going to focus on this right now". It was never an argument that government did not fail and could perfectly apply ideas. It was a demarcation of the subject of study, not a rejection of the idea of government failure.

Government failure is obvious, assumed, and long recognized. Market failure is what can be tougher to grasp. That's why people cordoned off politics for a while to talk about markets.

Agree or disagree?


  1. Disagree. We need theories of market failure and theories of government failure. The Pigovian tradition was unbalanced in that it really did not have a theory of government failure, and so was not a very good guide to policy.

    Of course, today's public choicers by and large don't acknowledge either the existence of market failure or the extent to which politicians pursue ideal rather than material interests, so it is considerably worse as a guide to policy...

    Brad DeLong

  2. I see where professor DeLong is coming from, and actually agree with him. But, the shortcomings of public choice have made it easier to come up with better theories of political failure.

  3. I would agree with Brad DeLong if the claim is that studying both is better than just studying one, or that good conclusions require both, or that public choice provides a formalization of earlier ideas (and represents progress in that respect). All of these are true.

    What I think is less defensible is the idea that it made an original theoretical contribution or that the people who focused their energies on market failure were unaware of the problem of government failure. Like I said, "benevolent dictator" was a placeholder - it was not a claim that government failure didn't happen and we actually have benevolent dictators.

  4. I'm curious, what was the general reaction by so-called mainstream economists in the 1960s and 1970s as the Virginia school morphed into public choice theory? Because that would tell you a lot about whether "government failure" was obvious to those working in the field of economics at the time.

    Did lots of economists flip out and write angry diatribes against Buchanan?

    1. I would have to look at the literature.

      I do know a lot of people thought Buchanan was something of a leftist - that his work on constitutions gave up too much ground to government.

      Remember Buchanan didn't just say governments can make mistakes or that behavior is symmetric. He mixed that in with some much less defensible claims about the political economy of Keynesianism. So if people weren't so sure about him (I don't know about that), I'd guess it has more to do with the extra baggage that Buchanan brought than the simple point of government failure.

      In light of Brad's comment I would clarify this way:

      Before public choice theory people were focused on other research agendas and what we largely agreed on with respect to government failure was left relatively unformalized. Buchanan made progress as a theoretical matter by formalizing many of the ideas, and he reinvigorated it as a research agenda. As Jonathan points out, his answer to these questions was somewhat narrow but in the sense I described above it was still an important contribution.


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