Overview
We assume politicians want to “serve the public.” Public Choice Theory says: “Nonsense. Politicians are humans. They want money, power, and to get re-elected.” It applies the logic of economics (self-interest) to politics. It explains why the government is often inefficient and corrupt.
Core Idea
The core idea is Politics without Romance. Treat politicians like businessmen selling a product (laws) to customers (voters/lobbyists).
Formal Definition
The use of economic tools to deal with traditional problems of political science. Founded by James Buchanan (Nobel Prize).
Intuition
- Concentrated Benefits, Dispersed Costs:
- Sugar Tariff: It benefits 5,000 sugar farmers a lot ($1 million each). It costs 300 million Americans a little ($1 each).
- Result: The farmers lobby hard. The public doesn’t care. The tariff passes. This explains why special interests always win.
Examples
- Rent Seeking: Spending money to get a government favor (a subsidy or monopoly) instead of creating value. It’s easier to lobby Congress for a tax break than to invent a better mousetrap.
- Rational Ignorance: Why don’t voters study the issues? Because one vote doesn’t matter. The “cost” of learning is high, the “benefit” is zero. So voters stay ignorant.
Common Misconceptions
- Bureaucrats are lazy: No, they are rational. In the private sector, you get promoted for profit. In government, you get promoted for having a bigger budget. So bureaucrats always try to expand their department, even if it’s useless.
Related Concepts
- Logrolling: “I’ll vote for your bridge if you vote for my stadium.”
- Regulatory Capture: When the bank regulators start working for the banks they are supposed to regulate.
Applications
- Constitutional Economics: Designing rules (like Term Limits or Balanced Budget Amendments) to limit the damage politicians can do.
Criticism / Limitations
- Cynicism: It assumes no one is ever altruistic. Some politicians do care about the country.
Further Reading
- Buchanan, James and Tullock, Gordon. The Calculus of Consent.