PUBLIC CHOICE THEORY Oh, No! Another unseen hand metaphor

All your life, you’ve been taught

Democratic governments try to improve society A responsible electorate can toss the bums out Poor leadership is to blame for political apathy You should vote and participate in the political process

Public choice economists say All this good government stuff is bunk!

Except for the extreme factions, There’s no difference between the political parties

Special interests will prevail over the public interest

It is not rational to vote

Bureaucrats are inefficient

Churchill says - “Democracy is the worst form of government… except for the alternatives”

4 KEY IDEAS IN PUBLIC- CHOICE ECONOMICS

1. Is it rational for government leaders to favor special interests over the general public interest?

Special interests have a big stake in government So they take a big interest in government When they give contributions, politicians know it Each member of the public may lose only a little bit, when a special interest gets what it wants – so the public doesn’t pay attention

The public tends to be ignorant Lobbyists make themselves experts

The more concentrated the benefit, and The more diffuse the cost

The more likely the special interest gets its way

2. Why are politicians mainly in the middle of the road?

The median-voter hypothesis

Prediction #1 – in primaries, candidates take a more extreme position, appealing to the median voter of their party

Prediction #2 – in general elections, candidates take a middle of the road position, appealing to the median voter of the general population

3. Are people rational or irrational when they spend little time evaluating candidates before they vote and when they don’t vote?

Rational Ignorance Why spend the time to be informed when your single vote counts so little?

Why do people even vote at all? Voting is a consumption activity – It provides a feeling of civic duty and You can complain without feeling guilty

4. What is the effect of bureaucratic entrepreneurs on government?

A business is successful If it can maximize profit

A bureaucrat is successful If she or he can maximize power

Bureaucrats have a smaller department if they become more efficient

Bureaucrats are rewarded When they expand the duties and clientele of their departments With a larger department comes A larger office A higher salary A larger pension