1. Economic Analysis of Behavior in Government
PUBLIC CHOICE THEORY
Economic Analysis of Behavior in Government

2. Public Choice Theory
Public choice theory is derived from the research of James Buchanan, Gray Becker, Victor Fuchs, Richard McKenzie, and Gordon Tullock.
It applies the analysis most often associated with the study of private markets to behavior in government.

3. Public Choice Theory Has Been Used to Study
Prejudice
Immigration
Health
Crime
Spouse seeking
Marriage
Divorce
Fertility

4. Public Choice 101
Individual behavior in government is influenced by many of the same considerations that influence behavior in markets.
What incentives motivate government officials?
How do elected and appointed officials face scarcity?
How do elected and appointed officials face competition?
How do elected officials make voluntary exchange for mutual gain?

5. Incentives Matter
Individual behavior in government is motivated by incentives including:
Monetary rewards
Recognition
Travel
Information
Influence
Personal Satisfaction

6. Competition: Elected Officials
Candidates fact scarcity and competition. They compete to:
Win nominations
Earn contributions
Attract voters
Find office space
Gain support from colleagues
Gain committee assignments
Be re-elected

7. Competition: Non-Elected Officials
Non-elected officials face scarcity and competition. They compete to:
Increase budgets
Obtain better equipment
Earn travel funds
Earn salary, promotions, and benefits
Gain support from colleagues
Influence decisions
Maintain power

8. Exchange in Government
Elected officials exchange:
Service to constituents
Funding for state or district projects
Support from interest groups
In return for:
Nomination
Votes
Contributions
Volunteers
Re-election

9. Differences between Markets and Government
Private markets depend on voluntary exchange.
Private markets have a direct connection between payment and consumption.

10. Difference between Markets and Government
Government can set the rules of the game.
Government can use coercion to enforce the rules

11. Interest Group Effects
Interest groups are likely to be successful when:
Benefits are concentrated among a few.
Costs are spread out over many.

12. Interest Group Effects
Examples of interest group effects include:
Tariffs on steel
Rent controls in some cities
Sugar quotas
Milk prices
Farm Subsidies
Ethanol Subsidies