Public Choice Theory; T. Machan

352 Public Choice Theory: Not the Whole Story by Tibor R. Machan I n October 1986 Professor James M. Bu chanan was awarded the Nobel Prize for economics. He received the award for his pioneering work in public choice theory, a branch of economic analysis that studies the be havior of politicians and bureaucrats, especially in a representative democracy such as the United States. Professor Buchanan, who now teaches at George Mason University in Fairfax, Virginia, developed his theory in cooperation with sev eral other economists, most notably Professor Gordon Tullock. (During the development of public choice theory both of these economists taught at the Virginia Polytechnic Institute and State University, Blacksburg, Virginia.) Their book, The Calculus of Consent (University of Michigan Press, 1962), pioneered this new ap plication of economics. Since its publication, other books and journals have followed, in cluding the scholarly journal of the Center for Study of Public Choice, Public Choice, which published extensive and complex studies on a great variety of topics of concern to public choice theorists. Professors Buchanan and Tul lock also have inspired numerous other econo mists, philosophers, political scientists, and legal theorists to explore various implications of the public choice approach.

What do public choice theorists claim? Es sentially they hold that when people enter govDr. Tibor R. Machan is Professor of Philosophy at Auburn University, Auburn, Alabama, Senior Fellow of the Reason Foundation and author, among other works, of Human Rights and Human Liberties. ernment and become "public" servants, they act on the same motives they would if they were agents in the marketplace. "Public" ser vants are motivated no less by private interests than are men and women in business. As Bu chanan puts it, "Politicians and bureaucrats are seen as ordinary persons, and 'politics' is viewed as a set of arrangements, a game if you will, in which many players with quite dis parate objectives interact so as to generate a set of outcomes that may not be either internally consistent or efficient. ' ,1 Public choice theory also implies, in Bu chanan's words, that "The bureaucracy can playoff one set of constituents against others, insuring that budgets rise much beyond plau sibly efficient limits. "2 To appreciate adequately why public choice theory delivers its paradoxical conclusions con cerning what our public servants actually do namely, further their own private or vested in terests-one needs to know the basic postu lates of contemporary economic science.

Mainstream economics today assumes that we always behave so as to maximize our satisfac tions or wealth. As another Nobel winner in economics, Milton Friedman, put it, ... every individual serves his own private interest. ... The great Saints of history have served their "private interest" just as the most money-grubbing miser has served his interest. The private interest is whatever it is that drives an individual. 3 Or as another influential economist, Pro fessor Gary Becker, put it as he spelled out the fundamental tenets of his social-scientific ap proach to understanding human affairs, "The combined assumptions of maximizing be havior, market equilibrium, and stable prefer ences, used relentlessly and unflinchingly, form the heart of the economic approach as I see it.' '4 What this view means in common parlance is that economic science assumes that we are all driven by our desires. These are ranked in order so that some of us prefer sweet things, fresh air, excitement, music, sports, in that order, others don't. It is such desires to have or do various things that motivate us and there is nothing from the economic point of view that needs to be said about whether these are good things or bad. And in the more extreme scien tistic versions of economics, there is nothing anyone can do about what will motivate people. Our motives are simply what explains what we do, period. And if we wish to under stand people's behavior, we need to pay atten tion to the fact that they are motivated by their desires.

Of course, there are various nuances in eco nomic theory which are not captured in the above general statements. But the main point is that we must do what we desire to do. And public choice theorists take this view into the special area of understanding the behavior of public officials by asserting, as a corollary of general economic analysis, that not only do we do this as shoppers, bankers, merchants, corpo rate executives, brokers, and the like, but also as "public" servants. Revising Common Sense There would be little interest in public choice analysis if it did not serve to modify our non technical understanding of how public servants behave. That is why Professor Buchanan was honored with the Nobel Prize. He points out something that we normally were not aware of -indeed, somethingthat we very likely would have missed without him. Ordinarily we take it that politicians, bureau crats, diplomats, and other "public" servants are devoted to the public interest, not to what they privately desire. At least, we take this as their professional responsibility, something 353 they ought to be doing, at least when they carry on in good faith. A public servant is not sup posed to be a profit maximizer, one who wants to satisfy himself in a competitive marketplace.

Put plainly, such as person is supposed to pursue the public interest. Yet public choice theorists deny this common assumption. What they say by way of economic analysis may be put in more familiar terms: They believe that people in public posi tions really try to advance their own lot before anyone else's. But is this the whole story? Public versus Private Service in the Welfare State Governments of welfare states get involved in all sorts of activities to pursue particular goals that various individuals and groups of cit izens seek to achieve. They further the lot of artists (via the various arts councils and endow ments), farmers (via subsidies and price sup port programs), various professions (via li censing requirements), auto workers or high tech industries (via trade policies), and so on. The welfare state expects a great deal of its government and even if officials conscien tiously tried to fulfill their duties to their con stituencies, they would go astray in their as signed tasks. It is not surprising, furthermore, that "public servants" who serve special in terests are not able to keep their minds on what the public interest happens to be.

Virtually no meaningful distinction betweeen the public and the private interest is possible when government promotes the same ends that are pursued in the private sector. Indeed, as soon as some people are dissatisfied with how the private sector achieves some private pur pose, governments are quickly approached to promote that same purpose. Too many ex amples come to mind to pick the most appro priate one,but a very apt recent case is day care centers. Although hundreds of private compa nies and other agencies fulfill the task of serving single or working parents with child care facilities, there is constant suppmt-- from various segments of the public for government to expand its involvement in this activity. From AIDS research to trade restrictions, the bulk of contemporary legislation comes to little more 354 THE FREEMAN. SEPTEMBER 1987 than government helping people with their pri vate or vested interests, misnaming it all as the pursuit of the public interest. There appears to be no public interest distinct from the varied private or special interests the government now serves.

Here is a case that is familiar to me. The fed eral government recently started the Jacob J. Javits National Graduate Fellowship Program (NGFP). People from various branches of the educational establishment were appointed to a board of overseers. Colleges and various groups devoted to undergraduate education be seech the board to conduct an effective pro gram, one that really helps deserving under graduates. At the same time, of course, other people are asking the government to work to ward other goals. In this example the public choice theorist would find a clear application of the assump tions of his view. Indeed, this is one way of describing what happens in cases such as the above that conforms to what public choice theory would predict: To wit, those on the overseeing board eargerly promote the efficient administration and ample funding of the pro gram in question. They select the appropriate panels and panel chiefs, they encourage the supporting staff, in this case from the Depart ment of Education, and they report back to Congress with requests of further and more abundant support for the program.

Vested versus Public Interest: A Meaningful Contrast But there is another way to describe what is going on here, a way that may be compatible with public choice theory yet does not cast the situation in the same conceptual light. And it may be important to try to do this because the public choice theory idea is rather pessimistic -if we really are all just trying to gain our own advantage, even when we swear that that is not what we will be doing in our role as poli ticians or bureaucrats, what's the use of even pointing this out? Those assigned to fix the sit uation, even at the institutional level (as Bu chanan suggests), would be simply carrying on in the same hopeless way as have all the other "public" servants. In a case such as the NGFP, the appointed overseers and administrators are asked to do a good job. And they are asked to report to Con gress about how well they are managing to do what members of Congress have decided on doing. And in most of these cases these people see that the money they have to administer is not enough to do the job as well as they can conceive of doing it. After all, if the program is to be carried out, it should be done right, shouldn't it?

As described above, this does not seem to be a case of politicians and bureaucrats simply wishing to fulfill their desires, nor of being driven by private interest. Not quite, although that is clearly part of it, especially when we focus on the staff hired to administer the pro grams in question, that is, "those persons," as Buchanan describes them, "who actually supply the goods and services that are provided via governmental auspices." Modifying Public Choice Theory Some friendly critics now make a point against public choice theory that seems to take into account the above understanding of what goes on in public administration. They seem to be aware that referring merely to the private or vested interest of those involved in carrying out the project fails to give full justice to the situa tion. They contend that in order for public choice theory to be an adequate explanation of how politicians and bureaucrats behave one must also consider the belief system that moti vates them-e.g., whether they are conserva tives, liberals, libertarians, socialists, what nots, and whether they have a bona fide com mitment to the programs involved or are merely advancing their private roles in the administra tion of such a program. They may even have a bona fide public service orientation, albeit somewhat unorthodox in what this means.

Professors Joseph P. Kalt and Mark Zupan, of Harvard's Kennedy School of Government and the University of Southern California, respectively, have argued that an "ideology" variable must be added to the public choice or "economic man" model so as to explain what members of the U.S. Congress and other bureaucrats do as they approach their various projects. In particular, they studied what the United States Senate did in the case of coal strip mining. Their statistical analysis shows that the "ideology" variable explains the voting patterns of the Senate on the Surface Mining Control and Reclamation Act (passed in 1977) better than does the public choice model. In short, in addition to considering the desires of the legislators to be reelected, the bureau crats to continue on and expand their jobs, etc., we need also consider the broader· political ideals of public agents. Some people, of course, will suggest· that adding the ideological variable does no damage to the economic man model. They will say that the urge to follow an ideology is no less a case of utility maximization than the urge to seek a vacation in the Bahamas or to increase one's income. But this simply makes shambles of the explanatory value of the economic man model.

Any factor or model that explains anything whatever-e.g., self-defeating as well as self serving conduct-simply explains nothing much! If economic man explains the bank robber as well as the banker, what can we learn from the explanation? In no science would this kind of approach be admitted. In order to avoid this vacuousness, the ideo logical variable has to be seen as adding a di mension - namely, what kind of conduct human beings take to be proper, what they see as binding on them quite apart from what they may prefer. This is how we can make sense of self-control, restraint, integrity, etc., not by lumping them all together and thereby wiping the human world clean of meaningful distinc tions. Indeed, Professor Buchanan himself has fo cused his attention on some of the broader phil osophical issues concerning public choice, finding the pure economic explanation of human behavior insufficient. The following passage from Buchanan will shed light on just how his thinking differs from the pure eco nomic man approach to understanding political behavior: . . . once the body politic begins to get overly concerned about the distribution of the pie under existing property-rights assignPUBLIC CHOICE THEORY 355 ments and legal rules, once we begin to think either about the personal gains from law breaking, privately or publicly, or about the disparities between existing imputations and those estimated to be forthcoming under some idealized anarchy, we are necessarily precluding and forestalling the achievement of potential structural changes that might in crease the size of the pie for all. Too much concern for [distributive] ,'justice" acts to insure that "growth" will not take place, and for reasons much more basic than the fa miliar economic incentives arguments. 5 In other words, focusing on the behavior of public servants within the current political and legal framework is not sufficient for under standing what alternatives face us in under standing and conducting public affairs. It can serve to block basic reform which is itself not impossible despite the motivations of public servants.

Ideas Can Have Consequences Basic reform may emerge as part of the ide ology that public servants themselves can in fuse into. their conduct in the public realm. If public servants were to become convinced that the promotion of some popular project is in deed not a proper government activity in the first place, then despite what they might do in circumstances which are not governed by this ,'ideological" consideration, they could come to behave very differently from what public choice theory predicts. In particular, suppose that a politician or bu reaucrat came to understand that as the govern ment is conceived under the welfare state, its operations must produce the famous tragedy of the commons-the overuse of the public realm (which in this case is public funds). This is a genuine tragedy in that something is morally amiss, yet given some of the structural features of government, it is not possible to remedy matters. Indeed, the problem of balancing the budget versus promoting worthwhile goals is just the sort that characterizes this tragedy everyone conscientiously aims to serve worth while goals, yet in the process a general shortage of the means to support such goals is created throughout the community.

356 THE FREEMAN. SEPTEMBER 1987 Once this is understood by public servants, it could turn out that they will discipline them selves to focus on the appropriate reforms. There are in our time ample cases of such re alignment of public behavior. Despite the fact, for example, that the Javits Program serves a valuable purpose that no one can fault, there are those involved in it who regard it as not the proper function of government to serve this purpose. This idea may be unusual these days and indeed such people are sharply resisted by many of their colleagues and those who come to "testify" before board meetings of the ad ministrators of the program-Le., supporters and lobbyists. Pleas about how similar projects, aimed at helping the sciences, are receiving so much more funding, so why not carry forth with this little bit for the humanities are often met with: "This is where I can do public ser vice and if I had the chance to do it elsewhere, I would. "

The realignment may, of course, come from a different understanding of public affairs, so the particular' 'ideology" that may lead to the reform must be carefully scrutinized, apart from the analysis of public conduct itself. But clearly the "ideology" of the public servant, not simply his or her vested interests, has a bearing on the development of public affairs. The reason this is obscured and why public choice theory is only now adjusting itself to the insight is. that the welfare state is structurally incapable of facilitating the serving of a distinct public interest when it implies by its scope that no distinction between public and private con cerns exists. This (socialist) notion can cause much confusion. Conclusion There is reason to think that while economic analysis is crucial for understanding virtually any area of human behavior, it is not sufficient for such an understanding .. There are, for ex ample, politicians who buck trends, who see that the fulfillment of their responsibilities lies with remedying, as best as possible, the conse quences of the special interest hustling that dominates the politics of the welfare state.

James Buchanan Some of these support-incidentally, with the advice of Professor Buchanan-the Balanced Budget Amendment movement. Others support appointments to various government bodies knowing that those whom they will appoint are not going to ask for more support for these pro grams. They will, instead, urge greater and greater restraint so as to solve the broader problem of creeping statism, holding that the special problem the program had been estab lished to solve should be handled by people outside the scope of politics. Professor Buchanan taught us that when gov ernment extends beyond its proper scope, it is very hard to limit its expansion. Yet we can still rely on the convictions of a few brave public servants who will try to resist the ad vances of statism and on the James Buchanans of the world to tell us that government must be limited to genuine public service-the mainte nance and preservation of justice as spelled out in the Declaration of Independence. D 1. James Buchanan, "Why Governments 'Got Out of Hand,' "

New York Times, October 26, 1986. 2. Ibid. 3. Milton Friedman, "The Line We Dare Not Cross," En counter, November 1976. 4. Gary S. Becker, The Economic Approach to Human Behavior (University of Chicago Press, 1976), p. 5. 5. James Buchanan, "Boundaries on Social Contract," Reason Papers, No.2, 1975, p. 27 (my emphasis in last sentence).