So letís look at James Buchanan, Gordon Tullock, and the public choice school. James Buchanan,
a Nobel Prize winner. Buchanan and Tullock wrote a lot of works together, probably the
most famous one is The Limits of Liberty. Their approach to the question, how do we
decide what the role of government, is they look for social contract. They say, supposing
youíve got rational individuals together and they had to decide what they would do,
how would they set up a form of government, what would they universally agree? The American
Constitution is an example of something like a social contract. They start with the questions
what would happen if we had no state at all, there was no government? They believe it would
be the Hobbesian state of nature after the ideas of the English philosopher Thomas Hobbes.
Hobbes said that life without a government is ìnasty, brutish, and short,î and not
as one student wrote, ìnasty, British, and short.î Nasty, brutish, and short. It wouldnít
be very pleasant to live in such a society. So if we donít have a government, there are
three things we can do: we can produce things, we can steal other peopleís things, or we
can spend time protecting our own things. Suppose if we got together, it would be in
the self-interest of everyone to create a body that would protect the things that we
produce. Because we didnít have to worry about things being stolen from us, we didnít
have to worry about protecting our own property, we can spend a lot more energy producing things.
We would be wealthier; we could give some of that wealth to government, which would
then prevent stealing. We wouldnít need to spend so much resources into protecting ourselves;
everyone in that society would be better. So itís argued that rational individuals
thinking about what sort of government they would want would agree on creating a government
whose responsibility was to protect our life and property.
Why should government be limited? Well, they say that when we try and understand what goes
on in economics, we assume that people are motivated by their own self-interest. That
they are, to use economist language, utility maximizers. The public choice school people
say people behave exactly the same way in the political realm as they do in the economic
realm. Theyíre the same human beings. What their self-interest may be may not be the
same. In economics, we tend to look for income and wealth to identify peopleís self-interest.
Self-interest in the political realm may be somewhat different. So, for example, if youíre
a politician, your self-interest is getting elected, getting reelected, being in public
office. How do you do that? Well you do that by promising goodies to particular groups.
Vote for me; I will protect your Social Security. Vote for me; I will reduce your student loans.
Vote for me; I will support your farms. So itís in the vested self-interest of politicians
to promise goodies to particular groups within society.
Bureaucrats, which I think is an underresearched area in terms of explaining what happens to
government, itís in the interest of bureaucrats to have a bigger government. The more government
there is, the more income they probably have, the more power they have, the bigger their
offices there are. Itís better for bureaucrats to have a bigger government than a smaller
government. And for most interest groups, the way they look to government is, how can
we manipulate government to work to our benefit? They are, again to use an economic term, rent-seekers.
How do we get the rules written in such a way that prevents it more difficult, for example,
to a competitor to enter into the market and compete with us? So it makes it more difficult
to import goods from abroad. So the problem for the public choice school is that most
political actors have a vested interest in growing government well beyond what people
agree on in the social contract. So thatís why they think government needs to be limited,
to prevent it going well beyond what the proper role of government should be.
So what should be the role of government in that context? Itís often described as the
public goods state, that the state and the public choice has two responsibilities. The
protective state: it should protect individual rights, especially our property. And it should
be a productive state: it needs to provide the public goods, deal with the sorts of externalities
that weíve talked about before. It is not the responsibilityópublic choice arguesóto
have any form of welfare state; that goes well beyond the social contract. So a lot
of public choice is interested in the question how do we limit the role of government? For
example, should we amend the U.S. Constitution to ensure that there would be a balanced budget?
So why does government grow far beyond that which people would reasonably agree under
the social contract? For example, why does the federal government in the United States
do so many more things than the limited and enumerated powers that was established in
the U.S. Constitution? The public choice school explains this by the concept of concentrated
benefits and disbursed cost. That is, the benefits of a government program concentrate
in the hands of a relatively small number of people while the costs of those programs
are spread much among the larger group of people. Letís take agricultural policy for
example. Agricultural subsidies, agricultural tariffs that make it difficult to import food
from outside the United States.
Only about 3 percent of the population in the United States is engaged in agriculture.
And 97 percent, weíre not. But when it comes to deciding agricultural policy, these 3 percent,
they really, really care about it. It would determine who they vote for. It would determine
who they campaign for. It would determine who they will give money for.
They will throw cow manure over politicians who donít support these agriculture subsidies
and tariffs. How about the rest of us? The 97 percent of us? Well, we all lose by this.
We lose because we pay higher taxes to subsidize this. We lose because of the tariffs, that
means we pay more for the food we buy in the supermarkets. So you would think, in a democracy,
here is a policy, it is in the interest of 3 percent and against the interest of 97 percent.
Obviously you would think in a democracy a policy would fail, and every attempt to do
away with these agriculture supports have failed. How do we explain that? Well, those
who really care about it, they really care about it. Theyíre active on the issue.
The rest of us, the population who loses by it, for us, we donít even think about agricultural
policy. But even if we did think about it, for each one of us, itís only a couple of
dollars a week. Weíre not going to get politically active on that issue. So when it comes to
debating agricultural policy, itís the small 3 percent that determine what those policies
should be. According to public choice, this is true of most government laws and programs.
It is driven by the small number of people, concentrated beneficiaries of that policy,
and almost no influence from those who pay the costsóconsumers and tax payers. Thatís
public choice.