A European Public Choice perspective

Abstract

In the field of macroeconomics students were taught for the most part at the time to analyze as if a government behaved like a benevolent dictator, i.e. as if it maximized a social welfare function subject to various constraints. To reach these goals it was further assumed that a government was able and willing to stabilize the business cycle using its various fiscal and monetary instruments. For example, the resolution of the problem of inflation versus unemployment was regarded as a matter of informed choice by governments picking an optimal point along a stable Phillips curve by reference to an appropriate social welfare function. Furthermore, most economists strongly believed that, with the help of Keynesian policy, a government could easily stabilize the economy. Only from time to time a fine tuning of the instruments for steering the economy appeared to present practical problems concerning the attainment of specified rates of growth of the gross national product. Public finance, which was another important area of analysis, had as its main task the designing of fiscal instruments for the support of the aforementioned macropolicies. Another main goal of public finance was (and still is) to create an optimal taxation framework, in which distortion was minimized. The emergence of the European Public Choice Society, in the early 1970s, and the spread of public choice ideas through the German-speaking academies has transformed the curriculum now available to the economics students of the early 1990s. The journal Public Choice can play an important ongoing role