Models of Imperfect Public Choice

Abstract

We model public choice in a number of cases where a government, since it cannot design an optimal policy as a whole, resorts to a sequential, myopic approach; and which is not free of error. We use this framework to explore governmental budgeting and welfare economics. We develop various examples that clarify how the introduction of such subjective and imperfect characteristics affect predictions concerning public choice. We then provide a model which integrates bounds errors and systematic (astray) errors. We argue that bounds errors and astray errors are inextricably intertwined - some level of bounded rationality is required for astray errors to emerge. We further extend this model to explore information lobbying and other types of external pressure; and we show that choosing leaders with high ability to choose, or with Madison's wisdom to discern, is important, especially in the case of policy decisions concerning dangerous products (e.g. assault rifles) and environments (e.g. COVID-19).