Public Choice Approach Research Articles

Bureaucracy and Intergovernmental Grants: A Comment

Intergovernmental grants have been explained in public finance texts by reference to the conventional welfare economics arguments of equity and efficiency. However, a more recent assessment of decentralization questions the explanatory value of this approach. An alternative analysis, based on Niskanen's model of bureaucracy, will explain inter-departmental transfers within the public sector. This public choice approach emphasizes the importance of price elasticity of demand, rather than spatial non-rivalness of public goods, in determining the federal segmentation of public expenditure. Copyright 1994 by WWZ and Helbing & Lichtenhahn Verlag AG

The Impact of Constitutions on Economic Performance

Constitutions matter for economic performance to the extent that they promote stability, accountability, and credibility. This article considers the nature of political constitutions and their impact on economic efficiency and economic security under three aspects: the basic rights laid down in the constitution, the structure of government, and the stringency of amendment procedures. While emphasizing that constitutions can be useful by serving as precommitment devices, the analysis also emphasizes the dangers of rigidity and the need for flexibility.

Rationalising parliamentary systems

Public Choice analysis of democratic political institutions focuses on the issues that are most salient under US constitutional arrangements. Parliamentary systems offer different institutional arrangements and different challenges to the Public Choice approach. We outline a Public Choice account of parliamentary democracy which concentrates attention on the roles of electoral competition and disciplined political parties, while also offering a discussion of parliamentary procedure. The Public Choice approach is contrasted with the mainstream view of representative, responsible government in which disciplined political parties are often seen as a threat to parliamentary democracy.

Public pensions

"In this paper the public-choice approach to explaining the evolution of public pension schemes [in developed countries] is surveyed. Emphasis is laid on the relation between expectations on future political decisions and future demographic and economic developments, on the one hand, and current political and economic decisions, on the other hand."

Althoff′s Administration of the Academic System: An Economic Approach

Argues that the autonomy of the Althoff administration was based on the “personal regime” of Friedrich Althoff. The public choice approach of bureaucratic behaviour reveals the basis for this autonomy: professionalism and continuity. Manageable span of control and entrepreneurship safeguarded the internal efficiency of Althoff′s agency. The information network of Althoff allowed the German scientific community to play its role as defined by the economics of inquiry. The auditing procedures of the community, that allow for technical and allocative efficiency, exert such pressure on its members that it works both as a voluntary monitoring device and as an incentive structure. In order to reduce the huge monitoring costs of scientific production, adopting a bureaucratic structure for the large academic organization of the Althoff system is consistent with the arguments that transaction cost analysis provides. The principal‐agent problem that arises from the attenuation of control, characteristic of bureaucracy, was solved by the comparative information advantage and the autonomy of the Althoff administration. Property‐rights theory further suggests that the centralized autocratic managing style improved academic productivity. The efficient organization of the Althoff system (both the administration and the academic organization) constituted a major improvement for the development and recognition of German science and scholarship.

Financing Higher Education: A General Equilibrium Public Choice Approach*

A public choice approach is used to examine the level of a tax‐financed grant chosen by a cohort, allowing for a wide range of interdependencies, including the goverment's budget constraint The existence of an externality is necessary, but not sufficient, for support of a grant It is shown that a majority voting equilibrium exists. Comparative static analyses are carried out using a minimum of assumptions about the structure of the model An increase in government expenditure for non‐higher education purposes is associated with an increase in the preferred grant while an increase in private returns to education reduces the grant

The Political Economy of International Organizations: A Public Choice Approach

The Political Economy of International Organizations: A Public Choice Approach

Neoclassical and institutional approaches to development and the environment

Institutional economics is suggested as a more fruitful approach to environmental problems than the now dominant neoclassical paradigm. The historical background of institutionalism in the United States and Europe is given, as well as the main characteristics of this approach, i.e. holism, emphasis on institutional arrangements, pattern modelling, and emphasis on the political element of economics. Differences between neoclassical and institutional economics are elaborated with respect to the concept of economics (reductionist versus holistic), the approach to decision making (aggregated versus highly disaggregated), and the view of social and institutional change (public choice versus actor-network approach).

The Political economy of international organizations: a public choice approach

Part 1 The public choice approach to international economic issues and organizations - theory: the public choice approach to international political economy, Bruno Frey a public choice approach to international organization, Roland Vaubel canons of public choice analysis of international agreements, Rodney Smith international organizations from the constitutional point of view, B. Frey and Beat Gygi approaches to the study of international organizations - major paradigms in economics and political science, Patricia Dillon et al international institutions and the market for information, Michele Fratianni and John Pattison. Part 2 Applications: the GATT as an international discipline over trade restrictions - a public choice approach, Michael J. Finger a public choice perspective of the International Energy Programme, R. Smith United States policy and the Law of the Sea Conference, 1969-82 - a case study of multilateral negotiations, Ross Eckert the political economy of the International Monetary Fund - a public choice analysis, R. Vaubel determinants of foreign aid under alternative institutional arrangements, Friedrich Schneider and Hannelore Weck-Hannemann unanimous decisions in a redistributive context - the Council of Ministers of the European Communities, William S. Peirce the common agricultural policy of the European Community - a public choice interpretation, Tim Josling and H.Wayne Moyer a public choice view of the Delors Report, R. Vaubel.

Tax Reform, Economic Emancipation of Women, and Public Policy Formation in The Netherlands 1980‐1992: A Public Choice Approach

Reconsiders tax reform and economic emancipation of women with respect to public policy formation in The Netherlands. In particular, investigates the attempts of organised interest groups of the Dutch women′s liberation movement during the 1980s to influence the public policy process on tax form. The theory of public choice is applied as a theoretical framework for this case study of The Netherlands. The analysis starts with an overview of the issues at stake in the tax reform debate in The Netherlands. Organised women′s interest groups have a specific viewpoint on these issues. These viewpoints are expressed in the public policy process by various lobby mechanisms and political arenas in the Dutch political‐economic system. The attempts to influence these mechanisms and arenas in favour of women′s interests appear to have been rather unsuccessful in the 1980s. The Dutch policy process can be characterised by the so‐called “barrier model”. Various barriers in the Dutch policy process offer an explanation for the relative failure of the organised women′s interest groups to influence the tax reform process in The Netherlands. This explanation may also be valid for similar cases in other West European countries, where the same issues of tax reform and women′s emancipation are at stake and where the public policy process has the same characteristics. Finally, formulates some policy recommendations to overcome the barriers in the public policy process on tax reform.

The demise of the public-interest model of the Federal Reserve System: A review essay

The Political Economy of American Monetary Policy (Cambridge University Press, Cambridge, 19901, edited by Thomas Mayer, is a collection of one previously published and eighteen unpublished works that seeks to review, consolidate, and extend the growing literature on a positive theory of the Federal Reserve System. A major theme of the collection is that the traditional public interest view of the Fed has little to offer as a guide to understanding the behavior of Federal Reserve officials. At the same time, the collection offers a word of caution to practitioners of the positive theory who use a ‘naive’ public-choice approach. According to this subplot, a narrow self-interest approach to the Fed is not much better than the traditional alternative. A general theory of the Federal Reserve System requires the right blend of the best elements from the staid public-interest view and the renegade public-choice view. As a review of the current state of the literature this collection of works has much to offer. The book is at its best in posing questions that force not only the public-interest proponent but also the naive public-choice theorist to rethink their positions. The book is less useful, I think, as a road map to future research. In contrast to this book’s premise, the problem I see with the naive public-choice approach is not that it has been too radical, but that it has not been radical enough. The renegade assumption that Fed decisionmakers are self-interested utility maximizers is misleading only when used within the context of a misspecified model of the macroeconomy. I argue in this review essay that the next discrete step in the evolution of a positive theory of central banking is to supplement the self-interest assumption with

The economics of educational choice

This paper places the recent debate over choice in education into an economic framework that considers both market choice and public choice mechanisms with respect to their efficiencies in producing social and private benefits. On the basis of the evidence, a market approach to education appears to be superior in terms of private benefits, while the public choice approach appears to be superior in terms of social benefits. It is difficult to find an advantage for either system in terms of overall efficiency. The market system appears to be more efficient in terms of meeting private tastes for education, and there is evidence of a slight superiority in terms of student achievement. However, the overall costs for sustaining the information, regulation, and other parts of the market system while providing, at least, minimum social protections look high to prohibitive relative to a public choice approach.

A PUBLIC ADMINISTRATION PERSPECTIVE ON THE STUDY OF HIGHER EDUCATION

This article explores the relationship between higher education research and the study of public administration, the concpetual perspectives of which are useful for understanding the links between government policy‐making and higher education. A short introduction to the study of public administration is followed by the presentation of six newly evolved concepts of public administration which are labeled as follows: comprehensive rationality, the community action approach, the public choice approach, political systems theory, policy sciences, and contingency and inter‐organizational approaches. All of these have contributed to the eclecticism and the conceptual pluralism of the discipline of public administration as a whole. Having been adapted to the theoretical underpinnings of the administration of higher education, these six concepts have stimulated the development of four theoretical models for the analysis of decision‐making processes in higher education: the analytical or rational actor model, the garbage can or organized anarchy model, the collegiality model, and the political model. Specific problems in higher education administration have been addressed, as they have arisen, with reference to one or more of the six concepts and the four decision‐making models. For the future, the public administration approach to higher education will be most likely to draw upon the study of co‐ordination mechanisms in collective decision‐making processes and the comparative analysis of the external functions and performances of government.

A stocktaking of perversities

Why, despite its recognized perverse effects, do societies opt for an expanding welfare state? Public choice theory accounts for this in terms of the prevailing choice rule, “majoritarian”; democracy. This contractarian perspective holds that other, more benign choice rules could be adopted. The reviewer disputes this view on the ground that if the public choice approach is generalized, the choice rule must be seen to be the product of the same influences as the choices within the rule. “Majoritarian”; democracy maximizes the scope for redistributive legislation, hence also the expected gains front politics; it will be “chosen”; in preference to more benign rules.

Historical considerations, property rights, and budgets: A comment on the use of inputs by the Federal Reserve

When considered in an alternative historical setting with a property right perspective, the extended public choice model found in AMCD offers strong confirmation for the S-T view of monetary authority behavior. In this light, a next step is to find an econometric specification that accounts for changing bureaucratic incentives within changing monetary regimes or constitutions. A rational expectations model of a bureaucratic Fed is beyond the scope of this comment. However, if a public choice approach to Fed behavior is to be useful, it must differentiate between variables, or the effects of variables, in a bureaucratic model relative to a model based on public service. For example, it is unclear how a significant debt variable in a static model of the monetary base supports or confirms a public choice view of the Fed. It is also possible that a public service oriented monetary authority could be motivated by national debt considerations. At least for now, Board employment appears to be a better public choice candidate. It is controllable by the central bankers and would be unimportant if the Fed was only interested in the public welfare.

Public choice and the improvement of policy instruments for environmental management

Currently used policy instruments have failed to halt environmental deterioration of sensitive ecological systems, such as estuaries. On the basis of efficiency criteria, economists have made comprehensive recommendations for improving policy instruments. The general rejection of efficiency-based policy instruments indicates the need for a broader set of criteria for improving environmental management. This paper suggests a public choice approach to environmental management, under which the design of more effective policy instruments would be based not only upon economic efficiency but also upon scientific validity (including ecological sustainability), distributional equity, and interest group acceptability. Examples are given for the Chesapeake Bay.

Public Choice and Economic Aid

A major development in the analysis of government economic policies in the developed countries has been the rise of the public choice school. The essence of this approach is the application of the same basic assumptions that are used in the study of consumers and producers to political decision makers. In the public choice approach, decision makers in the public sector are assumed to be trying to maximize their personal benefits similarly to consumers and firms. Imputing utility maximizing behavior to public sector decision makers does not automatically lead to the conclusion that they will not act in the general interest; rather, whether they do or not becomes a question of the system of rewards and constraints they face. As Adam Smith demonstrated for firms, self-interested parties will act in the general interest if properly constrained and rewarded. However, the public choice approach does imply that public sector decision makers will act in the general interest only if the constraints and incentives on their behavior make serving the general interest also in their interest. It would appear that development economics, which is highly concerned with government policies, could benefit from the application of the public choice perspective. This article attempts to do this with respect to the effectiveness of economic aid in promoting economic growth. There is an extensive literature that discusses theoretically the effectiveness of aid and a more modest literature that attempts to estimate empirically the impact of aid on growth. The literature was recently surveyed by R. Riddell.' He surveys the views of the major proponents and critics of aid. Marxist critics of aid reject the market and the notion of a neutral state pursuing the general interest. There seem to be no studies of aid that adopt the public choice approach, which both accepts the efficiencies of the market as an instrument for economic growth and also assumes government officials are utility

The Epistemological Foundations of Public Choice Theory

The new political economy ‐ public choice ‐ has contributed considerably to a long‐awaited inter‐marriage between political science and economics. The economic approach to the interpretation of the public sector ‐ politics as well as administration ‐ has resulted in a number of interestingly relevant models. At the same time modelling political behaviour on the basis of the economic man perspective gives rise to puzzling difficulties creating much controversy. The article attempts to establish in principle the ethically neutral and scientifically objective nature of the public choice approach. It elaborates on the crucial concept of self‐interest in the public choice behaviour assumptions in order to show that the criticism from the public interest adherents may be countered.

Medical Indemnity Insurance in the UK: a Public Choice Approach

Medical defence societies in the UK are non-profit bodies which provide medical practitioners with indemnity against the costs of actions for negligence. Subscriptions have risen very sharply in each of the past two years. While low compared with the costs of professional indemnity insurance for doctors in many other countries, the rapid increase has precipitated considerable concern within medical circles. An indication of the seriousness of the concern is that the medical defence societies themselves are contemplating making radical changes in their schemes. One medical defence society, the Medical Defence Union, has recently circulated a questionnaire to members inviting their views on a proposal to abandon the present flat rate indemnity premium in favour of a graduated scheme based on the practitioner's specialty. Another scheme which is currently attracting considerable attention in both the UK and the US would involve a move away from a negligence standard to a nofault approach to medical injury.

Chicago political economy: A public choice perspective

That a Chicago School of Economics exists has long been recognized by economists of all persuasions. That a distinct school of "political economy" has also prevailed should occasion little if any surprise, at least amongst economists. We have some confirmation of this contention as far back as the mid-seventies, when Warren J. Samuels edited a volume entitled The Chicago School of Political Economy (1976) and, more recently, with the publication of Chicago Studies in Political Economy (1989a), a collection of papers previously published by leading members of the Chicago persuasion and, edited, appropriately, by George J. Stigler. A recent autobiographical volume by Stigler (1988b) lends further credence to the notion that the Chicago perspective on economics includes a self-conscious orientation toward politics and its study. There is something there; the question is what? First a caveat or two: I do not propose to provide a detailed review of the Stigler collection, nor will I examine, in any detail, the consistency of views among Chicagoans over the years. Instead, I propose to distill the "essence" of Chicagoan political economy during the past thirty years and relate it, as best I can, with Public Choice and Social Choice approaches to politics. The emphasis is upon the "big" issues of substance and methodological concerns. Differentiating a coherent Chicago political economy is a good deal more difficult than discerning and describing the more basic paradigm of Chicago Economics. Lacking basic texts such as The Calculus of Consent and the Arrow and Black's monographs and their central roles in defining public choice and social choice theory, respectively, Chicagoans offer a more diffused view. We are confronted with a vast literature of case studies of regulation and empirical tests of the failures of policies intermingled with occasional theoretical forays into selected aspects of politics such as the nature of political competition in democracies by Stigler (1972), Demsetz (1982) and Becker (1958, 1983), or the more empirical exercises of Stigler (1973) and important articles by Peltzman (1984) on the growth of government and congressional elections and consumer protection (1973, 1975). If some Virginians have been reluctant to test their theories, most Chicagoans have been hyper-cautious about constructing