Public Choice Theory Research Articles

Australian Federalism in James Buchanan's Early Work on Fiscal Equity

James Buchanan, one of the founders of public choice theory and constitutional economics, began his career studying fiscal federalism in the doctoral program at the University of Chicago. This paper explores Buchanan’s early interest in Australian experiences with federation and intergovernmental grants as a guide to fiscal federalism in the United States. In his dissertation, Buchanan cited Australia in his arguments against the consolidation of the American states into larger regional governments. He also drew lessons from the early years of the Commonwealth Grant Commission for the intergovernmental grants that he proposed for the United States.

Tax aggressiveness and sustainable welfare: the roles of corruption and tax allocation inefficiency

PurposeThis paper aims to investigate the roles of corruption and tax allocation inefficiency in moderating the effect of tax aggressiveness on sustainable welfare.Design/methodology/approachThis research uses a fixed-effect multiple regression analysis for 55,438 firm-year observations covering 22 countries from 2007 to 2017.FindingsFor less (more) tax-aggressive observations, corruption and tax allocation inefficiency strengthen the negative (positive) effect of tax aggressiveness on sustainable welfare. The results are in line with public choice and functionalism theories that suggest that private investments can increase welfare when governments are dysfunctional.Practical implicationsThis paper shows that the effect of tax aggressiveness on sustainable welfare depends on tax aggressiveness, corruption and tax allocation inefficiency.Social implicationsThis paper implies that governments should reduce their corruption levels and increase tax allocation efficiency because private investments are ineffective in the long run.Originality/valueBecause of increasing awareness of sustainability issue, sustainable welfare is considered more relevant than traditional welfare. Hence, empirical studies on the effect of tax aggressiveness on sustainable welfare are crucial. This paper adds the literature by combining public choice and functionalism theories to investigate the moderating roles of corruption and tax allocation inefficiency in this issue.

Australian Federalism in James Buchanan’s Early Work on Fiscal Equity

James Buchanan, one of the founders of public choice theory and constitutional economics, began his career studying fiscal federalism in the doctoral program at the University of Chicago. This paper explores Buchanan’s early interest in Australian experiences with federation and intergovernmental grants as a guide to fiscal federalism in the United States. In his dissertation, Buchanan cited Australia in his arguments against the consolidation of the American states into larger regional governments. He also drew lessons from the early years of the Commonwealth Grants Commission for the intergovernmental grants that he proposed for the United States.

Discussion on How Government Can Provide Public Goods Better

Public goods are non-exclusive and non-competitive commodities. Because of this characteristic, the government has become the main body of providing public goods in most cases. However, at present, the government has problems such as low efficiency and waste of resources in the process of providing public goods. Based on the perspective of public choice theory, this article analyzes why government failures occur in the process of providing public goods, and proposes path reconstruction suggestions.

Budget transparency and governance quality: a cross-country analysis

ABSTRACT The aim of this study is to assess whether there is a relationship between budget transparency and governance quality. The so-called openness movement and the global financial crises, which have put significant pressure on governments to cut expenditures and ensure balanced budgets, have motivated this research. The public choice and principal-agent theories have been used to investigate this relationship, implementing econometric models based on a sample of 96 countries over the period 2008–2019. The results show that higher levels of budget transparency positively affect the quality of governance, and vice versa, documenting simultaneous causality between both issues.

Some Benefits and Costs of Cost-Benefit Analysis

The American administrative state has become a cost-benefit state, at least in the sense that prevailing executive orders require agencies to proceed only if the benefits justify the costs. Some people celebrate this development; others abhor it. For defenders of the cost-benefit state, the antonym of their ideal is, alternately, regulation based on dogmas, intuitions, pure expressivism, political preferences, or interest-group power. Seen most sympathetically, the focus on costs and benefits is a neo-Benthamite effort to attend to the real-world consequences of regulations, and it casts a pragmatic, skeptical light on modern objections to the administrative state, invoking public-choice theory and the supposed self-serving decisions of unelected bureaucrats. The focus on costs and benefits is also a valuable effort to go beyond coarse arguments, from both the right and the left, that tend to ask this unhelpful question: “Which side are you on?” In the future, however, there will be much better ways, which we might consider neo-Millian, to identify those consequences: (1) by relying less on unreliable ex ante projections and more on actual evaluations; (2) by focusing directly on welfare and not relying on imperfect proxies; and (3) by attending closely to distributional considerations – on who is helped and who is hurt.

Electoral Democracy – 2020 in the Light of Public Choice Theory: Lessons in Institutional Design for Russia

2020 was marked by major landmark events. First of all, there is the political crisis in the United States related to the presidential elections. Secondly, there is the UK’s secession from the EU. Finally, there is the unexpected return to power of left-wing forces in some Latin American countries. This forces us to return to the foundations and conclusions of the theory of public choice – a tool that allowed us to analyze and predict the political and economic behavior of modern electoral democracies.The paper states that the erosion of the middle class leads to the dominance of minorities and their priorities. The position of the median voter is losing its former significance. As a result, the political duopoly becomes unstable, in contrast to the model of political pluralism (oligopoly). The desire of middle-income countries with a high degree of social differentiation to adopt a bipartisan system in the hope that this will ensure political stability must be mistaken. In contrary to what was said, the construct of American federalism, which many scholars consider archaic, effectively defends horizontal democracy and discourages the imposition of values by aggressive minority coalitions. The use of one or another modification of the «electoral colleges» in the presidential and parliamentary elections would strengthen the federal principles of horizontal democracy in Russia. The article presents an analysis of two main approaches to the analysis of corruption – as «opportunistic behavior of an agent in the principal-agent model», and as «status rent». Criticism of the latter approach reveals the view of Russia as an «institutional mutant». Authors who interpret corruption as «status rent» tend to ignore the rent-seeking behavior of actors in rich countries. The article substantiates the idea of transferring to Russia the American legislation regulating the behavior of lobbyists, the contribution of funds to the electoral funds of parties and politicians. Such a transplant will dramatically reduce the volume of domestic corruption, while at the same time making the «electoral machines» much more transparent.

SECONDARY SCHOOL PRINCIPALS’ LEVEL OF PREPAREDNESS AND ADOPTION OF NATIONAL EDUCATION MANAGEMENT INFORMATION SYSTEM IN KEIYO NORTH SUB-COUNTY, KENYA

Purpose: The study investigated the level of preparedness of secondary school Principals to adopt the National Education Management Information System (NEMIS) in Keiyo North Sub-County, Elgeiyo-Marakwet County in Kenya.
 Methodology: It was an explanatory research based on the Unified Theory of Acceptance and Use of Technology (UTAUT) and the public choice theory. A target population of 30 secondary schools Principals and 30 HODs in charge of ICT in Keiyo North Sub-County schools consisting of Boarding and Day secondary schools was used. This formed a population of 60. The schools were classified as National, Extra-County, County and Sub-County secondary schools. This ensured that all the sub-groups were proportionately represented. Quantitative data was collected using close-ended questionnaires and analyzed using descriptive and inferential statistics. A model was developed through regression analysis.
 Findings: Results indicate that the sub-variable of Principal’s level of preparedness (acceptance, training and skills, and ICT infrastructure) had a statistically significant positive effect on adoption of NEMIS in secondary schools. The finding of this study is useful to the Ministry of Education (MOE) in planning purposes. The constructs of Principal’s level of preparedness (acceptance, training and skills and ICT infrastructure) positively and significantly correlated with adoption of NEMIS and as these constructs are enhanced, adoption of NEMIS receives a positive boost.
 Unique Contribution to Theory Practice and Policy: The study points out that use of technology is a function of acceptance by the user and is in line with the postulates of UTAUT theory that drove this study. It is therefore recommended that managers in the education circles should pay greater attention to the postulates of UTAUT theory for effective implantation of ICT driven programs like NEMIS. The study further points out that for any government policy to succeed, those in authority should allocate resources for public interest to support such policy rather than follow their own self-interest as pointed out by the public choice theory.

A burden on future generations? How we learned to hate deficits and blame the baby boomers

The idea that public borrowing places an intolerable burden on posterity is as old as the institution of public debt itself. But the debate over deficit-spending assumed an entirely new scope and import with the rise of the fiscal state in the early twentieth century, as governments assumed greater responsibilities with regard to public welfare and found themselves subject to a new kind of conflict concerning the uses and distribution of public income. In this context, the intergenerational argument against social welfare spending became an important tool in the fight against class redistribution. With a focus on American debates, this article provides a historical sociology of the idea that deficits constitute a burden on future generations, identifying the key historical turning points when this idea acquired new political resonance. In particular, the article investigates how we learned to blame baby boomers for the alleged ills of government deficit-spending and how this now ubiquitous motif of public discourse was reintroduced by the Virginia school public choice theorist James M. Buchanan and later refined by the chief proponent of generational accounting, Laurence Kotlikoff.

A Macroeconomic View of Public Choice: New Political Macroeconomics as a Separate Tradition of Public Choice

Public choice theory is listed under microeconomics in the JEL code. It is considered largely an issue of microeconomics, as well as the microeconomists who straddle the boundary between economics and political science. Starting from the 1970s, however, there has been an increasing number of macroeconomists researching on topics related to public choice-inspired macroeconomic models, and a few public choice scholars have discussed macroeconomic issues under the public choice framework. The difference is that the first group has attempted to separate themselves from the very label of “public choice” itself, adopting all manners of alternative labels (such as political macroeconomics, political economics, new political economy, among others). To these I use the term “New Political Macroeconomics” as an umbrella label for this tradition. This has created conflicts with other public choice traditions, especially the Virginia tradition. They claim that this attempt to “separate” from public choice is harmful to the entire field of economic analysis of politics. This article is an attempt to understand the formation of new political macroeconomics, how it became its own tradition of public choice and why it would want to separate from the label of “public choice theory.” The reasons, as this article shall detail, are primarily the political macroeconomists’ adoption of the macroeconomics paradigm, and the attempt to distance themselves from the ideological association with libertarianism present in some public choice traditions. This discussion indicates how differences in language and values might impact how economists see their subject of study: even if public choice theorists and political macroeconomists study similar topics, they have different understandings of them.

Anthony Downs et la théorie de l'équilibre de la démocratie

Anthony Downs was one of the founders of public choice theory, and An Economic Theory of Democracy (1957) remains one of the most cited texts within the field. Yet there is little historical scholarship on the development of Downs’s economic theory of democracy. Seeking to close this gap this article examines core characteristics and intellectual sources of his political ideas. The article argues that the overarching feature of Downs’s oeuvre was a theory of democratic politics as an equilibrium between the demand and supply of government goods and services. It shows that Downs explicitly intended his model as an answer to the public-expenditure problem of balancing government supply of publicly provided goods with citizens’ individual demands for these goods. The article thus provides a contribution to the literature on American public finance, demonstrating how Downs drew inspiration from Joseph Schumpeter, Harold Hotelling, and Walter Lippmann to address the problems associated with discerning the demand for public goods and services.

A Just Energy Transition and Functional Federalism: The Case of South Africa

Abstract The traditional concern of federalism literature has been both descriptive and prescriptive. How do federalist systems allocate powers among central, regional, and even local governments? How can these powers be divided in a manner that allows for unity and diversity in policymaking and law? These questions are given greater pertinence by the seriousness of climate change and the need for a just transition to lower-carbon economies. Classical federalism, public choice theory, and dynamic energy federalism all have something to offer in the field of clean energy federalism. This article situates the ‘functional federalism’ that arises from South Africa's multi-sphere system of government within these debates. The article explains the system of functional federalism in South Africa and details the tripartite structure (physical, market, and regulatory) of the South African electricity sector. By delineating the complex interactions that have unfolded between governmental and non-governmental actors in the electricity sector in recent times, the article demonstrates that the South African case will be of continuing interest to scholars of federalism.

Authoritarian Leadership, Conflicts and Economic Performance in Sub-Saharan Africa

RESEARCH OBJECTIVE: The goal of the paper is to analyze how the authoritarian leadership could impact economic performance in the region of Sub-Saharan Africa in the post-colonial period until currently. THE RESEARCH PROBLEM AND METHODS: Authoritarian leadership and power abuse led to a number of armed conflicts in the region since its formal independence. This may be accounted as one of the reasons, for which the region lags in terms of economic development compared to developed countries. The research comprises of qualitative and quantitative methods, including comparative analysis, basic statistics, and correlations. THE PROCESS OF ARGUMENTATION: First, the literature review was conducted with the application of comparative and system analysis. Next, based on the available World Value Survey and Global Governance Indicators data, empirical analysis of the power indicators and economic growth relations in sub-Saharan Africa was performed. The results are discussed in the context of the ideas anchored in the theory of public choice and new institutional economics. RESEARCH RESULTS: The results indicate the existence of a power paradox, which burdens development of the region, people rely on strong leaders despite the fact that strong leadership leads to power abuse and economic crises. The attitudes to politics, democracy and trust are particular for the region and may be related with this problem. CONCLUSIONS, INNOVATIONS, AND RECOMMENDATIONS: The lack of control mechanisms over the exercise of public authority in politically unstable Sub-Saharan African countries contributes to the consolidation of unfavorable attitudes and the abuse of power by privileged position by political leaders. The focus should be placed on reinforcement of institutional capacities and accountability for power abuse.

Macroeconomic performance of the Czech Republic during the global pandemic crisis

Research background: The global SARS-CoV-2 pandemic is unprecedented for human society. Despite the continuing uncertainty about the future, it is certain that the global consequences of the pandemic will have many dimensions. Among others, the economic impacts are extremely significant. However, the sudden slowdown in economic activity, the declared quarantines, and the state of emergency have many specific impacts in individual countries. The Czech economy (as well as other countries in the world) was exposed to an unexpected exogenous shock. The data confirm that, in 2020, the decline in the performance of the Czech economy was the deepest in its history. Purpose of the article: The primary goal of this article is to analyze the macroeconomic performance of the Czech Republic during a pandemic crisis. However, we also research the impact of the pandemic on individual sectors of the national economy in the context of government measures. Methods: The analytical part of the article is processed on the basis of publicly available statistical data, economic analyses, and economic forecasts of renowned institutions. The derivation and argumentation of the conclusions are based on an empiric-inductive approach, methods of synthesis, and comparison. Findings and value added: The article maps the direct and mediated macroeconomic effects of the pandemic crisis in the reality of the Czech Republic. At the theoretical level, the aim of the article is to bring new knowledge to current economic theory, especially in the field of macroeconomics and sectoral analysis as well as the theory of public choice.

What Is Formal Philosophy?

The paper focuses on the review of current literature on formal philosophy. Special attention is paid to the review of the book «Introduction to Formal Philosophy» [Hansson, Hendricks, 2018]. The book is a consistent introduction to the problems of formal philosophy, a research tradition that relies on the precise mathematical tools in order to study traditional philosophical problems. The methods of formal philosophy are successfully applied not only to the problems of ontology, epistemology and philosophy of language but also relevant for the problems of ethics, axiology and social philosophy. The book demonstrates that it is not correct to identify formal philosophy with another area of study – philosophical logic, since formal philosophy uses not only logical methods of analysis, but also uses the tools of game theory, decision theory, probability theory, Bayesian statistics, and other theories. Although the book has a propaedeutic character, it also contains some open problems. These problems include the aggregation of the opinions of the group under the condition of a conflicting base of premises in the theory of public choice, there are still open problems in the interpretation of Arrow’s impossibility theorem and others. Certainly, formalization in itself is not a general solution to the particular philosophical problem, but only a tool that allows to formulate a problem in a more rigorous and precise way, which sometimes allows to reveal some unexpected consequences, some implicit contradictions and new solutions. Despite the importance of the concept of coherence in ethics, decision theory, philosophy of law, Bayesian epistemology, philosophy of science, the existing formalizations of the concept of coherence are highly specialized for epistemology, researchers recognize the lack of the relevant explanatory models. Overall, the book is an excellent introduction in to the field of formal philosophy, which provides a general overview of different aspects of formal philosophy and the opportunity to study particular research topics by means of an extensive bibliography accompanying each of the chapters.

Democracy as an evolutionary process

In this chapter we argue that contemporary Democracies undergo intense political processes of competitive transformation, in such a way that they can be analyzed as evolving complex systems. We draw upon Schumpeterian evolutionary economics, to explore how local and global interactions between heterogeneous boundedly-rational citizens and platforms, innovative processes of competition to reach power and gradually transform society, and the co-evolution between the political and the economic realms, all lead to institutional transformations underlying political and economic change. The evolutionary approach to Democracy highlights new political paradoxes and dilemmas that must be explored, monitored and faced in a dynamic way. We claim that there exists a fruitful evolutionary approach to political economy that can add surprising findings to those provided by Public Choice theory and Neoclassical Welfare Economics.

The impact of interest groups on government size-regional evidence from Turkey

This study is aimed to investigate the regional pressure groups' effect on the government size in Turkey. According to the public choice theory, elections, political parties, interest and pressure groups, and bureaucracy significantly affect the public production process. Among these actors, pressure and interest groups directly affect variables such as economic growth and public expenditures. In this study, panel data analysis was used to observe the regional effect. The research data set covered 81 provinces of Turkey and the period between 2006 and 2018. According to the results, it was found that interest and pressure groups increase the public expenditures in the less developed regions in Turkey. These results are consistent with the empirical and theoretical studies. For this reason, the study has an important contribution to the literature. This study offers significant conclusions that public economic policies might be under the influence of interest and pressure groups. Even if stated that the results of this study might have many economic, demographic, social, and political reasons regarding Turkey, in the context of public choice theory, it could be seen as a significant indicator of not using public expenditure policies as efficient instruments. This situation shows that public resources are not used efficiently in Turkey and the government has a negative effect on the economy. To eradicate this negative effect, governments coming to power in the future ought to produce economic, political, and social policies in order to decrease the regional differences dramatically in Turkey.

Understanding the Rise of Regulation during the Progressive Era: What Role for Austrian Economics?

In this essay I selectively survey the economic history literature on the rise of regulation in America during the Progressive Era with the goal of identifying how this literature is informed by Austrian economic theory, and how Austrian theory might contribute to our understanding of the origins and growth of the regulatory state. I argue that much of the literature on the origins of Progressive Era regulation is consistent with the positive aspects of Austrian economics, largely because Austrian theory overlaps with public choice theory, the analytical toolkit used by most studies of the rise of regulation. However, the normative implications of Austrian theory regarding the efficiency consequences of regulation are not always supported by the literature on the Progressive Era. I also discuss two ways in which Austrian theory might add to our understanding of the rise of regulation during this period. The first concerns the dynamics of how regulation evolves. The second concerns the role of entrepreneurship within the bureaucracy in shaping the evolution and enforcement of regulation.

ПАЛЕСТИНСКОЕ МЕСТНОЕ САМОУПРАВЛЕНИЕ: ПРАВОВАЯ И ИНСТИТУЦИОНАЛЬНАЯ ОСНОВЫ

In the public administration field, the legislative, executive and judicial frameworks should be consistent. The institutional framework of the Palestinian local government, however, seems largely impacted by an incoherent legal framework. Against this backdrop, this study describes the current local government institutional framework. Secondly, this study investigates the current issues relating to the legal and institutional frameworks of the Palestinian local government. A qualitative research approach was adopted to collect data in order to achieve the objectives of the study. The present research utilizes a combination of primary and secondary data. Nine interviews were conducted to gather the primary data, while scholarly works and government documents were used for gathering secondary data. The results show that fully governmental institutions are the most active within the institutional framework while non-governmental institutions are less active. The results also show that the primary obstacle for an efficient legal framework is due to previous laws, overlapping powers and weak legal practices. Furthermore, the institutional framework suffers from deformed structure and weak integration. The discussion section revealed that the current local government system can be best described as a “Chaotic Hybrid System”. When comparing the empirical results with the theoretical concepts, it is indicated that the current local government structure reflects the Public Choice Theory perspective, which advocates for horizontal and vertical fragmentation. However, the Israeli occupation and international funds seem to contribute to complicating the fragmentation of the structure. The structure hence could be described as “Altered Fragmented Structure”.

Democracy Avoidance in Tax Lawmaking

The Tax Cuts and Jobs Act was the most significant tax law in more than three decades, but the strategy for getting it enacted included a variety of maneuvers to avoid public scrutiny. As a result, many taxpayers did not know how they would be affected until they filed their own tax returns more than a year later. This Article identifies this lack of transparency as part of a persistent pathology of avoiding and constraining democratic inputs and responsiveness in U.S. federal tax lawmaking. Indeed, some scholars and policy makers have sought to channel tax lawmaking away from democratically grounded decisions and towards prescribed outcomes, justifying these moves with strands of public choice theory that are expressly critical of democratic decision making. I critique this democracy avoidance approach to tax lawmaking, and make the case that tax law should be a product of mechanisms that provide greater transparency, accountability, and responsiveness to advance democratic legitimacy. I propose four reforms to tax lawmaking in the U.S. Congress to make resulting tax laws more democratically legitimate. One proposal, for example, is to require Congress to consider (and publicize) precisely how a proposed change in tax law is expected to affect different example taxpayers, including taxpayers from each congressional district. This would allow actual taxpayers observing the lawmaking process to anticipate their treatment under a proposed law, and in turn demand greater responsiveness to their real interests from their representatives. Other proposals build on this approach, calling for drastically more transparency and a radical—but, I argue, achievable—reworking of the types of analysis produced in the federal tax legislative process for consumption by non-experts.