Public Choice Theory

Conceptual Overview

In actuality, the behavior of actors is a function of the above assumptions combined with the effects of the particular context in which actors operate. Accordingly, individuals with given (selfish) motives are hypothetically placed in say an institutional or organizational context, which is essentially understood as a structured field of behavioral incentives and disincentives, as derived from the formal and informal rules and practices of the institutional setting or organization in question. Actual preference formation is partly a product of the particular situation in which actors finds themselves. In other words, explanation cannot be solely reduced to facts concerning individuals. Thus, to operationalize the motive of self-interest, rational choice scholars tend to partly deduce the specific preferences of actors in any given context from the structure of the situation they confront. Therefore, the approach does not rely solely on methodological individualism, because explanations are constructed from an interaction between individuals and the wider context in which they operate.

In this manner, public choice theorists have dealt with problems concerning collective action and the creation and role of institutions. They have also modeled the behavior of voters, politicians, bureaucrats, central bankers, business entrepreneurs, and others. The behavior of politicians, for example, is assumed to be derived from an institutional context in which the maximization of votes is paramount. The behavior of bureaucrats is modeled primarily as the quest for bureaucratic resources, power, and favored institutional roles. Public choice theory proposes that bureaucrats will seek to expand the budgets and staffing of their agencies, motivated by a desire for the personal status and material benefits that generally flow from controlling larger resources. They may also seek to reshape the role or mandate of their agencies to promote their career paths or to steer clear of awkward problem arenas. The obvious conclusion, according to public choice theory, is that bureaucracies are self-serving, overresourced, and inefficient; that is, they expand beyond the level necessary to provide a specified service in the most cost-effective way. Other applications include the work of Mancur Olson, who argued that individualist rationality would stymie the provision of public goods and inhibit collective action as individuals seek to ‘free ride' on the efforts of others.

...