Public choice economics: how the left is trying to have its cake and eat it
The acceptance of the assumption that people might behave in their own self-interest in the political system has enormous implications for public policy analysis. It means, for example, that we simply cannot assume that a public policy lever can be pulled to resolve problems that arise within markets because those pulling the levers may act in their own interests rather than in the wider public interest (this is putting aside the “knowledge problem”, the impact of unintended consequences, and so on).
Perhaps the profundity of the implications of assuming that actors in the private and political spheres might act with the same motives, accounts for the extraordinary way in which the left approaches public choice economics.
One approach is to totally mis-represent the school. For example, in her recent book on James Buchanan, Nancy MacLean says (page 98):
“And, in their assumption that individuals always acted to advance their personal economic self-interest rather than collective goals or the common good, Buchanan’s school went further, projecting unseemly motives onto strangers about whom they knew nothing.”
This is an important point in her analysis and it is clear why she may wish to make it. The idea is so absurd, and possibly insulting to many who are or who know public servants, that most reasonable people who accepted this assertion would dismiss public choice as having nothing sensible to say about public policy.
However, MacLean’s attribution to Buchanan is totally at odds with what Buchanan and public choice economists really believe. It is not difficult to find information about the assumptions that really do underlie public choice. All you have to do is read Buchanan’s Nobel Prize lecture in which it says:
“Many critics of the “economic theory of politics” base their criticisms on the presumption that such theory necessarily embodies the hypothesis of net wealth maximization, a hypothesis that they observe to be falsified in many situations. Overly zealous users of this theory may have sometimes offered grounds for such misinterpretation on the part of critics. The minimal critical assumption for the explanatory power of the economic theory of politics is only that identifiable economic self-interest (e.g., net wealth, income, social position) is a positively valued “good” to the individual who chooses. This assumption does not place economic interest in a dominating position and it surely does not imply imputing evil or malicious motives to political actors; in this respect the theory remains on all fours with the motivational structure of the standard economic theory of market behavior.”
When writing this passage. Buchanan could have been thinking: “In 31 years’ time, somebody is going to totally misrepresent public choice economics, so I better set the record straight so that they cannot credibly do so”. Frankly, nothing more needs to be said. But, just in case it is necessary, I shall point out that, if the predictions of public choice economics rest on the fact that self-interest plays some role in the political system, any left-leaning economist would have their work cut out falsifying this assumption.
But, in other respects, left-leaning economists exhibit multiple personalities when it comes to public choice economies.
In the book Mammon’s Kingdom, lauded by the left, David Marquand dismisses the Virginia public choice school as free-market fellow travellers. However, much of the book, following the reasoning of Piketty, is about how a large financial system and inequality give rise to rent seeking and people pursuing self-interest through the political system. Remarkably, Marquand uses the work of Stiglitz when raising the issue of rent seeking in a series of points designed to show that left-leaning economists have understood things that have simply escaped those who believe in free markets. Marquand’s book excoriates Chicago-school economists at length, often making extraordinary faux pas along the way. One such is in relation to rent seeking. Buchanan was dismissed by Marquand as was the whole Chicago school. However, Buchanan was not the only economist who won the Nobel Prize for his work on the role of self-interest in the political system. Chicago economist Stigler was cited for producing ‘studies of the forces which give rise to regulatory legislation [that] have opened up a completely new area of economic research.’
The left’s approach to public choice economists is simply not scholarship. If MacLean wishes to criticise the assumptions made by public choice economists, she must criticise the assumptions that they actually make. If others wish to argue that bankers and rich people might pursue their own interests through the political system, then they should examine the more general implications that the pursuit of self-interest through politics has for the analysis of public policy. Of course, there is a reason why they will not do so: it would drive a bus through many of their beliefs.