Rational Choice

270 Pages·2006·41.445 MB·English

by  Andrew Hindmoor

Rational Choice
Andrew Hindmoor
pal grave
macmillan
©Andrew Hindmoor 2006
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First published 2006 by
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ISBN-13: 978-1~39-3421-5 hardback
ISBN 10: 1~39-3421-5 hardback
ISBN-13: 978-1~39-3422-2 paperback
ISBN 10: 1~39-3422-3 paperback
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Library of Congress Cataloging-in-Publication Data
Hindmoor, Andrew.
Rational choice I Andrew Hindmoor.
p. crn.---{Political analysis)
Includes bibliographical references and index.
ISBN 1~39-3421-S (doth)---ISBN 1~39-3422-3 (pbk.)
1. Political science. 2. Rational choice theory. I. Title. II. Political
analysis (Palgrave Macmillan {Firm))
JA71.H56 2006
320.01--dc22 2006040484
In memory of Irene Hindmoor and Helen Langham
who never met but whose lives became entwined
Contents
List of Boxes, Figures and Tables x
Preface XII
1 Introduction 1
The marginal revolution and the methods of economics
(1870-1950) 6
The emergence of rational choice (1950-70) 7
The take-off to growth (1970-94) 9
A difficult decade (1994-2004) 14
2 Anthony Downs and the Spatial Theory of Party
Competition 22
Setting the stage: the demands of democracy 22
The precursors of party competition 24
The median voter theorem 26
Qualifying the argument: accounting for divergence 30
Assumption 1: there are only two parties 32
Assumption 2: political space is one-dimensional 34
Assumption 3: parties can move to and occupy any point
in this one-dimensional space 39
Assumption 4: parties are vote-maximizers 40
Assumption 5: voters vote for the party closest to them in
political space 41
Assumption 6: there is perfect information 42
Assumption 7: voters' preferences are fixed 44
Assessment 45
3 William Riker and the Theory of Coalitions 49
Setting the stage: choosing a voting system 49
Riker and the theory of the minimal-winning coalition 53
Policy-seeking parties 57
The portfolio-allocation model 62
The transaction costs of policy agreements 65
Assessment 73
Vlll Contents
4 Kenneth Arrow and Social Choice Theory 77
Setting the stage: democracy and the public will 77
The precursors of social choice theory 79
Arrow: social choice and individual values 83
Riker: liberalism against populism 86
Reining-in social choice theory 90
Assessment 100
5 Mancur Olson and the Logic of Collective Action 102
Olson's The Logic of Collective Action 102
Resolving collective action problems 113
Assessment 127
6 William Niskanen and Bureaucracy 129
Setting the stage: the growth of the state 129
The precursors of bureaucratic theory 131
The budget-maximizing bureaucrat 136
Evaluating the behavioural assumption 143
Evaluating the equilibrium argument 146
Assessment 151
7 Gordon Tullock, Rent-Seeking and Constitutions 155
Setting the stage: the politics of pressure 155
Rent-seeking: the welfare costs of tariffs, monopolies and
theft 157
The costs of rent-seeking 163
Reforming the rent-seeking society 171
Devising and enforcing constitutions 174
Assessment 178
8 Rationality 181
Introduction 181
The axiomatic approach 183
The optimizing approach 190
The reach of rational choice 193
Self-interest 195
Contents lX
9 Rational Choice Explanation 200
Introduction 200
Positivism and explanation through laws 202
All other things being equal: tendency laws and the
inexact (social) sciences 205
Scientific realism and the search for mechanisms 210
Interpretivism, understanding and reasons 212
Bibliography 219
Index 247
List of Boxes, Figures and
Tables
Boxes
1.1 Models 3
1.2 Path-dependency 10
1.3 Developments in rational choice 12
1.4 Bounded rationality 16
1.5 Equilibrium and explanation 20
2.1 The paradox of not voting 28
2.2 The effective number of parties 34
2.3 Political business cycles 46
3.1 Proportional representation and multi-party competition 50
3.2 The Shapley-Shubik power index 54
3.3 Transaction costs 68
3.4 The Coase theorem 70
3.5 Cabinet durability 74
4.1 Interpersonal comparisons of utility 85
4.2 Deliberation and social choice 96
4.3 Pareto superiority and Pareto optimality 98
4.4 Liberalism and social choice 101
5.1 Excludability: public goods and common goods 103
5.2 Game theory 106
5.3 The tragedy of the commons 114
5.4 Reputation, trust and backward induction 122
5.5 Norms 124
6.1 Market failure 132
6.2 Principals and agents 134
6.3 'Reflexive' predictions in the social sciences 152
7.1 Rent dissipation 159
7.2 Expressive politics 165
7.3 Rational ignorance 170
8.1 Psychological behaviourism 182
8.2 Revealed preference theory 185
8.3 lnstrumentalism 188
List of Boxes, Figures and Tables x1
Figures
2.1 Two-party competition with standard and bimodal
distributions 30
2.2 Party competition in two dimensions (i) 36
2.3 Party competition in two dimensions (ii) 38
2.4 Dimension-by-dimension median 39
3.1 Coalition instability in two dimensions 61
3.2 Coalition stability with portfolio allocation 63
3.3 Coalition stability with 'strong' parties 64
3.4 Coalition stability and the dimension-by-dimension
median 66
3.5 Policy compromises and portfolio allocations 67
5.1 The prisoners' dilemma 108
5.2 N-person prisoners' dilemma 109
5.3 Assurance game 111
5.4 Chicken game 112
5.5 Collective action and thresholds of cooperation 126
6.1 The profit-maximizing firm 140
6.2 The budget-maximizing bureaucrat 141
6.3 The demand-constrained bureau 142
6.4 The bureau-shaping bureaucrat 146
7.1 The efficiency costs of monopoly 158
7.2 The costs of rent-seeking 167
7.3 Logrolling and efficiency 168
7.4 Logrolling and pork-barrel politics 171
9.1 The dynamics of segregation 217
Tables
2.1 The effective number of parties 35
4.1 Majority voting generates a majority-opposed decision 80
4.2 Borda count winner is majority-opposed 81
4.3 The paradox of voting 82
4.4 Proportion of all possible profiles displaying the
paradox of voting 94
6.1 Central government expenditure in the G7 130
Preface
The aim of this book is to provide an accessible and balanced intro
duction to rational choice theory which connects its debates and argu
ments to those in other areas of political science. Truth be told when I
was asked to write this book I had just completed a lengthy research
manuscript and was hoping to write a simple textbook which would
take little time and effort to complete. I have spectacularly failed to
achieve this particular ambition. As no doubt any of the other authors
in the Political Analysis series could have told me, writing a book
which can 'provide a channel for different parts of the discipline to talk
to one another and to new generations of students', to cite one of the
objectives of the series, is a far from easy business. Completing the
book has taken me a great deal of time and no little effort. I can only
hope I have been slightly more successful in achieving my other ambi
tions for it.
I wanted to write a book which was accessible because the prolifer
ation of mathematical models and quantitative data analysis within
rational choice theory deters many students from coming to grips with
its underlying assumptions and arguments. This is a shame because no
matter how much they are feared and loathed, mathematical modelling
and quantitative data analyses are useful techniques which undergrad
uate programmes in political science ought to be teaching. It is also a
shame because, as I try to show in what follows, rational choice
theory's assumptions and arguments can be introduced and critically
analysed without having to learn these techniques. There is no doubt a
strong case to be made for a textbook which provides an introduction
to mathematics, data analysis and rational choice theory. But this is not
that book. Although it contains occasional tables and even the odd
diagram, the book assumes no prior knowledge of or particular inter
est in either rational choice theory or counting.
In the opening chapter of the first volume of Douglas Adams' cele
brated five-part science-fiction trilogy, we are told that, in many of the
more relaxed civilizations on the Outer Eastern Rim of the Galaxy, The
Hitch Hiker's Guide to the Galaxy has already supplanted the great
Encyclopaedia Galactica as the standard repository of all knowledge
and wisdom. It has done so because although it has many omissions
Prefa ce xm
and contains much that is apocryphal, or at least wildly inaccurate, it
scores over the older, more pedestrian work because it is slightly
cheaper and has the words 'Don't Panic' inscribed in large friendly
letters on its cover. In many ways 'Don't Panic' would have made a suit
able subtitle for this book. For although it no doubt contains many sins
of both omission and commission, I feel reasonably confident in stating
that nobody will find it difficult to understand.
The emergence and development of rational choice theory has
polarized political science. Rational choice theorists tend to argue that
their approach has revolutionized the study of politics as an academic
discipline, whilst rational choice's many and varied opponents argue
that it is all mouth and no trousers; that its success marks the triumph
of dazzling technical style over explanatory substance. Rational choice
theory, this argument runs, makes a series of implausible assumptions
about the reasons why people behave in particular ways and so, unsur
prisingly, finds itself offering deeply flawed explanations of why partic
ular events occur. Although this argument about the explanatory value
of rational choice theory can sometimes make for quite entertaining
exchanges in the pages of otherwise rather dry academic journals, it
makes the method a difficult one to come to grips with. It is for this
reason that I wanted to write a balanced introductory text in which
space is given over to both rational choice's proponents and opponents.
I need to be careful here because I also use this book to develop my own
argument about the status of rational choice theory. And whilst this
argument is itself a balanced one in the sense that it identifies both
strengths and weaknesses in the rational choice method, a bias towards
the middle of the road is a bias nevertheless. Yet by the time I develop
this argument in the closing chapters, I hope to have provided enough
material for readers to reach very different judgements.
It is one of the more puzzling and less attractive features of the way
in which political science is taught in universities today that so few
connections are made between different subjects. Although they
usually occupy the same building within social science faculties, poli
tics is routinely taught without any regard to or apparent interest in
economics, sociology or psychology. Furthermore, and although they
are usually taught by people occupying the same corridor, individual
courses in political theory, public policy, comparative politics and
international relations (especially international relations) are usually
taught in splendid isolation of each other. Very rarely are students in,
for example, a public policy tutorial asked to discuss how arguments
about the nature of justice ought to impact upon the study of public