The Next Twenty-five Years of Public Choice PDF
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THE NEXT TWENTY- FIVE YEARS OF PUBLIC CHOICE The Next Twenty-five Years of Public Choice Edited by CHARLES K. ROWLEY Center for Study of Public Choice, George Mason University FRIEDRICH SCHNEIDER Department of Economics, Johannes Kepler University of Linz and ROBERT D. TOLLISON Center for Study of Public Choice, George Mason University Reprinted from Public Choice, Volume 77, No. I, 1993 Springer-Science+Business Media, B.V. Library of Congress Cataloging-in-Publication Data The Next 25 years of Public choIce / edited by Charles K. Rowley and FriedrIch Schneider and Robert D. TollIson. p. cm. Inc 1u des bib 1 i ograph I ca 1 references. ISBN 978-94-017-3404-2 ISBN 978-94-017-3402-8 (eBook) DOI 10.1007/978-94-017-3402-8 1. SocIal choIce. 2. PolitIcal sCIence. 3. PublIc choIce. I. Rowley, Charles Kershaw. II. SchneIder, FrIedrIch. III. TollIson, Robert D. IV. Title, Next twenty fIve years of Publ ic choIce. HB846.8.N49 1993 302' .13--dc20 93-21577 ISBN 978-94-017-3404-2 Printed on acid-free paper All Rights Reserved © 1993 Springer Science+Business Media Dordrecht Originally published by Kluwer Academic Publishers in 1993 Softcover reprint of the hardcover 1st edition 1993 No part of the material protected by this copyright notice may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without written permission from the copyright owner. CONTENTS C.K. Rowley, F. Schneider and RD. Tollison, The next twenty-five years of public choice 1 G. Tullock, Public Choice - What I hope for the next twenty-five years 9 W.J. Baumol, Health care, education and the cost disease: A looming crisis for public choice 17 P. Bernholz, Public choice theory: Some items for a research agenda 29 C.B. Blankart and G. Knieps, State and standards 39 A. Breton, Toward a presumption of efficiency in politics 53 1.M. Buchanan, Public choice after socialism 67 D. Da Empoli, Public choice in Italy 75 J.M. Ene10w and RB. Morton, Promising directions in public choice 85 B.S. Frey, From economic imperialism to social science inspiration 95 , G. Kirchgassner and W.W. Pommerehne, Low-cost decisions as a challenge to public choice 107 S.P. Magee, Bioeconomics and the survival model: The economic lessons of evolutionary biology 117 W.E. Mitchell, The shape of public choice to come: Some predictions and advice 133 D.C. Mueller, The future of Public Choice 145 W.A. Niskanen, The reflections of a grump 151 D.C. North, What do we mean by rationality? 159 v. Ostrom, Epistemic choice and public choice 163 M. Paldam, Public choice: More of a branch or more of a sect? 177 K.T. Poole and T. Romer, Ideology, "shirking", and representation 185 A. Udagawa, The next twenty-five years of Public Choice 197 RE. Wagner, The impending transformation of public choice scholar- ship 203 F. van Winden, Some reflections on the next twenty-five years of public choice 213 Public Choice 77: 1-7, 1993. © 1993 Kluwer Academic Publishers. The next twenty-five years of Public Choice CHARLES K. ROWLEY, FRIEDRICH SCHNEIDER and ROBERT D. TOLLISON Editors 1. Introduction In 1965, only three years after the publication of The Calculus of Consent (Buchanan and Tullock, 1962), very few articles were circulating in the emer ging field now called public choice, and they were encountering stiff obstacles in breaking into the mainstream journals of economics and political science. In such circumstances, young scholars seeking tenure could not devote much of their research to the field and even more senior tenured professors were loathe to do so. The prognosis for the field was not encouraging. Armed with a small grant from The University of Virginia, and recognizing this threat to the discipline that he was helping to create, Gordon Tullock edit ed the best of the papers then circulating and published them as Papers on Non Market Decision Making in three volumes over the period 1966-1967. Initially, Tullock was not planning a journal but simply on the publication of occasional collections of papers. Only in the case of Volume III, published in Fall 1967, was the date of publication labelled on the covers of the volume. (Tullock, 1991: 131-132). Many of the early papers in public choice were written for a series of small annual meetings organized by Buchanan and Tullock starting in 1963 at Charlottesville. In 1967, at the Chicago meeting, the Public Choice Society was formed and Tullock renamed Volume IV of his journal Public Choice, in recognition of that decision. In the Spring 1968 issue, the following statement appeared in the journal: Public Choice, formerly Papers on Non-Market Decision Making, is a new journal, and the editors are not yet sure as to the supply of significant arti cles. In consequence the number of issues per year has not been firmly fixed. We plan two in 1968 and three in 1969, but do not wish to commit ourselves finally to those plans. Subscribers are not asked to make an advance payment. They will be billed at the end of the year for the issues they have actually received (not more than three) at $1.95 each for the paperback version and $4.40 for the hardback. 2 This was the first issue using the title, Public Choice, published just kenty-five years ago. The then tentative nature of the undertaking is apparent; all settling up was ex post. What has happened since 1968 is nothing less than a revolution in economics and political science. The journal, Public Choice, has played an important role in this revolution, facilitating the emergence of public choice as a part of the normal science of economists and political scientists. Spring 1993 marks the publication of the seventy-fifth volume of the jour nal. Public Choice currently sells to some one thousand libraries worldwide and to some four hundred individuals. Its twelve issues per annum only barely can incorporate the large volume of quality papers recommended for publica tion by well-qualified refereef who advise the Editors and who help them to consolidate the world-class reputation that the journal has attained under its founding editor. This is a far cry from its modest beginnings in 1968. This Special Anniversary Issue of Public Choice is intended not to take stock of what has been accomplished in the past twenty-five years but rather to assess where public choice research might go in the next twenty-five years. To that end, we have invited distinguished public choice scholars worldwide, both from economics and from political science, to offer their views on this subject. The eminence of these scholars is immediately recognizable by the names attached to the twenty-one responses that our invitations elicited. What emerges from their speculations is a rich research agenda for public choice scholars, albeit one with many forks in the road. Not everyone sees the future in the same way. In order to set the stage, we offer our own commentary on some of the major issues that receive attention and identify some issues that, surprisingly, receive little or no discussion. 2. Rational choice Although the large majority of the scholars contributing to this volume are content to work within the rational choice paradigm of human behavior, which has been the most significant export from economics to the other social sciences, a significant minority argues in favor of now moving beyond such models in order to advance our understanding of public choice processes. Skepticism concerning rational choice arises as a reaction to behavioral anomalies, exposed by psychologists and economists, that suggest that in dividuals do not always follow the von Neumann/Morgenstern expected utility axioms (Frey). To this, we respond that choice-theoretic puzzles are intriguing, and the world seems to be full of them, but that science should not be driven by anomalies. As yet, evidence of anomalies does not encourage us to abandon the expected utility model in favor of some confusing medley of alternative axiomatic systems, even though we recognize that in a lot of economic situa- 3 tions the expected utility model is not working satisfactorily. Nor are we fully convinced yet by arguments (Frey again) that public choice should rely less on extrinsic motivation (rewards and sanctions) and more on intrinsic motivation (inner self-motivations) as the basis for analysis. There is much to be said for the economy of Chicago's de gustibus non est disputandum assertion. Most public choice analysis concerns margins and not levels. In this respect, the theory of demand and supply usually works, much as water usual ly, though not always, runs downhill. We are open minded about the value of importing non-economic behavior notions into public choice, but skeptical until good theory and hard evidence convince us that they have superior predic tive powers to our classical approaches. We like the arguments advanced by North and by Ostrom against excessive use of the instrumental rationality postulate which renders institutions super fluous. The new institutional economic has already made great headway in public choice, and Virginia Political Economy has always accorded a signifi cant role to institutions. Yet, Chicago political economy with its general equilibrium, market-clearing notions has made a major impact on public choice, an impact that has down-graded institutions to a degree that, in our view, may not be helpful to the long-term development of the discipline. North's and Ostrom's platforms for research, in our view, have much to com mend them in the next stage of public choice. 3. Constitutional political economy A number of papers (notably Buchanan) argue the case for shifting the focus of public choice discussion away from ordinary political choices to the institutional-constitutional structure within which politics takes place. At a time of major world-wide constitutional change, the case for such an adjust ment carries weight, but we are not convinced about the prospects for complete segmentation of the two areas of analysis. We should not forget that the very same individuals - voters, legislators, interest groups, media representatives and bureaucrats - populate the constitutional decision-making processes and the ordinary political market place. The major difference between decision-making at the constitutional and at the ordinary political market levels in most cases is temporal, as The Calculus of Consent clearly explained. With the time horizon significantly longer for constitutional choices, uncertainty is greater, and this may make it difficult for individuals to know where their narrow self-interest lies. A veil of uncertainty, however, is not a veil of ignorance and, in many instances, constitutional choices will be influenced by self-interested considerations. There is no scientific purpose to be achieved by pretending that individuals 4 are less selfish than they really are, either in constitutional decision-making or in political markets. If narrow self-interest indeed prevails, the right question, as posed by Tullock, is how we can establish a self-enforcing constitution, given that Homo economicus both sets the rules and maximizes subject to the constraints imposed? 4. Technique For the most part, the papers in this volume do not make a case for more mathematics or for more sophisticated statistical methods in public choice analysis. In this respect, the leading scholars of public choice echo much the same reservations recently expressed by leading economists concerning the use of high-powered technique in public choice research (Economic Journal, Janu ary 1991). To those who do press for more technique, especially for game theory, we reiterate the warning advanced by Peltzman (1991) concerning the emergence of the City of Theory in industrial organization. Progress in any discipline can not simply depend upon the generation of more and more theorems, the expli cation of more and more special cases of strategic interaction without any attempt to test hypotheses by sound statistical and institutional analysis. Enelow and Morton make a good argument in this respect in urging political scientists (as well as economists) to combine theory with empirical analysis as the basis for good science in public choice. Technique for its own sake may secure National Science Foundation and other government-based grants in the imperfect environment of non-market decision-making based on narrowly focused peer review. It may have very little to offer in advancing our understanding of real-world political processes. Pub lic choice has not yet lurched into the surrealistic environment of much recent industrial organization scholarship. We shall do our best to see that it does not do so, at least through the instrument of this journal during our editorial watch. 5. Voters The superstructure of public choice theory is founded upon rational behavior assumptions. Yet, the process of voting, which empowers rational individuals with the property rights to certain actions, is analyzed through a wide range of sometimes confused and often contradictory models of behavior. The voter alternatively is a consumer or an investor, self-seeking or altruistic, naive or strategically sophisticated, rationally well-informed or rationally ignorant. 5 Vote models cannot yet explain why rational voters vote, surely the most basic question that public choice must address. Yet, highly sophisticated models of spatial politics are generated without more than a passing reference to this fatal weakness. This is an extremely unsatisfactory state of affairs, as Niskanen notes in his paper. Yet there are precious few ideas to be found in this volume that might resuscitate voting theory from its current malaise. As early as 1967, Tullock focussed attention on ways in which voters might be influenced as groups or blocs, notably by targeted media attention, to over come the low incentive to vote and the endemic tendency toward rational igno rance (see Pommerehne and Kirchgassner). The technique may well have been successful in winning the recent U.S. presidential election for Bill Clinton. In any event, the development of group models of voter behavior and the sys tematic testing of such models appears to us to be a fruitful avenue of public choice research. 6. Interest groups Given the current unreliability of voter models, public choice research accords a key role to interest groups as the principal actors in political markets. Models utilizing this approach have achieved convincing empirical success by substitu ting group for self-interest goals as the basis for interest-group pressure in the political market-place. Yet, there is surprisingly little emphasis among these papers on understanding how an interest-group economy functions. Mitchell offers some interesting insights into the determinants of group solidarity and the resolution of the free rider problem. Much more work is required, however, on such issues as how interest groups are formed, why they vary in size, and their impact on economic efficiency and the political process. Theory alone will not resolve these issues. Sound institutional analysis and careful empiricism must playa major role. 7. The executive branch Public choice is now rich in theories of legislative and bureaucratic behavior many of which have been tested, especially on u.S. data. It also has an emer ging theory of judicial behavior, as public choice scholars join law and eco nomics scholars at an interface full of research promise. As yet, however, there exists only a preliminary set of theories of executive branch behavior, viewing the President and the executive branch as electoral college vote maximizers. Technically elegant theories of executive veto have been developed to explain structure-induced political equilibrium. Yet, the issue of presidential prefer- 6 ences is treated more or less as a black box. A great deal of work remains to be done to determine what kinds of bill the President will veto, when and why. Research is also necessary to explain the relationship between the President's re-election objectives and his allocation of executive appointments and execu tive expenditures. None of these matters is raised in this Anniversary issue. 8. Evolutionary processes Two papers (Magee and Wagner) draw upon evolutionary models of public choice as alternatives to the rational choice model that we favor. Magee, in par ticular, proposes that rational choice should be replaced with a survivor model of biology which incorporates rational choice only as a special case. This sur vival modal incorporates all behavior, both cognitive and non-cognitive, that improves economic fitness, notably genetics, hormones and environmentally driven behavior. We have no doubt that evolutionary models will play an increasingly impor tant role in explaining past public choices. They may well offer valuable in sights into the appropriate set of political institutions for achieving economic efficiency. Yet, as with Austrian theory itself, the Achilles Heel of evolutionary theory is its weakness in predicting plausible outcomes comparable with those of public choice. The extent to which this weakness can be remedied will deter mine the long-run success or failure of this challenge to the neoclassical research program. Furthermore, caution should be exercised before claiming evolutionary processes to be efficient. It is possible, of course, to define things that last to be efficient (Stigler, 1992). But tautology is not science, and certainly is not the end of the public choice story. In some falsifiable sense, two-party democracy may be efficient, as Breton argues, because it endures and stimulates economic growth. But what happens if incumbents continually win re-election, or if the same 51070 of the electorate always wins and the same 49% always loses? What happens to efficiency in the rent-seeking society? There are real difficulties here for the evolutionary approach, but they are not identified in this volume. 9. Time consistency Public choice has only recently begun to investigate the properties of voter and legislative choices over time, given the possibility of a turnover of the govern ment. To what extent does the prospect induce myopia in public choice? To what extent does it induce strategic behavior that may be extremely efficient? For example, does this inconsistency explain why, in the United States, the
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