How Public Choice Theory Contributes to Political Economy? (Part-2)
In the 19th century, Panteleoni, an Italian economist, argued that the analysis of the public sector cannot be independent of the political level. This is because the behavior of political actors depends on the choice of institutions and rules.
Although the emergence of Public Choice economics dates back to the 1950s and 60s, its philosophical roots can be traced back to the views of 18th century thinkers. The precursors of Public Choice are the continental European scholars Sax, Mazzola, Pantaleoni, De viti de Marco and most importantly Knut Wicksell. Wicksell argued that public economics should be considered in conjunction with public decision-making (the decision of voters, directly or through their representatives, on what level of public goods and services to produce and how to share their costs). According to Wicksell, the rule of unanimity or near unanimity applies to achieve efficiency in the Pareto sense. Wicksell's thesis influenced the public finance theory of Buchanan, the founder of the public choice school. According to the public choice school, the institutional structure of how the level and composition of taxes and expenditures are decided in a society has an impact on the outcomes. The behavior of political actors changes according to the choice of institutions and rules. (Buchanan, 1968, preface, p. 13)
In addition, Jean-Charles Borda and Marquis de Condorcet, who were actually mathematicians who dealt with the problem of social choice in the 18th century, have an important place in Public Choice economics. In the 19th century, Panteleoni, an Italian economist, argued that the analysis of the public sector cannot be independent of the political level. The application of Marshall's (1890) supply and demand model within the partial equilibrium approach to the public economy was not long delayed; for the first time, Italian economists Viti de Marco and Pantaleoni thought that the marginalist method could be applied to the public economy at the end of the 19th century. In the 20th century, R. Musgrave's 'Voluntary Exchange Model' (1939) and Samuelson's (1954) analysis of public expenditures were the first foundations of the marginalist method. Long before Samuelson's (1954) public expenditure model, Lindahl (1919) worked on the optimal level of production of public goods by creating a public economy version of the supply and demand model in the private economy. Lindahl's 2-individual model was later generalized by Samuelson. However, both models ignored the problem of explaining the demand for public goods (due to the free-rider problem). In these 'voluntary exchange' models, which are still influential today, the relationship between the tax-price, which is accepted as the price of public goods, and the production quantity of public goods yields a demand function and the optimal production quantity of public goods is estimated on the basis of this relationship. Pigou (1928) was the economist who combined marginalist economics with utilitarian philosophy to examine public policy instruments to maximize the utility of society. These include the Pigou tax and progressive taxation, which were proposed to solve negative externalities. Pigou's theory of public finance was generally based on the view that welfare would be maximized at the marginal point where benefits would equal costs at the margin. (Şeker, 1996, p.11)
In the 20th century, the works of Harold Hotelling, James M. Buchanan, Kenneth Arrow, Anthony Downs, Duncan Black, William Riker, James M. Buchanan and Gordon Tulluck, Mancur Olson and William Niskanen played a pioneering role in laying the foundations and developing the Public Choice approach. However, there are five main works that stand out in the literature on Public Choice economics. These are;
- Duncan Black's "On the Rationality of Group Decision Making",
- Kenneth Arrow's "Social Choice and Individual Values",
- "The Economic Theory of Democracy" by Anthony Downs,
- James M. Buchanan and Gordon Tullock's "Accounting for Unanimity: The Logical Foundations of Constitutional Democracy" and
- Mancur Olson's "The Logic of Collective Action".
Duncan Black's early research on decision-making in committees is considered the beginning of modern Public Choice economics. Black introduced the median voter theory, first advocated by Harold Hotelling, and an analysis of the behavior of candidates and committees in elections.
In sum, Mueller, who made significant contributions to public choice theory, briefly defined the theory as "the economic discipline of non-market decision-making" (Aktan and Bahçe, 2007: 7). Public choice theory, defined as "Economic Analysis of Policy Science", is a subfield of rational choice theory (Heywood, 2006: 397) and tries to explain the decisions and practices taken in the political process based on the tools, methods and assumptions used by economics (Çevikbaş, 2006: 283). The theory of the state, voting rules, voters' behavior, party politics, interest groups and bureaucracy, which constitute the field of study of political science, also constitute the field of study of public choice theory (Mueller, 1989: 1).
