Buchanan, James M.

English

Research Papers in Economics

PUBLIC CHOICE AND PUBLIC  POLICY
James M. Buchanan
Center of Public Choice
Virginia Polytechnic Institute
In  a conference  like  this devoted  to  national  policy  issues,  it
is  always  tempting  for  an  economist,  or for any  social  scientist,
to launch into his own favorite policy proposals.  I share this temp-
tation,  as  I  have  my  own  favorite  policy  prescriptions.  But  if  I
succumb to this temptation  here,  I would be defrauding those who
invited  me  to  participate.  Presumably,  I  was  invited  to  discuss
with  you  the  "public-choice  approach"  to  public  policy  issues,
and  perhaps  the  most  characteristic  feature  of this  approach  is
its  "positivism,"  the deliberate  absence  of a normative  or "what
should be" policy  stance.
Saying that  public-choice  analysis  is  largely  positive,  or non-
normative,  does  not  imply  that  it has  no  social  purpose.  Along
with  all  science,  the  social  purpose  of our  efforts  is  to  improve
the  social  order.  Ultimately,  public-choice  theory  and  analysis
should  make  it  easier  for  men  to  live  together  under  mutually
acceptable  rules for behavior.  In this sense,  public-choice  analysis
is  instrumental just  like  all  other  policy  analysis.  The  difference
lies  in the level or stage  of instrumentality  that is involved.
But first,  what is  public-choice  analysis  all about?  Fundamen-
tally,  we  are trying to  apply the analytical  methods  of economists
to the subject matter normally reserved for study by political scien-
tists. We are devoting our efforts to analyzing  political or govern-
mental  decision  making (nonmarket  decision  making)  in terms of
models derived  from the choice  behavior of individuals.  We  look
at the choices confronting  persons as they behave  in their public-
choice capacities,  as  voters or nonvoters,  as  participants  or non-
participants  in  pressure  groups,  as  employees  of  governmental
units,  as decision makers  in bureaucracies,  as working politicians,
and in many other capacities.
But  how  does  this  differ  from  political  science,  and  notably
from the modem variant  called "behavioristic."  The subject mat-
ter  is  identical,  which  explains  a  great  deal  of  the  confusion
between  public-choice  and  behavioristic  political  science.  Public-
choice theory  or analysis differs  from most behavioristic  political
science  precisely  because  it  is  "theory"  or "analysis."  We  start
from the construction of models or theories of individual behavior
131and  of their  mutual  interactions  in political  or governmental  set-
tings.  We  draw implications  from these  models which  may, hope-
fully,  be subjected to empirical testing.  We do not commence  with
empirically observed  behavior and then attempt to derive  theories
to  explain  that  behavior-theories  which  may  have  little  or  no
generalized  meaning outside the particular  behavioral context.
What can  be exciting or interesting about public-choice  theory
if  this  is  all  there  is  to  it?  Since  the  basic  design  seems  simple
enough,  why  were  social  scientists  so  late in  applying  it?  I think
that economics,  as  a discipline,  has  been  basically  positive  (free
of "what should be's"), whereas  political science,  as a discipline,
has  been  essentially  normative  (concerned  with  "what  should
be"). This  may seem to contradict what  I said at the outset about
economists'  proclivity to  spout off policy proposals ad nauseam,
when  given  the opportunity  to  do  so.  But not  quite.  Even  when
economists  make  policy  proposals,  they  usually  base  these  on
some  underlying  positive  analysis  of  the  interaction  of  human
beings.  The  whole  concept  of  economic  efficiency,  which
influences so much of the policy discussion of economists,  is based
on an  analysis  of the  behavior of persons  in market-like  interac-
tions, essentially  a positive theory of market exchanges.
Economists who work in the policy arena would be lost without
the  props that are  provided  by  the  positive  theory.  It  is  because
of the existence of these props, offered by the models of economic
man  who  behaves  in  his  own  self-interest,  that economists  have
no need  to call on moral or ethical  theories  of behavior.
Compare  this,  however,  with  the  position  of the  traditional
political  scientist,  who  has  no  such  props.  His  discipline  offers
him  no underlying  model  or theory  of how  men  actually  behave
in  their  various  public-choice  capacities.  He  may  not  want  to
introduce  the economist's  model  of self-interest,  but  failing this,
what  are  his  alternatives?  There  is  no  developed  positive  theory
of individual  behavior  in  accordance  with  moral  or  ethical  pre-
cepts.  While  there  is  a  sophisticated  body  of moral  and  ethical
norms,  precepts  for  behavior,  there  are  no  predictions  about
behavior  based on  the acceptance  of such precepts.  Historically,
therefore, the pre-behavioristic  political scientist found himself try-
ing  to  derive  norms  for  what  men  "should"  do  in  their  public-
choice  roles,  not  what  they  may,  in  fact,  do  in  such  roles.  As
a result, and with rare exceptions,  political  science  has developed
no  genuine  theory of government  that  is  at  all  analogous  to  the
economists'  theory of markets.
Traditionally,  social  science  has  used different  methodologies
132to  look  at  market  organization  on  the  one  hand  and  political  or
governmental  organization  on the other.  Men have  been  more  or
less forced  to compare the market alternative  as it  actually works
with the governmental alternative  as it might work if men in public-
choice  capacities  followed  the  precepts  laid  down  in  normative
political  theory.
From this methodological confusion,  it is little wonder that we
have  had  a  bias  in  favor  of the  governmental  alternative,  with
the disastrous  results  that are only now  coming to be  recognized,
perhaps too  late for correction.  Let me elaborate  on this by  refer-
ence  to  neoclassical  welfare  economics,  which  has  been  recog-
nized  as the theory  of "market  failure."  The welfare  economists
continue  to find  flaws  in the workings  of market exchange,  flaws
which  insure  that  overall  economic  efficiency  is  not  attained
through  voluntary exchange processes.  For example,  the deterio-
ration  in  environmental  quality  is  explained  by  the  concept  of
external  diseconomies,  an example of market failure.
But  what  is  "failure"?  This  must  be  a  relative  term;  failure
must be judged  against  an  alternative.  If markets  fail to generate
economic  efficiency  when measured  against  an ideal,  this tells  us
nothing about  the performance  of markets when measured against
a  realizable  alternative.  Market  failure  in  the comparative  sense
must  mean  that  markets  are  less  desired  than  alternative  social
arrangements,  such  as  governmental  arrangements.  And  about
this,  modern  welfare economics  tells us little  or nothing.
How  does  public-choice  theory come  into  all of this?  Indeed,
the  major intellectual  result  of public-choice  theory  has  been  to
demonstrate  that "governmental  failure"  or "political  failure"  is
on  all  fours  with  "market  failure."  If  we  plug  in  models  of
individual  behavior in public  choice that are comparable  to those
employed  by  the  economists  for  the  models  of  private-choice
behavior,  we  can predict that governmental  decision  making  and
governmental  implementation of decisions  will also fail.
More  important,  however,  the  failures  of governmental  pro-
cesses  show  up  in  personal  loss for  individual  citizens.  Once  we
take  the  simple  step of demonstrating  that there  is  no such  thing
as the "public interest" over and beyond the interests of individual
citizens,  the  workings  of the  ordinary  political  process,  almost
regardless  of  the  existing  decision  rules  and  institutions,  must
impose  undesired  and  coerced  results  on  at  least  some  persons
in the  social group.
How  do we  weigh  these  losses  in  individual  freedom  against
133the  possible  gains  in  economic  efficiency,  even  when  it  can  be
demonstrated  that  the  losses  are  due  to  a  shift  to governmental
control?  It  is  not  our  task  to  assign  weights,  but  progress  has
been  made  when  the existence  of such  costs  is  recognized.  Still
we  can  do  more  than  treat  policy  proposals  on  a  case-by-case
basis.  Once  we  begin  to  analyze  the  working  of institutions  and
rules  for the making  of collective  or governmental  decisions,  we
are led directly to answering questions such as: What is the optimal
or efficient  structure  of rules?  What  is  the  optimal  constitution?
Public-choice theory allows us to go part way toward answering
these questions without introducing  normative concepts,  although
there  are  severe  limits  to  what  public-choice  theory  and  analysis
can  accomplish  here.  The public-choice  theorist cannot  lay down
the  "ideal"  constitution,  by  which  I  mean  the  set  of rules  and
institutions through which political choices must be made.  By mov-
ing the discussion  to the constitutional level,  however,  some prog-
ress  has  been  made.  If individual  citizens,  and  more  important,
if working  scholars  and  politicians  can  be  forced  to consider  the
rules,  the legal order,  the larger and  more inclusive  setting  within
which  policies  are  made  and  implemented,  actual  policy  would
be improved  immeasurably,  and by almost any standards  that you
choose to  invoke.
I  have,  on  many  occasions,  called  for  the  development  of  a
"constitutional  attitude"  toward  policy.  I do not define  "constitu-
tional"  in  any  legalistic  sense.  I  mean  by  a  constitution  that set
of rules, those institutions, that are treated as permanent or quasi-
permanent,  and  which  offer  the  framework  within  which  social
relationships  take  place,  both  private  exchanges  and  collective
choices.  While not all of my colleagues who call themselves public-
choice  theorists  would  accept  my  position,  it  seems  to  me  that
the public-choice  approach necessarily leads to a sharp conceptual
separation  between  the constitutional  stage  or level  of policy and
the operational or pragmatic  stage.  Particular policy measures  are
made  within the constitutional framework,  within  a specified  legal
order,  within  specified rules  for making collective  choices.
It  is  this  attitude  that  seems  to  have  been  lost  somewhere  in
modern history. Even legal philosophers,  who should know better,
seem  to  have  lost  sight  of just  what  a  constitution  means.  They
make  no apparent  distinction  between  changes  in  the basic  struc-
ture of rules,  the  legal order  itself,  and  changes  in  programs  and
policies  carried  on  within  these  rules.  The  actual  lines  are  often
blurred,  but the distinction  seems vital for understanding what  an
orderly  society  is all about.
134It  appears  that  the  whole  constitutional  order  has  been  seri-
ously  eroded  in recent  years,  and  notably since  1960.  Individuals
have  lost  respect  for  law,  for property,  for the  rights  of others.
And with this loss of respect,  this loss of mutual tolerance  among
persons, there has arisen a complementary  unwillingness to punish
those  who transgress  law,  who  invade  property,  who  disturb the
rights of others. Individuals  are everywhere  crying out against the
arbitrary  powers  of government,  and  yet  at the  same  time,  they
know of no alternatives  save  for more  governmental  action.
I  am  getting  somewhat  away  from a  discussion of the  public-
choice  approach  to policy,  but not so  far as  it might  first appear.
If public choice can succeed  in reducing the governmental  alterna-
tive to realistic proportions,  perhaps the organizational alternatives
will be viewed more rationally.  But this is not without its dangers.
If man  loses  all  faith  in  government,  as  he  has  lost  all  faith  in
God,  where can  he turn?  I do not offer answers  to this most basic
of all questions. The American version of the Enlightenment dream
has  all but disappeared.  This is a fact that must be faced,  however
bitter.  And  a  romantic  revolution  that  will  sweep  away  all  the
chaff of liberal  history  is not  in the cards.
It  is  well  and  good  that  sensible  men  among  our  political
leaders,  among  our journalists,  among our  working  scholars,  are
beginning  to  sense  that  the  disrespect  for  law fostered  and  pro-
moted by our liberal courts  and  our liberal  scholars  has  wrought
unpredicted  damage  in our  social  fabric.  But  it  is  folly  to expect
a  return  to  the status quo ante.  What  is  done  is  done.  And  all
roads  start from right here,  not from some  imaginary world.
We start from a position best described as one of constitutional
anarchy,  with  the  governmental  constraints  on  our  freedoms
largely  determined  by  the  personal  whims  of politicians  who  sit
as judges,  as legislators,  or as executives.  Somehow,  somewhere,
in  some  way,  we  must discover  or rediscover  something  akin  to
the  eighteenth  century  wisdom,  that of David  Hume  and  Adam
Smith,  the wisdom that was highly  skeptical about reform but yet
informed  by  an  understanding  that  made  genuine  social  reform
possible.
Public choice,  as an approach to  policy,  contributes  relatively
little  to  recovery  of this  wisdom.  Public  choice,  as  an  approach,
makes  its contribution  negatively,  by reducing  to  absurdity  some
elements  of  the  liberalistic-socialistic  heritage  concerning  the
efficiencies  of  social  control.  But  it  is  time  to  move  beyond
negativism;  it  is  time  to  construct  positive  alternatives.  To  say
this is one thing; to offer specific suggestions  is  quite another  mat-
135ter.  We  shall,  as  a  society,  as  a  nation,  probably  make  it  until
1984  without  the  Orwellian  monstrosities.  But  can  we  be  at  all
sure about 2004?
I  should  conclude  on a  note  that may  strike  directly  at  some
of your  own  interests.  I  know  that many  of you  are  engaged  in
community  development  programs,  and  that much  of your  effort
goes to helping local communities organize  themselves for specific
purposes.  One of the essential  steps  in attaining any  constructive
change  or modification  in our  society  is  a  shift from  national  or
central  government  paternalism  to  local  self-help,  local  self-
development.  The  necessity  for this  shift  in  our  whole  thinking
about  government  was,  I  think,  correctly  sensed  by  President
Nixon  when  he  emphasized  revenue  sharing  and  attempted  to
reduce  the size of the federal  budget.  To  me,  one of the  primary
tragedies of Watergate  has been  the erosion of this effort, in terms
of the  courage  of the  administration  in  carrying  it  through,  and
in terms of the power to force some limits on a reluctant Congress,
an  opposition  bureaucracy,  an  irresponsible  judiciary,  a  biased
press,  and  an  indifferent  public.  Regardless  of the results  of this
effort,  however,  we  know that the federal  budget cannot increase
at rates  comparable  to  those of the late  1960's  and  early  1970's.
All thinking about  local  community  development,  about  proj-
ects  and plans,  must  begin  from this  elementary  base.  There  are
no resources  available to the central government  that are not  ini-
tially  available  to  local  communities.  Your  task  should  be  to
mobilize citizens to help them make local public choices consistent
with their own resources.  Your expertise  can be  even more valu-
able  here than when  it is  applied  to the development  of local  pro-
grams that are  chosen  and financed  centrally  with the  hot breath
of the Washington  bureaucracy  always  over your shoulders.
136

PUBLIC CHOICE AND PUBLIC POLICY

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Research Papers in Economics