Public Choice Theory

Prior to the emergence of the public choice theory, Economist-s tended to ascribe to the government the role of an infallible controller with perfect information and unlimited power - an entity which the economist David Friedman called a "bureaucrat god". However, in practice bureaucrats and politicians are only humans, and they often face incentives that draw them to decisions that produce inefficient outcomes. Since the basic assumption of the economic theory is that humans are rational beings that act in a self-interested way, it follows that the economic analysis of the political Decision Making process might indeed reveal certain systematic trends towards inefficient government policies. Public choice theorists focus on the question of what government policies are likely to be implemented in a given political setting, rather than what policies would produce a desirable outcome if they were implemented. The conclusions of the public choice theory tend to increase skepticism towards the prospect that giving government power over various areas of human affairs will actually have beneficial results, regardless of the democratic control exercised by the citizens.

Economist James M Buchanan won the Nobel Prize in economics for his work on the public choice theory in 1986. He is generally considered to be the founder of this discipline along with Gordon Tullock. Another significant public choice component, the theory of Regulatory Capture, was developed by nobel laureate George Stigler. A noted critic of extreme public choice theory and another winner of the Nobel Prize in economics is the economist Amartya Sen, who considers public choice theory misused too often in simplified form, describing government officials as only self-interested. However, even Sen, a notable researcher of development economics thinks developing countries should minimize Protectionism and economic regulation if not for any other reason, wholly because of the Corruption often rising from giving economic decision-making power to politicians, and eventually turning the regulation to favor the interests of corporations or large interest groups. (Market Distortion)