"Public choice, or public choice theory, is 'the use of economic tools to deal with traditional problems of political science'. Its content includes the study of political behavior."
Public choice theory applies the tools of economics to the study of political decision-making. Public economics examines different models of political behavior and their implications for policy outcomes.
Theories of Public Choice: A central topic in Public Choice is the development of economic models that explain the behavior of politicians, bureaucrats, and voters in the context of decision-making in the public sector. Theories of Public Choice include rational choice, game theory, collective action, principal-agent models, and rent-seeking models.
Public Goods and Externalities: Public goods are goods that are non-excludable and non-rival, which means that they are available to everyone and their use by one person does not diminish their availability to others. Examples of public goods include national defense, clean air, and public parks. Externalities are costs or benefits that are not reflected in the market prices and can affect third parties. They include pollution, traffic congestion, and noise.
Taxation and Redistributive Policies: Taxation is an important tool used by governments to raise revenue to finance public goods and services. It is also used for redistributive purposes to reduce income inequality. Topics in this area include tax efficiency, tax fairness, progressive taxation, and welfare policies.
Public Sector Organizations: Public sector organizations comprise a diverse set of agencies, departments, and bodies that provide public goods and services. Topics in this area include the incentives and behaviors of bureaucrats, public-private partnerships, and government regulations.
Public Choice and Political Economy: The study of public choice often overlaps with political economy, which is concerned with the interaction between economic and political systems. Topics in this area include the role of interest groups, the influence of electoral systems on policy outcomes, and how political institutions affect the behavior of voters.
International Public Choice: International public choice studies the behavior of governments, international organizations, and multinational corporations in the global economy. Topics in this area include trade policy, foreign aid, and international institutions.
Social Choice Theory: Social choice theory is concerned with the aggregation of individual preferences into societal choices. It is an important tool for understanding how collective decisions are made in democratic societies. Topics in this area include voting systems, Arrow's impossibility theorem, and the theory of public choice games.
Experimental Public Choice: Experimental public choice is a rapidly growing field that uses laboratory experiments to test theoretical predictions about the behavior of politicians, bureaucrats, and voters in the public sector. Topics in this area include the design and implementation of experiments, the replication crisis, and the external validity of laboratory findings.
Empirical Applications of Public Choice: Empirical studies apply Public Choice theories to real-world data to test theoretical predictions and inform policy decisions. Topics in this area include the estimation of demand and supply functions for public goods, the analysis of voting behavior, and the evaluation of government programs and policies.
Voting theory: Study of how individuals and interest groups influence and respond to political decision-making.
Rent-seeking theory: Study of how individuals and firms use political power to gain economic benefits, often at the expense of others.
Regulatory economics: Study of how government regulation can affect economic behavior and outcomes.
Public goods theory: Study of the provision of public goods such as roads, schools, and parks, and how these goods are financed and managed.
Social choice theory: Study of how to make collective decisions when individual preferences may conflict.
Fiscal policy: Study of how government spending and taxation policies affect economic growth and stability.
Property rights theory: Study of how legal systems and institutions affect the ability of individuals to own and control property.
Public finance: Study of how governments finance their spending through taxation, borrowing, and other means.
Federalism: Study of how power and decision-making are distributed between federal, state, and local governments.
Game theory: Study of how individuals and groups interact strategically, and how this affects outcomes in markets and politics.
"It is the subset of positive political theory that studies self-interested agents (voters, politicians, bureaucrats) and their interactions."
"...which can be represented in a number of ways – using (for example) standard constrained utility maximization, game theory, or decision theory."
"Economist James M. Buchanan received the 1986 Nobel Memorial Prize in Economic Sciences 'for his development of the contractual and constitutional bases for the theory of economic and political decision-making' in this space."
"In popular use, 'public choice' is often used as a shorthand for components of modern public choice theory that focus on how elected officials, bureaucrats and other government agents can be influenced by their own perceived self-interest when making decisions in their official roles."
"Public choice theory is also closely related to social choice theory, a mathematical approach to the aggregation of individual interests, welfare, or votes."
"Public choice analysis has roots in positive analysis ('what is') but is often used for normative purposes ('what ought to be') in order to identify a problem or to suggest improvements to constitutional rules."
"Rather, decisions are made by the combined choices of the individuals."
"The second is the use of markets in the political system, which was argued to be a return to true economics."
"The final is the self-interested nature of all individuals within the political system."
"As Buchanan and Tullock argued, 'the ultimate defense of the economic-individualist behavioral assumption must be empirical...The only final test of a model lies in its ability to assist in understanding real phenomena'."