Public Sector Economics

In Class Exercise Three (The Public Choice Revolution)

1.  Before Public Choice theory (and still today in some circles) it was widely believed that government was simply promoting the best interest of society.  And yet, many economists were puzzled by the fact that government adopted policies that are not in the general interest of society (at least from the economists point of view).  So how does Public Choice theory explain the adoption of these policies by government?  Provide a couple of theories.

2.  What is the "violence of faction" principle and why, according to Public Choice theory, does it lead to "bad" outcomes in the democratic political process? (define "bad" here too).

3.  When will we see more rent-seeking and why?  Provide two reasons/explanations here.

4.  Explain why most politicians have an incentive to adopt shortsighted policies instead of policies that take time to create results? 

5.  How can the inefficiencies of the political process be lessened (according to Gwartney and Wagner)?  Do you agree or disagree with them?  Can you think of other rule changes (general or specific) that you think will decrease inefficiencies?

    Generally?

    Some Specifics?

6.  Public Choice economist James Buchanan is often quoted as saying, " Public Choice is nothing more than common sense, as opposed to romance."  What do you think he meant by this?

7.  "Public Choice scholars address the challenge of determining what is the best 'of the imperfect solutions'."  Discuss this statement (it relates to #6).

8.  Do you have any other questions on this material?