PUBLIC CHOICE APPROACH
"Public choice approach is the economic study of non-market decesion making or the application of economics to the political process of collective decesion making "
MAIN PROPOSITIONS OR ARGUMENTS OF PUBLIC CHOICE APPROACH
1)Human Behaviour is dominated by self interest
Individual who seeks utility maximisation shall remain a utility maximiser under all settings.
2) the govt is a collection of individuals
"the simple view that government's collective decesion making process solves social problems selflessly and in common interest is just romanticism in politico economics theory " JAMES BUCHANAN
3)The theory of govt failure
The argument is that the real world govt and real world collective decesion makers may not have self interest in efficiency. On the contrary they may actually have self interest in inefficiency.
-Vote maximising behaviour
-Self aggrandising behaviour
-Wealth maximising behaviour
COMPONENTS OF PCT
-Rent seeking theory by Anne Krueger, Gordon Tullock, James Buchanan
-Capture Theory by George Stigler
-Theory of self-seeking behaviour by Anthony Downs
CAPTURE THEORY
Given by George Stigler
The core proposition of this theory is that powerful interest groups can influence the enactment of laws n regulations in a self interested n self serving manner.
For eg :
What kind of excise laws or land laws or SEZ policy, mining laws etc are made, are often a result of the capture influence.
"Public choice approach is the economic study of non-market decesion making or the application of economics to the political process of collective decesion making "
MAIN PROPOSITIONS OR ARGUMENTS OF PUBLIC CHOICE APPROACH
1)Human Behaviour is dominated by self interest
Individual who seeks utility maximisation shall remain a utility maximiser under all settings.
2) the govt is a collection of individuals
"the simple view that government's collective decesion making process solves social problems selflessly and in common interest is just romanticism in politico economics theory " JAMES BUCHANAN
3)The theory of govt failure
The argument is that the real world govt and real world collective decesion makers may not have self interest in efficiency. On the contrary they may actually have self interest in inefficiency.
-Vote maximising behaviour
-Self aggrandising behaviour
-Wealth maximising behaviour
COMPONENTS OF PCT
-Rent seeking theory by Anne Krueger, Gordon Tullock, James Buchanan
-Capture Theory by George Stigler
-Theory of self-seeking behaviour by Anthony Downs
CAPTURE THEORY
Given by George Stigler
The core proposition of this theory is that powerful interest groups can influence the enactment of laws n regulations in a self interested n self serving manner.
For eg :
What kind of excise laws or land laws or SEZ policy, mining laws etc are made, are often a result of the capture influence.
THEORY OF SELF SEEKING BEHAVIOUR
This happens bcz of absence of market discipline. To elaborate Bureaucrats are not subjected to market discipline bcz they don't hv any personal stakes in the performance or non performance of public organisations.
As a result neither the success of public organisations greatly helps them nor the failure hurts them.
Downs wrote two imp books --
INSIDE BUREAUCRACY
An Economic Theory of Bureaucracy
This happens bcz of absence of market discipline. To elaborate Bureaucrats are not subjected to market discipline bcz they don't hv any personal stakes in the performance or non performance of public organisations.
As a result neither the success of public organisations greatly helps them nor the failure hurts them.
Downs wrote two imp books --
INSIDE BUREAUCRACY
An Economic Theory of Bureaucracy
Rent seeking theory
Argues that certain sections of the public or certain special interest groups have intense preferences for or against particular governmental policies or decesions and therefore they seek to earn benefits to manipulation and exploitation of politico economic envt.
Such behaviour on the part of these individuals or groups is called Rent seeking behaviour. Infact if anything, rent seeking is a shear wastage from societal point of view bcz no addition to wealth is created and Infact the resources which ought to hv been spent on public cause, go into private pockets.
GORDON TULLOCK in his 1967 paper "The welfare costs of tariffs monopolies and thefts ". Later the term rent seeking was coined in 1974 by ANNE KRUEGER in another influential paper "Political economy of the rent seeking society "
GORDON TULLOCK 's book
THE POLITICS OF BUREAUCRACY
RENT SEEKING
"much of the modern politics can only be interpreted as Rent seeking activities " James Buchanan
Argues that certain sections of the public or certain special interest groups have intense preferences for or against particular governmental policies or decesions and therefore they seek to earn benefits to manipulation and exploitation of politico economic envt.
Such behaviour on the part of these individuals or groups is called Rent seeking behaviour. Infact if anything, rent seeking is a shear wastage from societal point of view bcz no addition to wealth is created and Infact the resources which ought to hv been spent on public cause, go into private pockets.
GORDON TULLOCK in his 1967 paper "The welfare costs of tariffs monopolies and thefts ". Later the term rent seeking was coined in 1974 by ANNE KRUEGER in another influential paper "Political economy of the rent seeking society "
GORDON TULLOCK 's book
THE POLITICS OF BUREAUCRACY
RENT SEEKING
"much of the modern politics can only be interpreted as Rent seeking activities " James Buchanan
When a firm uses its resources to procure an unwarranted monetary gain from external elements without giving anything in return to them or the society, it is termed as rent-seeking.
Definition: When a firm uses its resources to procure an unwarranted monetary gain from external elements, be it directly or indirectly, without giving anything in return to them or the society, it is termed as rent-seeking.
Description: Instead of creating wealth, a firm seeks to obtain financial gains from others through alteration/ manipulation of the environment where economic activities take place. A popular example for rent-seeking is political lobbying by companies. These are primarily done by companies in order to make economic gains through government action.
This might be done by a company to get subsidy from the government for the product which it produces or increasing tariff rates by the government for its services, etc. Such a practice neither leads to creation of new wealth, nor does it benefit the society.
Definition: When a firm uses its resources to procure an unwarranted monetary gain from external elements, be it directly or indirectly, without giving anything in return to them or the society, it is termed as rent-seeking.
Description: Instead of creating wealth, a firm seeks to obtain financial gains from others through alteration/ manipulation of the environment where economic activities take place. A popular example for rent-seeking is political lobbying by companies. These are primarily done by companies in order to make economic gains through government action.
This might be done by a company to get subsidy from the government for the product which it produces or increasing tariff rates by the government for its services, etc. Such a practice neither leads to creation of new wealth, nor does it benefit the society.
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