PUBLIC CHOICE AND CONSTITUTIONAL POLITICAL ECONOMY Part 1

1. Introduction

Public choice – or the economics of politics – is a relatively new science located at the interface between economics and politics (Mueller 1997, and Shughart and Razzolini 2001). It was founded in 1948 by Duncan Black, who died in 1991 without ever achieving full recognition as the Founding Father of the discipline (Tullock 1991). Its practitioners seek to understand and to predict the behavior of political markets by utilizing the analytical techniques of economics, most notably the rational choice postulate, in the modeling of non-market decision-making behavior.

Public choice - thus defined, is a positive science concerned with what is or what conditionally might be. Its dedicated journal is Public Choice, introduced by Gordon Tullock in 1966 and now ranked among the thirty most important journals in social science worldwide. Its intellectual home is The Center for Study of Public Choice, now located in The James M. Buchanan Center for Political Economy at George Mason University in the Commonwealth of Virginia.

The public choice research program was launched in 1948 by Duncan Black’s paper on the rationale of group decision-making. This paper demonstrated that, under certain conditions, at most one motion is capable of securing a simple majority over every other motion. Specifically, if voter preferences are single-peaked over a single-dimensional issue space, a unique equilibrium exists in the motion most preferred by the median voter. For Black (1948), this result was the political science counterpart of competitive market equilibrium in his own discipline of economics.


In 1950, Arrow seized upon this insight to demonstrate that when Black’s condition of single-peaked preferences does not hold the unique vote equilibrium will not hold and voting cycles may prevail. Arrow incorporated this insight into his famous, 1951 book, Social Choice and Individual Values outlining a difficulty in social welfare. These papers fundamentally challenged Black’s theoretical notion of political stability and offered an alternative theoretical viewpoint that political markets are inherently unstable. These alternative viewpoints would be subjected to extensive empirical evaluation throughout the first half century of the public choice research program.

In 1957, Anthony Downs moved public choice from its early beginnings in analyzing committee decisions and direct elections in an environment essentially devoid of institutions to its subsequent preoccupation with the institutions of democracy and representative government. In a far-reaching contribution, he laid the foundations for an ambitious research program that would apply rational choice theory to every aspect of the political market place. Without apparently having read Black’s (1948) contribution, and having no clear concept of the importance of the median,Downs utilized the spatial economic theory of Harold Hotelling (1929) to emphasize the predictable dominance of the middle voter in two party democracies, thus offering a falsifiable theory of democracy that would attract a large volume of high quality empirical research.

However, even while re-establishing the notion that political markets, under favorable circumstances, may reflect the preferences of the middle voter, even while forcing the rational choice analysis of economists down the throats of political scientists, Downs sowed seeds of doubt that subsequently generated fruitful public choice research. He noted that, in an environment where information is complex, costly to acquire, and offering little economic return to those who acquire it, members of the electorate may economize in its acquisition, relying on ideology as represented by political party brand images to direct their voting decisions. He also noted that members of the electorate might rationally abstain from voting in situations where they could not distinguish between the policy positions of rival candidates or political parties.

Such doubts, notwithstanding, Downs (1957) essentially replicated the work of Black (1948) in rejecting the sophistry of Arrow (1950, 1951) and in reinforcing the notion that political markets inherently are stable and reflect the preferences of the middle voter. His original contribution consists of extending the 1948 insight of Black to the real world institutions of politics.

The classics of public choice reviewed so far focused attention exclusively on voting in unconstrained democratic environments. As such they were only of limited significance for a constitutional republic such as the United States of America, a republic that deliberately was not designed to be a democracy as usually defined. In 1962, Buchanan and Tullock ingeniously shifted the public choice perspective well away from the environment of parliamentary democracy as envisaged by Downs (1957) to reflect the institutions of constitutional republicanism envisaged by the authors of The Federalist almost two centuries earlier.

The Calculus of Consent (Buchanan and Tullock 1962) differed sharply from earlier contributions in the emphasis provided by Buchanan and Tullock on methodological individualism and universal consent. More important for public choice and constitutional political economy, however, was the insight provided by Buchanan and Tullock’s constitutional economic theory. The authors were able to demonstrate that at the constitutional stage, an individual rationally would choose to abide by a vote ratio that minimized the sum of his expected external costs and his expected decision-making costs from collective action. Whether this vote ratio would be some minority vote, a simple majority or some supra-majority vote would depend on the slopes of the two aggregated functions. This result was a direct challenge to the political scientists who almost universally at that time endorsed the normative advantages of majority rule.

The Calculus of Consent also challenged the new welfare economics of Samuelson and Arrow that systematically paved the way for government intervention in free markets on the grounds of widespread market failure. Buchanan and Tullock noted that all categories of market failure – monopoly power, public goods, externalities, limited and asymmetric information and moral hazard – were evident much more in political than in ordinary markets, not least because of the ubiquity of indivisibilities in political markets.

By this insight, Buchanan and Tullock leveled the playing field in the debate over the respective merits of political and economic markets (Goetz 1991). By directing attention to the difference between choices over rules and choices subject to rules.

Although both Downs and Buchanan and Tullock discussed the role for interest groups in political markets, neither of them analyzed interest group behavior from the perspective of rational choice theory. This lacuna was filled by the fifth and final founding father of public choice, Mancur Olson, whose book The Logic of Collective Action (1965) fundamentally challenged the conventional political science view of interest group behavior.

Whereas political science viewed interest groups as reflective of underlying voter preferences and as suppliers of relevant information to political markets, Olson offered a radically different interpretation. Because the objectives pursued by interest groups have profound publicness characteristics, rational choice predicts that their efforts typically will be eroded by free-rider problems, so that groups will be difficult to form and to motivate.

However, such difficulties are not uniform across groups. Existing groups have decisive advantages over potential groups in the competition for political favors; groups offering concentrated benefits are more effective than groups offering dispersed benefits; small groups are more effective than large groups; groups that can coerce supply (e.g. professional associations and trade unions) are more effective than those that cannot; and that successful large groups must rely on providing selective (private) benefits to members in order to attract support for policies with public good/bad characteristics (for a critique of this view see Stigler 1974).

Thus the logic of collective action suggests that competition among interest groups does not simply reinforce the underlying voter-directed political equilibrium. Rather, it predictably distorts the underlying political equilibrium in favor of policies favored by the more effective interest groups, policies typically that provide concentrated benefits for the few financed by dispersed taxes on the many.

2. Alternative Perspectives in Public Choice

Like all successful intellectual innovations, public choice has given birth to a new generation of scholars, journals and research institutions, offering a diversity of approaches and methods, not all of which correspond to those adopted by the ‘founding fathers’ (Mitchell 1988, 1989, 2001). Three schools currently dominate the public choice landscape, each worthy of a brief discussion, namely Rochester, Chicago and Virginia.

Rochester

The intellectual entrepreneur of the Rochester school of positive political theory was William Riker, who began to consider the applicability of the rational choice approach and game theory in political science during the late 1950′s (Riker 1962). In 1964, he strengthened this presence by transforming his introductory text on American government into the first rational choice book aimed at undergraduate majors in political science (Riker 1964).

By rejecting the then fashionable behavioral school in favor of rational choice theory, Riker indicated that he was stepping outside conventional political science in order to embrace the challenge from economics on its own terms. By employing game theory, Riker indicated that conflict and conflict resolution was an integral part of public choice, a view that was not universally shared by the leading Virginian scholars at that time (Buchanan and Tullock 1962).

By 1973, Riker and Ordeshook felt able to define politics as ‘the mystery of how social science evolves out of individual preferences’ (Riker and Ordeshook 1973, p. 6). Their book demonstrated that the mystery would be resolved by mathematical political science buttressed by the use of rigorous statistical method. Once again, Buchanan and Tullock, the joint leaders of the Virginia School were uncomfortable with this choice of scientific method.

The Rochester School encompasses such well-known scholars as Riker, Aranson and Banks (all now deceased), Ordeshook, Brams, Enelow, Hinich, Munger, Aldrich, Schofield, McKelvey, Fiorina, Ferejohn, Shepsle, Weingast, Romer and Austin-Smith. It consistently applies positive political science to the study of elections, party strategies, voting agenda manipulation, interest groups, coalition formation, legislative behavior and bureaucratic behavior. The rational choice approach is deployed unremittingly in this research program.

Until the early 1980′s, with the notable exceptions of Riker and Aranson, the Rochester School focused primarily on abstract theoretical analysis largely ignoring institutional details. In part, this reflected a reaction against the institutionalism of conventional political science. In part, it reflected the preoccupation of Rochester scholars with spatial voting models (Enelow and Hinich 1984). As public choice analysis gradually eroded confidence in the vote motive as a primary determinant of political market behavior, and as Virginia School interest-group theories began to play an ever more important role, the research program of the Rochester School appeared to be in significant decline.

The program was rescued during the early 1980′s by such scholars as Kenneth Shepsle and Barry Weingast who shifted direction and initiated influential research into the institutions of the US legislature and the federal bureaucracy. Drawing heavily on recent research findings in the new institutional economics, these scholars have blended political science with economics to the extent that it is now extremely difficult to unravel the primary focus. Initially, this Rochester program was chauvinistic, directed almost exclusively at US institutions and surprisingly narrow, ignoring the complex interactions between the separate branches of a compound republic. More recently, it has extended its focus to the international arena and has begun to model the interactive behavior of the separate branches of the US government.

The Rochester program, for the most part, eschews normative discussion. Its practitioners, whatever their personal philosophies, report neutrally on such matters as cyclical majorities, log-rolling, interest-group politics, legislative stability, bureaucratic discretion and the like. Some, like Shepsle (1982) are skeptical about constitutional reforms. Others like Fiorina (1983) are hostile to studies that find fault with the federal bureaucracy. Riker and Aranson were notable exceptions to this apolitical neutrality. However, they are no longer with us.

Chicago

The Chicago political economy research program (CPE) was a relatively late starter, launched by George Stigler’s 1971 article on economic regulation. Like so much of Chicago scholarship, this program largely ignored preceding non-Chicago work in the field and still fails to cite such work in its own publications. In rebuilding the wheel, however, it made distinctive contributions to the literature.

Although Stigler retained the mantle of leadership until his death in 1991, leading Chicago economists such as Gary Becker, Sam Peltzman and William Landes and leading legal scholars such as Richard Posner quickly joined the program. Although the Chicago School itself has a lengthy pedigree in normative as well as in positive analysis – Frank Knight, Jacob Viner, Henry Simons and Milton Friedman – CPE under the deconstructive influence of Stigler was overtly positive, asserting for the most part that ‘what is is technically efficient’. Although economists could observe, explain and predict, attempts to change the course of history by and large were deemed to be futile, wasteful uses of scarce resources.

CPE is a body of literature that analyses government from the perspective of rational choice theory and neoclassical price theory (Mitchell 1989, Tollison 1989). It views government primarily as a mechanism utilized by rational, self-seeking individuals to redistribute wealth within society. Homo economicus is modeled almost exclusively as an expected wealth-maximizing agent (Reder 1982). From this perspective, ‘fresh-water economics’ mocks the ‘salt-water economics’ of the east coast academies for their adherence to the public interest theory of government: ‘Get your heads out of the sand you hay-bags!’

Ironically, however, CPE ends up with a view of the political process that is not far distant from that of the public interest school. Specifically, political markets are viewed as technically efficient mechanisms for satisfying the preferences for redistribution of individual citizens working through efficient pressure groups. This interpretation of the political process emanates from a fundamentally flawed application of Chicago microeconomics to the political marketplace.

CPE draws on the tight prior equilibrium methodology applied by Chicago economists in their analysis of private markets (Reder 1982) in its study of transfer politics. The thrust of this methodology is toward instantaneous and durable equilibria, with political markets always clearing. In equilibrium no individual can raise his expected utility (wealth) without reducing the expected utility (wealth) of at least one other individual. Political agents (brokers) clear political markets without invading them as principals. They are driven by constraints, not by preferences. There is no role for ideology in the CPE research program.

The auxiliary hypotheses of the CPE program ensure that political market equilibria are tight and instantaneous. It is assumed that all political actors are price-takers; that there is no discretionary power in political markets; that the prices at which individuals agree to contract are market-clearing prices consistent with optimizing behavior; that such prices reflect all economically relevant information; that individuals engage in optimal search; that all constraints on political market behavior are efficient, reflecting expected utility maximizing behavior on the part of those who create or modify them.

The auxiliary conditions imposed by CPE do not produce political market equilibria based on perfect foresight. Random disturbances cannot be accommodated. Nor will political actors utilize uneconomic information. The system responds with stochastic analogs of determinist general equilibrium. A particular feature of CPE, as of the Chicago School more generally, is the presumption that only propositions derived from tight prior equilibrium theory are valid. In a sense, CPE demands that the findings of empirical research must be consistent with the implications of standard price theory (Reder 1982). This is a dangerous perversion of the methodology of positive economics advanced in 1953 by Milton Friedman.

Ultimately, the Chicago presumption must give way if confronted with relentlessly adverse evidence. But this can take a very long time, given the malleability of statistical techniques and of political-economic data. When Gary Becker (1976) remains willing to defend in-kind transfers as carrying lower excess burdens than lump sum transfers of income, when George Stigler (1992) argues that all long-lived trade protection tariffs are efficient, while William Landes and Richard Posner (1987) defend U.S. tort law as being economically efficient, and while the Journal of Political Economy publishes papers that defend the U.S. federal farm program as an efficient mechanism for transferring income to poor farmers, there is justifiable cause to worry whether CPE scholars and their journal editors ever look out from their ivory towers and survey the real world.

Virginia

The Virginia School, with its early roots in the economics of Frank Knight and Henry Simons at the University of Chicago (Mitchell 1988, 2001) is the most far-reaching program in public choice, provocative because many of its practitioners do not hesitate to step across the divide separating science from moral philosophy. Under the early intellectual leadership of James M. Buchanan and Gordon Tullock, the Virginia School established itself in the teeth of active opposition both from orthodox neoclassical economics and from conventional political science. It has challenged successfully, inter alia, Keynesian macroeconomics, Pigovian welfare economics, conventional public finance and the veneration of simple-majority democracies.

From the outset, the Virginia School differentiated its research program from the early public choice contributions of Duncan Black (1948) and Anthony Downs (1957) through its focus on the logical foundations of a constitutional democracy. In 1962, Buchanan and Tullock published The Calculus of Consent, arguably the single most important text ever written in public choice and constitutional political economy.

This topic demonstrates that individuals are capable of long-run expected utility maximization when establishing the rules of the game, even though they will resort to short-run expected utility maximization when playing under rules. Because constitutional rules are designed to be durable, individuals confront generalized uncertainty with respect to the impact of such rules on their individual lives. This generalized uncertainty makes possible near-universal consent regarding rules even among a heterogeneous electorate without reliance on the artificial assumptions later used by John Rawls in his famous book, A Theory of Justice (1971).

The Virginia tradition commenced in earnest in 1957, with the founding by James Buchanan and Warren Nutter of The Thomas Jefferson Center for Studies in Political Economy at the University of Virginia. For a decade, Buchanan, Tullock, and Ronald Coase pioneered a research program that would fundamentally change the playing field of political economy throughout the Western World by providing an effective scientific counter-balance to the early postwar onslaught by neoclassical economists targeted against the capitalist system.

Throughout the period 1945 – 1957, Keynesian macroeconomists, Pigovian welfare economists, Arrovian social choice theorists and Musgravian public finance scholars had waged an unrelenting war against free markets, alleging near-universal market failure and exploring the appropriate public sector responses by benevolent and impartial democratic governments. Even such an old-style free market economist as Milton Friedman (1963) was forced onto the defensive, devising ever more exotic methods of government intervention designed to minimize the discretionary power of government while recognizing that private markets were widely beset by such problems as monopoly, externalities, public goods and bounded rationality. Even Harold Demsetz, whose writing always stressed the importance of a comparative institutions approach to policy formation, had no theory of government from which to launch a scientific counter-attack.

In a tour de force, Buchanan and Tullock (1962) provided the missing theory of government and placed the advocates of market failure on the defensive (Goetz 1991). If problems of monopoly, externalities, public goods and bounded rationality afflicted private markets, they simply ravaged political markets that confronted individuals with massive indivisibilities and severely limited exit options. The scene was set for a program of scientific endeavor that would expose government failures and for a program of moral philosophy that would support constitutional reforms designed to restrict the scope and size of government.

The Virginia School does not focus primarily on the vote motive as the fulcrum of political markets, in part because of the paradox of voting implicit in rational ignorance and rational abstentions in large numbers elections, in part because of the lengthy period between elections (Mitchell 1988) and in part because of agenda control problems (Romer and Rosenthal 1978). Instead, a great deal of analysis is focused on the behavior of interest groups, the legislature, the executive, the judiciary and the bureaucracy. The results of such scientific inquiry rarely show the political market in a favorable light. Only through constitutional interventions do Virginians see much prospect of utility-enhancing institutional reforms.

The Virginia research program analyses government, from the perspective of neoclassical price theory, as a vehicle used by rational self-seeking individuals to redistribute wealth. In this respect, the protected core of the research program closely resembles that of Chicago. Yet, its central hypotheses – suggestive of widespread government failure – could not be more different.

Important differences in the auxiliary statements of the two programs explain this divergence. Virginia, unlike Chicago, does not assume that individuals are always price takers in political markets; significant discretionary power is recognized. Virginia does not assume as generally as Chicago that political markets clear instantaneously and completely. Virginia does not assume that decision-makers in political markets are always fully informed about the present or that they are capable of forming rational expectations over the future. Virginia does not excise human error from its theory of political market behavior, and does not ignore institutions in favor of black-box theory.

That its central hypotheses differ so sharply from those of a school that applies unmodified private market theory to political market analysis is only to be expected.

3. The Vote Motive

The early contributions to public choice (Black 1948, Downs 1957) viewed the vote motive as a key determinant of political market equilibrium. Black (1948) deduced the median voter theorem whereby competing political candidates would be driven by vote considerations to converge in policy space to a unique and stable equilibrium that reflected the policy preferences of the median voter.

Downs (1957) reinvented Black’s wheel albeit without reference to the median voter. He focused on systems of two party representative governments and demonstrated that vote maximizing politicians would formulate policies to win elections rather than seek political victory in order to implement preferred policies. He also noted the tendency for such political competition to converge to the center of the voter distribution, albeit without distinguishing between the mode, the median and the mean since he deployed normal distributions throughout his analyses.

This equilibrium offered little discretion to political parties unless they had no serious aspiration to govern. As such, it should have been attractive to those wedded to majoritarian political outcomes. In reality, it was anathema to conventional political scientists because of its strict adherence to the rational choice approach.

In the event, the median voter theorem, while still attracting attention among public choice scholars promised more than it could deliver. It rests on a stringent set of assumptions that coincide only rarely in political markets:

1. Two political parties must contest the election;

2. The policies at issue must collapse into one dimension of left-right space;

3. Voter preferences must be single-peaked over policy space;

4. Political parties must be able and willing to move across policy space;

5. Political parties must be well informed regarding the preferred policies of the voters;

6. Voters must be well informed regarding the policy positions of the competing parties;

7. Voters must not abstain in significant numbers from voting in elections;

8. Voters must punish governments that deviate from their electoral manifesto.

Once these assumptions are relaxed, individually or severally, to take account of the realities of political markets, the median solution is much less dominant, especially where the distribution of voter preferences is skewed or multi-modal. In some circumstances, the mean dominates the median (Romer and Rosenthal 1979). In others, the political equilibrium cycles in single or in multi-dimensional policy space (Black 1948, Arrow 1951). In yet other circumstances, there is no equilibrium as the political parties become immobilized at separate positions in policy space.In consequence the grip of voter majorities over the election manifestos must be viewed as much looser than either Black or Downs was willing to acknowledge.

Enelow and Hinich (1984) challenged the assumption, central both to Black and to Downs, that competing political parties (or presidential candidates) are mobile over policy space. Their counter-hypothesis is that political parties are immobilized in the short run by the recent history of their political behavior. In such circumstances, political parties (candidates) must advertise to consolidate the voter preference distribution around their respective positions in policy space. Rationally ignorant voters are vulnerable to such persuasive advertising. To the extent that they are correct, and elections are determined by campaign expenditures, the concept of revealed voter preferences is rendered suspect and, with it, the underlying connection between political equilibrium and majoritarian politics.

The probability that an individual vote will prove to be decisive in a major election is minute (less than one in a million in U.S. presidential elections (Stigler 1971). This implies that the differential expected benefit to any voter from voting decisively in an election is also trivial, far less than the cost of voting. Only some notion of civil duty or some major miscalculation of probabilities will drive the rational voter to the polls. Only an active consumption interest will motivate the rational individual to become informed about the political market. Otherwise, he will remain rationally ignorant, whether or not he casts his vote, and will rely on opaque ideology indicators to determine his electoral strategy (Downs 1957). Alternatively, knowing that his vote is indecisive, he will vote expressively, following his heart rather than his interest. This serious consequence of the indivisibility of the vote mechanism opens up tempting avenues for interest groups to invade the political process (for a counter view see Peltzman 1984).

Elections are discrete events in a continuous political process. The vote motive, at its best, is only as influential as elections are in controlling the post-election behavior of incumbents (Tullock 1976). Such control is limited by the high rate of voter memory decay that protects deviant governments from adverse electoral consequences. It is further weakened by the ability of political parties to full-line policy bundles intermingling popular with less popular policy proposals in the electoral process.

Once again, these weaknesses open up opportunities for effective interest groups to divert the supply of policies well away from the preferences of the median voter (for a useful survey of spatial models see Ordeshook 1997).

4. The Special Interests

A special interest issue is one that generates substantial personal benefits for a small number of constituents while imposing a small individual cost on a large number of other potential voters (Gwartney and Wagner 1988). As James Madison recognized in The Federalist (Number 51, 1787), a majority-based system of representative government is biased toward the adoption of special interest (or faction-based) policies, even when such policies are generally harmful to society. The Founding Fathers wrote the separation of powers and the bicameral legislature into the United States Constitution to curtail this perceived political bias. The ‘Bill of Rights’ (the first ten amendments to the Constitution) were clearly designed to protect individuals from the excesses of federal and state governments.

Arguably, these constitutional constraints have failed to hold firm against special interest pressures. Facilitated by a weak Supreme Court, that became increasingly deferential toward the legislative branch of government after 1936, parchment has ceded victory to the guns of the special interests and has allowed factions to roam freely across constitutional constraints (Wagner 1987).

Special interests emerge to take advantage of rational ignorance within the legislature, through the mechanism of persuasive campaign contributions, to obtain advantages for their members more than commensurate with their relative voting strength. Their success depends on their relative abilities to offer political gains, in the forms of votes and money, to politicians who broker policies beneficial to concentrated interests and detrimental to diffused interests (Ekelund and Tollison 2001). Legislatures infested with such parasites typically manifest weak party allegiance and relatively high incumbent electoral success rates.

The logic of collective action (Olson 1965) demonstrates that interest groups are far from easy to organize. Because many of the benefits to be derived from effective interest group lobbying have public good or public bad characteristics, free riding by members of the group is rational. Such free riding diminishes the pressure that can be exerted on the legislature. The free riding problem is not dispersed equally, however, across potential interest groups. Some groups, notably in the United States, trade unions and professional groups, are able to coerce supply. Other groups, notably producer groups, successfully engage in collective action, in the absence of coercion, because they are small and homogeneous. These groups predictably will be differentially successful in the political process.

Large, diffuse groups confront the free riding problem in its most devastating form. In many instances, for example consumers and taxpayers, they simply cannot form an effective coalition. If such interest groups are to be politically effective, they must organize themselves primarily to provide private (or selective) benefits to the membership, bundling their public objectives into the subscription fee as a by-product of their activities. The by-product solution, coupled with the tax privileged status of most such groups, explains the existence and relative success of organizations active on behalf of the elderly, of abortion rights, of the environment etc., each of which is plagued by public good or public bad characteristics.

To the extent that Olson’s (1965) theory is correct, and there is a great deal of accumulated evidence in its favor, the implications for the political process are serious. Interest group pressures will divert the political equilibrium away from the median voter even under circumstances outlined by Duncan Black (1948). Moreover, because such diversions are most effectively achieved through redistributions that are opaque and not transparent, interest group politics will impose high excess burdens on society, as regulations and complex in-kind subsidies are favored over lump sum transfers (Olson 1982).

The logic of collective action constitutes a core element of Virginia Political Economy. It has been challenged, inevitably, by the Chicago School, notably in the scholarship of Gary Becker (1983, 1985) and more recently of Donald Wittman (1989, 1995). Gary Becker modeled interest groups within a general equilibrium framework, on the assumption that they can be formed and reorganized at a minimal cost, that their policy benefits, for the most part, are private and not public in nature, and that free riding can be limited by low cost monitoring. It is not surprising that these assumptions result in a much more benign view of such organizations.

Specifically, Becker suggests that interest groups redistribute wealth efficiently, minimizing the deadweight costs to society. Groups that impose high deadweight excess burdens, in this view, are replaced by more efficient alternatives. This Panglossian view has its advocates, mostly from the University of Chicago. The public choice evidence almost universally refutes the predictions of the model (Ekelund and Tollison 2001). There are, for example, virtually no instances of lump sum redistribution in any democracy. Sadly, the post-Friedman Chicago is less interested in positive methodology (Friedman 1953, Lakatos 1978) and more interested in the elegance of theory, in this sense following the standard bias of modern neoclassical economics.

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