A Review on ‘People are People: The Elements of Public Choice’

‘People are People: The Elements of Public Choice’ deals with what Public Choice is and its effect upon democratic processes. The author thinks of Public Choice as a relatively new discipline, the students of which, contrary to the traditional view, hold that the government does not seek to maximise the welfare of the nation as a whole; instead it serves the individual interests of government officials. Collective welfare of all the citizens in a nation is merely a by-product of the process by which private individuals and government officials maximise their interests in commodity, factor and ‘political’ markets.

The author traces the historical roots of this assumption. From the time of Aristotle and Plato, it was believed that political economy was the science of “right” action. Businessmen and civil servants were told what was morally correct and they had to do it. David Hume and particularly, Adam Smith removed this moralistic perception. They held that private individuals, at any rate, maximised their own utility in the market place. However even Smith held that public interest governed public policy. This was the difference between homo politicus and homo economicus. Homo politicus thought of maximising the public interest. A contradictory bifurcated view sprang up. This held that the same people that participate in market activities engage in public policy making as well- either directly or indirectly. Thus government officials too maximise their own interest in formulating public policy.

This assumption is far more realistic than that held in traditional thought. It follows that the government isn’t altogether efficient and is no champion of equity and equality. This also implies that government intervention isn’t a necessary cure for market failures. Unfortunately, the author does not investigate as to whether market failure is a sufficient condition for government intervention, which it may as well be, especially in case of what Sen and Dreze consider as ‘errors of omission’.[1] For instance, in the case of a famine that has originated due to a lack of purchasing power to buy food grains, the market has committed an error of omission. It hasn’t generated enough purchasing power. Thus this is a sufficient condition for the government to start an income and employment generating relief programme. As far as Public Choice is concerned, students of this discipline will hold that politicians would propose this programme in order to get re-elected. It is in their self interest. This assumption is a practical one.

The author holds that the asymmetry of information problem is far more acute in the case of political markets. While one is likely to research the features of an automobile one would like to buy, one’s vote would merely be one in a million while electing a political leader. Thus one would not have an incentive to research the integrity and efficiency of that leader. While markets target well informed consumers, politicians target badly informed citizens. This deduction has an inherent flaw- it has not considered the role of the media. After all, the media provides a fairly researched insight into the activities of various political figures. If a politician is caught taking bribes or politicising economic decisions (locating PSUs in their own constituencies) the media is quite likely to inform the public of it. However, it may sensationalise facts to serve its profit motive but this will only bring short-term profits. In the long run and in a fairly competitive market, the media’s consumers will not like being misinformed.

The author gives the impression that students of public policy are cynical about the role of the government. Thus they believe that government functions should be privatised, as in, contracted out. Also they should be decentralised. Instances of each have been provided. The efficiency of contracting out is evident in that the United States’ privatised military procurement has proved to be more efficient than the military’s production of its own material. This is possible even in India and is now being carried out in the form of PPP (Public Private Partnership). As per decentralisation, a lot of community members often get together and take decisions on the administration of the community schools, hospitals etc. They also decide upon issues like how late an individual may play music or what colour each individual should paint her fence. This internalises externalities and would be particularly effective in India. If the teachers of a rural school were responsible to the parents rather than to the State Ministry of Education, teacher absenteeism and poor teaching quality would be greatly reduced.

Thus Public Choice is a discipline with a largely realistic outlook. However, it is far too cynical about the government. In a country like India, government investment is highly important, especially in fields like education, health and infrastructure provision where there is scope for positive externalities and where the asymmetries of information are many. A poor woman, who takes her child to a not-so-well-known private clinic as she cannot afford to go to a private clinic or hospital of repute, may not know whether she or he is being injected with plain water instead of vaccine. Surely, it is in the interests of the clinic to inject the child with plain water as this minimises costs. In case of a government clinic however, the treatment is more likely to be of a particular standard. Thus government investment in improving the condition of these clinics is a must.
[1] See Sen and Dreze, ‘Development and Participation’, Chapter 2.


Ruchira Sen