A range of philosophers, from John Locke to Thomas Hobbes, have written about the relationship between government and individuals. But there was almost no empirical analysis of the incentives facing the political class, until economists James Buchanan and Gordon Tullock wrote their seminal work, "The Calculus of Consent". Today their book forms the foundation of something called public choice theory.
What is public choice theory? It's a branch of economics that attempts to see the world from the perspective of politicians, bureaucrats, pressure groups and voters. Essentially, it's a discipline that studies the motivations of political actors using the techniques of economic science. For the most part, public choice models have assumed that individuals rationally pursue their self-interest within a specified set of constraints. This conception of self-interest is not to be equated with a hedonistic and narrow "greed". Indeed, some economists, such as Gary Becker, have modeled utility functions that take altruism into account.
No, it's not greed, but a deep suspicion of government that sets public choice apart from other disciplines. It's said that a person who makes a transition from the private to the public sector does not lose their desire to maximise individual utility merely because their job description has changed. This insight shatters the traditional view of government as a benevolent force for good.
First, it is strongly sceptical of the belief that democratic governments act consistently with moral imperatives to serve the best interests of society. In practice, politicians zealously pursue re-election without regard to the public interest. Public choice theorists contend that politicians concentrate the benefits of their policies towards a small number of special interest groups, while spreading the costs across taxpayers as a whole. For example, a subsidy to the sugar industry comes at the expense of those citizens who don't grow sugar. Interest groups have an incentive to engage in "rent-seeking" behaviour by spending large sums of money to extract privileges from the legislators who depend upon them for campaign funds and votes. This rent-seeking imposes "deadweight costs" on the economy as resources expended on lobbying could have been put to more productive uses elsewhere.
Second, public choice challenges the notion that the bureaucracy is an impartial entity diligently serving the public good. Even where a politician, in good faith, tries to work towards the "public interest", bureaucrats engage in rent-seeking behaviour that hinders rather than helps. There is said to be an asymmetrical information bias between politicians and the bureaucracy. Some have hypothesised that senior public servants often know how much it will cost to implement a particular policy, but nevertheless avoid disclosing accurate figures. This is because civil servants are interested in maximising their discretionary budgets by seeking a larger appropriation than necessary. An increase in discretionary budgets is postulated to be linked to higher salaries and more perks. Hence, a normative conclusion of public choice is that well-intentioned politicians must take care to avoid falling victim to self-interested pleas for additional funding, by insisting rigorous cost-benefit analyses are carried out.
Third, public choice literally forces us to think twice before placing faith in government's capacity to solve problems. Friedrich Hayek, in his essay entitled "The Use of Knowledge in Society", argues that politicians and bureaucrats who plan programs lack necessary "knowledge of the particular circumstances of time and place" (p. 524). Local information that is crucial for successful implementation of policy is only reliably available to private citizens on the ground. For this reason, it is suggested, many government policies do not achieve their intended objectives as legislators are not aware of all relevant events affecting the topics on which they cast a vote, and nor do they possess perfect knowledge in an epistemological sense. This lends support to the perception that a small, less interventionist government is preferable.
Several criticisms of public choice have been put forward. Some have argued that it is based on faulty assumptions - it is too sweeping to claim human beings are always rationally self-interested. Others take the view that public choice models are too simplistic to be of use: they do not take into account other relevant factors and their scope is limited to that which can be quantified. It would seem however, that these critiques are relevant only to the extent that public choice is inconsistent with the facts of a particular situation. Overall, public choice has been extremely valuable in dispelling the naive belief that governments pursue the public interest.