PUBLIC CHOICE ECONOMICS: A CRITICAL REVIEW OF THE LITERATURE ON MARKET FAILURE, GOVERNMENT INTERVENTION AND ARROW THEOREM

Abstract

This paper provides a critical review of the literature on public choice economics by highlighting some of its intriguing complexities to include issues like market failure and government intervention, rent-seeking activities with individual and collective interest, and Arrow’s impossibility theorem. The review of some existing literature shows that even when there is a collective goal that seems to bind up the general public in a society, individual interests might jeopardize the actualization of such collective goals and in some cases, some individuals can even go ahead to device means to exploit private gains from the privileges of public offices; a situation that is commonly refers to as rent-seeking. Furthermore, the Arrow impossibility theorem argues that collective interest cannot be taken as a mere aggregation of individual interest as it might be presumed in the ordinary sense and this theorem has provided a huge basis upon which many important contributions in the field of public choice economics are founded.

Keywords

• Public Choice,Market Failure,Government Intervention,Rent Seeking,Arrow Theorem

References

1. Aidt, T. S. (2016). Rent-seeking and the economics of corruption. Constitutional Political Economy, 27(2), 142-157.
2. Bellinger, W. (2016). The Economic Analysis of Public Policy. London: Routledge, https://doi.org/10.4324/9781315757940.
3. Block, W., & DiLorenzo, T. J. (2000). Is voluntary government possible? A critique of constitutional economics. Journal of Institutional and Theoretical Economics (JITE)/Zeitschrift für die gesamte Staatswissenschaft, 567-582.
4. Buchanan, J. M., & Tullock, G. (1962). The calculus of consent (Vol. 3). Ann Arbor: University of Michigan Press.
5. Butler, E. (2012). Public choice-a primer. Institute of Economic Affairs Occasional Paper, 147.
6. Den Hertog, J. A. (2010). Review of economic theories of regulation. Discussion Paper Series/Tjalling C. Koopmans Research Institute, 10(18).
7. Geanakoplos, J. (2005). Three brief proofs of Arrow’s impossibility theorem. Economic Theory, 26(1), 211-215.
8. Hardin, R. (1990). Public choice versus democracy. Nomos, 32, 184-203.

9. Iqbal, N., & Daly, V. (2014). Rent seeking opportunities and economic growth in transitional economies. Economic Modelling, 37, 16-22.
10. Le Grand, J. (1991). The theory of government failure. British journal of political science, 21(4), 423-442.
11. MacRae, D., & Wilde, J.A. (1985). Policy analysis for public decisions. Lanham, MD: University Press of America.
12. Maniquet, F., & Mongin, P. (2015). Approval voting and Arrow’s impossibility theorem. Social Choice and Welfare, 44(3), 519-532.
13. Mueller, D. C. (2008). Public choice: an introduction. In Readings in public choice and constitutional political economy (pp. 31-46). Springer, Boston, MA.
14. Murphy, K. M., Shleifer, A., & Vishny, R. W. (1993). Why is rent-seeking so costly to growth? The American Economic Review, 83(2), 409-414.
15. Ostrom, E., & Ostrom, V. (2004). The quest for meaning in public choice. American Journal of Economics and Sociology, 63(1), 105-147.
16. Qvortrup, M., & Qvortrup, M. (2005). A comparative study of referendums: Government by the people. Manchester University Press.
17. Schmitter, P. C., & Karl, T. L. (1991). What democracy is... and is not. Journal of democracy, 2(3), 75-88.
18. Stiglitz, J. E. (1989). Markets, market failures, and development. The American Economic Review, 79(2), 197-203.
19. Stiglitz, J. E. (2008). Government failure vs. market failure: Principles of regulation.
20. Svensson, J. (1999). Foreign aid and rent-seeking. The World Bank. DOI: 10.1596/1813-9450-1880. https://elibrary.worldbank.org/doi/pdf/10.1596/1813-9450-1880
21. Tideman, N. (2017). Collective decisions and voting: the potential for public choice. Routledge. Vickers, J. (1991). Government regulatory policy. Oxford Review of Economic Policy, 7(3), 13-30.
22. Tollison, R. D. (2004). Rent seeking. In The Encyclopedia of Public Choice (pp. 820-824). Springer, Boston, MA.
23. Tullock, G., Brady, G. L., & Seldon, A. (2002). Government failure: a primer in public choice. Cato Institute.
24. Tullock, G. (1967). “The welfare costs of tariffs, monopolies, and theft.” Western Economic Journal, 5: 224–232.
25. Yu, N. N. (2012). A one-shot proof of Arrow's impossibility theorem. Economic Theory, 523-525.
26. Zerbe Jr, R. O., & McCurdy, H. E. (1999). The failure of market failure. Journal of Policy Analysis and Management: The Journal of the Association for Public Policy Analysis and Management, 18(4), 558-578.