Public choice theory

Public choice theory applies the tools of economics to politics. It assumes that voters, politicians, bureaucrats and interest groups act largely out of self-interest, which means that government decisions reflect incentives and not just the public good.

The field was developed by James Buchanan and Gordon Tullock, whose The Calculus of Consent (1962) is a foundational work, and by Anthony Downs, Mancur Olson and others. Buchanan won the Nobel Prize in Economics in 1986. Key ideas include rational ignorance, the observation that voters have little incentive to learn about complex issues; the power of concentrated interest groups over diffuse majorities, as in Olson's logic of collective action; and rent-seeking, the use of political means to gain economic advantage, which feeds regulatory capture.

It underpins the case, popular among conservatives and libertarians, for constitutional rules that limit government, since officials are not benevolent planners, and has been used to explain features such as earmarks and subsidies. Critics argue that the self-interest assumption is too narrow, that many public servants are motivated by duty and that it underestimates the capacity of democratic institutions. The theory is also known as "government failure" analysis, a counterpart to market failure.