Saturday, February 04, 2012

Public Choice Theory for Agvocates

For aggies, agvocates, and otherwise 'agnerds' that are particularly interested in ag policy, if you are not familiar with public choice theory, I think you might find it as interesting as I have. For all of the regulatory issues facing the ag industry, (dust regulation, GIPSA, child labor laws, biotech and GMO issues, taxes, etc.) public choice offers a powerful but fairly straightforward analytical framework for policy analysis.

 The moral of the public choice story is that democracy and governments are not perfect. When we have issues with market outcomes and we are thinking about new regulations or government spending to correct those problems, public choice analysis offers a guide. Public choice analysis implies that we have to question which system will provide the best information and incentives to act on that information to achieve the results that we want. The democratic process itself offers no guarantee that the decision will be the best solution to our problems.

Below is a list of topics related to public choice with simple short descriptions as well as links to more detailed discussions. Following that, I've provided some links to some applications of the theory and tools, including many related to issues important to the agriculture industry.  For another good primer, I also recommend the article 'The Public Choice Revolution', Regulation Fall 2004. ( link ).

Concepts related to public choice theory include the following:

RENT SEEKING -  the act of seeking special privileges or protections form the government.

TYPE TWO ERROR BIAS - overcautious behavior, ex: FDA drug approval, response to Hurricane Katrina

VOTING PARADOXES- randomness of election outcomes

MEDIAN VOTER THEOREM- leads to exploitation of minority by majority

TRAGEDY OF THE COMMONS – lack of property rights and pollution

COASE THEOREM – symmetry of environmental pollution, internalizing effect of property rights and markets

TRAGEDY OF THE ANTICOMMONS – underutilized resources due to excessive checks on power, bureaucracy. Ex: response to hurricane Katrina

KNOWLEDGE PROBLEM- government relies on a ‘shrunken’ pool of knowledge vs. markets

My applications of public choice theory:

Biotech Alfalfa: Who may harm whom? An Application of the Coase Theorem

The Constitution, Democracy, and Public Choice

Biotech and Rent Seeking

Rent Seeking and Biotechnology

Homeland Security, The Knowledge Problem, and Rent Seeking

Cap and Trade: Can we really price carbon?

More on biotech and rent seeking...NYT

Rent Seeking, Economic Growth, Corporate Power, and Inequality

Politics and Science

Government and Capitalism - the knowledge problem

The Right and the Left from a public choice perspective

When should personal decisions become government decisions?

Regulating Commerce

For newer or additional posts related to these issues, follow my public choice tags on this blog here or my companion economics principles and applications blog here.


agricultural investments said...

I loved your list, especially "Tragedy of the Commons". That's what my wife (who is a good deal more clever than myself I might add) tells me every time she finds I've left a big mess in our kitchen:)

Matt Bogard said...

Never thought of that one....but just experenced it not 5 minutes ago! That's n awesome application!