New Political Economy

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The New Political Economy ( NPÖ ) (also Public Choice or Economic Theory of Politics ) comprises those theories and research areas that explain political behavior, decision-making processes and structures using the methodology of economics . It analyzes the individual and collective actions of political actors such as voters , administrations , parties and interest groups .

The term New Political Economy separates this sub-area from classical political economy , a term that means the same thing as economics . The English term public choice expresses that the New Political Economy sees itself as a positive economy that describes actual behavior. In contrast, normative economy discusses an ideal state.

History and creation

The first mathematical considerations on voting procedures based on voter preferences date back to the 18th and 19th centuries. Thus the Marquis de Condorcet examined electoral procedures according to the Condorcet method named after him and discovered the Condorcet paradox . Other mathematicians who dealt with the subject were Jean Charles Borda , Lewis Carroll and Pierre-Simon Laplace . Their considerations were taken up by Duncan Black in the 1950s. Gordon Tullock therefore sees Black as the “father of modern public choice theory”.

During this period, between 1957 and 1965, the foundation of the public choice theory was laid with the publication of five books in the United States. Together and individually, those academic papers have had a significant impact on political science and economics, and most of them have been awarded Nobel Prizes. The books are also known under the name "Public Choice Pentateuch ":

Arrow laid the foundation for the neoclassical analysis of political processes in 1951 with his theorem that there is no ideal voting rule (known as the Arrow Paradox ) .

Anthony Downs and Duncan Black expanded Arrows research into social election theory in relation to the study of voter behavior and electoral process.

James Buchanan and Gordon Tullock added other (theoretical) concepts, such as game theory , to public choice theory , and established the theory of interest groups.

In his work, Olson took up the problem of purely rational groups and now combined interdisciplinary public choice with sociology.

Assumptions

Classification of the new political economy
object
Methods
market off-market
economically traditional economics New Political Economy, family economics , economic analysis of law , ...
not economical Economic sociology , economic psychology , ... Sociology, law and political science

The basic assumption of the New Political Economy is methodological individualism with the model of the rationally acting Homo oeconomicus , guided by self-interest , whose goal is the maximization of benefits and who makes corresponding decisions.

Individuals are expected to act rationally and appropriate to the situation, whereby individual preferences are viewed as given and unchangeable. The results of a decision are not determined by changing preferences, but by changing restrictions that limit action. In addition to methodological individualism , normative individualism is also a basic assumption of public choice theory.

In the political environment, the theory assumes that there is a struggle for offices in the field of political forces. The aim of the politicians is to secure their re-election and to maximize their self-interest. Here they are assumed to have a tendency to power. Political decisions are seen as a by-product here (→ Schumpeter ).

With the public choice approach, the advocates of this theory try to explain the establishment of states and the formation of state institutions or voting behavior.

Sub-areas

The sub-areas of the New Political Economy include the economic theory of democracy founded by Joseph Schumpeter , Anthony Downs ( An Economic Theory of Democracy , 1957) and James M. Buchanan , William A. Niskanen's economic theory of bureaucracy , based on Mancur Olson and Gary S. Becker's retrograde theory of interest groups, the economic theory of regulation by George Stigler and Sam Peltzman, and the theory of rent-seeking by Gordon Tullock and James M. Buchanan.

In a broader sense, the theory of political business cycles by William D. Nordhaus and the political economy of growth by Mancur Olson also belong to the sub-areas.

decision making

Individual decision making

Building on the assumption of Homo Oeconomicus, every person strives to meet their preferences with the highest possible priority, as this is rational. The weighing of opportunity costs also plays an important role. An attempt is made to minimize the relative costs incurred by a decision against the second best alternative. The game theory affect the individual decision-making. An example of this is the Prisoner's Dilemma : This non-cooperative game attempts to predict the behavior of parties that can alter the outcome of a decision in order to maximize profit. If all parties involved find a decision in which they cannot choose a better option, as long as the other party remains constant in his choice, a Nash equilibrium occurs . Niccolo Machiavelli and Ronald Coase advanced further theories on individual action . According to Machiavelli, an individual seizes every opportunity in which he can improve his own position in relation to other individuals. In contrast, Coase was of the opinion that people always strive for cooperation in order to achieve a mutual benefit and to carry out a Pareto optimization .

Collective decision making

Collective decision-making is influenced by various aspects such as the balance of power between the parties involved in the decision and the extent to which the voters are informed about the possible alternatives.

When considering electoral procedures, social election theory , it is assumed that all voters act rationally and that there is also full information, completeness (classifiability of all alternatives) and reflexivity . It is possible that in spite of the same general conditions, voters and preference systems, different results will only be achieved through the use of different voting procedures. This conflict can arise, among other things, in a review of the Borda election with a majority vote . Another problem, the Condorcet paradox (also known as the problem of cyclical majorities), arises from the mere variation of the number and arrangement of options in the Condorcet election . Because of these difficulties, the Arrow theorem was formulated: It is not possible to find an electoral system that fulfills five basic requirements that Arrow formulated for the optimal establishment of a social order of preferences.

Thomas Grüter puts forward the thesis that in the context of the “economic theory of democracy” it is irrational behavior for individuals to take part in elections. “From an economic point of view, there is no point in voting. You have to [...] take the time to study the election programs and go to the polling station. In return you get a tiny share of participation in the composition of parliament. The yield is therefore close to zero and - viewed rationally - does not justify any expenditure. ”It must be explained why, in view of its citizens, still participate in elections.

State failure

The public choice assumes that the state just as the market hits imperfect decisions and therefore market failure can not always compensate. This is because public officials continue to put private over public interests. The former are above all a gain or maintenance of power. That is why the interests of the own electorate are regularly pursued, even if they harm the common good . In addition, the voters are not as well informed as the actors in the market and also have fewer options, since they can only decide on a certain ( party ) program.

Interest groups who want to influence politics in favor of their own goals play an important role in research . These groups also put their private interests before public interests. Therefore, they often exchange advantages with politicians, for example their support in return for legislation that, in their own opinion, puts the group better off.

Despite this criticism of the state, many representatives of Public Choice speak out in favor of the continued existence of central institutions, albeit against an idealization of the role of states. For example, Mancur Olson was an advocate of a strong state but criticized the influence of interest groups.

Rent-Seeking

Another sub-area of ​​Public Choice is what is known as rent seeking. Rent seeking describes the pursuit of what is known as a political rent. This is a non-return gain that can be achieved by taking advantage of a structurally conditioned shortage. In a functioning market, such a situation is ended by the appearance of additional providers who provide the good at a lower price. In rent-seeking, however, market players try to influence state institutions in such a way that they themselves achieve a dominant market position and (their competition is restricted or prevented so that they are not subject to any competitive pressure). If this is achieved, there is a monopoly or oligopoly, whose position is not endangered, and thus the possibility for the supplier to generate additional income through excessive prices.

Rent seeking is one of the main reasons for corporate lobbying. Because any lobbying work is aimed either for one's own advantages (against one's own disadvantages) or against the advantages of the competition. The resources used to generate pensions are considered wasted by the public choice as they are only used to redistribute existing wealth rather than create new ones.

Rent-seeking competition

If several rent-seekers use resources separately from one another to achieve a privileged market position, a competitive relationship can arise in which the players use more resources than can be achieved in future in profits from this market position. This apparently “uneconomical”, irrational action is based on the risk of losing the competition for influence. In addition, the motivation not to regard the money already invested as a loss can play an important role. Example: Two competing companies are trying to achieve a monopoly and embark on a spiral of money for influence that increases in resource volume - more than the monopoly is economically worth to them.

Rent-Seeking Problems

Increased influence by companies (lobbying) exposes politicians and bureaucrats to great stress or the temptation to act for their own benefit against the common good. This problem also occurs in autocratic systems and causes great welfare losses, especially in developing countries, primarily as costs for the poorer inhabitants of these countries.

See also

literature

Introductions and reviews

Basic works

  • Anthony Downs : Economic Theory of Democracy . (Original title: An Economic Theory of Democracy . New York 1957.).
  • Mancur Olson : The logic of collective action - collective goods and the theory of groups (=  The unit of social sciences . Volume 10 ). 5th edition. Mohr Siebeck, Tübingen 2004 (Original title: The Logic of Collective Action: Public Goods and the Theory of Groups . New York 1965.).
  • Gary S. Becker : Family, Society and Politics - the Economic Perspective . Ed .: Ingo Pies (=  The Unit of Social Sciences . Volume 96 ). Mohr Siebeck, Tübingen 1996.
  • Kenneth Arrow : Social Choice and Individual Values . Wiley, New York 1951.
  • Duncan Black : The Theory of Committees and Elections . Cambridge University Press, London and New York 1958.
  • James Buchanan , Gordon Tullock : The Calculus of Consent: The Logical Foundations of Constitutional Democracy . University of Michigan Press, 1962.

Trade journals

Individual evidence

  1. ^ Gordon Tullock: public choice . In: Steven N. Durlauf, Lawrence E. Blume (Eds.): The New Palgrave Dictionary of Economics . Second ed. 2008, doi : 10.1057 / 9780230226203.1361 .
  2. ↑ Bernard Grofman: Reflections of Public Choice . In: Public Choice . Springer, January 2004, JSTOR : 30025920 .
  3. ↑ Based on Dehling and Schubert: Economic Theories of Politics . 2011, p. 11 .
  4. ↑ Mathias Erlei, Martin Leschke, Dirk Sauerland: New Institutional Economics. 2nd Edition. Schäffer-Poeschel Verlag, Stuttgart 2007, pp. 381-404.
  5. ↑ Thomas Grüter: Why voting is not profitable - and why democracy works anyway . BLOG: Thought Workshop - the psychology of irrational thinking. Spectrum of science . September 12th, 2013.