Lately I have been reminded from several directions of the efficacy in various applications of the concept of “public choice theory” as developed by economics Nobel Laureate James M. Buchanan. In a recent issue of “Imprimis”, Buchanan expounds on this theory, which to me is nothing more complicated than one that espouses a market-based system for delivery of public services. Critics of this theory seem to believe that people, when acting politically, for example, as voters or legislators, do not behave as they do in markets, that somehow they set aside human nature and become immune to the dynamics and incentives of market forces. But I believe that, after several generations of the failure of the top-down collectivist monopoly in the delivery of public goods dictated and controlled by those who have political “voice”, we are finally moving toward a bottom-up “choice” model based on empowerment of the users of public services.
Two areas in which this transformation is currently playing out are education, where school choice programs of various designs are being successfully tested in a growing number of states and school districts, and health care, where universal, one-size-fits-all government solutions have been discredited. There are other areas in which I believe choice can and will be expanded. One of them is transportation, where it is clear that the collectivized model has failed miserably in responding to mobility problems in almost every urban area. A second is social security, which will not be viable or credible for the next generation until it is converted to something resembling a defined contribution retirement plan. Yet another is welfare services, and here it is a shame that President Bush’s faith-based initiative wasn’t originally structured on a voucherized basis, so that the funding would have gone directly to the person receiving the benefit who would then choose the best option for the delivery of the service from among governmental, charitable, and private providers. Likewise, the federal Head Start program, the control of which the Bush administration has proposed to transfer to the states, could be much more effective as a voucherized program rather than as block grants to education bureaucrats.
Public choice theory is not a novel concept. An early variation of it was introduced by Adam Smith in his explanation of the “invisible hand” in the 18th century, and, incidentally, his discipline wasn’t economics, it was moral philosophy, which is grounded in a proper understanding of human nature. There are hopeful signs that we are returning to that understanding in our public policy.