“Welcome to Public Administration Archive, the show that helps you apply the concepts you study. I am Satya and today I will be talking about the concept of Public Choice Theory.”
If you have finished reading the Introduction chapter in Paper-1, you would have definitely come across the Public Choice Theory also referred to as Public Choice Approach.
Let me start with a brief background to this concept.
During the 1940s and 1950s post the second world war, the role of the state was on the rise. The concept of welfarism - wherein the state provided for all the needs of the citizens was prevalent across many countries.
The problem started when the size of the responsibilities became so large that it led to a crisis in terms of finances. The thinker James O’Connor referred to this crisis as the “Fiscal Crisis of the state”
Poor service delivery and increased inefficiencies resulted in frustration amongst the people. Over time the citizens began to lose faith in the capability of the state. This was referred to as the “Crisis of Legitimacy” by Jurgen Habermas.
Post-1950s, there was a clamour amongst people for a change. It is in this background that the concept of New Rights Philosophy emerged. This philosophy challenged the concept of Welfarism and criticised it as a “Nanny State.”
In the name of welfare, the state had made individuals entirely dependent on it for all goods and services. Thus the New Rights philosophy emphasised having a greater amount of liberty and a rollback of the state.
But then liberty alone is also risky. What if the free market mechanisms adopt negative forms such as monopoly or collusion? The answer to this was summed up by Andrew Gaebler who referred to the New Rights Philosophy to have a small state but a strong state.
Now the New Rights Philosophy had multiple sub-branches of which one was our Public Choice Approach (PCA). Let’s call it PCA from now on.
The two major thinkers who propounded PCA were William Niskanen (1971) and Vincent Ostrom (1974). Basically, PCA has three major dimensions:
Utility Maximisation
Methodological Individualism and
Institutional Pluralism
Let’s look at each of these dimensions.
Utility Maximisation
First, is the dimension of Utility Maximisation. The traditional theories of public administration propounded by Weber and Hegel assumed that all individuals have a public interest. They also focused a lot on the public interest aspect of the state. This was referred to as Political Idealism.
Pause and ask yourself if this is actually true. Do individuals or even the government not have their own self interest? Upon further thought you will realise that this is not entirely true.
More often than not, it is self interest that drives ministers, bureaucrats and even citizens to maximise their utility in the fields of politics and administration. The bureaucrat is a budget maximiser and the politician a vote maximiser.
Methodological Individualism
Let’s now discuss about the second dimension called Methodological Individualism. This term was coined by Joseph Schumpeter.
In simple terms it means that Individuals should be considered as the basis for decision making and not groups. For example if you ask a group of students, “Which movie do you want to watch?”, the loudest voices might suggest some names. There might be some students who might not like the popular option and some who may want to play instead of watching a movie.
The point here is that we should treat each individual as a rational man capable of applying cost-benefit analysis to maximise their utility.
Institutional Pluralism
The final dimension is called Institutional pluralism. This is a logical extension to the previous two dimensions mentioned.
Imagine you wanted to board a flight and the only option you have is Air India. Would your utility be maximised? I would want multiple options to choose from. Based on the service and the price, I will pick the best option that suits me.
This was the case around the world In the 1970s and 80s. The state had limited competition and became the monopoly. This led to complacency and inefficiency.
Public Choice Approach aimed to change this scenario. It prescribed competition through Institutional Pluralism. In India, this phenomena came to light only after the LPG reforms of 1991.
Now citizens had an option to choose between SBI or HDFC or ICICI for banking; Air India or Indigo or Spicejet for flight travel.
This eventually led to the bureaucracy and the state improving its competitiveness.
Summing Up
So that in brief were the three dimensions of Public choice approach. If in the 1950s the state somehow managed to provide all the services and was super efficient, maybe there might not have been a New Rights Philosophy or a Public Choice Theory.
If you have understood the three dimensions of PCA - i.e Utility Maximisation, Methodological Individualism and Institutional Pluralism then you have got the basics of PCA. The next level in this concept is to understand the individual views of thinkers in this field and the criticisms of PCA. If you guys want, I will cover it in the next episode.
“Thanks for listening to this podcast. Before you go, do share your review about what you just heard. Also do let me know what you would want us to cover in the future. Signing off for the day!”
Have a nice weekend folks!
