Public Choice theory uses the tools of economics to study human action within the political sphere. Rather than assuming political agents act in the public interest, Public Choice theory treats them as self-interested individuals. This may seem obvious to many of us but it was an important step for the social sciences in the 20th century.
The birth of Public Choice as a field within economics can be traced back to the publication of James M. Buchanan and Gordon Tullock’s 1962 book the Calculus of Consent (although economists such as Duncan Black were working on voter models as far back as 1948). Anyone familiar with Austrian economist Ludwig von Mises cannot fail to see his influence on the Calculus of Consent. In fact, many Austrian ideas can be viewed as precursors to Public Choice analysis; F.A. Hayek’s analysis of how the “worst get on top” is just one example.
In today’s document, a letter dated March 17, 1948 from F.A. “Baldy” Harper to Henry Hazlitt, contains some very Public Choice thoughts. Harper, who was the main economist working for FEE at this time and who went on to found the Institute for Humane Studies, is discussing some of his thoughts on the House Agricultural Committee shelving the oleo tax repeal bill. This would repeal a major tax on oleo, better known as margarine. He points out how the public is overwhelmingly against the tax, 79% in some polls (interestingly even a large number are farmers). Clearly special interest groups have a strong influence despite public opposition, in this case its, most likely, in the form of butter producers.
Harper points to the flaws in incentives created by the structure of the committee system. The way he sees it, the job of screening the bills is delegated to committees, in this case the agricultural committee. The members of the committee must be predominantly person’s “sent to congress to protect our interests”, in this case agriculture. The incentive of such a system is to favor the special interests. Harper is merely speculating, as he is really suggesting that someone, sometime, should analyze this deeper. But in his mere speculation he is anticipating much of the work Public Choice economists would soon be doing.