Authors libby rittenberg 824
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15.3 Choices in the Public Sector
LEARNING OBJECTIVES
1. Compare public interest theory and public choice theory.
2. Use public choice theory to explain rational abstention and why
legislative choices may serve special interests.
How are choices made in the public sector? This section examines two
perspectives on public sector choice. The first is driven by our examination
of market failure. Choices in the public sector are a matter of locating
problems of market failure, determining the efficient solution, and finding
ways to achieve it. This approach, called the public interest theory of
government, assumes that the goal of government is to seek an efficient
allocation of resources.
An alternative approach treats public sector choices like private sector
choices. The body of economic thought based on the assumption that
individuals involved in public sector choices make those choices to
maximize their own utility is called public choice theory. Public choice
theory argues that individuals in the public sector make choices that
maximize their utility—whether as voters, politicians, or bureaucrats,
people seek solutions consistent with their self-interest. People who
operate business firms may try to influence public sector choices to
increase the profits of their firms. The effort to influence public choices to
advance one’s own self-interest is called rent-seeking behavior.
Public Interest Theory
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org
824
