The Encyclopedia of Public Choice

Volume I

The Editors

CHARLES K. ROWLEY, Duncan Black Professor of Economics, George MasonUniversity and General Director, The Locke Institute; and Dr. Dr. h.c.mult.FRIEDRICH SCHNEIDER, Department of Economics, The University of Linz

Advisory Board

JAMES M. BUCHANAN, Buchanan House, George Mason University

BERNARD GROFMAN, Department of Political Science, University ofCalifornia, Irvine

ARYE L. HILLMAN, Department of Economics, Bar-Ilan University

MARTIN PALDAM, Department of Economics, Aarhus University

WILLIAM F. SHUGHART II, Department of Economics, University of Mississippi

ROBERT D. TOLLISON, Department of Economics, Clemson University

DENNIS C. MUELLER, Department of Economics, University of Vienna

MICHAEL C. MUNGER, Department of Political Science, Duke University

PETER C. ORDESHOOK, Humanities and Social Sciences, Cal Tech

GORDON TULLOCK, School of Law, George Mason University

HANNELORE WECK-HANNEMANN, Institut Fur Finanzwissenschaft,Universitat Innsbruck

The Encyclopedia of

Public Choice

Editors

CHARLES K. ROWLEYThe Locke Institute, and

George Mason University

and

FRIEDRICH SCHNEIDERJohannes Kepler University of Linz,

Institute of Economic Policy

KLUWER ACADEMIC PUBLISHERSNEW YORK, BOSTON, DORDRECHT, LONDON, MOSCOW

eBook ISBN: 0-306-47828-5Print ISBN: 0-7923-8607-8

©2004 Kluwer Academic PublishersNew York, Boston, Dordrecht, London, Moscow

Print ©2004 Kluwer Academic Publishers

All rights reserved

No part of this eBook may be reproduced or transmitted in any form or by any means, electronic,mechanical, recording, or otherwise, without written consent from the Publisher

Created in the United States of America

Visit Kluwer Online at: http://kluweronline.comand Kluwer's eBookstore at: http://ebooks.kluweronline.com

Dordrecht

We dedicate ‘The Encyclopedia of Public Choice’to the memory of

Duncan Black23 May 1908 to 14 January 1991

The Founding Father of Public Choice

TABLE OF CONTENTS

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii

Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii

ESSAYS

Public Choice and Constitutional Political EconomyCharles K. Rowley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Public Choice: An IntroductionDennis C. Mueller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Are Vote and Popularity Functions Economically Correct?Martin Paldam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Constitutional Political EconomyJames M. Buchanan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

CorruptionSusan Rose-Ackerman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

DictatorshipRonald Wintrobe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Environmental PoliticsHannelore Weck-Hannemann . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Experimental Public ChoiceArthur J.H.C. Schram . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

Gordon Tullock at Four Score Years: An EvaluationCharles K. Rowley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

Interest Group Behavior and InfluenceFrans van Winden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

International Trade Policy: Departure from Free TradeArye L. Hillman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

James M. BuchananRobert D. Tollison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

vii

TABLE OF CONTENTSviii

Milton Friedman, 1912: Harbinger of the Public Choice RevolutionCharles K. Rowley and Anne Rathbone . . . . . . . . . . . . . . . . . . . . . . . 146

Monetary Policy and Central Bank BehaviorManfred Gärtner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159

The Political Economy of Taxation: Positive and Normative Analysis when Collective Choice MattersStanley L. Winer and Walter Hettich . . . . . . . . . . . . . . . . . . . . . . . . . . 173

Public Choice from the Perspective of EconomicsRobert D. Tollison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191

Public Choice from the Perspective of the History of ThoughtCharles K. Rowley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201

Public Choice Theory from the Perspective of LawFrancesco Parisi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214

Public Choice from the Perspective of PhilosophyHartmut Kliemt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235

Public Choice from the Perspective of SociologyViktor J. Vanberg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244

Public FinanceHarvey S. Rosen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252

Regulation and AntitrustWilliam F. Shughart II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263

Scholarly Legacy of Mancur OlsonMelvin J. Hinich and Michael C. Munger . . . . . . . . . . . . . . . . . . . . . . 284

Shadow EconomyFriedrich Schneider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286

Social Choice, Contracts and LogrollingPeter Bernholz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296

Spatial TheoryMelvin J. Hinich and Michael C. Munger . . . . . . . . . . . . . . . . . . . . . . 305

Trade Liberalization and GlobalizationArye L. Hillman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312

William H. RikerJohn Aldrich . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321

BIOGRAPHIES

ALDRICH, John Herbert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327

ANDERSON, Lisa Reneé . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328

BAUMOL, William J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328

BAVETTA, Sebastiano . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329

BENNETT, James Thomas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330

BENSON, Bruce Lowell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330

BERNHOLZ, Peter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332

BESLEY, Timothy John . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334

BESOCKE, Portia DiGiovanni . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335

BOETTKE, Peter J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335

BORCHERDING, Thomas Earl . . . . . . . . . . . . . . . . . . . . . . . . . . . 336

BRADBURY, John Charles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337

BRAMS, Steven J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338

BUCHANAN, James McGill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339

CAIN, Michael J.G. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340

CAPLAN, Bryan Douglas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341

CONGLETON, Roger Douglas . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341

COUGHLIN, Peter Joseph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343

COWEN, Tyler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344

CRAIN, William Mark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344

CREW, Michael Anthony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346

TABLE OF CONTENTS ix

DA EMPOLI, Domenico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347

DAVIS, Otto Anderson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348

EKELUND, Robert Burton Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349

FISCHEL, William A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351

FROHLICH, Norman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352

GARRETT, Thomas A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353

GOFF, Brian L. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354

GROFMAN, Bernard N. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355

HANSON, Robin Dale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357

HETTICH, Walter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357

HINICH, Melvin J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358

HOLCOMBE, Randall Gregory . . . . . . . . . . . . . . . . . . . . . . . . . . . 359

HOLLER, Manfred Joseph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361

HOLT, Charles A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362

KAEMPFER, William Hutchison . . . . . . . . . . . . . . . . . . . . . . . . . . 363

KEIL, Manfred Werner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364

KENNY, Lawrence Wagner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365

KLEINDORFER, Paul Robert . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366

KURRILD-KLITGAARD, Peter . . . . . . . . . . . . . . . . . . . . . . . . . . . 367

LABAND, David Neil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368

LANGBEIN, Laura . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369

LEE, Dong Won . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370

LEE, Dwight R. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370

LOHMANN, Susanne . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372

TABLE OF CONTENTSx

LÓPEZ, Edward John . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373

MATSUSAKA, John G. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374

MCCHESNEY, Fred Sanderson . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375

MUDAMBI, Ram . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375

MUNGER, Michael Curtis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376

NAVARRA, Pietro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377

OPPENHEIMER, Joe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378

PADOVANO, Fabio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379

PALDA, Filip . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 381

PARISI, Francesco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382

PEACOCK, Alan Turner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383

PECORINO, Paul . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384

RATHBONE, Anne Elissa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385

REKSULAK, Michael . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385

ROMER, Thomas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386

ROWLEY, Charles Kershaw . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387

RUBIN, Paul Harold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388

SASS, Tim Roger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390

SCHMID-LUEBBERT, Stefanie . . . . . . . . . . . . . . . . . . . . . . . . . . . 391

SCHNEIDER, Friedrich Georg . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391

SCHOFIELD, Norman James . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392

SCULLY, Gerald William . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393

SENED, Itai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394

SHUGHART, William Franklin II . . . . . . . . . . . . . . . . . . . . . . . . . . 395

TABLE OF CONTENTS xi

SMITH, Vernon L. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396

SOBBRIO, Giuseppe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398

SOBEL, Russell Steven . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399

STEPYKINA, Ekaterina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400

STRATMANN, Thomas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400

THOMPSON, Earl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401

THORNTON, Mark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401

TIDEMAN, Thorwald Nicolaus . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402

TOLLISON, Robert Dewitt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403

TOWER, Edward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405

TULLOCK, Gordon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 406

TWIGHT, Charlotte Augusta Lewis . . . . . . . . . . . . . . . . . . . . . . . . 407

URKEN, Arnold Bernard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 408

VACHRIS, Michelle Albert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409

VANBERG, Viktor J. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410

VAUBEL, Roland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412

WAGNER, Richard E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413

WECK-HANNEMANN, Hannelore . . . . . . . . . . . . . . . . . . . . . . . . 414

WILLETT, Thomas Dunaway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415

WILLIAMS, Walter E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417

WINER, Stanley Lewis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418

WITTMAN, Donald Alan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419

WU, Wenbo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421

TABLE OF CONTENTSxii

PREFACE

The Encyclopedia provides a detailed and comprehensive account of thesubject known as public choice. However, the title would not convey suffi-ciently the breadth of the Encyclopedia’s contents which can be summarizedbetter as the fruitful interchange of economics, political science and moralphilosophy on the basis of an image of man as a purposive and responsibleactor who pursues his own objectives as efficiently as possible.

This fruitful interchange between the fields outlined above existed duringthe late eighteenth century during the brief period of the ScottishEnlightenment when such great scholars as David Hume, Adam Ferguson andAdam Smith contributed to all these fields, and more. However, as intellec-tual specialization gradually replaced broad-based scholarship from the mid-nineteenth century onwards, it became increasingly rare to find a scholarmaking major contributions to more than one.

Once Alfred Marshall defined economics in neoclassical terms, as a nar-row positive discipline, the link between economics, political science andmoral philosophy was all but severed and economists redefined their role intothat of ‘the humble dentist’ providing technical economic information asinputs to improve the performance of impartial, benevolent and omniscientgovernments in their attempts to promote the public interest. This indeed wasthe dominant view within an economics profession that had become besottedby the economics of John Maynard Keynes and Paul Samuelson immediatelyfollowing the end of the Second World War.

Even during this ‘dark age’ for political economy, however, a little knownScot named Duncan Black was sowing the seeds for a renaissance that wouldonce again provide for a reunion between economics and political science.Black launched the public choice research program in 1948 with a seminalpaper on the rationale of group decision-making and in so doing earned laterfame as the founding father of public choice.

Black’s seminal contribution was extended in 1951 by Kenneth Arrow inhis famous 1951 monograph entitled Social Choice and Individual Values. Afurther major extension occurred in 1957, when Anthony Downs publishedhis seminal book entitled An Economic Theory of Democracy.

In 1962, James Buchanan and Gordon Tullock, in their famous book TheCalculus of Consent, extended the perspective of public choice by shiftingattention away from direct elections and parliamentary democracy, to outlinea rational choice approach to the logical foundations of a constitutionalrepublic. In 1965, Mancur Olson opened up the discussion of interest groupbehavior to rational choice analysis in his famous book entitled The Logic ofCollective Action. In 1971 William A. Niskanen opened up the discussion ofbureaucratic behavior to rational choice analysis in his book entitledBureaucracy and Representative Government.

xiii

These six contributions constitute the foundations of the public choiceresearch program. Two other books also contributed to the early public choicetradition, namely the 1951 monograph by Black and Newing entitledCommittee Decisions with Complementary Valuation and the 1962 master-piece by William Riker entitled The Theory of Political Coalitions. All theseworks are as relevant to scholars of public choice now as they were severaldecades ago when they were written.

Since public choice first emerged during the years of reconstruction fromthe devastation of the Second World War, the world’s political environment hasevolved and changed dramatically. The Marshall Plan enabled Western Europeto eliminate its dictatorships and to establish and/or to reinforce democracy.The European colonial powers eased themselves out of their imperial roles,releasing their former colonies into independence, albeit in many cases anindependence that rapidly deteriorated into the one party state, outright dicta-torship or even kleptocracy. Even Latin-America slowly has eased itself intodemocracy, albeit in many cases of a fragile and unstable nature.

The United States utilized its economic strength and its political resilienceto confront and to contain the USSR throughout the Cold War and eventuallyto defeat it, thus opening up Eastern Europe and even Russia itself to varyingforms of democratic or semi-democratic government. The remaining com-munist dictatorships, notably The People’s Republic of China, Cuba andNorth Korea, clearly are endangered species, unlikely to survive the firstdecade of the new century. The last bastions of non-communist, non-sub-Saharan African dictatorship, mostly located in the Middle East, are findingit increasingly costly and difficult to fend off the democratic desires of theirdown-trodden and mostly impoverished subjects. For the first time in the his-tory of the world, a majority of individuals now live under conditions ofdemocracy, a state that public choice is uniquely qualified to analyze.

Given the enormity of the political changes outlined above, it is very reas-suring to discover, not least through the contributions to this Encyclopedia, thatpublic choice has retained its ability to explain and to predict the behavior of allactors in political markets — even the behavior of al-Qaeda terrorists — withinthe framework of the rational choice approach.

The Encyclopedia of Public Choice is a monumental offering. It consistsof 306 entries each assigned to one of three headings, namely essays, con-cepts and biographies. The Encyclopedia is an entirely new work, all its con-tributions being newly commissioned. Drafts of the entries were receivedfrom the authors over the period October 2001 through September 2002, mostof them arriving during the six months March 2002 through August 2002.

The essays are designed to be far-ranging discussions of central issues in thepublic choice literature, and evaluations of the lives and works of some of thefounding fathers, each written by authors who have worked extensively inthose fields. The authors were asked to avoid writing surveys, but rather topresent their own views on the topic under review.

PREFACExiv

The concepts are designed to be more narrowly-focused contributions,offering up-to-date introductions and first-rate bibliographies. Once again,the authors were expected to explicate their own views and not to attempt towrite a comprehensive survey. In several cases, where the issue was deemedto be sufficiently controversial, authors with differing viewpoints providecompeting interpretations.

Every contributor to the essay and/or the concepts sections of theEncyclopedia was invited to contribute his or her own biography. The largemajority complied. These are short outlines modeled on Mark Blaug’s Who’sWho in Economics. They provide interested readers with a short biography, alimited list of publications and a brief statement of the scholar’s self-perceived career contribution to public choice.

The allocation of entries across these three categories is as follows:28 essays, including two introductions, one by Charles K. Rowley and oneby Dennis C. Mueller; 186 concepts; and 92 biographies. The Encyclopediaitself consists of well in excess of one million words. The contributors, andthe editors, have taken care to make the language of the Encyclopedia as non-technical and comprehensible as possible. For this reason, the Encyclopediashould be accessible to all scholars, all graduate and undergraduate studentsof economics, political science, and public choice as well as to most scholarsand students of such closely related disciplines as law, philosophy, sociologyand psychology. The Encyclopedia should be an indispensable companion toall practitioners of public policy.

The editors have made every effort to present a well-balanced andcomprehensive body of public choice scholarship from the early beginnings ofthe discipline to its current flourishing state. By and large, we believe that wehave achieved this goal. However, as always, the proof of the pudding is in theeating. We trust that you will enjoy the rich banquet that is set before you.

CHARLES K. ROWLEY

Duncan Black Professor of EconomicsGeorge Mason University andGeneral DirectorThe Locke Institute

and

PROFESSOR DR. DR. h.c.mult. FRIEDRICH SCHNEIDER

Department of EconomicsUniversity of Linz

REFERENCES

Arrow, K.F. (1950). “A difficulty in the concept of social welfare.” Journal of Political Economy, 58: 328–346.

PREFACE xv

PREFACExvi

Arrow, K.J. Social Choice and Individual Values. New York: Wiley.Black, D. (1948). “On the rationale of group decision-making.” Journal of

Political Economy, 56: 23–34.Black, D. and Newing, R.A. (1951). Committee Decisions with

Complementary Valuation. London: W. Hodge.Blaug, M. (2000). Who’s Who in Economics. Cheltenham, UK and

Northampton, USA: Edward Elgar Publishing.Buchanan, J.M. and Tullock, G. (1962). The Calculus of Consent. Ann Arbor:

University of Michigan Press.Downs, A. (1957). An Economic Theory of Democracy. New York:

Harper & Row.Niskanen, W.A. (1971). Bureaucracy and Representative Government.

New York: Aldine-Atherton.Olson, M. The Logic of Collective Action. Cambridge: Harvard University

Press.Riker, W. (1962). The Theory of Political Coalitions. New Haven: Yale

University Press.

ACKNOWLEDGMENTS

Our acknowledgments are due first to each scholar who has contributed tothis Encyclopedia, and most especially to those who have made multiple con-tributions. Their enthusiasm and commitment to the project made our edito-rial task much easier than it would otherwise have been. We are especiallyindebted to the members of the distinguished Advisory Board (listed sepa-rately at the beginning of this volume) whose responses to our request foradvice and help were always friendly and helpful. In particular we areindebted to William F. Shughart II and Robert D. Tollison whose help andintellectual support went far beyond anything that we could possibly expect.

We are also indebted to Marilea Polk Fried and Marian Scott at KluwerAcademic Publishers, both for their editorial help, and for their persistence inmaking sure that we adhered to deadlines.

The project was organized through the auspices of The Locke Institute inFairfax, Virginia. The Locke Institute acknowledges with deep gratitude thefinancial support of the following individuals and foundations, withoutwhose generosity, we could not successfully have completed this project:James T. Bennett; Robert S. Elgin; Daniel Oliver; Gordon Tullock; The ChaseFoundation of Virginia and the Sunmark Foundation.

Charles Rowley is grateful to the James M. Buchanan Center for PoliticalEconomy for Summer research support, and to Anne Rathbone for projectsupport.

xvii

The Encyclopedia of Public Choice

Volume II

The Editors

CHARLES K. ROWLEY, Duncan Black Professor of Economics, George MasonUniversity and General Director, The Locke Institute; and Dr. Dr. h.c.mult.FRIEDRICH SCHNEIDER, Department of Economics, The University of Linz

Advisory Board

JAMES M. BUCHANAN, Buchanan House, George Mason University

BERNARD GROFMAN, Department of Political Science, University ofCalifornia, Irvine

ARYE L. HILLMAN, Department of Economics, Bar-Ilan University

MARTIN PALDAM, Department of Economics, Aarhus University

WILLIAM F. SHUGHART II, Department of Economics, University of Mississippi

ROBERT D. TOLLISON, Department of Economics, Clemson University

DENNIS C. MUELLER, Department of Economics, University of Vienna

MICHAEL C. MUNGER, Department of Political Science, Duke University

PETER C. ORDESHOOK, Humanities and Social Sciences, Cal Tech

GORDON TULLOCK, School of Law, George Mason University

HANNELORE WECK-HANNEMANN, Institut Fur Finanzwissenschaft,Universitat Innsbruck

The Encyclopedia of

Public Choice

Editors

CHARLES K. ROWLEYThe Locke Institute, and

George Mason University

and

FRIEDRICH SCHNEIDERJohannes Kepler University of Linz,

Institute of Economic Policy

KLUWER ACADEMIC PUBLISHERSNEW YORK, BOSTON, DORDRECHT, LONDON, MOSCOW

eBook ISBN: 0-306-47828-5Print ISBN: 0-7923-8607-8

©2004 Kluwer Academic PublishersNew York, Boston, Dordrecht, London, Moscow

Print ©2004 Kluwer Academic Publishers

All rights reserved

No part of this eBook may be reproduced or transmitted in any form or by any means, electronic,mechanical, recording, or otherwise, without written consent from the Publisher

Created in the United States of America

Visit Kluwer Online at: http://kluweronline.comand Kluwer's eBookstore at: http://ebooks.kluweronline.com

Dordrecht

We dedicate ‘The Encyclopedia of Public Choice’to the memory of

Duncan Black23 May 1908 to 14 January 1991

The Founding Father of Public Choice

TABLE OF CONTENTS

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxi

Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxv

CONCEPTS

AcademiaSusanne Lohmann . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Al-QaedaAnne Rathbone and Charles K. Rowley . . . . . . . . . . . . . . . . . . . . . . . 5

Alternative Voting Methods Bernard Grofman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

AltruismPaul H. Rubin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

The Anatomy of Political Representation Tim R. Sass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Approval Voting Steven J. Brams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Arbitration and Bargaining Paul Pecorino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Arrow’s Impossibility Theorem Bernard Grofman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

An ‘Austrian’ Perspective on Public Choice Peter Boettke and Peter Leeson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Autocracy Gordon Tullock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Autocratic Succession Peter Kurrild-Klitgaard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Bicameralism John Charles Bradbury and W. Mark Crain . . . . . . . . . . . . . . . . . . . . 39

vii

TABLE OF CONTENTSviii

BlackmailWalter E. Williams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Black’s Single-Peakedness Condition Bernard Grofman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Budgetary Processes W. Mark Crain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Budget Deficits William F. Shughart II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Bureaucratic Discretion Laura Langbein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Campaign Contributions and Campaign Finance Thomas Stratmann . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Campaign Finance 1 Edward J. López . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Campaign Finance 2 Filip Palda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Central Banks Susanne Lohmann . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Chicago Political Economy Robert D. Tollison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

The Clayton Act Carlos D. Ramírez . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Coalitions and Power Indices Manfred J. Holler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Coalitions and Social Choice Itai Sened . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

Coase Theorem and Political Markets Francesco Parisi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Coercion Sebastiano Bavetta and Antonio Cognata . . . . . . . . . . . . . . . . . . . . . . 91

Collective Action under the Articles of Confederation Keith Dougherty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Committee Assignments Michael Munger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

Committee Jurisdictions and PAC Contributions Michael C. Munger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

Committees in Legislatures Randall G. Holcombe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Commons and Anticommons Francesco Parisi and Ben Depoorter . . . . . . . . . . . . . . . . . . . . . . . . . . 102

ConstitutionGordon Tullock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Constitutional Frameworks and Economic Progress Gerald W. Scully . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

The Constitution of the European Union Stephanie Schmid-Lubbert and Hans-Bernd Schafer . . . . . . . . . . . . . . 106

Constitutional Political Economy Stefan Voigt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

The Contemporary Political Economy Approach to Bureaucracy Thomas E. Borcherding and Portia D. Besocke . . . . . . . . . . . . . . . . . . 116

Contractarianism James M. Buchanan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

Corruption 1 Francesco Forte . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

Corruption 2 Omar Azfar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

Cost and Choice James M. Buchanan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

The Cost Disease of the Personal ServicesWilliam J. Baumol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

TABLE OF CONTENTS ix

Customary Law Francesco Parisi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

The Demand-Revealing Process T. Nicolaus Tideman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

Deregulation of Postal Service Michael A. Crew and Paul R. Kleindorfer . . . . . . . . . . . . . . . . . . . . . . 142

Dictators and Social Contracts Stefan Voigt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

Direct Democracy John G. Matsusaka . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

DiscriminationWalter E. Williams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

Dynamic Inconsistency W. Mark Crain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

Economic Freedom and its Measurement Sebastiano Bavetta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

Economic Freedom and Political Freedom Wenbo-Wu and Otto A. Davis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

Economic Regulation Robert D. Tollison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172

The Economic Theory of Clubs Gary M. Anderson, William F. Shughart II and Robert D. Tollison . . . 175

Economists versus the Public on Economic Policy Bryan Caplan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180

Education and the State Eugenia F. Toma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

Efficiency of Democracy Donald Wittman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186

Efficiency of Democracy? Charles K. Rowley and Michelle A. Vachris . . . . . . . . . . . . . . . . . . . . 189

TABLE OF CONTENTSx

The Efficiency of the Common Law Hypothesis Francesco Parisi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195

Elected versus Appointed Regulators Timothy Besley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198

Election Models Peter J. Coughlin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201

Electoral College Randall G. Holcombe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206

Electoral Competition in Mixed Systems of Representation Ram Mudambi and Pietro Navarra . . . . . . . . . . . . . . . . . . . . . . . . . . . 208

The Elusive Median Voter Thomas Romer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211

Emerging from the Hobbesian Jungle Bruce L. Benson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213

Endogenous Morality Bruce L. Benson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216

Enron Michael Reksulak and William F. Shughart II . . . . . . . . . . . . . . . . . . 219

Environmental Politics and Economic Development Roger D. Congleton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224

The Euro Roland Vaubel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229

European Political Integration Roland Vaubel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230

Evolution of Institutions Earl Thompson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232

The Evolution of Law Bruce L. Benson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237

Experimental Economics and Public Choice Lisa R. Anderson and Charles A. Holt . . . . . . . . . . . . . . . . . . . . . . . . . 240

TABLE OF CONTENTS xi

Experimental Public Choice Vernon L. Smith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243

Expressive Voting and Redistribution Russell S. Sobel and Gary A. Wagner . . . . . . . . . . . . . . . . . . . . . . . . 245

Fair Division Steven J. Brams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248

Fame and Politics Tyler Cowen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250

Federal Reserve System Mark Toma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251

Forecasting Presidential Elections in the United States Henry Chappell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254

Game Theory Steven J. Brams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257

Game Theory in Public Choice Robin D. Hanson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258

Generality and the Efficiency of Government Decision Making Roger D. Congleton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261

Group Roles in Evolution and Cognition Adam Gifford Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264

Growth of Local Government in the United States Randall G. Holcombe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268

The Growth of Public Expenditure Sir Alan Turner Peacock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270

The Growth of the Relative Size of Government Thomas E. Borcherding and Dong Lee . . . . . . . . . . . . . . . . . . . . . . . . 273

Heresthetics and the Evolution of the US Constitution Norman Schofield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279

Homo Economicus Robert D. Tollison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281

TABLE OF CONTENTSxii

Human Evolution and Political Behavior Paul H. Rubin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284

Ideology Paul H. Rubin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291

The Importance of the Middle in Spatial Politics Otto A. Davis and Melvin J. Hinich . . . . . . . . . . . . . . . . . . . . . . . . . . 297

Initiative and Referendum John G. Matsusaka . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300

Institutions of Trade Protection Willem Thorbecke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304

Interest Groups 1 Michael C. Munger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307

Interest Groups 2 Filip Palda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312

International Game of Power Peter Bernholz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315

International Organization Roland Vaubel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319

Internet Voting Arnold B. Urken . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321

Is Russia a Market Economy? Ekaterina Stepykina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323

Is Voting Rational? William F. Shughart II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326

The Italian Public Finance Contribution to Public Choice Domenico da Empoli . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329

The Judiciary Gary M. Anderson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334

The Law and Economics Movement Francesco Parisi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341

TABLE OF CONTENTS xiii

Legal Precedents and Judicial Discretion Ben Deoorter and . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343

Legal Rules and Standards Hans-Bernd Schaefer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347

Legislative Politics William F. Shughart II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350

Legislators Robert D. Tollison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353

Leviathan Models of Government Fabio Padovano . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356

Logic of Collective Action William F. Shughart II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360

The Logic of Liberty Emory Peters and . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363

Logrolling 1 Thomas Stratmann . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372

Logrolling 2 Joe Oppenheimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375

Meddlesome Preferences and Rent Extraction: The Tobacco Shakedown Richard E. Wagner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378

The Median in Politics David M. Levy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380

The Median Voter Model Roger D. Congleton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382

Medieval Church Robert B. Ekelund, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387

Mercantilism Robert B. Ekelund, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388

Monetary Politics Henry Chappell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390

TABLE OF CONTENTSxiv

The New Deal William F. Shughart II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394

Nonprofit Organizations James T. Bennett and William Snavely . . . . . . . . . . . . . . . . . . . . . . . . 397

The Origins of Social Choice Theory Arnold B. Urken . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400

The Paradox of Rebellion Peter Kurrild-Klitgaard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403

Parchment versus Guns Richard E. Wagner and Holbert L. Harris . . . . . . . . . . . . . . . . . . . . . 406

Political and Cultural Nationalism Frank Buckley and Francesco Parisi . . . . . . . . . . . . . . . . . . . . . . . . . . 409

Political Business Cycles Thomas D. Willett and Manfred W. Keil . . . . . . . . . . . . . . . . . . . . . . . 411

Political Economics and Public Choice Fabio Padovano . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415

The Political Economy of FEMA Disaster Payments Thomas A. Garrett and Russell S. Sobel . . . . . . . . . . . . . . . . . . . . . . 418

The Political Economy of Italian Electoral Reform Ram Mudambi, Pietro Navarra and Giuseppe Sobbrio . . . . . . . . . . . . 420

Political Transaction-cost Manipulation Charlotte A.L. Twight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 424

Pressure Groups and Uninformed Voters Donald Wittman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429

Principal–Agent Relationships in the Theory of Bureaucracy Michelle A. Vachris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433

Prohibition Mark Thornton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437

Public Choice and Socialism Peter J. Boettke and Peter T. Leeson . . . . . . . . . . . . . . . . . . . . . . . . . . 439

TABLE OF CONTENTS xv

Public Choice and the Chicago School of Antitrust Fred S. McChesney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444

Public Choice in Italy Fabio Padovano . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448

Public Enterprise Louis De Alessi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450

Public Finance and the Median Voter Model Randall G. Holcombe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453

Public Finance in Democratic Process Richard E. Wagner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455

Public Goods Laura Razzolini . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457

Public Schools Lawrence W. Kenny . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459

Public Utility Regulation Michael A. Crew and Paul R. Kleindorfer . . . . . . . . . . . . . . . . . . . . . 462

Rational Choice Approaches to Economic and Political History Norman Schofield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465

Rational Ignorance Bryan Caplan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 468

Rational Irrationality Bryan Caplan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470

Reciprocity Francesco Parisi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472

Redistributive Politics 1 Gordon Tullock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477

Redistributive Politics 2 Thomas Romer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479

Regulating Government J.R. Clark and Dwight R. Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 482

TABLE OF CONTENTSxvi

Regulatory Takings Karol Boudreaux . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 484

Rent Dissipation Gordon Tullock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491

Rent Extraction Fred S. McChesney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 493

Rent Seeking Robert D. Tollison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495

Rent Seeking and Political Institutions Roger D. Congleton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 499

Rent-Seeking Games Amihai Glazer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502

Rent Seeking in Development Paul Pecorino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504

The Rule of Law Peter J. Boettke and Ryan Oprea . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507

Rules Versus Standards Francesco Parisi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510

Self-Interest Norman Frohlich and Joe Oppenheimer . . . . . . . . . . . . . . . . . . . . . . . 517

Selfish Gene Gordon Tullock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519

September 11, 2001 William F. Shughart II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520

Single-Peaked Preferences and Median Voter Theorems Peter J. Coughlin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 524

The Social Cost of Rent Seeking David N. Laband . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 528

Sortition Alan A. Lockard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 530

TABLE OF CONTENTS xvii

Standard Oil and Microsoft: Antitrust Lessons Donald J. Boudreaux . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 533

State-Sponsored Murder as a Rent-Seeking Activity Gerald W. Scully . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 536

Structure-Induced Equilibrium William F. Shughart II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 538

Supply of Public Goods Francesco Forte . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540

The Supreme Court Brian Goff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545

Takings and Public Choice: The Persuasion of Price William A. Fischel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549

Term limits 1 Edward J. López . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553

Term Limits 2 Bruce Bender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555

Terrorism Anne Rathbone and Charles K. Rowley . . . . . . . . . . . . . . . . . . . . . . . 558

The Theory and Measurement of Economic Freedom Gerald W. Scully . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563

Totalitarianism Peter Bernholz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 565

Trade Protectionism William H. Kaempfer, Edward Tower and Thomas D. Willett . . . . . . . 570

Transitional Economies Michael J.G. Cain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 576

Transitions from Autocracy to Democracy Peter Bernholz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 580

Triangulation William F. Shughart II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584

TABLE OF CONTENTSxviii

Underground Government: The Off-Budget Public Sector James T. Bennett . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587

The Value of Voting Rights Hannelore Weck-Hannemann . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590

Votes for Women Lawrence W. Kenny . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 592

Voting Equipment, Minorities and the Poor Stephen Knack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 594

Voting in U.S. Presidential Elections Robert D. Tollison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596

Voting Paradoxes in List Systems of Proportional Representation Peter Kurrild-Klitgaard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 599

The War on Drugs Donald J. Boudreaux . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 603

Welfare Economics and Public Choice Timothy Besley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 606

Welfare Economics and the Theory of the StateWilliam J. Baumol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610

Why Government Succeeds Amihai Glazer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617

TABLE OF CONTENTS xix

PREFACE

The Encyclopedia provides a detailed and comprehensive account of thesubject known as public choice. However, the title would not convey suffi-ciently the breadth of the Encyclopedia’s contents which can be summarizedbetter as the fruitful interchange of economics, political science and moralphilosophy on the basis of an image of man as a purposive and responsibleactor who pursues his own objectives as efficiently as possible.

This fruitful interchange between the fields outlined above existed duringthe late eighteenth century during the brief period of the ScottishEnlightenment when such great scholars as David Hume, Adam Ferguson andAdam Smith contributed to all these fields, and more. However, as intellec-tual specialization gradually replaced broad-based scholarship from the mid-nineteenth century onwards, it became increasingly rare to find a scholarmaking major contributions to more than one.

Once Alfred Marshall defined economics in neoclassical terms, as a nar-row positive discipline, the link between economics, political science andmoral philosophy was all but severed and economists redefined their role intothat of ‘the humble dentist’ providing technical economic information asinputs to improve the performance of impartial, benevolent and omniscientgovernments in their attempts to promote the public interest. This indeed wasthe dominant view within an economics profession that had become besottedby the economics of John Maynard Keynes and Paul Samuelson immediatelyfollowing the end of the Second World War.

Even during this ‘dark age’ for political economy, however, a little knownScot named Duncan Black was sowing the seeds for a renaissance that wouldonce again provide for a reunion between economics and political science.Black launched the public choice research program in 1948 with a seminalpaper on the rationale of group decision-making and in so doing earned laterfame as the founding father of public choice.

Black’s seminal contribution was extended in 1951 by Kenneth Arrow inhis famous 1951 monograph entitled Social Choice and Individual Values. Afurther major extension occurred in 1957, when Anthony Downs publishedhis seminal book entitled An Economic Theory of Democracy.

In 1962, James Buchanan and Gordon Tullock, in their famous book TheCalculus of Consent, extended the perspective of public choice by shiftingattention away from direct elections and parliamentary democracy, to outlinea rational choice approach to the logical foundations of a constitutionalrepublic. In 1965, Mancur Olson opened up the discussion of interest groupbehavior to rational choice analysis in his famous book entitled The Logic ofCollective Action. In 1971 William A. Niskanen opened up the discussion ofbureaucratic behavior to rational choice analysis in his book entitledBureaucracy and Representative Government.

xxi

PREFACExxii

These six contributions constitute the foundations of the public choiceresearch program. Two other books also contributed to the early public choicetradition, namely the 1951 monograph by Black and Newing entitledCommittee Decisions with Complementary Valuation and the 1962 master-piece by William Riker entitled The Theory of Political Coalitions. All theseworks are as relevant to scholars of public choice now as they were severaldecades ago when they were written.

Since public choice first emerged during the years of reconstruction fromthe devastation of the Second World War, the world’s political environment hasevolved and changed dramatically. The Marshall Plan enabled Western Europeto eliminate its dictatorships and to establish and/or to reinforce democracy.The European colonial powers eased themselves out of their imperial roles,releasing their former colonies into independence, albeit in many cases anindependence that rapidly deteriorated into the one party state, outright dicta-torship or even kleptocracy. Even Latin-America slowly has eased itself intodemocracy, albeit in many cases of a fragile and unstable nature.

The United States utilized its economic strength and its political resilienceto confront and to contain the USSR throughout the Cold War and eventuallyto defeat it, thus opening up Eastern Europe and even Russia itself to varyingforms of democratic or semi-democratic government. The remaining com-munist dictatorships, notably The People’s Republic of China, Cuba andNorth Korea, clearly are endangered species, unlikely to survive the firstdecade of the new century. The last bastions of non-communist, non-sub-Saharan African dictatorship, mostly located in the Middle East, are findingit increasingly costly and difficult to fend off the democratic desires of theirdown-trodden and mostly impoverished subjects. For the first time in the his-tory of the world, a majority of individuals now live under conditions ofdemocracy, a state that public choice is uniquely qualified to analyze.

Given the enormity of the political changes outlined above, it is very reas-suring to discover, not least through the contributions to this Encyclopedia, thatpublic choice has retained its ability to explain and to predict the behavior of allactors in political markets — even the behavior of al-Qaeda terrorists — withinthe framework of the rational choice approach.

The Encyclopedia of Public Choice is a monumental offering. It consistsof 306 entries each assigned to one of three headings, namely essays, con-cepts and biographies. The Encyclopedia is an entirely new work, all its con-tributions being newly commissioned. Drafts of the entries were receivedfrom the authors over the period October 2001 through September 2002, mostof them arriving during the six months March 2002 through August 2002.

The essays are designed to be far-ranging discussions of central issues in thepublic choice literature, and evaluations of the lives and works of some of thefounding fathers, each written by authors who have worked extensively inthose fields. The authors were asked to avoid writing surveys, but rather topresent their own views on the topic under review.

PREFACE xxiii

The concepts are designed to be more narrowly-focused contributions,offering up-to-date introductions and first-rate bibliographies. Once again,the authors were expected to explicate their own views and not to attempt towrite a comprehensive survey. In several cases, where the issue was deemedto be sufficiently controversial, authors with differing viewpoints providecompeting interpretations.

Every contributor to the essay and/or the concepts sections of theEncyclopedia was invited to contribute his or her own biography. The largemajority complied. These are short outlines modeled on Mark Blaug’s Who’sWho in Economics. They provide interested readers with a short biography, alimited list of publications and a brief statement of the scholar’s self-perceived career contribution to public choice.

The allocation of entries across these three categories is as follows:28 essays, including two introductions, one by Charles K. Rowley and oneby Dennis C. Mueller; 186 concepts; and 92 biographies. The Encyclopediaitself consists of well in excess of one million words. The contributors, andthe editors, have taken care to make the language of the Encyclopedia as non-technical and comprehensible as possible. For this reason, the Encyclopediashould be accessible to all scholars, all graduate and undergraduate studentsof economics, political science, and public choice as well as to most scholarsand students of such closely related disciplines as law, philosophy, sociologyand psychology. The Encyclopedia should be an indispensable companion toall practitioners of public policy.

The editors have made every effort to present a well-balanced andcomprehensive body of public choice scholarship from the early beginnings ofthe discipline to its current flourishing state. By and large, we believe that wehave achieved this goal. However, as always, the proof of the pudding is in theeating. We trust that you will enjoy the rich banquet that is set before you.

CHARLES K. ROWLEY

Duncan Black Professor of EconomicsGeorge Mason University andGeneral DirectorThe Locke Institute

and

PROFESSOR DR. DR. h.c.mult. FRIEDRICH SCHNEIDER

Department of EconomicsUniversity of Linz

REFERENCES

Arrow, K.F. (1950). “A difficulty in the concept of social welfare.” Journal of Political Economy, 58: 328–346.

PREFACExxiv

Arrow, K.J. Social Choice and Individual Values. New York: Wiley.Black, D. (1948). “On the rationale of group decision-making.” Journal of

Political Economy, 56: 23–34.Black, D. and Newing, R.A. (1951). Committee Decisions with

Complementary Valuation. London: W. Hodge.Blaug, M. (2000). Who’s Who in Economics. Cheltenham, UK and

Northampton, USA: Edward Elgar Publishing.Buchanan, J.M. and Tullock, G. (1962). The Calculus of Consent. Ann Arbor:

University of Michigan Press.Downs, A. (1957). An Economic Theory of Democracy. New York:

Harper & Row.Niskanen, W.A. (1971). Bureaucracy and Representative Government.

New York: Aldine-Atherton.Olson, M. The Logic of Collective Action. Cambridge: Harvard University

Press.Riker, W. (1962). The Theory of Political Coalitions. New Haven: Yale

University Press.

ACKNOWLEDGMENTS

Our acknowledgments are due first to each scholar who has contributed tothis Encyclopedia, and most especially to those who have made multiple con-tributions. Their enthusiasm and commitment to the project made our edito-rial task much easier than it would otherwise have been. We are especiallyindebted to the members of the distinguished Advisory Board (listed sepa-rately at the beginning of this volume) whose responses to our request foradvice and help were always friendly and helpful. In particular we areindebted to William F. Shughart II and Robert D. Tollison whose help andintellectual support went far beyond anything that we could possibly expect.

We are also indebted to Marilea Polk Fried and Marian Scott at KluwerAcademic Publishers, both for their editorial help, and for their persistence inmaking sure that we adhered to deadlines.

The project was organized through the auspices of The Locke Institute inFairfax, Virginia. The Locke Institute acknowledges with deep gratitude thefinancial support of the following individuals and foundations, withoutwhose generosity, we could not successfully have completed this project:James T. Bennett; Robert S. Elgin; Daniel Oliver; Gordon Tullock; The ChaseFoundation of Virginia and the Sunmark Foundation.

Charles Rowley is grateful to the James M. Buchanan Center for PoliticalEconomy for summer research support, and to Anne Rathbone for projectsupport.

xxv