Perspectives on budgetary decision-making

The subject of this book is the analysis of the budgetary process in representative government from the perspective of public choice theory. Since there is a large literature on the budgetary process as well as on public choice theory, it seems appropriate to start with some clarification about the place of the present volume within both areas of scholarly activity.

The budgetary process in representative government is a theme which is being studied from different theoretical perspectives, public choice theory being only one of them. Looking at the postwar literature, four main perspectives can be distinguished.

The first is the normative perspective. This has been characteristic of the mainstream public finance literature, as exemplified, for instance, by the seminal handbook by R.A. Musgrave (1959). The central concern in this literature has been the application of welfare theoretical principles to the budgetary decisions of government. Major new developments in this literature originated in revisions of welfare theory itself. One can think, for instance, of the generalization of the conditions for optimal allocation of public goods, as initiated by Samuelson (1954), and the development of a new approach to social welfare functions (so-called ‘social choice theory’), as initiated by Arrow (1951).

Within the normative literature there is also a more practically oriented current, alongside the welfare theoretic branch. This is the area of financial management that gave rise to procedural innovations such as the Planning–Programming–Budget–System(PPBS), Management by Objectives (MBO) and Zero-Base-Budgeting (ZBB) in the USA, Programme Analysis and Review (PAR) and the Financial Management Initiative in the UK and the Reconsideration Procedure in the Netherlands.