Public Choice III

In this part of the book we present four applications of the public choice approach to explaining real-world phenomena. The first application tries to explain the macroeconomic policies of governments. To what extent are these determined by the competitive struggle for votes? To what extent do voters take into account the macroeconomic performance of a government when deciding how to vote? These questions have elicited a variety of theoretical models to explain governmental macroeconomic policies and a gigantic number of empirical studies. Indeed, probably no other area of public choice has witnessed as much empirical testing of its propositions as this area of politico-macroeconomic models. Alas, as too often happens with empirical work, not all authors reach the same conclusions as to what “the data show,” and the literature is therefore filled with often spirited exchanges. We shall not attempt to resolve all of the outstanding disagreements, but will try instead to give the reader a feel for the nature of the debate on various issues and the weight of the empirical support on each side of a question. We begin with the question that Harold Wilson obviously considered an established fact. Does the state of the economy affect how voters vote?