The Review of Austrian Economics, 16:1, 63–75, 2003.
2003 Kluwer Academic Publishers. Manufactured in The Netherlands.
How Compatible are Public Choice and Austrian
SANFORD IKEDA email@example.com
Purchase College, SUNY
Abstract. Public Choice relies heavily on equilibrium analysis in its models of government failure. Austrians
are suspicious of equilibrium analysis owing to its reliance on some variant of the perfect-knowledge assumption.
To what extent then can Austrians consistently embrace public-choice descriptions of government failure? This
paper argues that to maintain methodological consistency Public Choice should jettison the equilibrium, perfect-
information framework, while keeping the empirically relevant assumption of narrow political interest.
Key Words: Austrian political economy, public choice, radical ignorance
JEL classiﬁcation: D7, B53, L51.
“Policy failure has often been attributed to mistakes and ignorance, but it might rather be
the result of the rational pursuit of interest and not really a failure from the perspective
of those whose interests are controlling the choice at hand.”
Richard Wagner (1989:56)
“Economics does not say that isolated government interference with the prices of only
one commodity or a few commodities is unfair, bad, or unfeasible. It says that such
interference produces results contrary to its purpose, that it makes conditions worse,
not better, from the viewpoint of the government and those backing its interference.”
Ludwig von Mises (1966:764, emphasis original)
At least since the appearance of Buchanan and Tullock’s Calculus of Consent,itisfair
to say that practitioners of Austrian economics and Public Choice have generally felt a
fairly strong sense of kinship. This has been so especially in terms of method—i.e., the
use of the rational-choice approach (broadly construed) to study the political process—and
ideology, in the form of skepticism toward political solutions to perceived social problems.
(This is perhaps truer of adherents of “Virginia” Public Choice.
) For example, the Elgar
Companion to Austrian Economics contains an entry on public-choice economics, thus
explicitly acknowledging the latter’s place within the Austrian research program. Despite
broad areas of agreement, however, political economists working in the Austrian tradition
ought to feel rather more equivocally toward certain aspects of Public Choice than they
The reason for this ambiguity can perhaps be best understood in light of the Austrian cri-
tique of the neoclassical concept of market failure. That is, Austrian economists object to the