Friday, February 1, 2013

Lord Keynes — Steven Pressman on Public Choice Theory

Trashing public choice theory. Here's just one point, although a telling one.
(6) Pressman puts his finger on the conflict between rational expectations and Public Choice Theory:
“There are also a number of problems with the public choice view that politicians create business cycles. These problems, too, are both of a logical nature and of an empirical nature. First, the public choice perspective assumes that voters do not understand the economy and how it is being manipulated by politicians. Rational expectations macroeconomics, which assumes the rationality of all economics agents, points out this will not be so. Public choice shares the rationality assumption with rational expectations, so it is hard to understand why they would think citizens are continually duped on macroeconomic issues that affect their well-being.

"Public choice cannot really have it both ways. Either citizens are rational and understand the economic manipulations of politicians (and then vote them out of office for creating business cycles), or they are dumb and not rational, in which case there is no reason to study public choice.” (Pressman 2004: 14).
Social Democracy for the 21st Century
Steven Pressman on Public Choice Theory
Lord Keynes

1 comment:

frlbane said...

The banks create the "business cycle" since usury itself is unstable, much more so when everyone is driven into debt via negative real interest rates via credit creation.