June Sekera — The absence of a theory of public economy in today’s economics

More than a century ago, the effective operation of the public economy was a significant, active concern of economists. With the insurgence of market-centrism and rational choice economics, however, government was devalued, its role circumscribed and seen from a perspective of “market failure.” As Backhouse (2005) has shown, the transformation in economic thinking in the latter half of the 20th century led to a “radical shift” in worldview regarding the role of the state. The very idea of a valid, valuable public non-market has almost disappeared from sight....

Because mainstream economists in the U.S. and elsewhere have been so market-focused for so long, production outside the market has been erased from the equations of economics. So now, government action is regarded as an “intervention” that “distorts” smooth operation of an otherwise beneficent market. Government is considered to have an economic role only (or primarily) in cases of so called “market failure.” Consequently, there is no viable and explanatory concept of an actual, let alone a legitimate, public non-market economy. So pervasive is the creed that government only “intervenes” in what is thought to be the valid, market economy that even literature from the Congressional Research Service (Labonte, 2010) relegates government to an outsider role.... 

As I noted earlier, the “public choice” school has become the framework to which economists default for an explanation of the public economy. Backhouse (2005) outlines the development of the public choice school, which stems from a cluster of works published in the 1950s and 1960s by James Buchanan, Gordon Tullock, Mancur Olson, and Anthony Downs. It became a school, and a movement, when James Buchanan and Warren Nutter found a home for their efforts at George Mason University in Virginia. In the mid-1980s George Mason opened the Center for the Study of Market Processes, with its largest supporter being the Koch Family Foundations. Stretton and Orchard (1994) have demonstrated the anti-government, anti-democratic stance of public choice theorists in their extensive treatment of the school in Public Goods, Public Enterprise, Public Choice; Theoretical Foundations of the Contemporary Attack on Government. After critiquing the theory in economics terms, they suggest that public choice “reasoning seems to arise from the theorists’ reluctance to ‘come out’ and identify themselves as open enemies of democracy or at least of universal suffrage…Governments are viewed as exploiters of the citizenry, rather than the means through which the citizenry secures for itself goods and services that can best be provided jointly or collectively.”...

Real-World Economics Review Blog
The absence of a theory of public economy in today’s economics

June Sekera, researcher, UCL Institute for Innovation and Public Purpose; founder of the independent Public Goods Institute, and Research Fellow at the Global Development And Environment Institute (GDAE) at Tufts University, where she established and leads GDAE’s Public Economy Project