Public Choice 118: 469–473, 2004.© 2004 Kluwer Academic Publishers. Printed in the Netherlands.

469

Book reviews

Dennis C. Mueller, Public choice III. Cambridge and New York: CambridgeUniversity Press, 2003. xix + 768 pages. USD 120.00/GBP 90.00 (cloth);USD 45.00/GBP 22.95 (paper).

Because space within the covers of Public Choice is scarce, I do notordinarily consider publishing reviews of new editions of books. PublicChoice III merits an exception to the rule. It turns out that neither of theprevious incarnations of Dennis Mueller’s highly useful and widely respectedsurvey of the theories and methods of public choice, which began life morethan a quarter century ago as a 39-page article in the Journal of EconomicLiterature (Mueller, 1976), has been reviewed in the pages of this journal.A decade’s worth of experience as Public Choice’s book review editorallows me to explain, if not to excuse, that regrettable neglect: academicsare in general much more willing to agree to review books than actually tofulfill their commitments. The following sequence of events unfolds withdistressing frequency. A prospective reviewer undertakes to review a book,the book is sent out, and the reviewer is not heard from again. (I could namenames, but will resist exposing the guilty parties; you know who you are.)The upshot is that reviews of many books that should be published in PublicChoice never see the light of day.

Be that as it may, Public Choice III upholds the high standards set by itspredecessors. The latest volume is a substantially revised version of PublicChoice II, published by Cambridge University Press in 1989, itself a majorrevision to the first edition that had appeared ten years earlier. Compared tothose antecedents, Public Choice III is more reader-friendly. Its page dimen-sions are larger, affording more space for tables and diagrams and allowingthe text to be set in a bigger font. Six new chapters have been added to thematerial presented in Public Choice II, nearly all of which has been retained,but rewritten to greater or lesser extents consistent with the directions takenby the literature since 1989.

Anticipating that a copy of Public Choice II is on the working bookshelfof virtually every reader of this journal, this review focuses attention on the

470

new chapters. The completion of that mission is facilitated by the detailedconcordance Mueller provides in the preface to Public Choice III (p. xviii).

The first of the new chapters is Chapter 10 (“Federalism”), which opensPart III of the book, “Public Choice in a Representative Democracy”. It beginswith a lucid discussion of the “assignment problem” in federal governmentstructures. A nine-person polity, divided into three, three-person local com-munities, confronts the task of providing two public goods. One of them, GF,is a good, such as national defense, which, if supplied to one community,provides benefits to all. The other, GL, is a good like police protection withlocalized, community-specific benefits. The individuals in each communityhave single-peaked preferences over the quantities provided of the two pub-lic goods, and both of these preference profiles are arrayed along the sameunidimensional left-right scale such that the three inhabitants of communityA collectively are the low demanders of GF and GL, those of community Care the high demanders and community B occupies an intermediate position.(Within each community, the ordering of the citizenry’s ideal points is A1 <

A2 < A3, B1 < B2 < B3 and similarly for C.) If decisions are taken by simplemajority rule, the median voter theorem applies: B2 is decisive in determiningthe quantity of GF and each community gets the quantity of GL preferred byits median voter (i.e., A2, B2, and C2). Moreover, the same outcome material-izes either under direct democracy or representative democracy – in the lattercase, chosen by simple majority rule, each community’s delegate necessarilyrepresents the preferences of the median voter over the provision of bothpublic goods.

Things fall apart when tax financing is introduced. The inhabitants (or theelected representatives) of two communities, say B and C, now can form acoalition to exploit A by imposing on it a disproportionate share of the costof the polity’s total tax burden. Such tax-shifting reduces the cost of GL to Band C, moves the ideal points in those communities to the right, and resultsin overprovision there (accompanied by underprovision in A), compared tothe situation in which financing the local public good is the responsibilityof each local government. Mueller next asks whether, given the vulnerab-ility of minority-exploiting majoritarian coalitions to cycling, the tendencytoward discriminatory tax policies can be overcome if the legislature adoptsa norm of “universalism” whereby “every local community is supplied anylocal public [good] that the central government supplies” (p. 215). Publicchoice reasoning suggests not, since cycling can also be avoided by bund-ling each community’s “pet project” in an omnibus legislative package. Insuch circumstances, “the application of the norm of universalism results inall of their wishes being fulfilled.. . . Too much of each local public good isprovided” (ibid.; emphasis in original).

471

This simple model sets the stage for the remainder of Chapter 10 whereMueller summarizes the theory and evidence on intergovernmental grants,one of the more important features of federalist systems. That discussion in-cludes extended commentary on the so-called flypaper effect, which suggeststhat local government spending is much more responsive to infusions of fundsfrom higher levels of government than conventional estimates of the elasticityof demand for local public goods would lead one to expect. (Long acceptedas a stylized fact, the flypaper effect recently has become a topic of empiricaldebate.) The chapter ends with a provocative section entitled “Why the sizeof government may be ‘too large’ and ‘too small’ under federalism” (p. 233;emphasis in original). There, Mueller argues that the erosion of federalistconstitutional norms in the United States, Germany and elsewhere has shiftedlocal government functions inexorably toward the center. One perhaps unin-tended consequence of centralization is that spending on local public goodshas tended to crowd out spending on national public goods. In that sense,local governments may be too big and central governments too small.

Two new chapters close out Part III of Public Choice III. Chapter 17(“Legislatures and Bureaucracies”) devotes attention to the modern literatureaddressing the interactions between legislator-principals and the bureaucrat-agents to whom responsibility for implementing policy is delegated. It beginswith the congressional-dominance model, which reverses the direction of in-fluence found in Niskanen’s seminal work. (That early model and its progeny,in which budget- or slack-maximizing bureaucrats wield monopoly powerover the ill-informed members of the legislative committees who determ-ine their budgets and monitor their activities, are covered in the previouschapter.) Bureaucrats are now seen as being quite responsive to the wishesof their congressional overseers, who self-select onto committees havingjurisdictions relevant to their electoral interests and employ various mar-gins of control to ensure that bureaus behave in ways that advance thoseinterests. Extensions adding the chief executive and an “independent” judi-ciary successively to the model follow the literature’s progress toward itscontemporary multiple-principal, multiple-agent perspective. A concludingsection summarizes recent studies applying some of the chapter’s concepts todecision making in the European Union.

Dictatorship is the subject of Chapter 18. Beginning with the late MancurOlson’s insightful model of the wealth-maximizing strongman as solver ofthe collective action problem of state creation, a model which focuses on thetransition from roving banditry to stationary banditry, this particularly thor-ough and well-written chapter moves on to consider the tradeoffs dictatorsconfront amongst the competing goals of personal consumption, authoritarianpower and survivorship. Gordon Tullock’s seminal contributions to the liter-

472

ature on autocracy, especially so his analysis of the problem of succession,along with Ronald Wintrobe’s polar cases of tinpots and totalitarians, takecenter stage in this discussion. The final section presents theory and evidencecomparing the economic performance records of democratic and dictatorialgovernments.

Chapter 22 (“Government Size and Economic Performance”), a new addi-tion to Part IV, summarizes the literature addressing the impact of the sizeand scope of the public sector on a host of macroeconomic performanceindicators, including the magnitude of the underground economy, the extentof government corruption, the productivity of the private sector and the rateof economic growth. A section devoted to empirical testing of the Olsonianconjecture that rent seeking plays a pivotal role in explaining the rise anddecline of nations rounds out the discussion nicely.

Social choice theorists will be pleased to see that the material fromChapter 20 of Public Choice II on the paradox of the Paretian liberal hasbeen expanded to chapter length in Public Choice III. New Chapter 27(“Liberal Rights and Social Choices”), which follows a substantially revised,“almost new” (p. xviii) chapter on “The Constitution as a Utilitarian Con-tract”, reproduces Amartya Sen’s statement of the paradox, which generatesinconsistencies (cycles) in social choices when, in the presence of meddle-some preferences, each individual is decisive over one pair of alternatives(unrestricted domain) and any unopposed preference must be preserved inthe social ordering (the Pareto postulate), offers three possible resolutions ofthe paradox, and then discusses the implications for embedding liberal rightswithin a set of democratic institutions.

“Has Public Choice Contributed Anything to the Study of Politics?” isthe title of last the six new chapters, Chapter 28, which opens the final part ofPublic Choice III. It is an extended response to the attack launched on the fieldin 1994 by Donald Green and Ian Shapiro in Pathologies of Rational ChoiceTheory. Here, Mueller first provides a reasoned summary of the potentials andlimitations of the rational choice approach to modeling political behavior. Hethen engages three of Green and Shapiro’s specific criticisms, namely thatrational choice scholarship is plagued by post-hoc theorizing, formulatinguntestable theories and selectively interpreting the evidence. Mueller’s re-joinder, a balanced juxtapositioning of theoretical prediction and empiricalobservation with respect to the stability of democracy, the implications ofspatial voting models and the puzzle of voter turnout, is nothing short of atour de force.

As readers will have come to expect from earlier editions, Public ChoiceIII masterfully distills a literature that has grown exponentially since 1989.While one might agree with the author that the volume at hand “actually un-

473

derstates the growth of the field, since ... [it] leaves uncovered or only lightlycovered a far greater fraction of the literature than did the one published in1979” (p. 657; emphasis in original), one also stands in awe of the breadth anddepth of his accomplishment. The list of references, surely one of the mostvaluable features of the book to the active public choice scholar, alone runsto 65 pages of text. Public Choice III is also distinguished by the catholicityof its applications, which include European political institutions as well asthose of the United States. With my own collaborative attempt to survey theliterature in the not too distant past (Shughart and Razzolini, 2001), I fullyappreciate both the magnitude of the task Mueller set for himself and thepersistence required to complete it. No student or teacher of public choice,and no researcher working at the intersection of economics and politics canafford not to have a copy of Public Choice III within easy reach.

Let me close by declaring a general amnesty for book reviewers.Thoughtful reviews, no matter how long overdue, will be published in duecourse, no questions asked.

WILLIAM F. SHUGHART II, Economics, University of Mississippi,P.O. Box 1848, University, MS 38677-1848, U.S.A.

References

Mueller, D.C. (1976). Public choice: A survey. Journal of Economic Literature 14: 395–433.Shughart, W.F. II and Razzolini, L. (Eds.). (2001). The Elgar companion to public choice.

Cheltenham, U.K. and Northampton, MA, U.S.A.: Edward Elgar.