Table of Contents

Law and the State

Law and the State

A Political Economy Approach

New Horizons in Law and Economics series

Edited by Alain Marciano and Jean-Michel Josselin

Law and the State provides a political economy analysis of the legal functioning of a democratic state, illustrating how it builds on informational and legal constraints. It explains, in an organised and thematic fashion, how competitive information enhances democracy while strategic information endangers it, and discusses how legal constraints stress the dilemma of independence versus discretion for judges as well as the elusive role of administrators and experts.

Chapter 2: Schumpeterian political economy and Downsian public choice: alternative economic theories of democracy

Michael Wohlgemuth


Michael Wohlgemuth* 1 INTRODUCTION No one ever knew quite what to make of this neat saturnine man with a taste for dramatic prose and theatrical gestures. He was undoubtedly brilliant – but he was perplexing. (Robert L. Heilbronner 1953, 302 about Schumpeter) Joseph Schumpeter is often regarded a pioneer, if not the founder of ‘public choice’ or the economics of politics.1 Looking back at the development of mainstream public choice and looking closely at Schumpeter’s own writings on democracy (and on the limits of static equilibrium analysis), this seems rather odd. There may be a hidden irony in the history of ideas which only a few observers2 have uncovered in its manifold aspects. Usually Schumpeter is only mentioned as a precursor, but hardly ever quoted in his own words. Already Downs (1957) in probably the most influential book in its field is a telling case when he states: ‘Schumpeter’s profound analysis of democracy forms the inspiration and foundation of our whole thesis, and our debt and gratitude to him are great indeed’ (ibid., 29, fn. 11). In the whole thesis, however, Schumpeter is mentioned only twice with the same quote describing his general approach which regards social functions of politics as incidental byproducts of the competitive struggle for power and office. Schumpeter’s core assertions on irrationality in politics and the vital role of political leadership are neither mentioned nor accepted. Nevertheless, it has become ‘common to talk about the “Schumpeter–Downs” theory of democracy’ (Udehn 1996, 18). It may...

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