- Elgar original reference
Edited by William F. Shughart II and Laura Razzolini
Chapter 29: Public choice and economic growth
Randall G. Holcombe 1 Introduction Public choice offers fundamental insights into the process of economic growth, but only recently has the public choice approach been applied explicitly to growth issues. In large part, this is due to the longstanding view of much of the economics profession that an analysis of political institutions is largely irrelevant to economic growth. Indeed, as Krueger (1997) notes, economists often recommended central planning as the political foundation for growth, assuming that central planners would pursue optimal policies, with no analysis of political institutions or the political decision-making process. Economists such as Bauer (1972), who argued the virtues of markets, were the exception to the rule emphasizing central planning, but even then Bauer did not use a public choice framework in dissenting from the contemporary policy prescriptions of growth theorists. Two recent developments have prompted public choice economists to become more interested in growth issues. First, the subject of economic growth has moved from being a minor subﬁeld of economics into an area that is of much more interest to the profession’s mainstream. Second, with the collapse of centrally planned economies around the world, it has become much more apparent that there is an intimate relationship between political institutions and economic prosperity. As a result, the public choice literature on growth has had a strong institutional orientation, and has focused more on the impact of fundamental institutional differences rather than on collective decision-making processes. This emphasis on the relationship between institutions and economic growth stands...
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