An Economic Theory of Political Action in a Democracy

Abstract

ANTHONY DOWNS Chicago, Illinois I IN SPITE of the tremendous importance of government decisions in every phase of economic life, economic theorists have never successfully integrated government with private decision-makers in a single general equilibrium theory. Instead they have treated government action as an exogenous variable, determined by political considerations that lie outside the purview of economics. This view is really a carry-over from the classical premise that the private sector is a self-regulating mechanism and that any government action beyond maintenance of law and order is "interference" with it rather than an intrinsic part of it.2 However, in at least two fields of economic theory, the centrality of government action has forced economists to formulate rules that indicate how government "should" make decisions. Thus in the field of public finance, Hugh Dalton states: As a result of [the] operations of public finance, changes take place in the amount and in the nature of the wealth which is produced, and in the distribution of that wealth among individuals and classes. Are these changes in their aggregate effects socially advantageous? If so the operations are justified; if not, not. The 1 The argument presented in this article will be developed further in my forthcoming book, An Economic Theory of Democracy, to be published by Harper & Bros.