Turning now to the second part of the definition, public choice theorists,
like economists, use the assumption of self-interested behaviour to
construct stripped-down models of political processes from which they
deduce predictions and explanations about behaviour and outcomes. These
explanations are, I now want to emphasize, of a very general sort. They
relate to the behaviour of a particular class or ‘type’ of actor rather than
named individuals. Consider the decision of Labour’s incoming Chancellor,
Gordon Brown, to give the Bank of England operational independence in
May 1997. A political biographer or historian might try to explain this
decision in terms of particular features of Gordon Brown’s background and
personality such as his determination to assert authority over domestic
policy-making or his political friendship with American economists and
politicians who had previously extolled to him the virtues of the independent
American Federal Reserve (Rawnsley 1998: 31–49; Routledge
1998: 292–6). Alternatively, they might focus upon particular features of
the situation in which Gordon Brown found himself, such as the need to
reassure financial markets of New Labour’s fiscal prudence after eighteen
years in opposition. It is possible that a series of such studies into the
decision to give different central banks their independence in a number of
different countries might reveal a consistent pattern. It might, for example,
turn out that political parties are more likely to give central banks
independence after a long period in opposition. But such comparative
explanations would have to be build inductively from the ‘ground up’.
What then of public choice theory? Its basic explanation for central bank
independence runs as follows (Rogoff 1985). Financial markets consider
promises made by central bankers about inflation to be more credible than
those of elected politicians. They therefore ‘reward’ countries that have
independent banks with lower interest rates. Vote-maximizing politicians
know that voters prefer lower interest rates and therefore have an incentive
to give central banks independence. From this general argument we can of
course then derive an explanation of why Gordon Brown gave the Bank of
England independence. Public choice is not the only political science theory
to attempt such ‘top-down’ deductive explanations. The combination of
this approach with the assumption of self-interested behaviour is however
distinctive to public choice.