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ContributionofPublicChoiceLiterature…
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Optimalwaysofprovidingpublic,collectiveandclubgoods,andtheproblem
ofcollectivechoicewhendecidingontheiroptimalamountandhowtheyshould
befinancedhavealsobeenthefocusofpublicchoicetheories.Goodsthatare
exclusiveandtosomeextentunrivaledarecalledclubgoods.JamesM.Buchanan
developedatheoryofclubs,whichwasitselfbasedonthetheoryofCharlesTie-
bout,whoexaminedthefactorsaffectingthesizeofamunicipality14.Accordingto
Tiebout,individualschoosetoliveinthatmunicipalitywhichprovidesthemwith
themostsatisfactorycombinationofgoodsandservicesrelativetothetaxesthey
payonthem.
Buchanananalysedtheoptimalsizeofthegroupthathasaccesstoaclubgood
orservice.Theproviderofaclubgoodcanchooseeithertheoptimalsizeofthe
clubfortheamountofthegood,orserviceprovided,ortoadoptthequantityof
thegoodtotheexistingcapacityoftheclub.Inhismodel,Buchananassumes
thateachadditionalclubmemberwillequallysharethecostsassociatedwiththe
deliveryofaclubgood,andthelossofthebenefitassociatedwithaddinganew
membertotheclubisalsoevenlydistributedamongallmembers.
Buchananshowedthattheoptimalsizeoftheclubisoneinwhichthenumber
ofclubmembersallowsthedifferencebetweenthetotalindividualbenefitfrom
theconsumptionofaclubgoodandtheaveragecostofanindividualrelatedto
theprovisionofthisgoodtobemaximised.Thismeansthatthenumberofclub
membersshouldriseifthecostreductionofindividualclubmembersbecomes
higherthanthedeclineinindividualbenefitsthatoccursasaresultoftheover-
crowdingthataccompaniestheentryofonenewmembertotheclub.Buchanan
appliedhistheoryofclubstogoodsandservicesprovidedbylocalgovernments.
Clubgoodscan,then,beconsideredlocalpublicgoods.Thetheoryofclubsisalso
usedinotherareasofeconomicanalysis–forexampleindeterminingtheoptimal
sizeofthemonetaryunioninmonetaryeconomics,theoptimalsizeofacommon
marketininternationaleconomics,theoptimalsizeofanindustryinindustrial
economics,ortheoptimalsizeofanadministrativeunitintheregionaleconomics.
Asignificantcomponentoftheanalysisofpublicchoicetheoryisrelatedto
rentseeking.Theterm“rentseeking”describesthoseactivitiesthatindividu-
alsandprivatecompaniesdotoobtainspecialprivilegesfromthegovernment
(e.g.aprivilegedposition,governmentcontract,etc.).Inthiscontext,public
choicetheoryexaminestheeffectsofrentseekingontheefficiencyofresource
allocationinasociety.GordonTullockandAnneO.Kruegerpointedoutthat
effortstoobtainarentintheformofstatecontractsleadtoconsiderablewasteof
14J.M.Buchanan,AnEconomicTheoryofClubs,“Economica”1965,vol.32,no.125,
pp.1–14;C.A.Tiebout,PureTheoryofLocalExpenditures,“JournalofPoliticalEconomy”1954,
vol.64,no.5,pp.416–424.
