The Challenge of Positive Political Theory

By JERRY L. MASHAW
Yale University Press
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The Challenge of Positive Political Theory
Commenting on his portrait of Gertrude Stein, Pablo Picasso is reported to have said: "Everybody thinks she is not at all like her picture, but never mind, in the end she will manage to look just like it."

Picasso's statement may have been a product of his famous ego, but it contains an important insight. We are often the captives of our pictures of the world, and in the end, if the world does not look just like them, their influence on our perceptions is nevertheless profound.

The pictures that I want to discuss are not graphic representations but theories: verbal descriptions of how our political world is organized and how it works. They give us mental images of what to look for in political life and what to expect from it, in much the same way that Picasso's portrait leads us to expect, and perhaps to find, that Stein looks a certain way. My argument goes somewhat further than Picasso's, however. I want to argue that the influence of pictures or themes is not just on what we expect and what we see, but also on what we demand or affirm. Pictures lead not only to predictions but also to principles. Our vision of what is guides our approach to what ought to be.

This connection between "ises" and "oughts," between the "positive" or "descriptive" and the "normative" or "preferred," is both familiar and problematic. It is as familiar as the ancient fable of the fox and the "sour" grapes. If an end is unachievable, or believed to be beyond our reach, we tend to rationalize our disappointment by altering our view of its desirability. It is as contemporary as the hyperbolic charge by a former Bush administration official that "national health insurance would combine the frugality of military procurement with the empathy of an IRS audit." In short, any attempt to have what many Americans claim that they want would demonstrate that they do not actually want it. The general lesson from these old and recent examples seems clear. Our positive beliefs about what is, powerfully constrain and shape our normative beliefs about what is good or desirable.

Yet this familiar connection between ises and oughts is also problematic. Indeed, the use of reason to understand the nature of the world and to predict the likely effects of either individual or collective action is often sharply contrasted with the expression of either ethical commitments or personal preferences. On this view, positive theory is related to normative discourse in only instrumental terms. The definition of ends--what is good or what is right--comes first. An understanding of current reality and of the dynamics of change, that is, positive theory, then supplies only strategies for achieving the ends that have been specified. From this perspective tastes are rationally inexplicable ("chacun a son gout") and morality is a matter of faith. Neither is the domain of positive theory.

The contrast between these opposing views need not be quite so stark. The instrumental vision of positive theory may only represent a claim that scientific rationality should be the servant of some conception of the good or the right, not that there is no taste-shaping effect from our beliefs about the real or the possible. Such a position might be epitomized by the ironic comment, sometimes attributed to Frank Knight, "As an economist I cannot tell you whether you should adopt food price controls. I can tell you that, if you do, you should expect widespread hunger."

At one level, of course, Knight's pungent remark is a purely instrumental statement about institutional design. We may desperately want to lower food prices. But Knight reminds us that getting there from here may require a more circuitous route than direct regulation, that is, if we want to avoid some pretty harsh side effects. But the taste-shaping effect of the remark goes beyond the purely instrumental. In associating price controls with drastic shortages, Knight's aphorism may persuade us to be skeptical of any attempt by government to meddle with market prices. It might even cause us to associate all regulation of markets with the prospect of disaster. It is but a short hop from here to distrust of all government regulation and to an antigovernmental ideology that condemns any collective attempt to restrict individual economic activity however it might be implemented. On this view, reducing the size and scope of governmental action rapidly becomes an end in itself. Individual action becomes "good," governmental initiative "bad."

It is hardly likely, of course, that one jibe at price controls by an economics professor little known outside of elite academic circles will have a general taste-shaping effect. Nor would a quick glance at Picasso's portrait of Stein much influence our visions of its subject. Picasso's point, and mine, has to do with repeated exposure to representations or ideas, with a process of habituation or acculturation that is as subtle as it is profound.

Something like what I have in mind might emerge from another economically oriented example. For the economist, "economic man" is little more than a calculating machine attempting to become better off through rational consumer or producer behavior. This is, of course, merely a simplifying assumption. The economist claims to be able to predict market outcomes by assuming that people behave as if they were purely rational calculators of their own gains and losses from alternative courses of action. Yet, on first (and sometimes prolonged) exposure, many find the fundamental behavioral assumptions of micro-economics morally repugnant. This reaction, and it is often a strong one, seems to be based both on guilt and on fear. Guilt that we sometimes do behave as economic monsters, and fear that thinking about human behavior as if motivated solely by "rational self-interest" will have moral and political consequences. The unintentional side effect of micro-economic analysis may not only be to help us to rationalize our self-regard, but to suggest that the steely-eyed calculation of personal gains and losses is the decisional posture that we should cultivate in ourselves. To do otherwise is to be irrational--perhaps a dupe. To think like economic man is not only to lose one's guilt about selfish behavior, but to aspire to a life of pure self-interested calculation. Or so we may fear.

Perhaps enough has been said to get agreement on a weak form of my argument: it seems likely that there is at least some influence of facts or presumed facts on political values. But this brief exploration also suggests that the relationship between our ises and oughts is neither necessary nor straightforward.

One way of better understanding this claim is to explore some examples of how we have failed to keep our facts and values separate in American political life. Indeed, I am about to argue that the way we, as citizens, articulate and understand our most cherished political ideal, democratic governance, has been a product largely of our changing understandings of how human beings do behave within particular institutional settings, not changing ideas of the moral underpinnings of democracy itself. For this purpose we need to look at only two formative eras of American democratic ideology, the founding of the Republic and the Progressive-New Deal period. Our quest is to understand how the very idea of democracy has been shaped by the differing "political science" of each period. We will then fast-forward again to consider what I take to be the dominant vision of political life in late twentieth-century America. I characterize this vision, somewhat hyperbolically, as a world of greed and chaos, of private self-interest and public incoherence. It is this vision that provides the primary challenge for today's designers of public institutions. For it is a vision that makes all public action deeply suspect.

My basic claim is that this vision is already shaping our public life, both what we do and what we think to be right and good. Moreover, because the political values we affirm are powerfully tied to what we believe to be true about human nature and the dynamics of public institutions, a simple rejection of contemporary individualistic or market values in favor of alternative normative commitments, like equality or community, is not readily available to us. If we would reform or renew our democratic faith, we need a better understanding of what it is reasonable to expect from institutions of governance and how we might design them. The claim of positive political theory, or what is sometimes called "public choice theory," must be confronted on its own terms, its claim to truthful description, if it is to take its appropriate place in shaping our values and in helping us to better design our public institutions.

Federalist and New Deal Political Science
THE FEDERALISTS
One widely accepted view of our constitutional history is that the scheme of national government adopted in 1787 abandoned both the communal values of colonial America and the radical democratic values of the American Revolution in favor of institutions featuring the protection of propertied interests and rule by a "natural aristocracy." To read Madison's great statement of Federalist political science in Federalist 10 is to see the force of this interpretation, if not necessarily the conspiratorial connotations that some of its adherents find persuasive. For in Federalist 10 popular democracy's tendencies to instability, oppression, and ineffectualness are set forth as the major problems to be solved when constructing a government that can and will protect individual rights.

The structure of Madison's analysis, you may recall, is first to identify in human nature the causes of popular democracy's malaise and then to design a governmental scheme that avoids these pitfalls, while presumably retaining what is feasible of the democratic ideal. In Madison's account of popular democracy, the force of an inevitable factionalism, which leads to majoritarian tyranny, injustice, and the collapse of democratic legitimacy, would be reduced by the nation's large size, by the use of representative assemblies, and by internal checks and balances within the government. In short, the new American democracy would eschew what many thought democracy to be about--local autonomy, direct citizen participation, and the sovereignty of popular majorities.

Just how much of the idea of popular democracy was being sacrificed by the Federalists' stratagems for inducing stability was, of course, the theme of many an anti-Federalist pamphlet. Federalist 10 responds to the charge that the Constitution is antidemocratic in two different ways, both of which rely on the positive theoretical presuppositions of Federalist political science. First, there is a basic argument from feasibility. Given the tendency of popular political action to degenerate into factional politics, a greater degree of either popular control or state sovereignty would be dysfunctional. The new government would be oppressive, ineffectual, or both. Second, there runs through the Federalist 10 analysis a subtle but clear difference between Federalist and anti-Federalist normative commitments--a difference which both reinforces and is reinforced by Federalist positive theory. Democratic self-determination emerges from Madison's analysis as only an instrumental end. The fundamental purpose of government is justice, the preservation of rights. If popular democracy tends toward oppression, ineffectualness, and instability, it is inadequate to the protection of rights and should be rejected.

To see how this view of the value of popular democracy was intimately related to the Federalist view of human nature, we need but contrast the views of the prominent anti-Federalists. For the anti-Federalists imagined a popular democracy that both teaches and is enriched by civic virtue. In this vision, it is through direct participation in governance that citizens achieve their highest ends. Nor is democratic participation here merely instrumental to the attainment of a separate good--civic virtue. The two goals are inseparable. Civic virtue is as necessary to democratic participation as democratic participation is to civic virtue. The anti-Federalists, therefore, charge (and there is much truth to the claim) that Federalists' fears about the likely outcomes of strong democracy have caused them to displace the only goal that makes self-government worth having--the cultivation of civic virtue in the citizenry. The Federalists' understanding of the possibilities of democratic self-rule have caused them to forget why the revolution was fought.

Moreover, having rejected what we might call "expressive democracy" in favor of "protective republicanism," the Federalists go further. Federalist 10 argues that the permanent interests of the community can only be expressed through representative assemblies composed of a natural aristocracy of merit. Popular democracy entails a sort of false consciousness in which men, driven by their passions and interests, fail to focus on the public good. Representatives, elected for their qualities of leadership and given an opportunity to deliberate at leisure, on the other hand, will be less likely to fall prey to the vice of faction. The representative assembly, properly checked and balanced, is thus not a pale substitute for the expression of the popular will, but rather is its true voice. In a remarkable transformation of values, rule by a "natural aristocracy" becomes the true democracy. "Justice," the maintenance of individual liberties and property rights, replaces civic virtue both as the product of and the necessary condition for democratic governance.

On this interpretation, Federalist 10 is a tour de force in the persuasive confusion of ises and oughts. Popular will is simultaneously suppressed and exalted by an argument that seems to proceed from merely the "facts" of human nature and the way it is shaped by institutional design.

PROGRESSIVES AND NEW DEALERS
Look ahead now a century and a quarter. If the triumph of Federalist political science was the legitimation of representative democracy as the true voice of the people, the triumph of Progressive and New Deal political science was the rationalization of the administrative state. The problem to be solved by these theorists was not the one Madison and his colleagues set for themselves, the protection of rights through a careful balancing and checking of majoritarian excesses. Indeed, the problem was almost the opposite. The theoretical task was to legitimate change in a society whose needs and demands were thwarted by vested interests. It was in part, of course, the legal protection of these interests through the elaboration of our Federalist Constitution that made them "vested." But the problem was not just in the courts.

Madison's representative assemblies had fallen into disrepute as well. Far from natural aristocracies of merit, by the turn of the twentieth century most legislative institutions were viewed as both corrupt and incompetent. They were also seen as conservative bottlenecks to the expression of the liberal public opinion that new techniques of sample polling revealed. "Progressive" political science was thus initially characterized by renewed enthusiasm for the anti-Federalists' basic ideas. Direct democracy in the form of the initiative and referendum was hailed as the institutional means for transforming the caretaker or guardian state into the positive or welfare state that the public demanded.

But the discovery that public opinion was more "advanced" than legislative action could not sustain a commitment to direct democracy in the face of other "facts." One cluster of facts resulted from the penetration of political science by social psychology. Psychological theory, and the empirical findings of social psychologists, increasingly featured irrational drives, passions, and prejudices as the mainsprings of human conduct. Moreover, individual irrationality seemed, if anything, to be magnified by group activity. This "crowd" or "herd" image of social groups hardly stimulated a sanguine view of the likely results of direct democracy. The social psychologists' dire visions also seemed to be borne out by events--the rise, and ultimately the "democratic" triumph, of fascism in Germany and in Italy.

Political theory thus seemed to produce an impasse. Public opinion demanded action to meet the social needs generated by industrialization and urbanization. Studies of the Congress and of the state legislatures suggested that a combination of features apparently endemic to American legislative assemblies--such as party corruption, committee power, and the seniority system--limited legislators' capacity to address a wide array of social ills either rationally or with dispatch. Representative democracy was not producing that attention to the general interests of the community that Federalist political science had predicted. Yet increased reliance on the momentum of popular democracy was obviously dangerous, for positive theory and current events portrayed voters as both apathetic and irresponsible. What forms of governance might be devised that could combine energy with intelligence, while maintaining the symbols of democratic control?

The answer seemed to be suggested by another emerging field of positive theory--management science. The industrial growth of the late nineteenth and early twentieth centuries had come to be understood as the joint product of technological and managerial innovation. The success of science combined with management bred an optimistic vision of "organized intelligence" as the cure for social ills. Indeed, a body of management theory was developing that seemed to promise success to any who would apply science, scientifically organized, to virtually any issue. While representative assemblies had failed to further Madison's "permanent interests of the community," those interests might yet be furthered by rational planning. Public administration thus was the key to meeting public demands while avoiding the dysfunctions of either popular or representative democracy.

The problem, of course, was what to do about "democracy" itself. Managerial government seemed at first blush quite different from, almost the opposite of, self-rule. And progressive political science was unlikely to persuade unless it could somehow explain that the new institutional arrangements it advocated need not abandon democratic ideals. The Progressives and New Dealers were as equal to this challenge as the Federalists had been. Moreover, their arguments bear a strong resemblance: Democracy was at base a system of governance so designed that the people got what they wanted. And what people most wanted, Progressive and New Deal theorists claimed, was "good government"--government that pursued the true long-term interests of the polity. Once it had been demonstrated that a government bound by antiquated notions of property rights and beholden to vicious party mechanisms for legislative policy choice could not provide good government, and that direct democracy led straight to irrational policy choice or authoritarianism, it was but a short step to the claim that managerial government was the government desired by the populace. The administrative state became the institutional means for achieving "rational democracy," that is, that system which gave the people the good government they demanded through "public opinion."

Note the degree to which the analyses of Federalist and New Deal political science coincide. Both are deeply suspicious of popular democracy and both fear it for much the same reason--the tendency of citizens' "passions" or "interests" to produce majoritarian tyranny. Twentieth-century political science merely added a psychological gloss and some more scientific observations of public attitudes to the eighteenth-century position. But late eighteenth- and early twentieth-century ideas of the appropriate role of the state and of particular governmental institutions were markedly different. Moreover, these normative positions were premised on fundamentally different images of how social organization was to be modeled, of how society, in fact, worked. These differences between Federalists and New Dealers once again dramatically illustrate the impact of positive theory on normative ideals.

In its simplest terms, the Federalist/New Deal dispute is a chicken-and-egg question concerning which came first, society or rights. In Federalist political science, individuals came endowed with natural rights. They entered into a social contract for governance primarily to secure the enjoyment of those rights. The preeminent task of statecraft thus was to design a mechanism that, through appropriate checks and balances, maintained social equilibrium and preserved the entitlements of the individual rightsholder.

Much of the energy of late nineteenth- and early twentieth-century political science was devoted to the empirical falsification of these basic Federalist premises. Comparative historical studies were done to demonstrate that there was and could be no agreement on any presocial set of natural rights--in short, that natural rights did not exist. Similar studies debunked the myth of the social contract. The growth of government everywhere was demonstrably by the evolution of traditional forms, rooted in particular cultural, geographic, and economic circumstances: rarely, if ever, by self-conscious acts of institution building in which citizens contracted for particular governmental forms.

The mechanistic Federalist imagery of checks, balances, and equipoise thus came to be viewed as historically or empirically naive. The reality of governance was not stasis but change; institutions did not operate according to mechanical laws, they evolved organically. As Woodrow Wilson put it in his classic, Constitutional Government in the United States,

Our statesmen of the generations quoted no one so often as Montesquieu, and they quoted him always as a scientific standard in the field of politics. Politics is turned into mechanics under his touch. The theory of gravitation is supreme.
The trouble with the theory is that government is not a machine, but a living thing. It falls, not under the theory of the universe, but under the theory of organic life. It is accountable to Darwin, not to Newton. It is modified by its environment, necessitated by its tasks, shaped to its functions by the sheer pressure of life. No living thing can have its organs offset against each other as checks, and live. On the contrary, its life is dependent upon their quick cooperation, their ready response to the commands of instinct or intelligence, their amicable community of purpose.

These changed perceptions of social reality led to normative prescriptions radically different from those of the Federalists. If rights were not primary and government was not a contract, then the principal purpose of government could hardly be the protection of rights. Government was instead an organ for the accomplishment of social purposes. The "goodness" of a governmental institution was to be determined, therefore, not by its capacity to maintain the positions of the parties to a particular contractual bargain, but by its functional appropriateness in an ever-changing social context. Public welfare, not justice, should be the principal goal of government. The public good lay in the pursuit of public welfare.

This new vision of social life transformed not only ideas about the overall purposes of government but also the meaning attached to the fundamental normative building blocks of American constitutionalism. Listen, again, to Wilson on the idea of "freedom" or "liberty":

Political liberty consists in the best practicable adjustment between the power of the government and the privilege of the individual; and the freedom to alter the adjustment is as important as the adjustment itself for the ease and progress of affairs and the contentment of the citizen.
There are many analogies by which it is possible to illustrate the idea, if it needs illustration .... We speak of the "free" movement of the piston-rod in the perfectly made engine, and know of course that its freedom is proportioned to its perfect adjustment. The least lack of adjustment will heat it with friction and hold it stiff and unmanageable. There is nothing free in the sense of being unrestrained in a world of innumerable forces, and each force moves at its best when best adjusted to the forces about it. Spiritual things are not wholly comparable with material things, and political liberty is a thing of the spirits of men; but we speak of friction in things that affect our spirits, and do not feel that it is altogether a figure of speech. It is not forcing analogies, therefore, to say that it is the freest government in which there is the least friction,--the least friction between the power of the government and the privilege of the individual. The adjustment may vary from generation to generation, but the principle never can. A constitutional government, being an instrument for the maintenance of liberty, is an instrumentality for the maintenance of a right adjustment, and must have a machinery of constant adaptation.

Given this radical alteration in perspective, it is hardly surprising that the Federalists' governmental structure was found inadequate. In Wilson's analysis, only the rise of dominant political parties outside the constitutional scheme of government had made nationhood possible and had avoided the complete collapse of government for want of either energy or discipline. But surely American government could not rely forever on a nonpublic and often corrupt party structure to provide both the long-range planning and the disciplined implementation that twentieth-century social and economic life seemed to require. The Progressives and their New Deal heirs thus opted for an "apolitical" administrative state as the appropriate expression of the public will. Thus was our understanding of "democracy" and its possibilities transformed.

Contemporary Positive Theory
The positive political theory that seems most pervasive today is really a cluster of theories in a field often called the "theory of public choice." Practitioners of this arcane art combine highly abstract mathematical deduction with some of the basic behavioral assumptions of micro-economics to produce theories of the behavior of voters, of representative assemblies, of bureaucracies, and even of courts. Public choice theory thus seeks to explain, or at least to "model," "rational public choice" within the typical institutional environment of the modern welfare state.

Many aspects of public choice theory are often associated with three recent American Nobel laureates, Kenneth Arrow, James Buchanan, and George Stigler. Arrow and his successors have been concerned particularly with decisional outcomes under various voting rules. We will for convenience call their contributions "voting theory." Stigler, and others associated with his enterprise, have been much more interested in analyzing the likely legislative output of a pluralist, representative democracy. We will call this set of theories "interest group theory." Buchanan's writings straddle both domains and are broadly oriented to issues of institutional design. His is a set of concerns in "political economy" that resonates most strongly with the governmental theorists of the Federalist or the Progressive-New Deal periods. Buchanan's approach also connects him to another strong current in contemporary economics, game theory, or the study of how bargaining strategies, information, and institutional characteristics mold the outcomes of joint or collective decisionmaking. Others, William Niskanen and Mancur Olson prominent among them, have been concerned particularly with bureaucratic behavior and with the formation of political pressure groups.

I should hasten to add that although I have attached these theories to prominent economists, the intellectual histories of the lines of thought we are exploring are long and thoroughly interdisciplinary. Arrow's contribution to voting theory owes much to the marquis de Condorcet, second secretary of the French Academy of Sciences, who was Madison's contemporary and whose work may have been known to the drafters of our Constitution. Moreover, although Arrow was an economist himself, his insights have been refined and elaborated as much by political scientists as by those finding their disciplinary homes in economics departments.

Similarly, Stigler's concern to understand the influence of interest groups on legislative outcomes was certainly shared by the author of Federalist 10, and Stigler's insights owe much to accounts by his contemporaries in political science. Indeed, while much of the more recent literature elaborating the interest group theory of legislation has been by economists, there is a rich parallel literature generated by political scientists working within both liberal and Marxist traditions.

Although the field we are now discussing covers a variety of interests and approaches, the one notion that unifies it is just this: We must always seek to understand political outcomes as a function of self-interested individual behaviors. Voters, like consumers, try to choose what is best for them. Representatives, like business firms, try to supply what people want. There is demand and supply at work, a market for collective action. Like all markets, of course, the political market may have distortions. The signals from voters to representatives may be vague, conflicting, and poorly informed. The quality of the performance of representatives may be difficult to monitor. Collusion may lead to monopolistic or quasimonopolistic behavior. And so on. The basic idea, however, remains fixed. Politics can be understood by deploying the basic tools of economic analysis.

None of this is too surprising, of course. We hardly expect where people stand on political issues to be unconnected with their economic interests. And we are all familiar with ways in which markets may fail to supply the goods and services that we want. Much of welfare economics and public policy analysis is devoted to the question of how to regulate or structure markets to make them perform better--that is, to insure the maximum increase in public welfare. Market failure is to be expected in public policy markets too, and much institutional design work will surely consist in trying to correct these failures. That indeed is what Federalist and Progressive or New Deal political scientists considered to be their task. The striking thing about the public choice literature, however, is the degree of "government failure" it finds. Indeed, the message is generally not about the ameliorative steps needed to improve the political marketplace. It is instead a message about why political markets cannot work to satisfy the democratic wish, that is, to provide the people with the government that they want. Modern positive political theory provides a much bleaker picture of political life than virtually any of its influential predecessors. It suggests quite strongly that no appealing version of democracy is possible and that no possible version is very appealing.

Obviously, no policy has a majority of first-place votes. Moreover, these preferences result in a "vicious" cycle when voted on in pairs. When X is paired against Y, X wins (A and C versus B). When X is paired against Z, Z wins (B and C versus A). When Z is paired against Y, Y wins (A and B versus C). That is, X beats Y, which beats Z, which beats X.

Ordinary voting routines simply will not choose a most preferred alternative. Indeed, the startling generality of Arrow's proof is that no voting rule which allows voters to express their true preference and which treats each preference as equally decisive can assure us that it will produce a single preferred choice for three or more voters who have at least three alternatives. In short, majority-rule systems may produce indeterminate, shifting, and therefore chaotic outcomes even if applied to small groups like committees, not to mention legislatures or the whole electorate.

As casual empiricists, we do not often observe the cycling phenomenon in operation. Elections routinely produce winners and representative assemblies make decisions that are not immediately undone by subsequent votes. Does this mean that the Arrow Theorem is either incorrect or irrelevant? Not at all. In fact, the absence of cycling gives the theory much of its normative interest. Stability can be achieved by relaxing any of the "conditions" that underlie the proof. We can give someone the power to constrain the alternatives or to determine the order of expressing preferences; we can give someone an extra vote; or we can allow false or strategic voting. But, of course, none of these choices is particularly attractive. Thus, the Arrow Theorem might be recharacterized as telling us that whenever we find stable choices, we cannot know that stability has not been bought at the price of unfairness in the underlying voting process. Our choice seems to be between incoherence (cycling) and some form of unfairness.

Most voting systems, whether governing elections or other types of choice, use some set of institutional devices to constrain choice, or else they explicitly abandon majority rule. In most elections, for example, we vote for one of two candidates and the winner is the candidate who obtains more than 50 percent of the votes cast. In multiple-candidate elections, various techniques may be used to produce a final majority. Run-off elections between the top two candidates are common. So is the electoral college winner-take-all system for American presidential elections--a system that not only produces a clear majority winner in the face of serious third-party candidates, but also sometimes permits a candidate to prevail without garnering a plurality of the popular vote.

(C) 1997 Yale University All rights reserved. ISBN: 0-300-06677-5Let's Hear It for Bureaucrats
By CASS R. SUNSTEIN

Read the First Chapter
GREED, CHAOS
AND GOVERNANCE
Using Public Choice to Improve Public Law.
By Jerry L. Mashaw.
231 pp. New Haven:
Yale University Press. $28.

o fewer than three Nobel Prizes have been awarded to economists who helped create the important field that goes by the name of ''public choice theory.'' Small wonder economics is so often called the dismal science. The first strand of public choice theory, associated with George Stigler, emphasizes the effects of greed. It tries to explain political outcomes by assuming that people, including politicians, pursue their selfish interests, often in well-organized private groups, or ''factions.'' The second, associated with Kenneth Arrow, emphasizes the risk of chaos and arbitrariness, showing with the Impossibility Theorem that a voting system cannot add up people's preferences in a way that produces something worthy of the name of ''the public will.'' The third and least dismal strand, associated with James Buchanan, harks back to the project of the Founders, proposing institutions -- an independent judiciary, separation of powers, a system of individual rights -- to help counteract the baleful influence of the worst aspects of human nature.

Public choice theory bears directly on the most pressing issues of democratic self-government. How can interest-group power be reduced? Does the notion of a ''public interest'' have any meaning? How should the nation respond to the recent proliferation of huge regulatory bureaucracies? In ''Greed, Chaos, and Governance,'' Jerry L. Mashaw, a professor of law at Yale University, traces the implications of public choice theory for the actual practices of government. He draws some remarkable lessons. In his most striking chapter, Mashaw argues that the people who run and staff Federal bureaucracies should be allowed to make important political decisions. To the familiar complaint that Congress too often passes the buck to out-of-control administrative agencies, he responds that bureaucracies are generally controlled by the White House, a hierarchical institution that is in some ways more accountable than the sprawling national legislature.

Political decisions by bureaucrats, he suggests, may make for better law; they can even help overcome the problems of logrolling. In a number of ways Mashaw's conclusions run up against the conventional wisdom. Consider his discussion of a hilarious case in which the Supreme Court upheld a California law that required government approval for the opening or relocating of any retail car dealership within 300 miles of any existing dealership selling the same kind of car. The Court validated the law as a reasonable effort to prevent unfair trade practices. Invoking the dismal science, Mashaw contends that the law should have been struck down as a transparent attempt to insulate current dealers from competition; such a law would hurt, not help, consumers. More broadly, he laments the Supreme Court's post-New Deal retreat from the idea that laws should not be mere bows to private interest groups. The Court would do well to strike down laws that cannot be explained as ''public-regarding,'' he says; the state must ''make a coherent and plausible claim to serve some public, rather than a merely private, interest.''

Mashaw's inclination throughout is pro-bureaucracy, and he is skeptical of legislatures. Debunking the familiar notion that ''discrete and insular minorities'' are at special risk in the political process and therefore deserve special protection, he argues that discrete minorities can often organize very effectively; indeed, diffuse and ill-organized groups, such as consumers, may well be at the most serious disadvantage, and hence deserve protection too. And he invokes Arrow's Impossibility Theorem to debunk what he calls ''naive populism.'' Chaos, not democracy, is likely to result from an effort to allow anyone to put anything on the political table, he says; rules that exclude certain proposals and provide a measure of order can be a great help.

''Greed, Chaos, and Governance'' offers an attractive and unusual combination of the iconoclastic and the reasonable. The iconoclasm comes in Mashaw's specific conclusions; the reasonableness comes in his refreshing ambivalence toward public choice theory. He thinks that people act from altruistic as well as selfish motives, and he deserves great credit both for his creative defense of national bureaucracies and for his effort to bring theoretical work in economics to bear on concrete policy.

But his book has two flaws. The first stems from the fact that it is hard to make progress on the underlying questions without taking some kind of stand on what the national Government ought to be doing. We cannot know whether laws banning race discrimination, or requiring welfare payments, or setting aside national parks, or requiring air bags, or stabilizing rents in large cities, count as ''public-regarding'' unless we have an account of what is right for government to do. It is not exactly big news that laws like these result from the activity of self-interested groups. Whether a law is objectionable depends not on the forces that gave rise to it, but on whether it does something good. Mashaw understands this point but says little about it, and thus some of his recommendations seem unanchored.

The second problem is that the book contains too little information about what Federal bureaucracies do, and how well they do it. To know, for example, whether bureaucracies should be limited by specific instructions from Congress, it would be good to know more about actual results. Have agencies without specific instructions (the Securities and Exchange Commission, the National Highway Traffic Safety Administration) done better or worse than agencies with much narrower authority (the Social Security Administration, the Department of Commerce)? How, in fact, have consumers been affected by the activities of the agencies designed to protect them? It is far from impossible to answer such questions. We know, for example, that the Environmental Protection Agency has made the air a lot cleaner, and that the Department of Agriculture has made prices a lot higher.

Nobel Prizes are awarded for theoretical advances; successful reforms, especially in the area of government regulation, are usually founded on specific investigations of what works and what doesn't. ''Greed, Chaos, and Governance,'' like the prizewinning work that underlies it, sheds a great deal of light, but it would throw still more if it had offered something other than a glimpse into the real-world effects of regulation.