ABSTRACT
The basic elements—the self-interested actor, competition among producers, and a relatively unregulated market—are the hallmarks of neoclassical economic thought and central to rational choice theory. One of the earliest and most far-reaching impacts of rational choice theory was in explaining the actions of bureaucrats and bureaucracies. The more data-driven research helped support some of the theoretical underpinnings of rational choice, but it also made clear that economic theory had difficulties digesting the public sector. Research from behavioral economics has demonstrated a strong tendency to abide by norms of fairness, even in the absence of an external authority or in cases of anonymity. Herbert Simon argued that the economic concept of human rationality at the heart of rational choice theory fails the empirical acid test set by William Buchanan and Gordon Tullock. If there are unbridgeable differences between markets for cars or soft drinks and markets for public goods, such as library, education, and law enforcement services, economic theory may have limited use for scholars of the public sector.
