Buchanan and Tullock (1962) identified the state as a central problem of neoclassical economic theory. Whereas traditional neoclassical analysis had little to say about the state, neoclassical welfare economics assumed the existence of a benevolent and efficient state capable of correcting market failures. Buchanan and Tullock then expanded on the Chicago School interest group and state agency models confined to regulatory politics (e.g., regulatory capture theories developed by MPS members Stigler and Posner) by developing a universal economic theory of politics. All policies, including those carried out in the name of the public, are explained by economic interests represented by conspiring coalitions of voters and by the capacity of politicians to shape such coalitions based on their interest in maintaining their positions of power. Inefficient consequences in the political marketplace were solely blamed on the fallacies of political decision making: “We can summarize public choice as a theory of governmental failure” (Buchanan 1979, 178).

Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin, loc. 1583