Nobel economics winner focuses on government self interest

By , Staff writer of The Christian Science Monitor

James M. Buchanan is not a conventional economist, spouting academic theories about how private decisions work their way through the economy. Instead, the winner of this year's Nobel Memorial Prize in Economics, has taken a sharply realistic look at government, how it makes decisions, and how it affects the economy. As the ``father of public choice theory,'' Mr. Buchanan believes government officials' first interest is their reelection, not the national interest.

To counter this parochialism, Buchanan, a professor at George Mason University in Fairfax, Va., has emphasized that government needs discipline in its spending decision. To reign in spendthrift politicians, he believes the country needs a constitutional amendment forcing a balanced budget.

Until then he is content to see how the Gramm-Rudman deficit-reduction bill works.

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``I've been surprised,'' he says, that ``it's worked as well as it has.'' Should Congress, however, find ways to ignore the spending cuts mandated by Gramm-Rudman, he adds, ``We should take a constitutional approach; it's more binding.''

These tough views have an influential following. James C. Miller III, director of the Office of Management and Budget (OMB) was a student of Buchanan's at the University of Virginia. Mr. Miller recalls, ``Professor Buchanan had a commanding presence in the department at the time.''

Miller says Buchanan's influence on him was mainly attitudinal. ``When I see decisions not going in the right direction, I think of arrangements to provide the right incentives.''

In addition, Miller says Buchanan's teachings helped him understand the necessity to veto legislation, something President Reagan has done.

Other believers include Sen. Phil Gramm (R) of Texas, a co-author of the Gramm-Rudman bill; Manuel Johnson, the vice-chairman of the Federal Reserve Board; and Robert Tollison, a former top official at the Federal Trade Commission who is now at George Mason.

For someone who has had as much influence as Buchanan has, his interests remain mainly academic. He does not keep in touch with Reagan administration officials, but some of his colleagues do.

In addition, Buchanan's students are now teaching economics in universities around the world. Buchanan says one former student, now a professor, called to congratulate him from Lisbon, Portugal.

``In the battle of ideas,'' commented Buchanan, ``he said my teaching now would have an impact on that country as well.''

A former Reagan-appointee, Larry Kudlow, now an economist at Bear Stearns, a Wall Street brokerage house, is also a fan of Buchanan's. ``He is a strong free-market advocate,'' says the former OMB official, ``and is a strong advocate of cutting back on government activism. Buchanan tells you there is no free lunch with deficit spending.''

Such views were also shared by David Stockman, President Reagan's controversial former OMB chief, and William Niskanen, formerly of the Council of Economic Advisers.

Buchanan's views contrast with economists who have long believed fiscal policy could be an important tool. Buchanan says, however, ``I think there is a growing recognition of all persuasions that what we can accomplish in government is more limited than we thought 30 years ago. . . . I think we've found we can't fine tune economic recessions.''

In the event of an economic depression, he notes, Congress would be able to override budget limits, such as a budget-balancing amendment.

This viewpoint is disputed by many economists including Lawrence Chimerine, chief economist and chairman of Chase Econometrics, an economic forecasting service.

``The world does not conform to their model,'' he says, ``and, some coalition between government and business can be helpful as shown by the Japanese model. How can that be ignored?''

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