Where do big deficits come from? James M. Buchanan had an idea.
James M. Buchanan, who died Wednesday, concluded that a government's rules often favor its own expansion. He furthered 'public choice theory,' which says that politicians and others tend to act in self-interest.
Why do politicians act as they do? Specifically, why do they do things that don’t seem to be in their constituents’ long-term interest, such as creating big deficits by authorizing lots of government spending without enough tax revenue to back it up?
James M. Buchanan devoted his life to trying to discover the answers to questions such as these. Mr. Buchanan, who died Wednesday, was a Nobel Prize-winning economist and leading advocate of a branch of his discipline called “public choice theory.”
Public choice theory holds that people who engage in public life, from politicians to bureaucrats to voters, behave pretty much as people do in private marketplaces. In other words, they act in narrow self-interest.
It’s an unsentimental view of politics that goes like this: Politicians want to be reelected or make their parties powerful, so they offer up pork-barrel projects and entitlement goodies without imposing tax-derived pain to pay for them. Bureaucrats want to keep their jobs, so they facilitate the process. Voters want to keep the good times rolling, so they mark their ballots for the folks who’ve let the good times roll.
Liberals complain this theory discounts the ability of people to work together for the greater political good. Libertarians, on the other hand, saw him as a rock star – someone whose academic work tended to confirm their view of the world.
“The passing of Nobel laureate economist James M. Buchanan, one of the greatest proponents of limited government and free markets in the 20th century, leaves a giant void at a time when Western democracies are expanding the size and scope of the government and threatening the future of liberty,” wrote James A. Dorn, a vice president of the libertarian Cato Institute, on Thursday.
Buchanan himself called his area of economic focus “politics without romance.” It’s not groundbreaking to look at governance with a morally critical eye, of course: That’s what Machiavelli was all about. Buchanan’s contribution involved examining modern democratic government structures to see what factors pushed them to keep growing and growing, even under leaders supposedly committed to spending control.
His conclusion was that the rules of the game often favored just such an expansion. Once constitutions established how such governments were to be run, everyone tried to maximize his or her own gains within that system. But even if individuals got what they wanted, this would inevitably produce results that were less than optimal for society at large.
In this view, politicians tend to not choose between spending and lower taxes; they often opt for both. Buchanan also felt that traditional Keynesian economics, which holds that deficit spending can boost a slumping economy, aided and abetted spiraling debt. The Keynesian theory allowed politicians to comfort themselves that they were doing the right thing at the moment and would surely do better in the long run. They seldom did.
A Tennessee native, Buchanan got his undergraduate degree at Middle Tennessee State Teachers College. He earned his doctorate in 1948 at the University of Chicago after serving as an officer on the staff of renowned Adm. Chester Nimitz during World War II.
Much of his teaching career was spent in Virginia. He led the economics department at the University of Virginia, moved to Virginia Polytechnic Institute in 1969, and then took his Center for Study of Public Choice to George Mason University in 1983.
His work was not to every economist’s taste. Some called his ideas unremarkable, even banal. Others felt they did not explain differences in political systems – why one country has a better fiscal balance sheet than another, for instance. Even at his passing, some economic commentators wondered what all the fuss was about.
“I have to say he really stands out for such a highly regarded scholar as someone [whose] work I feel like I don’t understand or appreciate,” wrote Slate economic correspondent Matthew Yglesias on Friday.