Wednesday, January 9, 2013

James M. Buchanan (1919-2013) [updated]

Economist James M. Buchanan has passed away. Twenty years ago this month I reviewed his memoir Better than Plowing in Commentary. Excerpt:
The dust jacket of Better Than Plowing, a collection of autobiographical essays, describes Buchanan’s work as “the theoretical inspiration for much of the Reagan era’s economic philosophy.” This is an overstatement. In fact, public choice was but one of several intellectual schools that influenced U.S. economic policy in the 1980′s, along with supply-side theory and monetarism. True, the perspective offered by public-choice analysis was compatible with the Reagan administration’s efforts to scale back the government’s role in the economy. But the implications of public-choice theory are that achieving such a goal would require institutional change, as opposed to mere policy adjustments.
Thus, although the Reagan administration provided tax and regulatory relief, and constrained the growth of public expenditure, the mechanisms of economic policy-making remained much the same in 1988 as they had been in 1980. There had been little change in the budgetary process, or in other institutional arrangements conducive to the expansion of government. The way was thus clear for a swift reversal of Reagan’s economic policies during the succeeding administration, which is indeed what happened.
Now: I still have respect for Buchanan, and think public choice offers important insights. But looking back at what I wrote in the passage above, I no longer fret much about the supposed "rapid reversal" of Reagan policies under Bush I, as I think it was more a course change than a reversal and not without merits. Moreover, I now have much more doubt about "institutional change" in the budget process as a way to limit government; back then I think I had in mind a constitutional balanced-budget amendment, for one thing, and I could imagine that resulting in more fiscal cliff/debt ceiling-type fiascoes.

UPDATE 1/11 3:48 PM: Matthew Yglesias at Slate expresses some puzzlement about what Buchanan's work accomplished, and asks readers to help him out. Excerpt:
Buchanan's point is that is that an actual regulator or politician is not a benevolent social planner, but instead a regular person with regular motives. So while an unregulated local utility company might be a vicious exploitative monopolist, the director of a publicly owned utility might be a viciously exploitative bureaucrat, or the chief of a public utility regulatory commission might be viciously exploitative corrupt hack. You can't just infer from the existence of a market failure that a regulatory solution will in fact emerge.
Absolutely true. But also I think a little banal. People were aware of the problem of political corruption and malfeasance before Buchanan came along.
Me: While numerous others can explain public choice better than I can, a key aspect I think is that the government official isn't necessarily corrupt or malfeasant--that the demands of getting elected and staying in office push even reasonably moral politicians to engage in behaviors that ultimately don't serve the public well. For example, politicians will spend a lot but not tax enough to pay for the spending, precisely because the voters (in effect if not with clear intent) are asking for them to do that. Remember, the school of thought is called "public choice," not "politicians' choice."

UPDATE 1/14: Tyler Cowen has a quick but wide-ranging answer to Yglesias's question.

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