Gluttonous for votes, Elizabeth Warren and other Democratic candidates promise, if elected, to outdo President Trump at ruling by executive diktat. They ludicrously promise “free” this and “free” that, largely paid for by further bloating our already gargantuan debt. Politicians in both parties demand that we trust them with power to conduct industrial policy, to break-up highly successful yet disfavored firms, and to curtail the freedom of expression of YouTube and other private entities.
Can there be any doubt of the importance of the work and legacy of our late colleague, the Nobel laureate economist James Buchanan, whose career from the start was devoted to fighting such political irresponsibility?
Born on a Tennessee farm 100 years ago on October 3, Buchanan came of age when the ideas of John Maynard Keynes reached their zenith among economists. Among these ideas is the notion that the burden of government debt is fully borne at the time it is incurred. And so as a young scholar, Buchanan accepted the proposition that government debt—especially debt owed to foreigners—imposes no burden on future generations.
If this Keynesian proposition is true, the bourgeois aversion to debt, and the shame of sticking our children with bills for our current consumption, would be foolish. With future generations not burdened by government debt, citizens should guiltlessly borrow and spend through their government as much as they please. The kids won’t mind.
But after breakfast one morning in 1957 at Rome’s Hotel d’Inghilterra, Buchanan had a Road-to-Damascus revelation. He saw that the burden of government debt does indeed fall on future taxpayers. While it’s true that those who buy government bonds sacrifice current consumption, they do so—like all creditors—expecting to receive a return large enough to compensate them for this sacrifice. Contrary to the prevailing Keynesian view, therefore, the burden of paying for debt-financed government programs does not fall on government’s creditors. It falls on those who must repay the debt—namely, on future taxpayers.
Buchanan quickly wrote up this insight into his first book, “Public Principles of Public Debt.” The books and articles that he tirelessly produced over his long academic career—from 1949 until his death in 2013—fill more than 20 hefty volumes. It is this scholarship’s depth, breadth, creativity, and relevance that won him the 1986 Nobel Prize in Economics.
As with his discovery of the fallacy that infected Keynesian economists’ reasoning about government debt, most of Buchanan’s work was iconoclastic—none more so than his insistence that people are just as self-interested when making political decisions as they are when making private ones.
If today the proposition that politicians and bureaucrats act self-interestedly seems trite, some thanks for this realism is owed to Buchanan and to his long-time collaborator, Gordon Tullock. When they first published their path-breaking book “The Calculus of Consent” in 1962, the dominant attitude among economists and political scientists was that political decision-makers—at least in democracies—generally are motivated to promote the public welfare even when doing so runs counter to their private interests.
Buchanan and Tullock explained the folly of this romantic belief. And they showed how infusing economic and political theory with more realistic assumptions about political motivations enables us to better understand actual political behavior and outcomes.
Only when armed with this improved understanding are we equipped to craft constitutional rules that will successfully confine government to its proper role without denying to it the powers necessary to perform tasks that a consensus of citizens wish government to perform.
If this goal sounds like the one pursued in Philadelphia during the summer of 1787 by George Washington and other founding fathers, that’s because it is. Among Buchanan’s greatest heroes was James Madison, who drafted the Constitutional Convention’s Virginia Plan. Buchanan admired Madison’s hard-nosed understanding that all humans are prone to abuse power. He likewise admired Madison’s ingenuity at designing workable constitutional rules that give officials enough power to act but not enough to actually abuse. In fact, his admiration for Madison ran so deeply that Buchanan came to call his own academic enterprise “Virginia Political Economy.”
Yet despite the best efforts of Madison & Co., the constitutional constraints they fashioned were whittled away by the Progressive ideology that took root in the early 20th century and reached full bloom during the New Deal. The result is what Buchanan called “constitution anarchy,” under which people “feel themselves at the mercy of a faceless bureaucracy, itself irresponsible and subject to unpredictable twists and turns that destroy and distort personal and private expectations.”
It’s not enough, Buchanan insisted, that the franchise be wide and elections fair and regular. In addition, those with political power must be bound by enforceable rules to avoid doling out favors and responding to the passions du jour.
Imagine what candidates’ debates would be like if any of them paused to ask if authorization to impose a wealth tax or grant free college tuition and Medicare-for-All is found in the Constitution.
James Buchanan spent much of his illustrious career arguing for a restoration of constitutional order, warning that “‘constitutional’ must be placed in front of ‘democracy’ if the political equality of individuals is to be translated with any meaningful measure of freedom and autonomy. The tyranny of the majority is no less real than any other, and, indeed, it may be more dangerous because it feeds on the idealistic illusion that participation is all that matters.”
Although today unheeded, let’s hope that Buchanan’s counsel triumphs soon.