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Quotation of the Day…

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… is from pages 489-490 of Jim Buchanan’s 2000 collection Debt and Taxes [2], which is Vol. 14 of the The Collected Works of James M. Buchanan; specifically, it’s from Jim’s January 1985 Economic Inquiry article “The Moral Dimension of Debt Financing”:

The Victorian fiscal morality, a set of behavioral precepts which dictated adherence to strict budgetary balance, to a limited absolute level of taxation, and to a self-enforcing monetary regime, was neither rationally nor biologically derived.  It was an outgrowth of a cultural evolutionary process which was not understood by those who shared the morality.  It existed in continual tension with the tribal morality which remained essentially indifferent to the Victorian rules for fiscal behavior; indeed allegedly rational arguments for fiscal-monetary debauchery were introduced on occasion.

On the moral dimension that is my emphasis here, Keynes may be viewed as a successful revolutionary who destroyed the Victorian precept.  He did so for rationally based reasons, and he sought to replace the strong but essentially unconscious adherence to long-standing rules by what seemed at the time to be well-reasoned “logic of policy.”  However, Keynes totally failed to recognize that the long-standing rules for fiscal-monetary prudence were required to hold the tribal instincts in check, and that, once the Victorian precepts were eroded, the tribal instincts would emerge with force sufficient to overwhelm all rationally derived argument.

The debt finance we observe today we might have predicted from the simple public-choice analysis of political behavior.  Constituents enjoy receiving the benefit of public outlays, and they deplore paying taxes.