In an essay this month for Liberty Fund’s website, I reflect on the 1979 collection – What Should Economists Do? – of 16 of James Buchanan’s papers. Here are my opening two paragraphs:
I‘m thankful to my undergraduate mentor, Bill Field, for things too many to count. Among these is his introducing me during my junior year to public-choice scholarship. “Dr. Field” (as I then called him) did so by suggesting that I read James Buchanan’s and Richard Wagner’s 1978 monograph, published by the Institute of Economic Affairs (and with a contribution from John Burton), titled The Consequences of Mr Keynes. In this monograph’s main essay, Buchanan and Wagner use straightforward economic logic to expose with crystal clarity a core political flaw of Keynesian economics—namely, even if Keynesianism is fully correct as a matter of theoretical economics, in practice democratic governments have poor incentives to implement it.
The reason for this political failure is that politicians’ incentives to spend more than they bring in are dominant regardless of prevailing macroeconomic conditions. And so while democratic governments will eagerly heed Keynesians’ counsel to run budget deficits during economic slumps, these governments will, with equal eagerness, ignore Keynesians’ counsel to balance their budgets under conditions of full employment.