Democracy in Deficit: The Political Legacy of Lord Keynes
  

Democracy in Deficit: The Political Legacy of Lord Keynes

by Academic Press
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Democracy in Deficit is one of the early comprehensive attempts to apply the basic principles of public-choice analysis to macroeconomic theory and policy.

According to Robert D. Tollison in the foreword, “The central purpose of the book was to examine the simple precepts of Keynesian economics through the lens of public-choice theory. The basic discovery was that Keynesian economics had a bias toward deficits in terms of political self-interest.”

Democracy in Deficit opened the door for much of the current work on political business cycles and the incorporation of public-choice considerations into macroeconomic theory. Even in the area of monetarism, Buchanan’s landmark work has greatly influenced the sway of contemporary theorists away from the nearly universally held belief of Keynesian theory.

Democracy in Deficit contributes greatly to Buchanan’s lifelong fiscal and monetary rules to guide long-term policy in macroeconomics. The book serves to bolster Buchanan’s central beliefs in the necessity of a balanced-budget amendment to the U.S. Constitution and in monetary rules rather than central bank discretion.

The book is co-authored with Richard Wagner, a respected colleague of Buchanan, whom Buchanan recognized as helping to keep the book free of polemics and on target with its central purpose of applying the elementary theory of public choice.

James M. Buchanan is an eminent economist who won the Alfred Nobel Memorial Prize in Economic Sciences in 1986 and is considered one of the greatest scholars of liberty in the twentieth century.

The entire series will include:

Volume 1: The Logical Foundations of Constitutional Liberty
Volume 2: Public Principles of Public Debt
Volume 3: The Calculus of Consent
Volume 4: Public Finance in Democratic Process
Volume 5: The Demand and Supply of Public Goods
Volume 6: Cost and Choice
Volume 7: The Limits of Liberty
Volume 8: Democracy in Deficit
Volume 9: The Power to Tax
Volume 10: The Reason of Rules
Volume 11: Politics by Principle, Not Interest
Volume 12: Economic Inquiry and Its Logic
Volume 13: Politics as Public Choice
Volume 14: Debt and Taxes
Volume 15: Externalities and Public Expenditure Theory
Volume 16: Choice, Contract, and Constitutions
Volume 17: Moral Science and Moral Order
Volume 18: Federalism, Liberty, and the Law
Volume 19: Ideas, Persons, and Events
Volume 20: Indexes

--This text refers to the Hardcover edition.

Product Description

Democracy in Deficit is one of the early comprehensive attempts to apply the basic principles of public-choice analysis to macroeconomic theory and policy.

According to Robert D. Tollison in the foreword, “The central purpose of the book was to examine the simple precepts of Keynesian economics through the lens of public-choice theory. The basic discovery was that Keynesian economics had a bias toward deficits in terms of political self-interest.”

Democracy in Deficit opened the door for much of the current work on political business cycles and the incorporation of public-choice considerations into macroeconomic theory. Even in the area of monetarism, Buchanan’s landmark work has greatly influenced the sway of contemporary theorists away from the nearly universally held belief of Keynesian theory.

Democracy in Deficit contributes greatly to Buchanan’s lifelong fiscal and monetary rules to guide long-term policy in macroeconomics. The book serves to bolster Buchanan’s central beliefs in the necessity of a balanced-budget amendment to the U.S. Constitution and in monetary rules rather than central bank discretion.

The book is co-authored with Richard Wagner, a respected colleague of Buchanan, whom Buchanan recognized as helping to keep the book free of polemics and on target with its central purpose of applying the elementary theory of public choice.

James M. Buchanan is an eminent economist who won the Alfred Nobel Memorial Prize in Economic Sciences in 1986 and is considered one of the greatest scholars of liberty in the twentieth century.

The entire series will include:

Volume 1: The Logical Foundations of Constitutional Liberty
Volume 2: Public Principles of Public Debt
Volume 3: The Calculus of Consent
Volume 4: Public Finance in Democratic Process
Volume 5: The Demand and Supply of Public Goods
Volume 6: Cost and Choice
Volume 7: The Limits of Liberty
Volume 8: Democracy in Deficit
Volume 9: The Power to Tax
Volume 10: The Reason of Rules
Volume 11: Politics by Principle, Not Interest
Volume 12: Economic Inquiry and Its Logic
Volume 13: Politics as Public Choice
Volume 14: Debt and Taxes
Volume 15: Externalities and Public Expenditure Theory
Volume 16: Choice, Contract, and Constitutions
Volume 17: Moral Science and Moral Order
Volume 18: Federalism, Liberty, and the Law
Volume 19: Ideas, Persons, and Events
Volume 20: Indexes

--This text refers to the Hardcover edition.

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13 of 14 people found the following review helpful
4.0 out of 5 stars Public-choice perspective of public debt finance October 19, 2004
Format:Hardcover
The authors, James M. Buchanan and Richard E. Wagner, offer two main points of criticism of the Keynesian prescription of deficit spending during recession. They first expose the internal inconsistency of Keynesianism that, if it were true, during an economic recession with slack resources, public spending increases could simply be financed by the creation of money rather than the issuance of interest-bearing debt (pp. 34-35).

More important, however, is the authors' public-choice criticism of Keynesianism. The Keynesian doctrine of deficit spending provided the academic excuse for elected representatives to spend without taxing, thus removing the self-imposed discipline of balanced budgets that had existed prior to the adoption of Keynesian thinking (p. 4): "The legacy or heritage of Lord Keynes is the putative intellectual legitimacy provided to the natural and predictable political biases toward deficit spending, inflation, and the growth of government" (p. 26).

Keynesianism might perhaps work under a system of benevolent dictatorship, but not in a democratic setting with citizens who are both taxpayers and beneficiaries of public services, professional politicians, political parties and government bureaucracy (pp. 79-80). "Political decisions in the United States are made by elected politicians, who respond to the desires of voters and the ensconced bureaucracy. There is no center of power where an enlightened few can effectively isolate themselves from constituency pressures" (p. 98).

Elected public officials display a bias towards spending public funds on projects that yield tangible benefits to their constituents, and towards not encumbering them with a tax bill to pay for those projects.
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5 of 5 people found the following review helpful
3.0 out of 5 stars The argument for a balanced budget amendment March 21, 2012
Format:Paperback|Verified Purchase
Few people will be interested in this book who don't already have strong opinions on the subject. I will make no effort to conceal my own opinions here but I still hope to write a review that will help people decide whether or not they want to read this volume regardless of their views on the subject matter.

This book is one of the first and best arguments anywhere for a balanced budget amendment to the Constitution. I was not persuaded by it but even those opposed to the arguments here will profit from understanding them better. Buchanan received a Nobel prize for his work, which has been quite influential. The argument here is made concisely in crisp and lucid prose refreshingly free of unnecessary jargon.

Buchanan and Wagner maintain that Keynes intellectually undermined what they think of as the effective "fiscal constitution" that had previously existed in the United States. This they describe as having been a broad bipartisan commitment to pay down, during normal times, any federal debt accumulated during wars and depressions. The authors acknowledge that Keynes himself never condoned budget deficits during healthy economic times. They even concede that Keynesian economics might work under a "truly benevolent despotism." Under democracy however, they insist that Keynes legacy has been the main reason we have had a seemingly permanent bias in public policy towards inflation and bigger government.

The main problem with this volume, and this argument, is not what it contains but what it leaves out. Public debt is discussed in nominal terms rather than the more relevant statistic which would be percent of GDP.
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6 of 8 people found the following review helpful
5.0 out of 5 stars Rare Political Economy Case Study January 27, 2007
Format:Paperback
Comprehensive analysis of the political and economic effects of Keynesianism from a public choice perspective. This is an impressive look at the lasting changes in the economic order since Keynes' ideas were adopted by politicians and influential economists alike.
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15 of 33 people found the following review helpful
Format:Hardcover
J. M. Buchanan's(JMB)book is completely mistitled and out of date.Nowhere in any of Keynes's writings does Keynes ever advocate a policy of deficit finance,which is actually the brain child of Abba Lerner,a member of the American Keynesian-Neoclassical Synthesis school of economics.Lerner used the term functional finance to describe deficit finance.During a visit to America in 1944 as the representative of England's Treasury Department,Keynes totally disagreed with Lerner's approach.Keynes's approach is an advanced version of the cyclically balanced budget first laid out in clear terms to the Pharaoh by Joseph some 3,700 years ago-build up a surplus in the good years that will cover the deficits of the bad years.This is the first statement of what economists call a countercyclical fiscal policy.Keynes's additional provision is that the budget be split into two categories-one of which would be a capital budget.The government could only run deficits in the provision of capital projects in public infrastructure(building dams,reservoirs,water projects-irrigation networks,seaports,airports,public transportation projects,public schools,colleges and universities,public research laboratories,etc.,)that would pay for themselves in the long run.Nor was Keynes an advocate of tax cuts in an economic downturn except for temporarily suspending the social security tax for workers only.Keynes's major policy recommendation was the maintenance of low interest rates combined with a central bank policy of eliminating loan availability for speculative undertakings(greenmail,leveraged buyouts,hostile takeovers,margin account loans,corporate raiders,junk bonds,etc.). Read more ›
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