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Democracy in Deficit: The Political Legacy of Lord Keynes

3.4 out of 5 stars 5 customer reviews
ISBN-13: 978-0121388508
ISBN-10: 0121388506
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Editorial Reviews

About the Author

Recipient of the 1986 Nobel Prize in Economics, James Buchanan has won international recognition for his pioneering role in the development of public-choice theory. --This text refers to the Digital edition.
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Product Details

  • Hardcover: 208 pages
  • Publisher: Emerald Group Publishing Limited (January 28, 1977)
  • Language: English
  • ISBN-10: 0121388506
  • ISBN-13: 978-0121388508
  • Product Dimensions: 6 x 0.6 x 9 inches
  • Shipping Weight: 13.3 ounces
  • Average Customer Review: 3.4 out of 5 stars  See all reviews (5 customer reviews)
  • Amazon Best Sellers Rank: #3,331,046 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

By Jerry H. Tempelman on 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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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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I bought this for a class in Economics of the Public Sector. I was struck by what a great idea Buchanan has, and how little chance it has of ever being implemented. The book is free online, but I prefer having a paper copy to annotate. There are a lot of highlighter-worthy phrases and passages in this one.
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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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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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