James Buchanan's public economics: One proposition, two speculations and three queries

CONSTITUTIONAL POLITICAL ECONOMY, VOL. 1, NO. 2, 1990

JAMES BUCItANAN'S PUBLIC ECONOMICS: One Proposition, Two Speculations and Three Queries*

Geoffrey Brennan**

I. Prologue

My object in this paper is not to provide a careful general survey of Buchanan's economics. That is a task I have attempted elsewhere.l My aim here is rather to offer an interpretation of Buchanan's work in the public economics area, and to try to locate that work in the broader Buchanan corpus. My approach has been deliberately conjectural, and I may have offered an excessively personal view. I believe, however, that my claims here can be defended, and it is precisely such a defense that the ensuing discussion offers.

I have taken my brief in this paper to include what many economists would regard as the core of Buchanan's work, namely: the literature on public goods, including specifically The Demand and Supply o f Public Goods (1968), the well-known externality paper with Stubblebine (1962b), the 'over-expansion' note with Kafoglis (1963), and the clubs papers; the literature on taxation, which includes both Public Finance in Democratic Process (1966) and The Power to Tax (1980) as well as a large bulk of articles on the whole range of tax questions (e.g. the paper on tax incidence in Buchanan 's first book of essays); and the material on public debt and related matters, including Public Principles of Public Debt (1958), Democracy in Deficit (1977), the papers with Dwight Lee on political discounting, and the relevant chapters of The Reason of Rules (1985). There is such an enormous menu here that merely to list it is enough to daunt even the most ambitious appetite.

*The text of this paper is substantially that presented to participants at the Buchanan-at- seventy conference. I have not attempted to recast the discussion along more conventional journal lines, because it has been decided to publish the conference papers in this supplementary volume in their original form. I have, however, made some modifications in the light of the conference discussion.

**Professor of Economics, Research School of Social Sciences, Australian National University. GPO box 4, Canberra ACT 2601, Australia

1 Geoffrey Brennan (1987). Moreover, summaries on the Buchanan public economics can be found elsewhere. See for example, A.B. Atkinson (1986) or R. Congleton (1988).

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Even so, I have excluded several seminal contributions Buchanan has made in public economics--for example, to the economic theory of federalism. And there is much other material (such as the book on academia with Devletoglou 1970) that might well be construed as falling under the ambit of public economics broadly conceived--and certainly fits better under my rubric than that of any of the other papers at this conference. This material I shall just have to ignore.

There are two particular difficulties that confront a satisfactory treatment of Buchanan's public economics. If, as I shall assert in my first "proposition", Buchanan's work is very much of a piece, then any division into subsets is bound to be arbitrary, and to talk of any part in isolation is liable to be misleading. Specifically, it is unsatisfactory to discuss the public economics without simultaneously discussing the contractarianism, the constitutionalism, the public choice theory and the subjectivism. As I have already complained, to provide adequate coverage of Buchanan's public economics is a daunting agenda in itself: to treat the public economics, properly contextualized as an aspect of the whole Buchanan research program, is really quite overwhelming. Moreover, when one deals with the public economics at this level of generality, it is natural to make appeal to abstraction--which drives the discussion back precisely to the contractarianism, the public choice and so on. The public economics element as such can easily slip between the cracks, and indeed I am not sure that I have managed here to prevent it from doing so.

The second difficulty is that, perhaps precisely because it can pass as more mainstream, much of the public economics output may strike one as less characteristically Buchanan-esque, less distinctive, than Buchanan's more philosophical writing. Take the theory of clubs for example. This material was clearly important in establishing Buchan- an's professional credentials: indeed, in talking with my mainstream public finance colleagues, one can sometimes get the impression that clubs theory was Buchanan's major contribution.2 But it may be difficult to recognize anything particularly Buchanan-esque in club theory. Could that work not have been done by a Samuelson or a Stiglitz or a Sandier? Most of us will be more philosophically inclined at seventy than we were at forty-five, I suppose, but looking back through the Buchanan-at-seventy lens, it is tempting to relegate the earlier, more

2 A view incidentally that I find somewhat preposterous.

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analytic and narrowly professional work, however important it may have been at the time, to a subsidiary place. I believe that any such relegation would be a mistake. For one thing, there is plenty in the Buchanan public economics that is distinctiveEthat almost certainly could not and/or would not have been written by a Samuelson or a Musgrave. Moreover, we can easily forget how much public economics has moved in a Buchanan direction over the last forty yearsElargely of course because of Buchanan's own influence. What seerhs mainstream now would not necessarily have seemed so in the sixties or early seventies, still less in the fifties. In short, I want to resist any temptation to downplay the significance or the distinctiveness of Buchanan's public economics. In fact, I shall become something of a partisan for the opposite position. Rather than seeing the public economics as deriving from the constitutionalism and the public choice concerns, I want to suggest that its role is much more central--that the public economics is as much the driver of the whole intellectual scheme as driven by it. This is the first of my "speculations." I should be the first to acknowl- edge that the contrary view has much to be said for i t--but I think my claim can be defended and I happen to believe it myself.

II.

Proposition One--Buchanan's work can and should be viewed as a single intellectual enterprise, of which the subjectivism, contractarianism, constitutionalism, public choice analysis and public economics are all inter-related parts.

To Buchanan's followers, this proposition may be uncontroversial. Let me therefore suggest at the outset several reasons why the proposition, if correct, ought to be viewed as surprising. First, the work itself spans an enormous range: from abstract matters like political philosophy, jurisprudence, methodology, epistemology and ethics to quite detailed issues like the incidence of public debt, or explaining why regulations rather than taxes are actually used in anti-pollution policy. Second, the authorship covers a now significant time span. The first Buchanan pieces appeared almost exactly forty years ago (a little more, in fact). Would one not expect that over a forty year span there would be a significant change in intellectual focus? Or that there may have accumulated along the way a significant group of papers that now strike one as "out-liers" in the corpus? Third, and at a more personal

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psychological level, Buchanan has never been much concerned with inter-temporal consistency in his work. For him, the charge "but you said the opposite yesterday" will as likely as not be met with the response: "who cares?" Buchanan casts off his papers from his vintage typewriter like someone setting children free to live their own lives. In these recent times, when anniversaries of the great Buchanan classics have become standard occasions for "re-appraisal", Buchanan's own response has been one of slightly awkward detachment. He treats the work as "out there" in the public domain: it will have to answer for itself. He certainly does not show much inclination to offer an explicit defense of past thoughts. Or equally, to let past thoughts constrain present ones. The Buchanan classics may be widely and intensively read--but not by Buchanan. In that sense, the ubter-temporal coherence is actually a trifle uncanny.

Compare Buchanan here with other scholars. There is--for one thing--no tendency to redo earlier work. No revised editions (like Adam Smith for example); no going carefully over the same territory to "get it right" (as for example one might characterize Rawls as doing). Or compare Buchanan with fellow Laureates. Say, Samuelson and Arrow. In both these other cases, the work covers a comparable time span and both men have made contributions across an enormous range. Samuelson, although largely restricted to economics, has written in every nook and cranny of the discipline (or, better put, has transformed nooks into major areas of inquiry); and Arrow, perhaps comparably with Buchanan, has ranged widely across disciplines. Yet in neither the Arrow nor Samuelson cases does one have the impression of the work being informed by a single philosophical vision, whereas it is just such a vision that confronts one in Buchanan's work. The adage for Arrow and Samuelson might be: "have brain, will travel". But the consistency in their work is at the level of technical brilliance: in neither case does that work amount to what we might call an intellectual program. It is, by contrast, precisely that kind of programmatic coheretace that characterizes Buchanan's work.

To justify this claim, I need briefly to describe the content of the Buchanan enterprise, and more particularly sketch out how the pieces fit together. The pieces in question are: Buchanan's subjectivism; his contractarianism; his constitutionalism; his public choice; and his public economics. Briefly, Buchanan's subjectivism insists on the (relative)

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impenetrability of other persons' mind. We may know the barest elements of people's psychology--that they have ends; that they act to promote them; and we know enough of what those ends are to know that this is how people generally behave. But we cannot know--at least independently of individuals' behaviour--what it is exactly that people want or how their various (necessarily competing) ends are internally weighed by them. Nor do we know the relative intensities of pleasure and pain (or economic satisfaction, or utility) that accrue to different individuals. Accordingly, we lack the information to be able to imple- ment the utilitarian program that was dominant in welfare economics and public finance until the early 1930's. Even if one did not have independent normative objections to utilitarianism (which Buchanan clearly has), one would be forced to abandon it for something more operational.

Enter contractarianism. One thing we can know is that when two agents engage in a simple voluntary exchange within an idealized market setting, both are made better offin the relevant ex ante sense. Voluntary agreement therefore becomes a behavioral test of expected mutual gain, and the searching out and exploitation of such prospects for mutual gain is to be seen, Buchanan claims, as the central object of any normatively defensible social interaction. Now, on the face of things, this idealiza- tion of bi-lateral exchange seems to give a natural bias towards market organization. However, at this point, the public economics and the public choice theory immediately enter.

First, note that although both traders in a simple bi-lateral exchange are made better off, the same is not necessarily true for others. For one thing, there may be "pecuniary" externalities; persons who are not parties to the exchange may find that market prices change, leaving some persons better and some worse off. For another, we know that not all market agreements are systematically beneficial (as when producers agree to form a cartel). More generally, the assumption of "idealized markets" begs all the normatively relevant questions. Public economics suggests, and not least Buchanan's own contribution, to us the possible ubiquity of market failures--of inter-dependencies (externalities) that are not internalized; of public goods (in the technical Samuelsonian sense) both under-provided and over-provided, with consequent distortions among other goods filtering through the general equilibrium system; of politically motivated interventions in technically private markets; of monopoly elements in market exchange, and so on and so

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on. No-one who looks at Buchanan's work can fail to be struck by the seriousness with which he takes "marke t fai lure"/"public goods" phenomena.

Equally, politics, which on its face does not instantiate voluntary agreement in any sense, nevertheless has to be viewed according to Buchanan in exchange terms. What appears as coercion within politics has to be understood as merely one side of the complex set of multi- lateral exchanges that make up political process, properly conceived. Of course, majoritarian democracy per se may be a highly imperfect mechanism for implementing those exchanges, and doubtless ought to be hedged with various restrictions on the domain of politics and perhaps on taxing and regulatory powers. All the same, the "exchange" window is the appropriate one through which political processes are to be viewed.

Let me offer two appeals to textual matters to buttress my interpretation of Buchanan's public economics here. First, note that in the externalities paper the definition of an externality is drawn very broadly-- much more so than in Pigou or Turvey or even Coase. Any inter- dependence, actual or potential, is included. One is invited to a view of the market as an institutional technology for internalizing some of those inter-dependencies, rather than as an institution that fails to internalize them all. One is drawn to a view of market participants as swimming in a sea of inter-dependencies, many of which the market picks up, rather than of externalities being an occasional anomaly in an otherwise perfectly functioning order. To be sure, one is hardly encouraged to think that heavier reliance on political processes will necessarily improve the situation. Whether the collectivization of property rights that the political process involves will internalize more inter-dependence than it externalizes is an open question--and one whose answer depends on an appeal to the more abstract 'constitutional' level of decision-making.

Second, and relatedly, it is a notable feature of the treatment of public goods in The Demand and Supply of Public Goods (1968), that the analysis is cast not as a normative demonstration of market failure but rather as a descriptive account of how agents search out arrangements for their mutual benefit. As Buchanan himself puts i t . . . "my own interpretation differs from that of other scholars largely in my somewhat greater emphasis on the positive content that can emerge from the analysis" (134). And on this view, the emergence of political activity

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in the provision of goods and services is to be explained by reference to, and concomitantly provides evidence of, market failures of one kind or another. "A community of individuals decides to demand goods and services publicly through governmental-political processes, rather than privately, precisely because the bilateral exchanges facilitated by market arrangements are insufficiently inclusive" (7f). Accordingly, the extent of political activity provides prima facie evidence of the extent of market failure and of the generalized mutual benefits of political provisionmthough, of course, such prima facie evidence might be mod- erated by countervailing evidence of an analytic kind.

The point here is that markets are not to be seen--cannot be seen-- as normatively appropriate because they instantiate the exchange ideal. They clearly do not--except where markets themselves are "ideal", and we cannot tell, simply by observation, whether markets are "ideal" or not. Market failure (and equally market success) are not directly observable. "Unless the observing economist is assumed to be omniscient, his classification of a final position as non-optimal can never be more than a conjectural hypothesis that is impossible to test" ["The Relevance of Pareto Optimality." In: Buchanan (1977b): 233]. The ubiquity of market (and more generally institutional) "failure" when measured against some imaginary ideal in which all conceivable gains from exchange are exhausted, and equally the difficulty of specifying the precise dimensions of that failure, mean t h a t " . . , the Pareto criterion is of little value when employed solely to c lass i fy . . , inputs and outputs of goods and services" (215): " . . . the criterion must be extended to classify social rules which constrain the private individual behaviour that produces such results." (216)

We are thus driven, via the public economics and the subjectivism, from Buchanan's contractarianism to his constitutionalism. Markets, on this constitutionalist view, are to be seen as normatively appropriate not so much because they exemplify agreement but rather because they emerge from it. And here we do have a behaviorally relevant test: "if a presumed or apparent non-optimal rule cannot be changed through agreement among members of the group, the hypothesis stating that the rule is non-optimal is effectively refuted" (233). Although explicit agreement is too costly at the post-constitutional level [as The Calculus of Consent (1962) argues] it is much more relevant at the constitutional level itself, where particularized individual interests obtrude less and bargaining costs are lower.

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What though, at this level, is the role of the economist? If all we need do in order to secure normatively appropriate outcomes is to insist on unanimity at the constitutional level, and if we cannot independently identify market or political 'failure', is there any normative role for the economist qua economist at all? Yes, says Buchanan. The role is to use his knowledge of the way in which institutions mobilize mutual gains, informed by his analytic models of those institutions, to offer profitable conjectures as to arrangements that will mobilize mutual gains more effectively. The relevant analytic inquiry for these purposes is comparative institutional analysis---of which public choice theory is a critical piece. 3 Public choice analysis in Buchanan's hands has always had an eye to this overarching normative purpose. Buchanan has never seemed too much interested in public choice as "political science": there is no attempt to build a grand model of majoritarian political process analo- gous in any way to the Arrow-Debreu general-equilibrium model for markets. Buchanan has generally been content to exploit particular insights, with their own normative import. The model of public sector over-expansion under majority rule in The Calculus of Consent, and the work on political discount rates with Dwight Lee are two characteristic examples.

Let me summarize. I hope I have provided a reasonably persuasive account here of the Buchanan intellectual enterprise as a coherent whole, and of the way the various bits--subjectivism, contracta'rianism, public economics, constitutionalism, public choice--fit together. I con- fess that what I find impressive is the coherence, no less than the breadth and depth, of the work. Moreover, it seems to me that that coherence is perhaps the most distinctive Buchanan feature.

I wish merely to add two points. One is that, although there is a nice logical sweep to the whole Buchanan enterprise, the various elements are to some extent logically separable. That is, one could be a contractarian without being a subjectivist; a constitutionalist without being a contractarian; a public choice scholar without any normative engage- ment. The interesting question is whether one can be a public econo- mis t -wi th most of the baggage that orthodox public economics carries

3 So, one might add, is that part of "law and economics" that deals with the positive theory of judicial behavior--and not least the literature, that deals with the "efficiency" or otherwise of the common law.

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with it--and not follow a Buchanan line. That is an issue that I next turn to.

The second point is that there is always a danger that any coherence detected in any aspect of the world is an artifact of the observer. Have I simply imposed my own intellectual order on Buchanan~s work, conveniently overlooking contrary themes? Or is the order something we can only identify ex post, a sort of (benign) unintended consequence of a career directed to other ends? I do not think either charge will stick. The same sweep can be detected in any of the books of Buchanan essays recently published4--books which contain essays spanning his entire career. And as Tony Atkinson perceptively observes in his com- mentary of the Buchanan contribution, much of the intellectual program was actually set out in one of Buchanan's earliest published papers "A Pure Theory of Government Finance: A Suggested Approach" (1949). The coherence is, I assert, Buchanan's own and has been in significant measure evident from the outset. I find that fact quite remarkable.

III.

Speculation One--Despite the various excursions into the territories of ethics, law, politics, and philosophy, Buchanan remains essentially a public finance economist and his whole intellectual program is identi- fied in such terms.

To philosophers, ethicists, jurisprudists and political theorists who might want to contest this speculation and claim Buchanan as their own--and to those public finance people who would equally happily disown him--I have a small confession: the opening words of this proposition are Buchanan's [The Power to Tax (1980): ix]. That does not, of course, mean that they are uncontestable. In particular, the insertion of that weasel word "essentially" does a fair bit of unspecified work. So let me give an account of what I mean by the claim as stated.

The claim is stronger than the mere observation that Buchanan earned his professional stripes as a public finance man. Or that the public finance is a central piece of his intellectual scheme--a proposition that

4 I have in mind Freedom in Constitutional Contract (1977) and the two books of essays recently compiled by Viktor Vanberg and Robert Toilison Economics: Between Predictive Science and Moral Philosophy (1987) and Explorations into Constitutional Economics (1989).

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I hope I have already established. Or that public finance was, as a matter of fact, Buchanan's disciplinary point of departure and that much of his work was a reaction to mainstream public finance currents. Or even that the intellectual tradition in which he stands--most notably Wicksell and De Viti De Marco--is predominantly located in public economics. What I mean rather is that, if it were faithful to its own internal logic, public economics ought to have developed along Buchan- an-esque lines--that, in a sense, Buchanan has almost uniquely been faithful to the basic logic of the welfare economics that underlies modem public finance. Buchanan's enterprise is, then the public economics enterprise.

My reason for speculating along such lines is basically that modem public finance accepts the Robbinsian critique of utilitarianism that is a point of departure for Buchanan. Even if (public) economists are not thorough-going subjectivists, they seemmat least in principle--to accept that information about utility functions is sufficiently vague both to make inter-personal comparisons of utility extremely hazardous and to render opaque the details of individuals' preferences: The whole behaviorist thrust of revealed preference theory is now firmly established as a core piece of the economics orthodoxy, and its predominance is grounded on an implicit acceptance of the fact that independent information about agent preferences is unavailable. At the normative level, the utilitarian calculus is dropped in favor o f " optimal conditions" analysis, "excess burdens", cost-benefit calculations and the like--yet all of these depend on information that is, by implication, unavailable. In other words, the claims that Buchanan makes on behalf of the application of the Pareto criterion at the level of social rules, ought to be compelling for all post-Robbinsian public economics--or at least so it seems to me. Either Buchanan's logic is wrong, or public economists should never have given up utilitarianism in the first place: the economist can either read agents' minds or he can not. If he can, utilitarianism is perfectly feasible: ff he can not, then the standard repertoire of

5 Richard Wagner quite rightly points out that some public economists, and in particular those in the neo-utilitarian tradition associated with 'optimal tax theory' and its look- aiikes, do not appear to accept the Robbins critique. Yet they do appear to accept the authority of the revealed preference tradition and take Arrow's impossibility theorem seriously. There seems to be some ambiguity here, and to that extent my claim should be modified.

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economic efficiency analysis is bankrupt for just the reasons Buchanan isolates.

Simply put, I assert that the standard public finance economist has a commitment to two principles (among others): first, to the relevance of exchange-related norms--that is, he makes some appeal to a variant of Pareto optimality/superiorty/critefion, etc; second, to the ineradicable difficulty of directly determining agent preferences over all goods (whether marketed or not). And further, that these twin commitments commit him to the Buchanan enterprise. For that is just what the Buchanan enterprise is: post-Robbinsian public economics, rendered coherent.

Now, one should p e r h a p s 6 be careful here. Charges of incoherence are strong ones. And at least, in principle, we ought to be able to convince public finance economist themselves of any incoherence. The fact that Buchanan has been unable to do this over a lifetime of patient (and sometimes impatient) argument, should perhaps give us pause.

Actually, Buchanan's own epistemological stance is something of a barrier here: it tends to let the orthodoxy off the hook. One of Buchan- an's favorite metaphors concerning intellectual matters is the Nietz- schean one of windows on the wodd- -a metaphor that carries with it an implication of the radical non-comparability of alternative visions. On this view, public finance orthodoxy is merely a rival vision. And there is surely considerable evidence to suggest that that is how Buchanan sees it. For example, in the preface to Public Finance in Democratic Process (1966), he contrasts his "individualistic- democratic" model of fiscal process with the orthodox alternative, but asserts that " . . . the relative efficacy of the two models, need not be discussed. . ."(xii i) . As he sees it, " . . .d i scuss ion in public finance reflects an uncertain mixture of the two approaches, along with a liberal dosage of idealist-democratic norms. The resulting inconsistencies are not surprising" (xiv). And, one might add, what does not surprise need not disturb. As an Australian friend of mine once remarked (when in deep intellectual trouble, in our argument)-- ' 'Oh well, one must either be inconsistent or a fanatic, and I choose the former". As it happens, I do not accept the terms of the choice. It seems to me that one has an intellectual obligation to ride one's logic right into the midst of its

6 I say "perhaps" because I have deliberately thrown care to the winds in this account.

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confrontations. Inconsistencies are a problem: we should not treat them nonchalantly.

So, notwithstanding a certain reluctance on Buchanan's own part, I want to proceed to the question: where is it exactly that the inconsistencies in mainstream public economics arise? There are actually several points, all of them the focus of Buchanan criticism on various occasions. There is an inconsistency between the presumed morally directed behavior of political agents and the predominantly egoistic motivations of market agents (or those same agents in market roles). There is an inconsistency between the ethical principles that inform the "efficiency" aspects of the standard normative apparatus and those that are supposed to direct the "distributive" aspects. And there is an inconsistency between the assumptions about information accessibility that direct ordinary consumertheory (and that underlie the jettisoning of standard utilitarianism) and the assumptions about information accessibility that are used to validate standard "efficiency" policy. In this paper, I have focused on the last of these. But Buchanan has, of course, been attentive to them all; and his intellectual scheme aims to offer a solution to them all.

Buchanan's is not, perhaps, the unique solution. In this sense, to characterize his work as the coherent post-Robbinsian public economics is too strong. It may be possible to derive a public economics from a non-contractarian base that takes due cognizance of informational problems in isolating gains from exchange, and of the constraints imposed by agents' behavior and of the necessity of institutional feasi- bility. However, it seems to me that any such enterprise, even if it differs from Buchanan's at the margin, is going to look very much like it. At the very least, the mainstream public economist would have to concede that there seem to be quite deep foundational problems in his professional practices. The proposition that such problems exist is, as I see it, exactly the proposition that Buchanan's logic sets before us.

IV.

Speculation Two--In the Buchanan scheme, properly interpreted, there is no public economics as normally understood; all public economics is simple public choice.

At one level, this seems self-evident. That is, if we define the domain of public economics to be "government policy" (Browning & Browning

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1983: 1) or "those policy problems which involve the use of tax and expenditure measures" (Musgrave & Musgrave 1980: xiii), it seems clear that the constitutional-contractarian cannot deal with these matters in anything other than a purely positive way. Public choiee theory will provide an account of why public policy is what it is. Accounts of what policies ought to be chosen are about as relevant to the operation of politics as specification of the "just price" is to the operation of markets. The whole normative enterprise in mainstream public economics is, on this account, simply misconceived.

This does not mean that all of mainstream public economics is useless. Presumably a sound knowledge of incidence analysis (who benefits and who loses from particular public policies) will be useful, under standard public choice assumptions, for predicting the patterns of electoral support that will accumulate around particular proposals, and perhaps thereby for predicting which policies will ultimately prevail. And such skills are likely to be politically as well as scientifically profitable. But what passes for "efficiency" analysis (excess burdens and the like) will generally be of second-order significance in explaining political behavior. Even the capacity to discern (or invent) Pareto superior moves is not a particularly useful skill at the level of in-period politics, because policies that survive the unanimity test almost certainly will not survive majoritarian electoral competition.

Actually, even the purely predictive enterprise in public economics is likely to be extremely limited. If we take seriously central public choice propositions about the generalized instability of majoritarian electoral equilibria, only the most general claims about the nature of political process and the likely shape of political equilibria seem possible. Predictions as to what particular coalitions of interest are likely to form and prove decisive in any throw of the electoral dice, and hence predictions as to what particular special-interest policies will prevail, will be highly conjectural, even if voter utility functions are totally transparent.

Now it may be 7 that the model of homo economics at the ballot box, which characterizes most public choice analysis, is seriously defective, and that appeals to moral considerations make up a significant part of electoral process. In that sense, something of public finance orthodoxy

7 As I have argued elsewhere: J. Buchanan and G. Brennan (1984) and following up earlier Buchanan themes, as in : J. Buchanan (1954).

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may survive as politically relevant: showing that a tax is "unfair", or that a public works projects is likely to yield substantial general benefits, or that a particular special-interest project will actually cost rather more than had been thought, may well influence opinion on the proposal even among voters whose interests are not at stake. "Efficiency" and "equity" might, on this reckoning, become electorally influential labels and come to represent part of the currency of political debate.

Any such attempted resurrection of orthodox public finance will not, however, conflict with speculation one: there is no rejection of the proposition that public economics is public choice in disguise. Rather there is a rejection of the particular public choice model in which individual interests are the prime counters in the political game. Note, moreover, that the moral considerations that are relevant here are those that voters find persuasive, and specifically not those that the public finance expert happens to find personally compelling. "Efficiency", for example, only appears as a politically relevant concept to the extent that it makes up part of the content of prevailing social morality. More- over, these moral considerations weigh only (and exactly) to the extent that they weigh in actual voter choices. Morality takes its place along with interests, ideologies, candidates' appearance, party loyalties and whatever else figures in voter choice. No special role attaches to morality on this view, and the relevance of the normative categories familiar from standard public economics becomes a contingent matter to be investigated as part of the general positive public choice program.

V. Three Queries

Query One--ff speculations one and two are correct, what about Buchanan's own public finance theory, as in Public Finance andDemo- cratic Process (1966) or The Power to Tax (1980)?

This is a challenge that is surely easily met. The characteristic feature of Buchanan's public finance is its assignment of tax matters to the constitutional levelmthat is, to treat the tax system not merely as an outcome of on-going political process but rather as part of the institutional fabric within which on-going political process functions. This analytic move is not available more generally. That is, we should not want to allow normative policy analysis to appear completely intact at the constitutional level by the simple expedient of renaming the policy "a constitutional matter". What makes tax issues special here is their

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role of determining the prices that citizen-voters must pay for public goods. The tax structure must be specified before voters can indicate the levels of public spending they desire (and thereby the tax rates they wish to be applied). In that sense, the tax system is logically prior to Other matters of policy, and is to be determined at a different and more abstract level of deliberation. The tax structure is, we might say, a quasi-constitutional matter. And the whole purpose of Public Finance in Democratic Process is to indicate the distinctive analytic apparatus required to understand the role of tax structure in shaping post-constitutional policy dec i s ionsmand thereby to inform individual choices among alternative fiscal constitutions. The object in The Power to Tax is identical, though there the model of political process chosen is quite different. In many ways, the model used in The Power to Tax is much closer to that used in the orthodox public finance literature: government is taken to make policy decisions independent of specific political constraints. The "despot ic" aspects of the standard benevolent despot model are retained, but the benevolence assumption is replaced with an assumption more congruent with that used in explaining the exercise of discretionary power in the economic system more generally. The resultant highly stylized model of governmental fiscal behavior 8 is, however, merely the preliminary to the analysis of the fiscal constitution.

There is another way in which tax analysis might be argued to differ from normative policy analysis more generally. This is that, in expenditure and regulation discussion, the existence and magnitude of putative "external" benefits and costs (at the relevant margins) is the central issue. Since these externalities, if Pareto relevant, are not included in market prices, their size can only be guessed at: it is here that the subjectivism critique of conventional welfare economics is particularly compelling. The same, of course, applies to so-called "Pigovian" taxes to correct for putative distortions in market allocations. But no such distortions are at issue in the general revenue-raising activities of the fisc. There is no presumption in levying a general income tax that income-earning ought to be discouraged: on the contrary. There is therefore no suggestion at all that market prices are sending the wrong signals to economic agents. Accordingly, the calculation of 'excess burden' and tax incidence can confidently rely on market-revealed

8 Though, to be sure, not obviously more stylized than the standard monopoly model.

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values (and elasticities) as authoritatively revealing 'social values'. Of course, such calculations are not entirely unproblematic--and some taxes (most notably, discriminatory excises such as those on gasoline and alcohol) may incorporate some Pigovian element in addition to their pure revenue-raising properties. All the same, the subjectivist critique seems decidedly less telling on the revenue-raising side of fiscal transac- tions, and in that sense (specifically, the generalized public choice critique aside) the conventional tax analytics seem more robust than analysis on the expenditure side.

Query Two--There is some suggestion in various places where Buchanan's work is referred to, that Buchanan may allow a subsidiary role for conventional welfare economics--for example, by treating a generalized benefit-cost requirement as a constitutional constraint. If so, would not this be a major lapse?

My answer here is: yes, it would. To be fair, however, I can find no textual support for such an interpretation. Roger Congleton, in his survey of Buchanan's work, suggests this possibility as consistent with the Buchanan position and assures me that Buchanan gave it verbal support. And John Head, whose knowledge of the Buchanan texts is probably better than Buchanan's own, has put to me a similar interpretation in casual conversation.

Given my own understanding of the Buchanan enterprise, however, and particularly of the role that subjectivism plays in it, to concede any such role for cost-benefit analysis would be a major lapse. Of course, Buchanan does concede that, under majority rule, all kinds of restrictions might be constitutionally agreed that would not be legitimate if unanimity were feasible at the level of in-period politics. General rather than specific-revenue financing is one particular example, considered in The Calculus of Consent. But, except in extremely restricted cases (cases where the arguments for public intervention are weakest), market prices will be no proper basis for cost-benefit calculations: the normative debate will necessarily focus on magnitudes at whose value we can only speculate. Only a massive concession to the omniscient objective policy-engineer could make cost-benefit analysis in such cases anything other than an essentially arbitrary exercise.

The two queries that I have dealt with so far are, in my view, easily handled. Let me close, therefore, with a query that I think is not so easily dealt with, and where I do regard the Buchanan enterprise as a

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bit shaky and Buchanan's own statements about it confusing. This query deals with the positive-normative distinction in the work, and how Buchanan's normative theory fits with the assumptions he makes about agents' motivations more generally. I am not quite sure how to phrase the query, so let me put it in its most general terms:

Query ThreemHow does one go about drawing the delicate line between positive and normative in the Buchanan enterprisemand is there, in the final analysis, any room for the normative at all?

Part of the thrust of the Buchanan scheme is, as I see it, to rule out the introduction of normative elements at the level of in-period policy choice. There are several overlapping arguments here. One is the charge that we cannot legitimately attribute to political agents (or for that matter to ourselves as social analysts) motivations that we do not equally attribute to ordinary persons in their social roles. This is, I take it, the force of the public choice critique of the benevolent despot construction. If markets are to be modeled as if all agents exploit such discretionary power as they possess to further their own private interests, then politics must be analogously modeled. And even if we allow moral considerations to play some role in influencing agents' behavior, the morals relevant are--as I have argued abovemthose that agents have, not those they "ought to have" in the analyst's opinion. The second argument is a moral objection--to the effect that to seek to impose one's own morality is to play God, and to reduce all other moral agents to the status of beasts. It is, says Buchanan, simply immoral to treat other persons as pawns in one's own moral projects. It is this kind of moral argument that contractarianism claims to avoid--though to the extent that contractarianism is itself a substantive normative theory, it is not clear why it is not susceptible to the same charge. If A says: murder is wrong; and B responds that it is wrong only if there are universally agreed social rules against it; why is B not playing God when he seeks to secure his own norm? And, incidentally, in what sense is B's ethic "minimal"? The idea that any weirdo can unilaterally veto any ethical rule is not a weak one, and as it happens does not seem to satisfy the test of general acceptability.

The third argument is the informational one we have already discussed. "The Pareto criterion has relevance in this situation only insofar as it provides some assistance in dispelling areas of ignorance or in removing certain barriers to rational behavior" (Buchanan 1977: 218).

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"In this situation" refers here to the in-period level of application. But the same point applies at the constitutional level. Fundamental motivations do not change in the move to the more abstract level of choice of rules: only the context and domain of choice alter. Ignorance about one's own position may moderate, and in the limit obliterate, the distinctiveness of different persons' interests, but the Pareto criterion applied at this level still has relevance only in so far as it provides "assistance in dispelling areas of ignorance". The Buchanan view is that economists have a comparative advantage in dispelling ignorance at this constitutional level. The kind of general abstract information about how alternative institutions work that is relevant at the constitutional level is exactly the kind of information which the economist's analytic tools provide. By contrast, the more detailed information about the specific content of individuals' utility functions, relevant at the in- period level, is information to which the economist qua economist has no privileged access.

So far, so good. But what does this really amount to? As a make- work scheme for economists, a focus on the constitutional level seems fine. As a suggestion to fellow economists as to where their comparative advantage may be greatest, fine also. But ultimately, whatever rules emerge at the constitutional level of decision-making will emerge and there is nothing explicit in the Buchanan scheme that indicates why agents at the constitutional level will do anything other than pursue their interests as perceived through the constitutional lens or why they themselves would have any particular reason for "going constitutional". What sort of work ultimately does the normative framework do? Is the enterprise simply one of deriving a professional ethics for economists--an answer to another well-known Buchanan question: "What should economists do?" And why is it not the case that the only answer we can reasonably expect to that question--indeed, the only answer that the Buchanan scheme admitsmis: maximize your utility !?

REFERENCES

A.B. Atkinson (1986) "James Buchanan's Contribution to Economics." London School of Economics Discussion Paper No. 100: London.

J.M. Buchanan (1949) "A Pure Theory of Public Finance: A Suggested Approach." Journal of Political Economy 57: 496-505.

J. M. Buchanan (1954) "Individual Choice in Voting and the Market." Journal of Political Economy 62: 334-343.

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J.M. Buchanan (1958) Public Principles of Public Debt. Homewood.

J.M. Buchanan and G. Tullock (1962) The Calculus of Consent. University of Michigan Press: Ann Arbor.

J.M. Buchanan (with W.C. Stubblebine) (1962b) "Externality." Economica 29: 17-28.

J.M. Buchanan (with M. Kafoglis) (1963) "A Note on Public Goods Supply." American Economic Review 53: 403-414.

J.M. Buchanan (1965) "An Economic Theory of Clubs." Economica 32: 1-14.

J.M. Buchanan (1966) Public Finance in Democratic Process. University of North Caro- lina Press: Chapel Hill.

J.M. Buchanan (1968) The DemandandSupply of Public Goods. Rand-McNally: Chicago.

J.M. Buchanan (with N. Devletoglou) (1970) Academia in Anarchy. Basic Books: New York--London. (English edition 1971)

J.M. Buchanan (with R. Wagner) (1977) Democracy in Deficit: The Political Legacy of Lord Keynes. Academic Press: New York.

J.M. Buchanan (1977b) Freedom in Constitutional Contract. Texas A&M University Press: College Station.

J.M. Buchanan (with G. Brennan) (1980) The Power to Tax: Analytical Foundations of a Fiscal Constitution. Cambridge University Press: New York.

J.M. Buchanan (with G. Brennan) (1984) "Voter Choice: Evaluating Political Alterna- tives." American Behavioral Scientist 28: 185-201.

J.M. Buchanan (with G. Brennan) (1985) The Reason of Rules. Cambridge University Press: New York.

J.M. Buchanan (1987) Economics: Between Predictive Science and Moral Philosophy. Texas A&M University Press: College Station. (Compiled by V. Vanberg and R. Tollison)

J.M. Buchanan (1989)Explorations in Constitutional Ecomomics. Texas A&M University Press: College Station. (Compiled by V. Vanberg and R. Tollison)

G. Brennan (1987) "The Buchanan Contribution.'" Finanzarchiv 45: 1-24.

E.K. and M. Browning (1983) Public Finance and the Price System. Macmillan: New York. (2nd ed.)

R. Congleton (1988) "An Overview of the Contractarian Public Finance of James Buchanan." Public Finance Quarterly 16: 131-157.

R.A. and P.B. Musgrave (1980) Public Finance in Theory and Practice. McGraw Hill: New York. (Third ed.)

SELECTED BIBLIOGRAPHY OF PUBLICATIONS BY JAMES BUCHANAN

"Federalism and Fiscal Equity." (1950) American Economic Review 40: 583-599.

"Knut Wicksell on Marginal Cost Pricing." (1951) Southern Economic Journal 17: 173-178.

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"Social Choice, Democracy and Free Markets." (1954) Journal of Political Economy 62: 114-123.

"Positive Economics, Welfare Economics and Political Economy." (1959) Journal of Law and Economics 2: 124-138.

Fiscal Theory and Political Economy. (1960) University of North Carolina Press: Chapel Hill.

"Politics, Policy and the Pigovian Margins." (1962) Eeonomica 29: 17-28.

"The Relvance of Pareto Optimality." (1962) Journal of Conflict Resolution 6: 341-354.

"The Economics of Earmarked Taxes." (1963) Journal of Political Economy 71: 457-469.

"Is Economics the Science of Choice." (1969) In: E. Streissler (ed) Roads to Freedom: Essays in Honor of F.A. Hayek. London: 47-64.

Cost and Choice. An Inquiry in Economic Theory. (1969) Markham Publishing Co.: Chicago.

"An Efficiency Basis for Federal Fiscal Equalization." (with R. Wagner) (1970) In: J. Margolis (ed) The Analysis of Public Output. New York: 139-158.

"Efficiency Limits of Fiscal Mobility." (with Ch. Goetz) (1972) Journal of Public Eco- nomics 1: 25-43.

The Limits of Liberty. (1975) University of Chicago Press: London.

"Taxation in Fiscal Exchange." (1976) Journal of Public Economics 6: 17-29.

"Barro on the Ricardian Equivalence Theorem." Journal of Political Economy 83: 337-342.

J "A Contractarian Perspective on Anarchy." (1977) In: Freedom in ConsUtutjonal Con- tract. Texas A&M University Press: College Station: 11-24.

"Towards a Tax Constitution for Leviathan." (with G. Brennan) (1977) Journal of Public Economics 8: 255-274.

"Tax Instruments as Constraints on the Disposition of Public Revenues." (with G. Brennan) (1978) Journal of Public Economics 9: 301-318.

What Should Economists Do? (1979) Liberty Press: Indianapolis.

"The Logic of the Ricardian Equivalence Theorem." (with G. Brennan) (1980) Finanzar- chiv 38: 4-16.

"Towards a Theory of Yes-No Voting." (with R. Faith) (1981) Public Choice 37: 231-245.

"The Normative Purpose of Economic Science." (with G. Brennan) ( 1981) International Review of Law and Economics 1: 155-166.

"Tax Rates and Tax Revenues in Political Equilibrium." (with D.R. Lee) (1982) Economic Inquiry 90: 344-354.

"Politics, Time and the I.after Curve." (with D.R. Lee) (1982) Journal of Political Economy 90: 816-819.

"Predictive Power and the Choice among Regimes." (with G. Brennan) (1983) Economic Journal 93: 89-105.

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"The Tax System as Social Overhead Capital: A Constitutional Perspective on Fiscal Norms." (with G. Brennan) (1983) In: D. Biehl, K. Roskamp and W. Stolper (eds) Public Finance and Economic Growth. Michigan: 41-54.

Liberty, Market and State: Political Economy in the 1980s. (1985) Brighton-New York.

"Vote-Buying in a Stylized Setting." (with D.R. Lee) (1986) Public Choice 49: 3-15.

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Documents

James Buchanan's public economics: One proposition, two speculations and three queries