James Buchanan, R.I.P.

Some economists become at least somewhat famous outside the profession. James Buchanan wasn’t really one of those economists, despite winning the Nobel Memorial Prize in 1986. But his contributions to economics were significant, and his public choice theory of economics not only changed the way many economists think about government, politicians, and regulation, but his thinking worked its way into popular thinking. Many people analyze government actions according to Buchanan’s paradigm without knowing it. I mention this because Buchanan passed away last week at age 93. Here’s a good summary of his contributions.

7. He provided the most important revision to optimal tax theory since Ramsey, namely the point that supposedly efficient methods of taxation can be too easy to use.  That was in The Power to Tax, with Brennan.  His piece on static vs. dynamic versions of the Laffer curve, with Dwight Lee, is also significant.

8. He provided a public choice analysis of why Keynesian economics would not lead to the appropriate budget surpluses during good times and thus would contain dangerous ratchet effects toward excess deficits.