THE CONSEQUENCES OF MR KEYNES.pdf - Institute of Economic ...

Hobart Paper 78 is, in effect, an application of the relatively
new economics of politics, of which Professor Buchanan is a
Founding Father. (Another is Professor Gordon Tullock, who
outlined its main propositions in The Vote Motive, 1976.) Economists
have moved from what was considered their sphere of
interest, the exchange economy, into the activities of government
itself. Government is no longer regarded as an external
and benign provider of the legal/institutional environment, but
as a direct activist in the economy, which it is induced by pressures
and its own interest to manipulate for its advantage. In the
jargon, government is regarded no longer as an exogenous
(outside) but as an endogenous (inside) element in the working
of the economic system.
Part I of the Paper is a restatement of the argument of a book
by Professors Buchanan and Wagner recently published in the
USA, 1 which should be read for a fuller version of their
analysis. Mr Burton's Part II offers a new approach to British
pre- and post-war and more recent economic history in the
light of the Buchanan/Wagner critique of Keynes. Part III
suggests the consequential new approach to contemporary and
future politico-economic pohcy.
Not the least novel and fundamental ofthe proposals is that a
change in the constitution is required to ensure that government
is prevented from pursuing its own interests at the expense
of the public. Here is one of the main insights of the new
economics of politics. It displaces the conventional view that
government can be safely trusted to operate in the public
interest by demonstrating that, on the contrary, it must be expected
to be generally engaged in operating against the long-term
public interest by serving its short-term political advantage.
This Hobart Paper was suggested by Professor Buchanan, an
adviser ofthe Institute. It offers teachers and students of economics
a provocative and stimulating new approach to the
economic pohcy of Keynes that should begin or consolidate a
new development in thinking and debate in Britain on the
power of government to harm the people. It will, for that
reason, be of exceptional interest to non-economists in government,
industry and the media as a new explanation of Britain's
economic discontents.
March igj8
ARTHUR SELDON
1 Democracy in Deficit, The Political Legacy of Lord Keynes, Academic Press, New
York and London, 1977.
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