5 - Virginia Political Economy and Public Choice Economics

Summary

Wicksell’s 1896 essay on just taxation approved of Mill’s endorsement of Hare’s system of proportional representation. The distinction between democracy, identified as government by discussion, and majority rule is central. When Buchanan laid out the role of the economist, he worried about a temptation to propose policies that garnered only majority support rather than policies with unanimous appeal. Buchanan’s development of Wicksell’s principle that expenditures and the taxes to finance them ought to be voted on simultaneously shows in his opposition to deficit financing: those who benefit from deficit-financed expenditures need not be the same as those who bear the costs. The link to an older Chicago tradition of Simons, who was concerned with the monetary instability generated by a fractional reserve monetary system, shows in the 1962 In Search of a Monetary Constitution. Tullock’s initial paper on rent seeking targeted the Chicago result that the economy was close to allocative efficiency. The question of the status quo comes into focus when we ask whether Wicksell’s simultaneity principle is appropriate under dictatorial rule where government by discussion does not exist.