Abstract

This chapter examines the origins of James M. Buchanan’s critique of Keynesian fiscal policy. Considered are Buchanan’s graduate training in public finance and fiscal policy and his early work in fiscal federalism. Two important themes emerge. The first is the influence of Henry C. Simons. The second relates to the necessity of choice between “rules versus authorities” or democratic process versus authoritarianism in policy making. Beginning with his 1948 dissertation, Buchanan consistently emphasized the importance of incorporating democratic processes directly into economic models rather than relying on omniscient and benevolent social planners or other authorities. It is the lurking authoritativeness in fiscal policy that Buchanan particularly objected to, more than the theoretical mechanics.