Bringing rules centrestage
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James M. Buchanan, who died on January 9 at 93, was one of the most profound thinkers of our age. Few Indians would be familiar with his academic contributions or even recognise his name. Yet, the insights from his research would strike a chord with every Indian navigating government inefficiencies and excesses on a daily basis.
Buchanan, professor emeritus at George Mason University in Fairfax, Virginia, won the Nobel Prize in Economic Sciences in 1986 for his contributions to the economic analysis of political decision-making. By bringing politics back into economics, Buchanan made economics more humane, realistic, interesting and relevant. He challenged the economics orthodoxy, dared to be different, inspired his students and colleagues, and developed one of the most unique and creative research programmes in economics at the Centre for Study of Public Choice at George Mason University.
"Politics without Romance", the title of his 1997 article, summarises one avenue of research in a career spanning over six decades. Buchanan, with his colleague Gordon Tullock, developed the field of public choice, applying economic reasoning to political processes. Buchanan assumed that politicians and bureaucrats act in their own interest and respond to incentives. While this is recognised in our daily lives, economists and policymakers focusing on market failure overlook it and advocate government intervention, assuming that political actors will take the optimal action.
Corruption scandals like the 2G and Adarsh Society scam, election manifestos promising freebies, from rice to laptops, and the dismal state of public goods and services in India can be comprehended by applying Buchanan's insights. By eliminating romantic assumptions about the public spirit of political actors, he shed light on how governments operate and explained why the political process of allocation often intensifies problems instead of solving them.
The current disillusionment of the common man with the inefficient and corrupt government in India has prompted many to take to the streets and protest. Yet citizens demand that better and honest politicians and bureaucrats solve the problems created by self-interested political actors. Buchanan's work, however, shows that the solution is not hidden in intentions but in institutional incentives. His analysis is firmly rooted in a more realistic understanding of human nature. Instead of appealing to the goodness and public spirit of politicians and bureaucrats, Buchanan argued for limiting or constraining political actors.
To find a way to limit individuals in public office, Buchanan shifted the analysis from everyday politics to the constitutional level. After abandoning the hope that political actors will act contrary to their interests, Buchanan sought different arrangements of constitutional rules that would constrain individuals and minimise opportunistic behaviour in everyday politics. This construction of a constitutional political economy is best summarised by his 1985 book The Reason of Rules, written with his colleague Geoffrey Brennan.
Buchanan's constitutional analysis sheds light on the current state of Indian politics. To escape the problems of everyday politics in India, the Constitution could be revisited, keeping in mind Buchanan's work on constitutional rules. The Indian Constitution has been amended 97 times by Parliament to relieve itself of constraints. In India's darkest moment, Indira Gandhi used the Constitution to protect her office as prime minister and legitimise the excesses of the Emergency. Indian academics would do well to follow Buchanan's lead and rethink constitutional arrangements that would effectively constrain those in public office.
While Buchanan's work in public choice may invoke cynicism with politics it does not leave us without any hope. In his 1965 article titled "An Economic Theory of Clubs", Buchanan explains how private arrangements, or clubs, supply excludable public goods at optimum levels. This lesson is perhaps the most important in the Indian context, where goods and services like potable water, waste disposal, law-and-order, traditionally poorly provisioned by the state, are now privately provided. If government failure is rampant, perhaps the time is ripe for Indians to seek alternative solutions to public problems.
It is impossible to summarise Buchanan's extraordinary career, spanning 65 years, in a few hundred words. John Meadowcroft comes closer in his 176-page book titled James M.
Buchanan discussing Buchanan's intellectual biography, ideas, influence and relevance. To understand Buchanan, his own words might be even better, as his scholarship remains one of the most thoughtful and accessible writings in economics.
The writer is a doctoral student in economics at George Mason University