It is sad that the economist James Buchanan, who died on Jan. 9, departed just after Congress was finishing up its "fiscal cliff" budget deal. And that this 93-year-old Nobel Memorial Prize winner left us just as the United States entered the stage of enforcement of its new health care law.
Almost everyone involved in the budget deal agrees that it is more a product of interest groups than a principled construct. The same can be said for Obamacare.
More than any of the rest of America's great modern economists, Buchanan stressed the primacy of interest groups. It is interest groups, he said, rather than ideas or even men, that shape our modern political and economic life. High-minded politicians might speak of "the public interest," and claim a special authority over the rest for their work. But as Buchanan and his colleagues showed, a public interest is often just another special interest in disguise.
The economic school he founded, known as public-choice theory, casts a skeptical eye on government officials and bureaucrats, and points out that their work might serve the public less than a very private enterprise.
I've always wondered whether Buchanan turned to the study of sanctimonious government officials because he spent time in graduate school on the South Side of Chicago in the late 1940s (the neighborhood where I was later born). Hyde Park was lively, but uneven. Little shops might thrive, but poor black migrants crowded together in apartments with insufficient heat during the city's tough winters.
Buchanan earned his doctorate in 1948, about the time the politicians and other civic leaders promised that bulldozing large swaths of the neighborhood and creating new public-private projects would yield a better Hyde Park, prettier and more racially integrated.
But instead of bringing people together, the results separated them: One complex quickly became known as Monoxide Island. With the stores gone, there was less life on the streets. Yet Hyde Park locals lacked the vocabulary to criticize the transformation we had been told was progress. Who wants to be construed as pro-slum?
Buchanan supplied that vocabulary. Instead of calling urban renewal "reform," as the officials did, he called it "politics." It was important, he said, that all such projects be viewed honestly, that we look at "politics without romance." Politicians often promoted such ugly ambitious projects not because the projects were good. They did so because the projects enabled politicians to award contracts to important campaign donors.
I first encountered Buchanan's work when I asked him in a phone interview whether "pro-business" tax breaks were actually good for the economy. He took much time pointing out that Big Business wasn't the same as the free market. Buchanan had spent a year studying in Italy and looking at the work of left-leaning economists, indeed some Marxists, who criticized the corruption of Italy's republic before Benito Mussolini.
He faxed me dozens of pages of the work of Amilcare Puviani, an Italian scholar. The pages were in Italian and curled up on my desk unread. Buchanan, already a Nobel laureate, didn't relent: He translated over the phone for me. The main idea he conveyed was that hidden taxes served a pernicious purpose: They tricked taxpayers into thinking they were paying less than they were, and therefore also thinking that government could spend more and tax more.
I soon found that public-choice theory explained the tendency of bureaucracy to create more work for itself. Health officials' interests in testing small children's blood for lead, for instance, made sense when one considered that finding poisoned children validated their jobs.
Those of us who had the luck to know Buchanan will remember his generosity. He exposed arrogance, while eschewing it himself. He was a paradox: The man who studied selfish interests also sacrificed his own.
Amity Shlaes is a Bloomberg View columnist and the director of the Four Percent Growth Project at the Bush Institute.