Deficits, Debt, and Democracy

Deficits, Debt, and Democracy

Wrestling with Tragedy on the Fiscal Commons

Richard E. Wagner

This timely book reveals that the budget deficits and accumulating debts that plague modern democracies reflect a clash between two rationalities of governance: one of private property and one of common property. The clashing of these rationalities at various places in society creates forms of societal tectonics that play out through budgeting. The book demonstrates that while this clash is an inherent feature of democratic political economy, it can nonetheless be limited through embracing once again a constitution of liberty.

Chapter 4: Property Rights, Societal Tectonics, and the Fiscal Commons

Richard E. Wagner

Subjects: economics and finance, public choice theory, public finance, politics and public policy, public choice


The centralized mindset reduces the self-organized patterns created by interaction among independently acting entities to a point-mass entity that operates through choice by some leader. Contemporary treatments of political economy and public choice, for instance, typically reduce political outcomes to a singular act of choice by a median voter who is selected through an election. This framework makes it easy to offer definitive statements that can be attributed to that entity, but that easiness brings in its train misleading statements, erroneous implications, and an inability to appreciate the complex and balanced structure of reasonably well-working political arrangements. The economic theory of a market economy explains how the economic activities undertaken within a society acquire an organized character even though there is no one who does the organizing. This theory involves the conceptualization of private property as providing an institutional framework inside which a system of coordinated prices arises that facilitates the emergence of a reasonably wellcoordinated pattern of activity even though there is no person or office that is in charge of securing that coordination. This theory is clearly an incomplete explanation of the economic organization of societies because collective action is missing. This incompleteness is typically addressed by embracing a theoretical antinomy: privately organized activities are explained by a theory of interaction within a framework of market interaction, but collective activity is explained by a theory of planning outside of markets. To be sure, this explanation of collective activity does not leave explicit recourse to central planning. Instead, it...

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