James C. Miller III

Former Director, U.S. Office of Management and Budget,

Counselor, Citizens for a Sound Economy,

John M. Olin Distinguished Fellow, Center for Study of Public Choice,


Member, Board of Visitors, George Mason University

Preface from James M. Buchanan, Public Finance in Democratic Process: Fiscal Institutions and Individual Choice (Chapel Hill: University of North Carolina Press, reissued with new forward, 1987).

Twenty years ago, when this book was first published, I was a graduate student in economics at the University of Virginia, where James M. Buchanan was an omnipresent influence.(1) To take not one whit from the other fine faculty members, students, and administrators there at the time, it is only slightly an overstatement to say that it was "his" department. Buchanan was clearly the dominant intellectual influence, and his brilliance, the spirit of inquiry he inspired, and the high standards he set for himself and all those around him attracted notable teachers and highly motivated graduate students who pursued truth and knowledge with the zeal that Mr. Jefferson had intended for his "academical village."

At the time, my fellow graduate students and I were aware that an intellectual revolution was brewing within the department. This was not comparative economic systems, which had been around for some time, nor was it traditional public finance. It had to do with the application of economic logic-- that is, the study of how people choose and the resulting organization of markets-- to the public sector. Like so many seminal ideas, this one was at first hard to understand. But once you got the hang of it, your reaction was, "Why didn't I think of that?"

This book is perhaps the best compact exposition of Buchanan's theory of public choice. It is not nearly as well developed here as in some of his later works. It does not include the emphasis on constitutional principles that in later years he brought to the forefront. Nor does it contain the strong normative tones of some of his current writings. But the basic methodology and the scope of the subdiscipline are all here in this volume.

Legions of graduate students have written dissertations on the theories this book contains. And they have not exhausted its rich potential. There are enough testable hypotheses here to keep their successors busy for years to come. That, almost by definition, is characteristic of any seminal work.

Immediately after Buchanan won the Nobel prize last fall, I received numerous inquiries from reporters who either knew or else discovered that I had studied under Buchanan and still look to him for inspiration and advice. Again and again they asked me, "What is public choice?" In response, I could do no better than to direct the caller to the introduction of this book, especially the first paragraph.

The next question would usually be, "Give me an example of public choice." It is, I suppose, characteristic of the social sciences that the popular media would ask such a question. Surely, few people would think to ask winners of the Nobel prize in chemistry or physics to give examples of practical applications of theoretical achievements which garnered them their prizes--much less ask them to justify their awards on that basis. But if pressed, I would say that the recent Gramm-Rudman-Hollings deficit reduction law reflects Buchanan's teachings, although he was not involved in drafting the legislation and gaining its approval.

In a way, Gramm-Rudman-Hollings is the equivalent of the classic government intervention to remedy a market failure. Under existing institutions--representative government, majority voting, imperfect information, and the existence of well-organized interest groups, all within loose constitutional restraints--government will tend to be too large and to engage in grossly inefficient levels of deficit finance. Gramm-Rudman-Hollings, though highly imperfect in certain of its particulars, is a grass-roots response to a perceived imperfection in our public decision-making process. It seeks to alter the actions of our elected decision makers by altering the incentives that move them to act in the first place. If this is not Buchanan, it is at least Buchanan-esque.

But my older mentor might disagree with me on this one. He might well remind me that what the politicians do today, they can undo tomorrow. Indeed, already we are seeing artful legislators trying to avoid the discipline they imposed on themselves. Perhaps Buchanan would argue that only a constitutional amendment would likely alter the incentives for good.

I suspect the readers of this book will find their own examples of public choice. The subject matter is truly diverse--ranging from meetings of faculty committees, to ensembles of corporate directors, to town hall meetings, to sessions of the U.S. Congress. Whatever the case, I have no doubt that virtually anyone reading this book will enhance his or her understanding of collective decision making, as well as public finance.



1. At Virginia, I was not one of Buchanan's students in the strictest sense; I took only one of his courses and audited another. (Auditing a Buchanan class was easier than taking it, because you didn't have to turn in those weekly papers he was famous for requiring. But I suppose we shouldn't have complained, since so many of those papers found their way into professional journals. This was true of the first essay I ever published.) However, all of use came under Buchanan's influence one way or another--whether indirectly through his colleagues, or during one of the many seminars in which we could watch his restless intellect at work--probing, questioning, or offering constructive criticism.