Welfare without rent seeking? Buchanan’s demogrant proposal and the possibility of a constitutional welfare state

In a number of works, James M. Buchanan set out a proposal for a ‘demogrant’—a form of universal basic income that applied the principles of generality and non discrimination to the tax and the transfer sides of the scheme and was to be implemented as a constitutional rule outside the realm of day-to-day politics. The demogrant has received surprisingly little scholarly attention, but this article locates it in Buchanan’s broader constitutional political economy project and shows it was a logical application of his theoretical framework to the problem of inefficient and unfair welfare systems when reform to the basic institutions of majoritarian democracy was not forthcoming. The demogrant aims to end the problems of majority cycling and rent seeking that plague contemporary welfare states and therefore offers a model of welfare without rent seeking—a constitutional welfare state. We compare Buchanan’s demogrant model to other universal basic income and negative income tax models and consider the most important criticisms. We conclude that rescuing the demogrant model from relative obscurity would be a fruitful future task of applied constitutional political economy and public choice.

Facing the Future

This chapter examines Young’s work as founding chair of the Social Science Research Council between 1965 and 1968 in the Labour government led by Harold Wilson. It describes how Young responded to increasing anxieties about the nature of planning and expertise in the British civil service by arguing that the social sciences should play a more prominent role in government policy making. The chapter focuses mainly on Young’s Committee on the Next Thirty Years, and his proposals for an Institute of Forecasting Studies, which he unsuccessfully sought to develop as part of a transnational forecasting movement with the support of foreign intellectuals such as the American sociologist Daniel Bell and the French futurologist Bertrand de Jouvenel. The chapter also discusses the intellectual networks associated with the popular social science journal New Society, showing that this group promoted libertarian and state-critical perspectives on urban planning, and radical economic ideas like negative income tax. While the Next Thirty Years Committee was short-lived, it reflected Young’s career-long conviction that public policy should be guided by interdisciplinary social science.

Unblocking Progress in Austrian Economics: Response to Skousen

Skousen is to be congratulated for creating an entirely new con- cept in economics, GO. There are not many social scientists of whom such a claim can be made, so this constitutes a gigantic accomplishment on his part. There are other instances of this phenomenon: Menger, Aus- trian Economics; Rothbard, libertarianism; Buchanan and Tullock, Public Choice; Coase and Posner, Law and Economics; Milton Friedman, monetarism, the negative income tax, school vouchers; Wenzel, Private Property Society. Of course, we all stand on the shoulders of those who came before us. None of these people invented anything entirely out of the whole cloth. There are always predecessors for all scholars. For example, the School of Salamanca in many ways foreshadowed Austrian economics. But the fact that Skousen can even be mentioned in such august company is an indication of his creativity. Of course, there are many and serious reservations that can be launched at some of these,1 and Skousen is no exception to this rule, as I show in this present response. The present paper is a rejoinder to Skousen (2017) which was, in turn, a critique of Barnett and Block (2016), hence “BnB”. It is organ- ized as follows, and I pattern my response to Skousen accordingly: A. Skousen reiterates his position. B. He takes to task BnB on the following grounds. 1. BnB maintain that GO has taken the profes- sion by “storm”, and these authors err in this assertion; 2. Skousen attributes to BnB the claim that Austrian economists must reject aggregate data and upbraids BnB for this; 3. he reiterates his posi- tion on the “consumer spending” myth; 4. Skousen thinks the BnB critique of the Hayek triangle is misplaced; 5. BnB maintained that Skousenʼs GO amounts to no more than measuring vertical inte- gration; Skousen demurs; 6. BnB charged him with double count- ing; Skousen attempts to rebut this charge. I follow this organization of Skousenʼs interspersed with my commentary. In section III, I reiterate several criticisms of BnBʼs, on which Skousen has failed to comment. I conclude in section IV.

Optimal Income Taxation with Unemployment and Wage Responses: A Sufficient Statistics Approach

We derive a sufficient statistics tax formula in a model that incorporates unemployment and endogenous wages to study the shape of the optimal income tax. Key sufficient statistics are the macro employment response to taxation, the micro and macro participation response to taxation, and the wage-moderating effect of tax progressivity. We empirically implement the tax formula by estimating the micro and macro elasticities using policy variation from the United States. Our results suggest that the optimal tax more closely resembles a negative income tax than an earned income tax credit relative to the case where unemployment and wage responses are ignored. (JEL E24, H21, H23, H24, H31, J22, J31)