percent of GDP. After reviewing some of the recent efforts to limit or eliminate budget deficits, the remainder of the chapter explores alternative conceptions of responsible fiscal conduct. The budget reforms that have been enacted in recent years have always been presented as improvements and yet the problems they apparently were designed to correct persist. This persistence suggests that what we observe is not some broken process that participants are seeking genuinely to fix but is a process that is pretty much working as we should expect it to work under present institutional arrangements that constitute a democratic system of political economy. To understand why present institutional arrangements might promote a continuing parade of crises requires a reasonable theory of political economy. That theory cannot be grounded in such familiar constructs as systemic equilibrium and median-voter optimization. Chapter 2 sketches an alternative theory of political economy grounded in emergent interaction among political and economic entities. Within this theory, a society and its enterprises resembles an ever changing jumble of pedestrians rushing through a piazza, in contrast to the image of the placid parade that dominates standard political economy. Any effort to describe persistent budget deficits as fiscally irresponsible must confront the Ricardian equivalence proposition, which holds that deficits are just taxation that while deferred to the future is equivalent in present value to the taxes that would have been required to eliminate the deficit. Chapter 3 does not deny the simple arithmetic of Ricardian equivalence, but rather shows why that
percent of GDP. After reviewing some of the recent efforts to limit or eliminate budget deficits, the remainder of the chapter explores alternative conceptions of responsible fiscal conduct. The budget reforms that have been enacted in recent years have always been presented as improvements and yet the problems they apparently were designed to correct persist. This persistence suggests that what we observe is not some broken process that participants are seeking genuinely to fix but is a process that is pretty much working as we should expect it to work under present institutional arrangements that constitute a democratic system of political economy. To understand why present institutional arrangements might promote a continuing parade of crises requires a reasonable theory of political economy. That theory cannot be grounded in such familiar constructs as systemic equilibrium and median-voter optimization. Chapter 2 sketches an alternative theory of political economy grounded in emergent interaction among political and economic entities. Within this theory, a society and its enterprises resembles an ever changing jumble of pedestrians rushing through a piazza, in contrast to the image of the placid parade that dominates standard political economy. Any effort to describe persistent budget deficits as fiscally irresponsible must confront the Ricardian equivalence proposition, which holds that deficits are just taxation that while deferred to the future is equivalent in present value to the taxes that would have been required to eliminate the deficit. Chapter 3 does not deny the simple arithmetic of Ricardian equivalence, but rather shows why that
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