ABSTRACT
Keynesians are frequently reproached for their political naivete. Their models assume that the economy is made up of self-interested, income maximizing individuals and organizations. Some more of the historical record of postwar inflation can be explained in terms of institutions, by which they mean the legal and customary restraints on government spending and methods for financing any resultant deficit. In practice, much of the empirical work on macroeconomic outcomes is in the form of writings on the so-called political business cycle. This chapter shows shortly, there are important respects in which the political business cycle literature is transparently beside the point as an account of the postwar inflation. The argument is simply that ideas, including ideas about what is morally appropriate, are powerful forces in their own right and weaken the association between politicians' self-interest and their behavior. One of the principal specifications of the public choice approach is the so-called "political business cycle''.
