Early economic models assumed that the maximizing behavior of individual actors was the primary determinant of political as well as market outcomes. This approach revolved several long-standing puzzles in political science, but created new anomalies in place of the old: why do citizens vote in large elections? Why are democratic legislatures as stable as they are? Partly in response to these anomalies, the emphasis has shifted from the study of self-interested choice, to the study of constraints on self-interested choice. This has opened new doors for the study of bureaucracies, parties, and other fundamental political institutions.

The Tax Reform Act of 1986 constituted the most sweeping postwar change in the U.S. federal income tax. This paper considers what the Act accomplished and its implications for future tax policy. After a review of the Act itself, and why it happened, we consider the evidence of the Act's impact on economic activity and how this evidence squares with initial predictions. Where appropriate, we draw out how consideration of the impact of TRA86 has contributed to the development of the methodology of economic analysis. We conclude with an overall evaluation of the Act.