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Constitutional Political Economy
Published in: Constitutional Political Economy 1/2014

01-03-2014 | Original Paper

The role of homo oeconomicus in the political economy of James Buchanan

Author: Gebhard Kirchgässner

Published in: Constitutional Political Economy | Issue 1/2014

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Abstract

Whenever the economic model of behavior is to be applied, the utility function has—at least somewhat—to be specified. Buchanan generally prefers to apply a rather narrow version. However, he acknowledges that it is hardly possible to explain actual behavior of individuals with such a version, so in performing empirical economic research he accepts that we have to use a more open one. He also acknowledges that people might behave differently in markets than they do in politics; other-regarding behavior might be more pronounced in politics as compared to markets. Which version should be applied in constitutional economics, however, is a different question. Following a long ongoing tradition in political philosophy, he insists that—for methodological reasons—the narrow version is the correct one to be applied; this is the way to compare different sets of rules when analyzing the possible abuse of power by rulers in order to prevent it as far as possible. The same should also be taken into account when analyzing the process of policy advice. The narrow homo oeconomicus model should, however, not be misunderstood as a normative prescription.
previous article Special issue on the contributions of James Buchanan
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Footnotes
1
On methodological individualism, for example, see Watkins (1958), but also Buchanan and Tullock (1962: Chapter 2, 16ff.) as well as Buchanan (1979a: 48f.; 1987a: 244f; 1989: 55ff.).
 
2
On the weak rationality principle, see Kirchgässner (2013).
 
3
For example, see Schoemaker (1982).
 
4
In particular, see Buchanan and Tullock (1962: 78ff.).
 
5
For example, see Buchanan (1959, 1982a).
 
6
For example: “The task of economic theory is not that of predicting specific patterns of behavior, it is that of providing a structural understanding of the processes within which the divergent behavioral plans of persons are integrated and reconciled.” (Buchanan 1976: 127).
 
7
For example, see Buchanan (1987b) as well as Brennan and Buchanan (1985).
 
8
See also the more drastic formulation: “to put my point differently but more dramatically, in some aspects of their economic behavior, with appropriate qualifications, men are indeed like rats.” (Buchanan (1982b: 35).).
 
9
He actually refers to the textbook by Alchian and Allen (1968).
 
10
See also Brennan and Buchanan (1981: 156).
 
11
Wicksteed (1910: 174ff.) does not generally exclude altruism from the individual’s motives in economic transactions, but only that the individual does not “further the good of … the person with whom he is dealing.” The individual might further the good of all other people in the world. Therefore, “The specific characteristic of an economic relation is not its ‘egoism,’ but its ‘non-tuism’.” (p. 180). Buchanan and Tullock (1962: 17) and in particular Brennan and Buchanan (1981) are more restrictive: “Homo economicus, by construction, is not predicted to act other than in furtherance of his interests, vis-à-vis that of his trading cohort, as he evaluates such interest at the moment in choice.” They explicitly exclude that he is “influenced by ethical or moral considerations” (p. 156)—On the consideration of altruism in the economic approach, referring to Andreoni (1988), see Kirchgässner (2010).
 
12
See also Buchanan (1969a: 38). While this is a usual assumption in economic models and holds in most real situations, it precludes that individuals deliberately restrict their leeway in terms of future actions in order to improve their long-term well-being. In contrast to the remark by Buchanan and Tullock (1962: 17), in the meantime there have not only been observations in this respect but there are also theories which explain why in some situations individuals “will choose ‘less’ rather than more’.” For the economic analysis of such situations see, for example, Thaler and Shefrin (1981) or Maital (1986).
 
13
See Popper (1935: 84ff.) with reference to Carnap (1932: 458).
 
14
See also Buchanan (1954).
 
15
On the role of ‘unrealistic’ assumptions in economic analyses, see the seminal contribution of Friedman (1953).
 
16
There he argues, of course, for the very narrow version of the homo oeconomicus model and not for one of its extended forms which might be applied in empirical analyses. See also Brennan and Buchanan (1983: 90): “… that the Homo economicus model of human behavior may be superior in comparative institutional analysis to a more ‘accurate’ model of human behavior in the conventional predictive sense”.
 
17
For example, see Buchanan (1987c: 10ff.).
 
18
Part of this passage is cited by him, for example, in Buchanan (1990: 11).
 
19
Mill (1861, Chapter XII: 217f.).
 
20
For example, see Kirchgässner (2008: 121ff.; 2010).
 
21
In terms of Rawls (1971), one might say that Buchanan (1959) developed an ‘ideal theory’ at this point, and the realistic theory is still yet to take shape.
 
22
Here he comes quite close to the consensus theory of truth as propagated, for example, by Habermas (1971) or Apel and Kettner (1992).
 
23
There is a similar discussion on the role of economic education. As several studies show, economics students seem to be more self-regarding and less other-regarding than students of other disciplines. The question is whether this is due to training and/or self-selection. Probably both play a role. For example, see Carter and Irons (1991), Kirchgässner (2005) or Wang, Malhotra and Murnighan (2011).
 
24
See also the comparatively negative evaluation of the current moral situation in Buchanan (1976: 132f.).
 
25
See, for example, Saul (1995). – On the increased role of economic (financial) arguments and markets in modern life and reasons for this, see, for example, Kirchgässner (1997).
 
26
For example, see Kirchgässner (2008: 162) and the literature given there.
 
27
See the overview of the discussion in Kirchgässner (2010). As Kliemt (1986) showed, the same holds for (secret) voting and referendum decisions, because these are made behind a “veil of insignificance”.
 
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Metadata
Title
The role of homo oeconomicus in the political economy of James Buchanan
Author
Gebhard Kirchgässner
Publication date
01-03-2014
Publisher
Springer US
Published in
Constitutional Political Economy / Issue 1/2014
Print ISSN: 1043-4062
Electronic ISSN: 1572-9966
DOI
https://doi.org/10.1007/s10602-014-9157-z

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