31. James Buchanan and the Return to an Economics of Natural Equals

The following year, Whately published Money Matters in which the details for trading taxes for protection is worked out in considerable detail (Whately 1833). Not surprisingly, Whately’s argument is one from specialization.

Buchanan (1959, pp. 129–130): “An additional simple, but often overlooked, point on compensation needs to be made. The requirement of full compensation as here interpreted need not imply that the measured incomes of individuals or groups may not be reduced by acceptable social policy changes. ‘Welfare’ is defined as that which is expressed by individual preference as revealed in behavior. And individual behavior may be fully consistent with a reduction in measured personal income or wealth. For example, a policy which combines progressive income taxation and public expenditure on the social services may command unanimous support even though the process involves a reduction in the measured real incomes of the rich. The existence of voluntary charity indicates that individuals are, in fact, willing to reduce their own incomes in order to increase those of others. And the peculiar nature of collective choice makes support for collective or governmental action perhaps even more likely. Many individuals may find themselves saying: ‘I should be willing to support this proposal provided that other equally situated individuals do likewise.’ Thus collective action may command relatively widespread support, whereas no purely voluntary action might be taken in its absent.” In Calculus of Consent the compensation is by log rolling which seemed to dispense with the need for sympathetic agency. K. J. Arrow (1963) pointed out the link between log rolling and compensation but he did not think it escaped the reversals that plagued Kaldor-Hick possible compensation. This is an odd argument since the Buchanan-Tullock log rolling is an actual trade not simply a possible one, whatever possible is taken to mean (Levy and Peart 2017).

Buchanan (1978, p. 40): “Individuals need not be ‘natural equals’ in this Hobbesian equilibrium, but they would still find it mutually advantageous to enter into contractual agreements which impose limits on their own activities, which set up ideally neutral govern mental units to enforce these limits.”

Rothbard (2009, p. 97): “It is clear that conditions for exchange, and therefore increased productivity for the participants, will occur where each party has a superiority in productivity in regard to one of the goods exchanged—a superiority that may be due either to better nature-given factors or to the ability of the producer.” It is thus no accident that in Rothbard’s eyes, egalitarianism is a “revolt against nature” to quote the title of one of his books (Rothbard 2000).

Ricardo’s acceptance of Smith’s proposition of the equalization of the net advantages of employment in competitive equilibrium demonstrates that, like Smith, he believed people were fundamentally the same. If people were fundamentally different we would not expect equal wages in competitive equilibrium. Thus, “In speaking, however, of labour, as being the foundation of all value, and the relative quantity of labour as almost exclusively determining the relative value of commodities, I must not be supposed to be inattentive to the different qualities of labour, and the difficulty of comparing an hour’s or a day’s labour, in one employment, with the same duration of labour in another. The estimation in which different qualities of labour are held, comes soon to be adjusted in the market with sufficient precision for all practical purposes, and depends much on the comparative skill of the labourer, and intensity of the labour performed. The scale, when once formed, is liable to little variation. If a day’s labour of a working jeweller be more valuable than a day’s labour of a common labourer, it has long ago been adjusted, and placed in its proper position in the scale of value” Ricardo (1821, 1.24). Ricardo appeals to Book 1 Chapter 10 of the Wealth of Nations in which Smith’s makes the argument. Buchanan once asked us if Ricardo was a racist. No, but you can see this in the later Ricardians.

Taussig (1915, III.21): “Again, implements themselves, big and little, are likely to be well made in a country where people are constantly turning to machinery; from kitchen utensils and household hardware to machine tools, electric apparatus, and huge printing presses. These are things in which the success of American industry is familiar; which are exported, not imported; in which it is proverbial that the Yankee has a peculiar knack,—another way of saying that he has a comparative advantage.”

An earlier version with a good deal less detail is found in Buchanan (1994).

The choice of a physical good such as a chair instead of a stream of labor services might be formulated as akin to the utility-enhancing constraints to address the dynamic inconsistencies that Robert Strotz pointed out (1955‐1956). The cover image for the journal Buchanan inspired, Constitutional Political Economy, is Odysseus, bound to the mast and thus unable to act on the temptation of the sirens.

With evident amusement, he found himself in agreement with George Stigler’s dictum “it was always best to proceed on the presumption that it was Smith, rather than we, who had things right.”

His first proposed paper was “Adam Smith’s use of empirical evidence to support theoretical positions.”

Stigler (1971, p. 272): “In general, however, Smith’s attitude toward political behavior was not dissimilar to that of a parent toward a child: the child was often mistaken and sometimes perverse, but normally it would improve in conduct if properly instructed.”

Buchanan benefited from A. L. Macfie’s work which appeared too late for Rawls to benefit from it. Buchanan also relied upon Jacob Viner’s edition of John Rae’s Life of Adam Smith from which he found the material to question Stigler’s reading of a fundamental difference between public and private activity. Nate Rosenberg’s work was early enough for Rawls but only Buchanan saw its importance.

Buchanan (1976b, p. 6): “Smith’s great work, The Wealth of Nations, has been widely interpreted as being informed normatively by efficiency criteria. This emphasis is broadly correct, provided that the efficiency norm is not given exclusive place. Smith’s purpose was that of demonstrating how the removal of restrictions on free market forces, how the operation of his ‘system of natural liberty,’ would greatly increase the total product of the economy and, more importantly, how this would generate rapid economic growth, thereby improving the lot of the laboring classes.” The exceptions Smith makes when natural liberty is rightly violated occur when the well-being of the majority is harmed by the actions of a few (Levy and Peart 2013).

We have heard that Buchanan never cited Moral Sentiments. If one only uses the JSTOR search engine, one will not find Theory of Moral Sentiments because Sentiments occurs at a line break in Buchanan (1976b) and the search engine fails to recognize Senti-ments as Sentiments.

Gordon Tullock Papers, Box 11, Buchanan 1 of 2 Folders.