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Über dieses Buch

James Buchanan (1919-2013), economist and philosopher, was awarded the Nobel Prize in Economics in 1986 for his original theory of political democracy as market exchange. Buchanan believed economics should be concerned with liberty, individualism and equity.



1. Introduction

In summary, it is like this. The good society must be built up from the revealed preferences of unique individuals who feel a need to register their choices. God has been dead for a century. Truth is tested by agreement. Efficiency is tested by agreement. Justice is consensus. Fairness is the rational calculus of the loss-averting one-off when situated behind a thick veil of fog.

David Reisman

2. Individuals and Agreements

The irreducible building-block is the discrete individual. There is no social welfare function and no metric of right and wrong that cannot be reduced to living human beings coming together in a mutual adjustment process to further their own objectives, self-perceived. Good rules are the rules that emerge from good procedures. That is why they are good. As for good outcomes, the normative posture is as kaleidoscopic as it is complaisant: ‘Whatever emerges from individual choices emerges… It is not a question of imposing a kind of global maximization process. I don’t think that that is proper or possible’ (BAM, 143). It is not proper or possible to tell Common Everyman what he thinks is ‘fair’, whether defence is a ‘public’ good or whether the market has ‘failed’. The gold standard is process. All that may legitimately be done is to design good procedures that allow humble Simple to speak his mind.

David Reisman

3. Rules without Regulators

Human action unfolds within tramlines that previous generations have laid down: ‘Man acts within a set of institutional constraints that have developed historically: in part by sheer accident; in part by survival in a social evolutionary process; in part by technological necessity; in part by constructive design (correctly or incorrectly conceived)’ (CW I, 361). Individuals reveal preferences. They like to think that their preferences are innate, idiosyncratic and fully authentic. They like to say, ‘Don’t tread on me’. It is too late. The treading is a fait accompli. Much that they reveal is standard issue for their club.

David Reisman

4. Social Justice: Buchanan and Rawls

Justice is tested by agreement. If men disagree then nothing is just. That is why the constitutional contractarian is obliged to put consultative procedures first. Equity is inseparable from consent. God has been dead for a century. Democracy is all that remains: ‘A “fair rule” is one that is agreed to by the players in advance of play itself, before the particularized positions of the players come to be identified. Note carefully what this definition says: A rule is fair if players agree to it. It does not say that players agree because a rule is fair’ (CW XVII, 313).

David Reisman

5. Social Evolution: Buchanan and Hayek

Marx was an evolutionist who believed that unguided unfolding would lead inevitably to collective betterment. So was Hayek, who argued in effect that ‘basic institutional change will somehow spontaneously evolve in the direction of structural efficiency’ (CW X, 166n). Such thinking, in Buchanan’s words, has done ‘great damage’: ‘Hayek is so distrustful of man’s explicit attempts at reforming institutions that he accepts uncritically the evolutionary alternative. We may share much of Hayek’s skepticism about social and institutional reform, however, without elevating the evolutionary process to an ideal role. Reform may, indeed, be difficult, but this is no argument that its alternative is ideal’ (LL, 194n).

David Reisman

6. Acts and Rules

Act utilitarianism is short-term, reactive and piecemeal. It is a pragmatic response to a here-and-now challenge. Act utilitarianism ‘plays it by ear’ and lives for today. It focuses on the one-off choice and the case-by-case assessment. It is a short-term patch rather than a long-term solution. It is the standard approach of the maximising economics. It is the window on the world of John Maynard Keynes. Keynes (1923: 80) calls the long run ‘a misleading guide to current affairs’: ‘In the long run we are all dead’. Keynes recommends that economists should rank the ad hoc in the hand above the unknowable in the void.

David Reisman

7. Constitutional Rules

Buchanan met Gordon Tullock in 1958 when Tullock, aged 36 and anxious to escape the Washington bureaucracy where he had been trapped for nine years, came to the University of Virginia as a postdoctoral fellow. His doctorate was in law, from the University of Chicago. He spoke fluent Chinese, acquired in Tianjin before Communism had moved him on to Hong Kong and Korea.

David Reisman

8. Operational Rules

There are alternatives. These include the military junta, the single-party dictatorship, the hereditary monarchy, the elitist ruling committee or the philosopher ruler on-beam to the underlying truth. None of them, Buchanan says, is better able to represent individuals’ preferences than constitutional democracy. Democracy, like exchange, is a discovery process that grinds out an acceptable image of the public good. Democratic politics scans the largest feasible constituency. It reconciles the separate, often conflicting, interests of the greatest possible number.

David Reisman

9. The Microeconomics of Consent

No concept figures so prominently in economic theory as does that of voluntary exchange. The ceremony is old and it is familiar. Property rights are well defined. The lesser-valued utility is swapped for the higher-valued satisfaction. Preferences are equal but opposite. No trading partner concludes his contract unless he believes it to be in his interest, self-perceived.

David Reisman

10. Moral Anarchy

Buchanan experienced student revolt at first hand in the 1960s, both at the LSE in 1967 and at UCLA (where a bomb went off in the Economics Department) in 1968. Believing as he does that ‘ingrained in Western tradition is a sense of respect for the rights of others, including property rights’ (AA, 122), he was bound to recognise in the ‘chaos’, the ‘trespass’, the ‘violence’, the ’social and political vandalism’, the ‘terrorist tactics’, the ‘class, race, and national hatred’ (AA, xi, 4, 5, 64), the ‘constitutional illiteracy’ (CW X, xv), the ‘burned-out buildings, broken windows, and widespread behavioral pollution’ (WSED, 268) of those troubled years nothing less than the recrudescence of the Hobbesian state of nature that had not gone away.

David Reisman

11. Keynesian Ethics

The rules are leaking externalities. The politicians are self-seeking. The bureaucrats are self-promoting. Accompanying the laws and magnifying the lawmakers there are the economists. Keynesian economics is unethical economics. It has been a further cause of the failed society in which license reigns supreme and only moral anarchy dares to go out after dark.

David Reisman

12. Ethics as Unknowledge

It is easy to regard Buchanan as a moral nihilist who finds no place in his system for normative absolutes and fundamental obligations, who has as little time for God as he does for philosopher-rulers, who assigns footnote importance to evolution and none at all to natural rights. Such an interpretation is tempting but it is false. Buchanan has the temperament of an Old Testament prophet crying in the wilderness that without a solid moral code the social edifice is doomed to damnation.

David Reisman

13. Economics as Unknowledge

Buchanan’s economics is a minority interest. Its primary focus is on consensual order and conflict resolution: ‘My interest in understanding how the economic interaction process works has always been instrumental to the more inclusive purpose of understanding how we can learn to live one with another without engaging in Hobbesian war and without subjecting ourselves to the dictates of the state’ (CW I, 26). Allocative efficiency and general equilibrium are a poor second: ‘The “wealth of nations”, as such, has never commanded my attention save as a valued by-product of an effectively free society’ (CW I, 26). Buchanan’s economics is primarily the study of processes and rules. Only secondarily is it about goods and services.

David Reisman

14. Macroeconomic Policy

Buchanan, born in 1919, was a witness to the human tragedy of the Great Depression. He was himself a victim of the slack:

I was to be the lawyer-politician… Economic reality destroyed this dream; Vanderbilt moved beyond the possible as the Great Depression moved in. College was what I could afford, Middle Tennessee State Teachers’ College in Murfreesboro, which allowed me to live at home and to earn enough for fees and books by milking dairy cows morning and night for four years. (CW I, 12)

David Reisman

15. Microeconomic Policy

Buchanan is a proceduralist and a democrat. He is adamant that his principal contribution is to the theory of just and orderly processes. He denies that his insights and schemata are an endorsement of any specific ideology or social system: ‘I do not offer a description of the “good society”, even on my own terms’ (CW VII, 210). It is always the journey. It is never the destination: ‘What emerges from a process is what emerges and nothing more’ (CW X, 51). Outcomes are non est disputandum.

David Reisman

16. Buchanan’s Legacy

The tools are in the saddle. The economist is not. As long ago as 1948, reviewing Samuelson’s Foundations of Economic Analysis when it first appeared, Kenneth Boulding (1948: 199) complained of ‘rapidly diminishing marginal productivity in the application of mathematics to economics’: ‘It may well be that the slovenly literary borderland between economics and sociology will be the most fruitful building ground during the years to come and that mathematical economics will remain too flawless in its perfection to be very fruitful’. Later on, at the very time that the students were revolting, Galbraith (1965: 38) was reiterating the message that the ‘slovenly’ was well suited to the ‘grubby’ and that the neoclassical mainstream was tuning out because reality was a bore: ‘It would be a mistake to identify complexity with completeness and sophistication with wisdom’. Still later it was the turn of Piketty (2014: 32): ‘The discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences’. The heterodox knew that the orthodox held the commanding heights of path dependence, intellectual inertia, professional advancement and vested interest. They nonetheless believed that even a minority ought to make a stand.

David Reisman


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