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2018 | OriginalPaper | Buchkapitel

25. James M. Buchanan: Political Economist, Consistent Individualist

verfasst von : Viktor J. Vanberg

Erschienen in: James M. Buchanan

Verlag: Springer International Publishing

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Abstract

A common perception is that economic theory is based on a methodological individualism, while political economy adopts normative individualism as the standard of judgment. Kenneth Arrow voices this perception in asserting “it is a touchstone of accepted economics that all explanations must run in terms of the actions and reactions of individuals [and] not of other social categories” (Arrow 1994: 1). While agreeing with Arrow’s diagnosis that in their actual practice economists do not generally adhere faithfully to the principle of methodological individualism, I shall argue that this is not due to inherent limitations of this principle but to economists’ failure to consistently apply it. And, while Arrow quite obviously considers James Buchanan’s methodological and normative individualism ill-founded, I shall argue that Buchanan’s contractarian-constitutionalist approach is solidly based on a consistent methodological individualism.

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Vorheriges Kapitel Politics as Exchange in the Byzantine Empire

Nächstes Kapitel A Public Choice Analysis of James M. Buchanan’s Constitutional Project

Arrow (1994, p. 1) defines methodological individualism as the claim “that it is necessary to base all accounts of economic interaction on individual behavior.”

Summarizing the message of his paper Arrow (ibid., p. 8) notes: “I do conclude that social variables, not attached to particular individuals, are essential in studying the economy or any other social system.”

Arrow (1994, p. 1): “I am old-fashioned enough to retain David Hume’s view that one can never derive ‘ought’ propositions from ‘is’ propositions.”—Contrast this with Arrow’s (2010, p. 25) more recent comment on Hume’s view: “Obviously, in some sense, this must be right, but the examination of social choice theory suggests that the dichotomy is more blurred than it seems.”

The earlier debates I have covered in Vanberg (1975). On the more recent debates, see, e.g., Basu (1996), Udehn (2002), and List and Spiekermann (2013).

The argument that “social-scientific explanations must employ non-individualistic terms” (List and Spiekermann 2013, p. 629) is, as indicated above, a standard objection raised against methodological individualism.

This is equally true for Arrow’s (1994, p. 5) remark: “More generally, individual behavior is always mediated by social relations. These are as much a part of the description of reality as is individual behavior.”

Arrow (1994, p. 2): “Limitations on individualistic methodology appear very strongly when considering the role of information.”

Arrow (ibid., p. 7) posits that “it may be easier to think of information breeding information and to suppress the role of individuals.”

See also Buchanan (1999a [1959], p. 196): “Propositions advanced by political economists must always be considered as tentative hypotheses offered as solutions to social problems.”

See, e.g., Buchanan (1989, p. 93): “Some critics have often accused me of skirting dangerously close to, if not actually committing, the naturalistic fallacy, that of deriving the ‘ought’ from the ‘is.’ I have never been concerned with such criticism directly because … in a certain sense we do derive ‘oughts’ from our conceptions of what ‘is’.”

Buchanan (1999a [1990], p. 391) contrasts the premise of normative individualism with premises “implicitly or explicitly asserting the existence of some supra-individualistic source of evaluation … God, natural reason, or the state.”

Buchanan (1960, p. 4): “I consider the ‘individualistic’ assumptions to be the only appropriate ones for democratically organized societies.”—Buchanan (1999a [1990], p. 392): “(T)he whole of the constitutional economics research program rests squarely on a democratic foundation.”

As Buchanan notes, in accusing the “orthodoxy” of adopting an “organismic framework” he does not mean to imply that this is by explicit choice but that “scholars working in fiscal analysis have developed constructions which become meaningful only upon some acceptance of an organic conception of the social group” (1999b [1958], p. 29).

Buchanan (2001a [1975], p. 79): “Where did economics, as a discipline, take the wrong turn? My own suggestion is that Lionel Robbins marks the turning point. His book defined ‘the economic problem’ as the location of maxima and minima.”—On the influence of Robbins’ definition in the profession, see, e.g., Backhouse and Medema (2009, p. 227ff).

On the so-called “impossibility theorem” for which Arrow’s Social Choice and Individual Values became famous Buchanan (2001b [1989], p. 58) has commented: “Kenneth Arrow’s impossibility theorem appeared surprising only to those who failed to understand the restrictive limits imposed by the individualistic presupposition.”

Arrow (1963 [1951], p. 1): “In a capitalist democracy there are essentially two methods by which social choices can be made, voting typically used to make ‘political’ decisions, and the market mechanism, typically used to make economic decisions.”

Buchanan (1999a [1954], p. 101): “The market does not establish the optimum social state in the sense that individuals, if called upon to vote politically (act collectively) for or against the market-determined state in opposition to a series of alternatives would consistently choose it.”

Buchanan (1989, p. 82): “Given the dominance of the Robbins formulation in the economic theory of mid-century, it is not surprising that market solutions were often modeled as analogues to planning solutions to the resource allocation problem. Economists proceeded as if ‘the market’ embodied ‘social choices’ among alternative allocations of resources, choices that may be compared with those that might emerge from the monolithic decisions of a single planner.”—Buchanan (1999a [1964], p. 37): “If … the economist will look on the market order as a means of accomplishing the basic economic functions … (t)he ‘market’ becomes an engineered construction, a ‘mechanism,’ an ‘analogue calculating machine,’ a ‘computational device’ … In this conception, the ‘market,’ as a mechanism, is appropriately compared with ‘government,’ as an alternative mechanism for accomplishing similar tasks.”

Arrow (2010, p. 26): “Social choice theory strips down the properties of the members to their preference scales.”

Buchanan (1999a [1959], p. 133): “Individual preferences, in so far as they enter the construction must be those which appear to the observer rather than those revealed by the behavior of the individuals themselves. In other words, even if the value judgments expressed in the function say that individual preferences are to count, these preferences must be those presumed by the observer rather than those revealed in behavior.”—Buchanan (1999a [1954]): “A necessary condition for deriving a social welfare function is that all possible social states be ordered outside or external to the decision-making process itself. What is necessary, in effect, is that the one erecting the function be able to translate the individual values (which are presumably revealed to him) into social building blocks.”

Buchanan (2001a [1988], p. 62): “(T)he values or interests of individuals are the only values that matter for the quite simple reason that these are the only values that exist. Such terms as ‘national goals,’ ‘national interest,’ and ‘social preference’ are confusing at best.”

The difference between respecting individuals’ choices and respecting individuals’ preferences, emphasized by Buchanan, is implied when A. Sen (1986, p. 217f.) comments: “We can also distinguish between the problem of aggregating individual interests … and that of aggregating individual judgments on some social matter. … Similarly, the individual preference might be expressed by the persons themselves (e.g. by voting), or guessed by someone doing the aggregation exercise (e.g. by a Planning Commission arriving at a plan for the country by taking note of the interests of each group, or a person making a social welfare judgment by assessing what he sees to be the interests of different people).”

Buchanan (1999a [1979], p. 48): “The basic units are choosing, acting, behaving persons rather than organic units such as parties, provinces, or nations. Indeed, yet another label for the subject matter here is ‘An Individualistic Theory of Politics’.”—Buchanan (2000 [1968], p. 6): “We should try to derive a theory of individual behavior in the political process … When I looked around at all this, some dozen years ago, I was surprised to find that a theory of individual behavior in political process did not exist, and that only a few scattered attempts had been made to create one. … Since that time, since 1954 roughly speaking, I have been, in the on-and-off manner of academic custom, working within this broadly defined area of research. That is to say, I have been exploring, along with various colleagues and co-workers, some of the aspects of a theory of individual behavior in political choice.”

The contrast between the two processes corresponds to F. A. Hayek’s (1973, p. 35ff.) distinction between “two kinds of order,” spontaneous order and organization.

Buchanan (2000 [1968], p. 4): “I define the economy precisely in the same way that I defined government. It is the complex of institutions that emerges as a result of the behavior of individual persons who organize themselves to satisfy their various objectives, privately as opposed to collectively. Thus, the economy and the government are parallel sets of institutions, similar in many respects, and, of course, intersecting at many separate points.”—Buchanan (1989, p. 92): “There is no categorical distinction between the economic and the political process; inquiry in each case centers on the choice behavior of individuals who act, one with another.”

Buchanan (2001b [1989], p. 57): “The discovery and elaboration of this principle were the crowning achievement of the eighteenth-century moral philosophers, from whose work economics, as a discipline, emerged.”

Buchanan and Tullock (1962, p. vi): “Human beings are conceived as the only ultimate choice makers in determining group as well as private action. Economists have explored in considerable detail the process of individual decision-making in what is somewhat erroneously called the ‘market sector.’ Modern social scientists have, by contrast, tended to neglect the individual decision-making that must be present in the formation of group action in the ‘public sector’.”

Koppl (1992, p. 294): “(T)here is partial equilibrium modeling wherein ‘firms’ are given mathematical or graphical representations as profit maximizers and ‘households’ are similarly treated as utility maximizers. This strand of Post-Marginalist analysis is, of course, widely practiced. It is the meat and potatoes of the practicing economist.”

In this sense one must also interpret statements such as this one: “Only individuals choose and act. Collectivities, as such, neither choose nor act, and analysis that proceeds as if they do is not within the accepted scientific canon. Social aggregates are considered only as the results of choices made and actions taken by individuals” (Buchanan 2001a [1987], p. 8).

Rubin’s (1997) discussion of the contrast between economists’ declared methodological individualism and their practice of treating firms and other collectivities as rational actors is in parts ambiguous because of the failure carefully to distinguish between speaking of “collective entities as making decisions, adopting strategies” (ibid., p. 1437) and “ascribing rational behavior to the firm” (ibid.).

Buchanan (2001b [1989], p. 57): “There may exist settings in which the collective seems to confront a selection among alternatives. The decision process must generate a single result from among several options available. The political unit, the state, must (1) go to war, or (2) maintain peace. It is natural linguistic usage to refer to the state as ‘choosing’ among the options, and from this to infer directly that the decision process of the state should exhibit the rationality properties of the individual.”

Buchanan and Tullock (1962, p. 32): “Under the individualistic postulates, group decisions represent the outcome of certain agreed-on rules for choice after the separate individual choices are fed into the process. There seems to be no reason why we should expect these final outcomes to exhibit any sense of order which might … be said to reflect rational social action.”

On the notion of organizations as “constitutional systems”, see Vanberg (1994 [1992]) and Vanberg and Buchanan (2000 [1986]).

According to Arrow (1963 [1951], p. 67), the “most precise definition of a social state would be a complete description of the amount of each type of commodity in the hands of each individual, the amount of labor to be supplied by each individual, the amount of each productive resource invested in each type of productive activity, and the amounts of various types of collective activity, such as municipal services, diplomacy and its continuation by other means, and the erection of statues of famous men.”—Sen (1970, p. 152) defines a social state as “a complete description of society including every individual’s position in it.”

Buchanan (1995, p. 142): “My basic proposition is that, in any social setting, individuals … retain personal control over actions along at least some minimal set of dimensions of behavioral adjustment. Once this elementary fact is accepted as a positive description of social reality, the logical fallacy involved in any analysis of choices among social states stands clearly exposed. Social choice, in any meaningful sense, must be behaviorally multidimensional.”

In fact, Buchanan objects to the very notion of “utility functions” that can be identified separately from actual choices and be used as the basis on which “social preferences” may be calculated. He posits “that not even individuals have well-defined and well-articulated objectives that exist independently of choices themselves. Introspectively, we must realize that we do not” (1999a [1979], p. 258).

In characterizing his theoretical outlook Buchanan (1975, p. 2) notes: “The approach must be democratic, which … is merely a variant of the definitional norm of individualism.”

Buchanan (1999c [1967], p. 174f.): “If the analyst chooses to work within the confines of the democratic model, he must commence at the level of the individual citizen-voter, and he is obliged to explain how the choices of the citizen-voter are translated into collective decisions.”

Buchanan (1999a [1986], p. 463): “The political analogue to decentralized trading among individuals must be that feature common over all exchanges, which is agreement among the individuals who participate. The unanimity rule for collective choice is the political analogue to freedom of exchange of particular goods in markets.”

Buchanan has on many occasions emphasized that in developing his views on the significance of the agreement criterion in fiscal theory he was “influenced strongly by the thinking of Knut Wicksell” (2000 [1968], p. 10).—For more detailed references, see Vanberg (2018).

Buchanan (2001b [1966], p. 255): “The center of attention becomes the mental calculus of the individual as he is confronted with a choice among alternative rules for the reaching of subsequent political decisions – that is to say, as he is confronted with a genuinely constitutional issue. The individual does not know, nor is he able to predict, what particular issues will be presented subsequent to the adoption of the rule.”

Buchanan (2001b [1966], p. 255): “It is necessary to distinguish sharply between day-to-day political decision-making, where the struggle often does reduce simply to that among conflicting individual-group interests, and ‘constitutional’ decision-making, where individuals may be thought of as participants in choices of rules under which subsequent day-to-day decisions are to be made. … (A)t this stage, it becomes possible to reconcile separate individual interests with something that could, with some legitimacy, be called the ‘public interest’ were it not for the confusion that this particular usage might generate.”

Buchanan and Tullock (1962, p. 285): “(T)he ‘public interest’ becomes meaningful only in terms of the operation of the rules for decision-making.”

Buchanan (1999a [1986], p. 461f.): “Improvement in the working of politics is measured in terms of the satisfaction of that which is desired by individuals, whatever this may be … There is no criterion through which policy may be directly evaluated. … The focus of evaluative attention becomes the process itself, as contrasted with end-states or outcome patterns. ‘Improvement’ must, therefore, be sought in reforms in process, in institutional change that will allow the operation of politics to mirror more acutely that set of results that are preferred by those who participate.”

The contrary claim is implied when Rothbard (1956, p. 250) argues: “The free market is the name for the array of all the voluntary exchanges that take place in the world. Since every exchange demonstrates a unanimity of benefit for both parties concerned, we must conclude that the free market benefits all its participants.”

Buchanan (1996 [1995], p. 267f.): “What is the ultimate maximand when the individual considers the organization of the political structure? … (T)his maximand cannot be summarized as the maximization of (equal) individual liberty from political-collective action. … A more meaningful maximand is summarized as the maximization of (equal) individual sovereignty. This objective allows for the establishment of political-collective institutions … So long as one’s agreement to such political action is voluntary, the individual’s sovereignty is protected even though liberty is restricted.”

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Titel: James M. Buchanan: Political Economist, Consistent Individualist
verfasst von: Viktor J. Vanberg
Verlag: Springer International Publishing
Buch: James M. Buchanan
Print ISBN: 978-3-030-03079-7

Electronic ISBN: 978-3-030-03080-3

Copyright-Jahr: 2018
DOI: https://doi.org/10.1007/978-3-030-03080-3_25