James M. Buchanan

This essay discusses the arguments in Buchanan’s 1964 paper, ‘What should economists do?’, in the light of recent developments in behavioural economics. Criticizing the preference-satisfaction criterion of neoclassical economics, Buchanan argues that the central concern of economics should be to design and maintain institutions that allow individuals as much opportunity as possible to make their own choices and to engage in voluntary cooperation. He worries that using preference rather than choice as the fundamental normative concept might license social planners (and economists who see themselves as their advisers) to set themselves up as the judges of what individuals ‘truly’ prefer. This is exactly what behavioural welfare economics is now doing by using the satisfaction of (supposed) latent preferences as its criterion. Following Buchanan, I propose an opportunity-based criterion and argue that the contractarian justification for this criterion is unaffected by behavioural findings.

One of the key tenets of James Buchanan’s political thought was the centrality of the status quo, embodied in Buchanan’s frequently heard axiom that “we start from where we are.” There is practical political value in “starting from where we are,” because we are in fact there, and not someplace else. Buchanan’s normative concern is that starting from where “we are” means that changes are more likely to be voluntary, and therefore Pareto-improving. The history of this notion of the status quo in contractarian thought is developed briefly, and then a particular example, the Chilean Constitution and its problematic implementation, is discussed.

Throughout his career, James Buchanan displayed a remarkable consistency regarding the didactic role of the properly trained economist. As he would say, it takes varied iterations to force alien concepts upon reluctant minds. What he regarded as the role of the properly trained economist is just a variation on his understanding of constitutional political economy. According to Buchanan, properly trained economists occupy dual, roles as economic scientists and political economists. As economic scientists they understand how spontaneous orders emerge as a result of self-interested behavior under alternative institutional arrangements. As political economists they may propose changes to existing institutions for the purpose of better facilitating the mutually shared goals among free and responsible individuals. Such proposals are not technical advice to a benevolent dictator, but conjectures about Pareto improvements to be tested through democratic deliberation. These related, but distinct, roles, have a non-normative and didactic basis, which is to teach citizens of a democratic society that there are opportunities for mutual gains from trade.

This essay pursues one historical and one conceptual task. The historical task is to reconstruct the “thinking-in-orders” tradition in political economy as a contextual approach to socio-economic reality, a tradition in which James Buchanan was socialized and to which he was a life-long contributor. The historical mainline extends from classical political economy to ordoliberalism, and shows how contextual economics has gained relevance in periods of transformation and transition. Living today in a world of fundamental transformation, the essay’s conceptual task is to depict how a recent research program, “New Economics of Order”, revitalizes the ordoliberal tradition by complementing it with Virginia School impulses of James Buchanan and Bloomington School impulses of Elinor and Vincent Ostrom. This new contextual research program conceptualizes the balance between the fragility stemming from the dynamics of globalization and digitalization, and the provision of statics through the state and civil society as demanded by the citizen.

Nicholas Vriend (2002) asked whether F.A. Hayek was an “ace,” and answered affirmatively. By “ace,” Vriend meant someone who worked with agent-based modeling. To be sure, Hayek could not have worked with agent-based models because that platform did not exist when Hayek was developing his ideas about the distribution and use of knowledge in society. All the same, Vriend explained convincingly that Hayek could have made good use of the agent-based platform had it been available in the 1930s. To similar effect, we argue in this paper that James Buchanan could have made good use of agent-based modeling to carry forward his ideas about the value of taking an emergent approach to the explanation of economic processes.

James M. Buchanan advocated constitutional constraints on tax-funded activity in order to limit it to cases where government could provide Pareto improvements, namely “genuinely public goods of the pure Samuelsonian type.” However, even the most benevolent government agents cannot improve on imperfect market outcomes in the presence of free-rider or demand-revelation problems because—being human and not omniscient—they cannot know the public’s true but necessarily unobserved willingness to pay for unpriced services. The claim that project x’s expense to each individual will be exceeded by the value the individual places on its services can never be falsified given the free-rider or demand-revelation problem built into the Samuelsonian concept of a public good. It follows that to give a human bureaucracy the constitutional mandate to provide public goods would provide no firm barrier to the scope of government.

In their ground-breaking work The Power to Tax, Buchanan and Brennan find decentralization to be the key to protect citizens from excessive taxation. Citizens could compare, choose, and migrate, and thus force their government in tax competition to administer their money with due care. In our contribution to this book, we argue that a solid financial architecture requires institutional congruence. The power and responsibility for taxation, expenditures, and debt must be consequently decentralized (autonomy model) or centralized (integration model). If fiscal decentralization or centralization, however, is incomplete, citizens and their governments will have perverse incentives to spend excessively and to shift the debt/tax burden to the common pool of interconnected fiscal units. We illustrate our argument with an analysis of four distinct models of fiscal organization in the United States of America, France, Germany, and the European Monetary Union.

Today, the debate about public indebtedness has reached a fervor not often seen among professional economists and the general public. This has renewed considerations of requiring Congress to balance its budget, through either a Constitutional amendment or some other legislative or statutory means. But what effect would such a requirement have on the actual practice of federal spending? Conventional approaches to answering this question are typically empirical in nature, perhaps looking at the budgets of individual states and the patterns of spending before and after balanced budget requirements were put into practice. This paper takes a different tack, instead exploring the process by which figures of federal revenues and expenditures are constructed and what effect requiring these constructed figures to be equal would have on actual underlying fiscal realities.

The Affordable Care Act (commonly termed Obamacare) has and continues to experience substantial political and economic challenges to the “Exchange” market for individual (non-job-related) insurance it is trying to build to cover the uninsured. The promise to make insurance available to those who have already become above-average risks has resulted in high and growing premiums for Exchange coverage. Efforts to control the rate of growth of medical spending have been ineffective in curbing the growth of private sector spending. Furthermore, the cost of subsidies to the formerly uninsured has provoked taxpayer backlash to such an extent that repeal of the entire program almost succeeded. I explore whether there is a way to redesign subsidies and the distribution of methods to overcome these difficulties by developing insights contained on some of James Buchanan’s work, particularly his contributions to “positive political economy” and “fiscal illusion.”

Buchanan (1965) highlighted the inconsistencies that arise when public services (available at little or no cost at the point of delivery) are financed by general taxation. Citizens (as ‘consumers’) increase their demand for services, even though citizens (as ‘voters’) are reticent to increase taxation. Buchanan invited readers to explore the impact of different assumptions of politicians’ behaviour. In this chapter, attention focuses on the way that vote maximising governments are likely to respond to the divorce between receipt and payment for services. Buchanan illustrated his analysis with reference to the National Health Service in the UK. Predictions are tested with reference to the pattern of excess demand in the National Health Service between 1970 and 2012.

Economists model state-provided defense as a value-added, public good. The actual government provision of defense, however, is a “black box” that is rarely analyzed. This chapter contributes to opening this black box by analyzing the U.S. defense budget. We provide an institutional explanation for why scarce public resources are often squandered on defense-related activities. Our framework blends insights from James Buchanan and Elinor Ostrom and models the U.S. defense budget as a “fiscal commons.” We consider the absence of mechanisms to ameliorate overgrazing and, in doing so, emphasize that waste, fraud, and abuse is a system feature of the current system. We also consider the implications for reform.

Even though effective contraception has been widely available and used in the U.S. since the 1960s, access to affordable contraception became a political issue in the early 1990s and culminated in the adoption of the federal contraceptive insurance mandate in 2011. This paper analyses the emergence of contraceptive mandates in the context of Virginia Political Economy, focusing on James M. Buchanan’s distinction between a productive and a redistributive state. Buchanan would surely view insurance mandates as an expansion of a welfare state and an activity indicative of constitutional anarchy. To understand the coordinated patterns of societal coordination within constitutional anarchy I employ Richard E. Wagner’s framework of Entangled Political Economy. I conclude that the push for state and federal contraceptive mandates was driven by a rent-seeking effort oriented at increasing the demand for more profitable forms of contraception.

It is nearly universally presumed that redistribution can be carried out effectively only at the national or even global level, because local redistribution will be negated through personal mobility: recipients will move to high-paying jurisdictions while taxpayers will move away from those jurisdictions. To avoid this situation requires redistribution to be concentrated at national and not at local levels. In contrast to this standard line of argument, we explore how redistribution might be carried out more effectively at local levels than at the national level. To explain this reversal from standard analytical implications, we integrate three concepts that are not present in the standard analysis. These concepts are the Samaritan’s dilemma, co-production, and polycentricity. It is interaction among these three concepts that reverses the implications of the standard analysis of redistribution.

Starting with The Calculus of Consent James M. Buchanan published many books and articles emphasizing the importance of constitutional institutions and the promise of constitutional reforms. In this chapter I review some of these publications. The review begins with The Calculus, and then goes on to The Limits of Liberty, The Power to Tax, The Reason of Rules, Politics by Principle, Not Reason, and essays about the importance of constitutions in the European Union. The chapter closes with discussions of the prospects of and impediments to constitutional reform in the United States and the European Union.

Buchanan’s approach to political economy is often characterized as rejecting romance in favour of realism: as taking feasibility seriously. But Buchanan provides no detailed account of his understanding of feasibility. This chapter discusses the idea of feasibility and its role at the constitutional, political and individual levels of Buchanan’s work, offers a reconstruction of Buchanan’s position on feasibility based on the idea of politics as exchange, and locates that position in the context of the more recent discussion of the concept of feasibility in the political philosophy literature.

This chapter conceptualizes computer code as constitutional rules and constraints governing blockchain technology. The Bitcoin protocol is essentially a set of rules written in computer code, governing what is, and what is not, allowed by the participants in the Bitcoin network. In this sense, it is like a constitution. No single participant can change the rules, but new rules (in the form of upgrades to the open-source software) can be advanced by different participants. The key to understanding Bitcoin’s rules is to understand consensus at all levels. In this context, Buchanan’s scholarship analyzing constitutional choice is extremely relevant to blockchain technology in general, and Bitcoin in particular.

Blockchains are the distributed ledger technology underpinning cryptocurrencies such as Bitcoin and Ethereum. Blockchains facilitate exchange, provide public goods (security, property rights), map identities, and provide a platform for contracting and the enforcement of contracts. Some applications of blockchains offer the possibility of new forms of ‘corporate’ organisation—such as distributed autonomous organisations. Other applications suggest the possibility of removing public good provision from states to networks—such as property titling and identity. This chapter offers a constitutional political economy perspective on the development of the blockchain ecosystem. We argue that blockchains are constitutional orders—rule-systems in which individuals (or firms, or algorithms) can make economic and political exchanges, and so offer a unique economic environment for institutional discovery and constitutional experimentation.

This paper was motivated by what we see as an inconsistency between a 1988 paper by Brennan and Buchanan expressing concern that public choice might erode public confidence in government and previous work by Buchanan, in particular Buchanan (1979). The one advantage we saw with the 1988 paper was that it, all by itself, is all one needs to dismiss MacLean’s (2017) depiction of Buchanan as an ideologically rigid extremist. We also found the same inconsistency occurring simultaneously in Buchanan’s writing in 1979. Yet, based on Wagner (2017), we conclude that such inconsistencies may reflect a strength in Buchanan’s scholarship.

Political-economic life is rife with bullshit: false, often nonsensical, beliefs. Some of those beliefs are socially productive. James M. Buchanan identifies popular false beliefs in the constitutional realm as foundational supports of political-economic order. I consider how popular false beliefs in the judicial realm support criminal law and order. The beneficence of bullshit in such arenas may help explain the prevalence of bullshit in political-economic life.

The ability to voluntarily choose our memberships within political groups is an important mechanism for disciplining political actors and encouraging better decision making over the use of public resources. However, sorting between voluntarily chosen groups also creates the opportunity for people to become sorted into groups of haves and have-nots, leading to a concern that voluntary sorting across groups could generate or exacerbate inequality in harmful ways. In this essay, I refer to both the example of choice within public education systems and to J. M. Buchanan’s work on interstate externalities within Federal systems to explore this issue. The conclusion is that there is much work to be done on the subject, but that the answer to the question must be a constitutional one, and that therefore the insights of Buchanan are important to those wishing to better understand this difficult question.

James M. Buchanan’s and Vincent Ostrom’s contributions to the field of Constitutional Political Economy spanned 60+ years as they explored how individuals come together in democratic societies to design social decision processes capable of protecting individual liberty. This chapter examines a set of rules frequently associated with such protective processes—votes, vetoes, voice, and exit—in order to compare how these scholars’ approaches to constitutional choice overlapped and where their perspectives differed slightly. It concludes with an examination of their treatments of US federalism and their concerns for the future viability of this institutional form.

We introduce ideas about how coercion in public finance can be formally defined, building on recent work in the literature. Our discussion illustrates the connection between selected aspects of this research and earlier seminal work on coercion by Wicksell, Lindahl, and Buchanan and Tullock. We also attempt to contribute modestly towards a fuller understanding of the nature of coercion in a public finance setting. We use a Lindahl solution as the counterfactual social state relative to which coercion inherent in any situation is to be judged in order to evaluate and compare the nature of coercion imposed by a social planner and in an electoral equilibrium.

Buchanan (1987) identifies Politics as Exchange as one of the key pillars of research program. Viewing politics through the lens of exchange focuses attention on what sorts of political bargains individuals and organized groups find both to their advantage and feasible. Politics as Exchange locates differences between policies in the different rules that condition and result from these bargains. This essay contrasts the Politics as Exchange approach with the recent literature on state capacity, which typically embodies a view that we dub Politics as Administration. While these two points of view are not mutually exclusive, we argue that Politics as Exchange may be more effective in explaining important changes in political economic systems. We illustrate the relationship between the two by examining the evolution of the Byzantine Empire during and after the reign of Basil II.

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.

Public choice uses economic methods to analyze government decision-making. Buchanan’s constitutional project has the normative goal of discovering constitutional rules and institutions that empower government to protect individual rights, but that constrain government from violating people’s rights. He relies heavily on hypothetical models of unanimous agreement as a benchmark for evaluating constitutional rules, but with a limited analysis of the political processes that might secure a consensus. A promising avenue for advancing Buchanan’s constitutional project is to more explicitly apply public choice analysis to it—that is, to apply economic analysis to the actual political processes that produce constitutional rules.

Although public opinion and most of the academic community reject libertarian anarchy, explaining why governments are legitimate remains a major and much neglected problem. This paper discusses the foundations of social-contract theorising with emphasis on the Hobbesian approach. It then examines the constitutional alternatives (including Buchanan’s) and draws three main critical conclusions. First, the Hobbesian construction is not a social contract dictated by nature, since the individuals’ instinct to survive does not necessarily justify the presence of a watchman. Second, the constitutional contract takes the status quo for granted, fails to identify the signatories, and ignores the presence of dissenters. Finally, Buchanan’s version of the constitutional approach shares the Hobbesian perspective, and focuses on describing the bargaining process, rather than on assessing the legitimacy of government. Although it is a fitting description of the context prevailing in today’s Western democracies, Buchanan’s view ends up replacing the rule of law dear to the classical-liberal tradition with the rule of compromise.

Public choice theory, built on the homo economicus model, is regularly attacked as an empirically inadequate and potentially harmful example of economic imperialism. I offer a methodological defense of the homo economicus assumption and argue that public choice theory provides not merely a negative theory of “government failure.” Instead, public choice can be understood as a positive, optimistic enterprise that points to the potential for institutional reforms that are in the common interests of citizens.

We argue James M. Buchanan’s scholarship provides us an exemplary model for doing liberal political economy. Levy (2014) argues there are irreconcilable tensions within liberalism between rationalism and pluralism. Buchanan navigates these tensions in a way that powered one of the most important research programs in 20th century social science. Buchanan’s political economy contains both rationalist and pluralist elements, and it is this synthesis-without-solution that makes his political economy contributions perpetually relevant. We document Buchanan’s affinities for rationalism and pluralism, show how they informed specific portions of his research agenda, and describe how this agenda is being carried forward today.

James Buchanan shared with F.A. Hayek a deep appreciation of the market as a creative discovery process. Like Hayek, Buchanan understood that the results of market processes are ever-changing, highly complex, and cannot possibly be consciously planned. Yet while Buchanan also shared Hayek’s commitment to classical liberalism—both normatively and as supplying a framework for research—Buchanan rejected Hayek’s thoroughgoing ‘evolutionary’ perspective. Unlike Hayek, Buchanan believed that human beings could and should—in an appropriately structured setting for social contracting—consciously design and choose the foundational rules that undergird society’s daily operations. When subjected to critical evaluation, however, Buchanan’s case for consciously designed and implemented constitutional rules for society does not stand up.

James Buchanan often argued that fairness is an obligation toward our equals. If Adam Smith is our equal, then we are under obligation to try to understand him. We see this in Buchanan’s attempts to reformat political economy on the basis of natural equals, a world in which Smith’s street porter does indeed have the same capacity as the philosopher. This shows in Buchanan’s excitement over increasing returns models as well as John Rawls’ Theory of Justice both of which he saw a way to make this view operational.

The object of this paper is to retrace the steps that led Buchanan from marginal cost pricing to clubs. We claim that the idea individuals could form clubs to finance public goods can be traced back to his first works on public finance, at the end of the 1940s, and relates to the financing of highways and the pricing of their construction and of their use. Very early in his career Buchanan adopted Knut Wicksell’s proposal to use a marginal cost pricing rule even for public goods. The many criticisms raised against this rule led him to replace it with club pricing.

In this essay I argue that vanity is a Janus-faced feature of social cooperation: as Hobbes stresses, it certainly can lead to conflict, yet it can also motivate enforcing norms of fairness. What Hobbes call “vain glorious” individuals will walk away from “vile and contemptible” Pareto gains. A society composed of both egoists and glory-seekers is thus more likely to stabilize fair terms of cooperation than even the most enlightened society of self-interested agents. Rather than, as in many economically-inspired analyses of social order such as James Buchanan’s in The Limits of Liberty, modeling a society of self-interested agents, we would do better to model polymorphic populations, containing multiple agent types.

James Buchanan wrote many short pieces on human nature and on the weaknesses of the rational choice model used by mainstream economics. Although he normally used such models in his own work, he recognized that their usefulness was limited to only a subset of choice settings. This chapter provides the rule-based model of choice that Buchanan may have had in the back of his mind when writing his critiques. It is not an effort at mind reading, but rather develops a model of rule-bound but not rule-determined choice that is consistent with Buchanan’s remarks on human nature and with contemporary research from evolutionary psychology. It develops a theory of self-constitutions or homo constitutionalus.

In Buchanan’s broad “constitutional contractarian” framework ultimate justification depends on the institutional arrangements under assessment being universally accepted (that is, not subject to veto by any of the relevant parties, all of whom possess a right of veto). Accordingly, market arrangements (the definition of rights, and rules about their transfer) have the same status as in-period collective decision-making rules: both equally hang or fall on whether they (could have) emerged from constitutional consensus. The paper underlines this ‘equivalence’ by showing that the constitutional calculus over market ‘rights’ follows the same analytic structure as the derivation of in-period collective decision rules. This means that Buchanan’s view of the virtues of markets is essentially rooted in a collective decision and despite his self-professed “classical liberal” inclinations, his relation to standard defences of the market order (whether grounded in “natural rights” or liberty or in wealth creation or “efficiency”) is at best equivocal.

This paper discusses Buchanan’s ideas on the “extent of the market” and the associated ethical questions. Buchanan demonstrates that a work ethic generates economy-wide benefits, i.e., enhanced productivity of input factor, in a setting of generalized increasing returns. He analyzes ethics as a public good question in a moral community. The two topics, “extent of the market” and “ethics”, have externality as a common element; and the size matters in both cases. The work ethic has economic contents as the market nexus extends, while ethical rules are difficult to emerge in large numbers. The paper resolves the dilemma.

How does a government arise from anarchy? In a classic article, Mancur Olson (1993) theorized that it could occur when a roving bandit decides to settle down. This stationary bandit comes to recognize an encompassing interest in its territory, improving its lot by providing governing and committing to stable rates of theft (taxation). The bandits highlighted by Olson (1993) are not individuals but rather groups organized to act collectively. I provide a club-theoretic (Buchanan 1965) analysis of bandits. I characterize the (actual or threats of) violence as a club good, i.e., one that is non-rival but from which out-group members can be excluded. I elaborate on the changes in the club’s group interest and in-group that will likely accompany the roving-to-stationary transition. To illustrate the salient points of the analysis, I provide a case study of the Visigoths: their emergence as a roving confederacy in the late fourth century, their migration and subsequent settlement, and the establishment of the Visigothic Kingdom.

Does a system of fixed punitive rules or an adaptive system of discretionary authority better assure proportionate punishment and incarceration outcomes? Do fixed rules or discretionary interventions better avoid the social consequences of mass incarceration? This chapter leverages theoretical insights from the Public Choice tradition regarding monetary policy to inform and progress applied debates surrounding mass incarceration.

Reading James BuchananBuchanan, James M. ’s 2005 essay “Afraid to be Free Afraid to be free: DependencyDependency as desideratum” is profoundly depressing. BuchananBuchanan, James M. envisions a rather gloomy future, where despite the intellectual bankruptcy of socialism there will be a steady expansion of the sphere in which state control is exercised over individual choice. The incoherence between the political norms of classical liberal political systems and the fiscal burdens of the welfare state will increase to a breaking point where one or the other must be repudiated. To the extent this involves restricting the generality of welfare entitlements, these programs will be increasingly be seen as dispensations to particular factions, and contestation over the capacity for redistribution will increasingly dominate political life.

Buchanan’s work, and in particular The Calculus of Consent, which he wrote with Gordon Tullock, has been foundational in the field of public choicePublic choice. One of his students, Charles Plott, became a pioneer with multiple seminal contributions in the field of experimental public choice. In this chapter we focus on Buchanan’s work on decision making under majority rule, and any influence it may have had on Plott. While Buchanan and Tullock address environments with single decisions, they focus much more on decision making under repeated votes, a topic they found of great interest. Plott’s seminal 1978 paper with Morris Fiorina, however, focuses on single decisions. It may seem puzzling, then, that Plott has often suggested Buchanan’s influence on his work. We offer a resolution to this puzzle.

This chapter examines the origins of James M. Buchanan’s critique of Keynesian fiscal policy. Considered are Buchanan’s graduate training in public finance and fiscal policy and his early work in fiscal federalism. Two important themes emerge. The first is the influence of Henry C. Simons. The second relates to the necessity of choice between “rules versus authorities” or democratic process versus authoritarianism in policy making. Beginning with his 1948 dissertation, Buchanan consistently emphasized the importance of incorporating democratic processes directly into economic models rather than relying on omniscient and benevolent social planners or other authorities. It is the lurking authoritativeness in fiscal policy that Buchanan particularly objected to, more than the theoretical mechanics.

James Buchanan pioneered the political economics of public debt 60 years ago. In this paper, we contrast his thinking of the burden of debt, the public choice mechanisms that lead to excessive debt and the demand for constitutional restraints on public debt with its development, its sustainability, the evidence on the political economy of debt and on the effects of institutions. It turns out that Buchanan farsightedly anticipated the problems that would emerge from excessive indebtedness in the developed world. The introduction of fiscal rules appear as a late triumph of Buchanan’s thinking. However, socialism is dead, but Leviathan lives on. Opposition to sound fiscal policies has increasingly dominated the public debates since the Great Recession.

Over recent decades, and especially over the last decade, there has been a phenomenal expansion in public debt. While most advanced and emerging countries have experienced that trend, some have done so far more than others. Japan, Greece, Italy, Portugal, the United States and a few others have seen the ratio of their public debt to GDP exceed 100 per cent. The accommodating policies of central banks, that have kept interest rates at historically low levels, have made that debt more attractive and more sustainable. But the situation remains and may have become more precarious, because interest rates might increase, and recessions may return. Using a public choice perspective, first suggested by David Hume and consistent with James Buchanan’s thinking, this paper explores some reasons that have led to these results, and why public debt is so attractive to governments.

The chapter explores the background of public debt theory by contrasting the Anglo-Saxon tradition as embodied in the Ricardian (1821) equivalence theorem and the Italian tradition as embodied in de Viti de Marco’s (1893, 1898) non-equivalence theorem. Moreover, it highlights the key role that de Viti de Marco played in inspiring Buchanan’s (1969) theory of public debt. Specifically, it concentrates on the quality of public expenditures in a contractarian constitutional setting and asks whether, under certain budget conditions, debt financing can be justified. An effort is made at exploring the rationale for explaining the genesis of this apparently biased view and attention is drawn to how de Viti’s distinction between productive and unproductive expenses has an impact on either the ethics of debt and the ethics of default.

The aim with this chapter is to find some logical conclusions about ideal monetary arrangements departing from Buchanan’s monetary ideas. First, his ideas about the constitutionalization of money are explained. Second, his proposal for the abolition of fractional reserve banking, once put in historical context, allows us to conclude it had become anachronistic. Finally, his advocacy for the adoption of a common brick standard, arguably, offers a solution to the main criticism raised against “narrow banking” schemes. Put together they seem to be the last logical step before the complete separation of monetary functions in theoretical terms. In spite of those ideas’ long tradition, starting with the Chicago Plan, they are considered by many to be outside the mainstream economics; so, another aim with this chapter is to show the solid economic logic behind them once institutional arrangements and other non-economic factors are acknowledged as part of the reality.

The purpose of this paper is to discuss the connections and links that existed between Buchanan and Italian economists. We show that, even though Buchanan had read them, it was only after having spent one year in Italy—1955–1956—that Buchanan paid attention to these economists. Here, Francesco Forte played a particularly important role. It did not only transform Buchanan’s conception of the public debt but also lead him to pay more attention to law, institutions and political phenomena.

This study considers Pareto’s treatment of fiscal issues, first as a middle age economist and subsequently as a mature age sociologist. It establishes that Pareto never regarded fiscal studies as a purely theoretical exercise. Even as an economist, he relegated ‘fiscal effects’ to the aspect of applied economics that he called the ‘concrete economic phenomenon’. Pareto’s fiscal sociology takes his observations from applied economics and subjects them to further analysis using his division between logical and non-logical action, with fiscal effects falling within the category of non-logical action. This chapter reviews those enhancements and subjects Paretian fiscal sociology to critical assessment. While the Paretian episode in fiscal sociology has now long passed, the study concludes by noting a number of its attributes that have continuing relevance.

Given the broader context of the Public Choice and Constitutional Political Economy scholarly community, James Buchanan and Vincent Ostrom assumed a rather distinctive shared position which has rarely, if ever, been explicitly and properly recognized as such in the literature. This chapter focuses on this problem arguing that the specific nature of the Buchanan-Ostrom perspective is fully revealed only if we focus on one key concept, which despite its lack of salience in the literature, captures best the gist of their position: The concept of “artefactual” and through it, an entire cluster of related notions such as “artefact”, “constructivism” and “artisanship”. The chapter uses the concept of the “artefactual” as the preeminent vehicle in developing a more nuanced understanding of the foundations of the Buchanan-Ostrom system of ideas, while trying to stay very close to the textual evidence which supports the thesis at the core of the chapter.

James Buchanan and Gordon Tullock in The Calculus of Consent and Vincent Ostrom in The Political Theory of a Compound Republic brought the study of constitutional choice into public choice theory and provided the basis for constitutional economics. Buchanan and Tullock presented a typical economist’s model of the trade-off between decision-making and political externality costs, and Ostrom, in his reconstruction of the political theory underlying the Constitution of the United States as explicated in The Federalist, expanded the model to introduce information and learning. Ostrom also expands on ideas contained in The Calculus and The Federalist to develop the concept of polycentric federalism whereby one can examine all governments, including state and local, within the same framework. The chapter concludes with an examination of some of the applications of the approach to national, state and local governments.

Despite affection for his former teacher, James M. Buchanan’s work ran counter to that of Frank H. Knight. Knight disagreed with Buchanan’s methodological, economic, ethical, and political assumptions. He rejected methodological individualism, the underlying methodological commitment of Buchanan’s research program. While Knight remained within the standard constrained maximization framework of neoclassical economics, Buchanan adopted a catallactic perspective. Ethically, Knight argued that all ethical judgments must remain open to debate, and also rejected the de gustibus non est disputandum assumption that went hand-in-hand among economists with methodological individualism. And philosophically, Knight’s theory of democratic politics was centered on “democracy as discussion” rather than choice, contract, and constitution. Why, then, did Buchanan return again and again to Knight’s work? After a survey of his published criticisms of Knight, the conclusion emerges that engagement with Knight pushed Buchanan toward a more open-ended political economy.