Political Entrepreneurs

The Economic Engine of Political Change

James M. Buchanan: Complete Scholar

January 10th, 2013 by Edward Lopez

Here are five observations to illustrate the breadth and depth of Jim Buchanan’s work.

1. The philosophical depth and political idealism of James M. Buchanan, from the early pages of The Calculus of Consent: Logical Foundations of Constitutional Democracy (1962), which he authored with Gordon Tullock:

The Scholastic philosophers looked upon the tradesman, the merchant, and the moneylender in much the same way that many modern intellectuals look upon the political pressure group. Adam Smith and those associated with the movement he represented were partially successful in convincing the public at large that, within the limits of certain general rules of action, the self-seeking activities of the merchant and moneylender tend to further the general interests of everyone in the community. An acceptable theory of collective choice can perhaps do something similar in pointing the way toward those rules for collective choice-making, the constitution, under which the activities of political tradesmen can be similarly reconciled with the interests of all members of the social group.

2. The political realism of James M. Buchanan, from a retrospective essay that he wrote in 1979 called “Politics Without Romance,” (online in several places) in which he sums up the contributions of public choice theory:

The romance is gone, perhaps never to be regained. The socialist paradise is lost. Politicians and bureaucrats are seen as ordinary persons much like the rest of us, and “politics” is viewed as a set of arrangements, a game if you will, in which many players with quite disparate objectives interact so as to generate a set of outcomes that may not be either internally consistent or efficient by any standards.

3. The academic entrepreneurship of James M. Buchanan, from his essay “Public Choice: The Origins and Development of a Research Program,” in which he explains why he and Gordon Tullock founded the Public Choice Society.

Our book [The Calculus of Consent] was well-received by both economists and political scientists. And, through the decades since its publication, the book has achieved status as a seminal work in the research program. The initial interest in the book, and its arguments, prompted Tullock and me, who were then at the University of Virginia, to initiate and organize a small research conference in Charlottesville in April 1963. We brought together economists, political scientists, sociologists, and scholars from other disciplines, all of whom were engaged in research outside the boundaries of their disciplines. The discussion was sufficiently stimulating to motivate the formation of a continuing organization, which we first called the Committee on Non-Market Decision-Making, and to initiate plans for a journal initially called Papers on Non-Market Decision-Making, which Tullock agreed to edit.

We were all unhappy with these awkward labels, but after several annual meetings there emerged the new name “public choice,” for both the organization and the journal. In this way the Public Choice Society and the journal Public Choice came into being. Both have proved to be quite successful as institutional embodiments of the research program, and sister organizations and journals have since been set up in Europe and Asia.

4. The scholarly citizenship of James M. Buchanan. As the New York Times obituary noted, Buchanan was always trying to “uneducate the economists”. In pursuit of that, his work evinces a steady pattern of responding to, improving upon, and more deeply extending seminal works that came before his. Here are just a few couplets to illustrate.

– Paul Samuelson, “The Pure Theory of Public Expenditure,” (1954)
– Buchanan & Stubblebine, “Externality” (1962) and Buchanan, “An Economic Theory of Clubs” (1965)

– F. A. Hayek, The Constitution of Liberty  (1960)
– Buchanan & Tullock, The Calculus of Consent (1962)

– Robert Nozick, Anarchy, State, and Utopia (1971)
– Buchanan, The Limits of Liberty (1975)

– Gordon Tullock, “The Welfare Costs of Monopoly, Tariffs, and Rent” (1965)
– Buchanan, “Rent Seeking vs. Profit Seeking” (1980)

– Paul Romer, “Increasing Returns and Long-Run Growth” (1986)
– Buchanan and Yong Yoon, The Return to Increasing Returns (1994)

– Michael Heller, “The Tragedy of the Anticommons” (1997)
– Buchanan and Yong Yoon, “Symmetric Tragedies: Commons and Anticommons” (1999)

5. The iconoclastic, anti-establishment, intellectual maverick, James M. Buchanan. An excerpt from Chapter 4 of Madmen.

When James Buchanan (born 1919) won the Nobel Prize in 1986, the usual press inquiries followed. Each fall the Nobel committee announces six prizes over several weeks, and reporters get into full-blown geek mode, knowing they’ll have to quickly write informative summaries of complex science for the general public. When Paul Samuelson won the economics Prize in 1970, the New York Times asked whether it was even possible to explain his work to readers, and insisted that Samuelson would say no. Not possible. The paper nonetheless found it possible to convey Samuelson´s philosophy of government intervention, and it went on to describe him as “the Hollywood image of a Cambridge professor.” Other Nobel Laureates are easy to write about because they already have a public image when they win the Prize, like Paul Krugman in 2008 and Milton Friedman in 1976. But this Buchanan character; he didn’t fit the mold.

The Nobel committee’s official notice recognized Buchanan for “a synthesis of the theories of political and economic decision-making (public choice).” When Buchanan was asked by his local paper, The Washington Post, to explain “exactly what public choice is,” Buchanan said public choice is studying politics with the tools that economists use to study markets. Public choice treats voting, lobbying, regulating, and all other political decisions as made by self-interested individual people, working within agreed-upon rules. The Post’s reporter was nonplussed. Well, isn’t that just common sense, the paper asked? And why would the Swedes award common sense with a Nobel Prize? Perhaps recognizing a language barrier, Buchanan agreed, saying it probably wasn’t much more than common sense. But he reminded his interviewer that most economists didn’t see it that way. Unsatisfied, The Post ran a guest column ten days after Buchanan’s prize. “What it all boils out to is that Buchanan’s economics represents a particular ideology: leave the economy alone and everything will be all right.” A New York Times op-ed of exemplary candor upped the ante. “To put it bluntly, the Nobel Committee’s choice is far more a testimonial to the fashionable popularity of conservative politics in the United States and elsewhere than a tribute to Mr. Buchanan’s rather modest achievements.”

The Nobel committee fired back. Its selection chairman later told the Post “that’s stupid, that we think about people’s political opinions. It’s a very superficial interpretation. No, no, we’re not that simple-minded.” Nonetheless, the spin continued even at the heights of the profession. The previous year’s Nobel Laureate in economics, Samuelson’s colleague at MIT, Franco Modigliani, told the Times that “Dr. Buchanan says very emphatically that the government should get out, and this fits very nicely with the Swedish view right now.”

This was how the establishment of the time received the news of Buchanan’s Nobel prize. What got them so riled up?

More to come on this blog.

Note: updated to correct typo’s.

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.189, ch.7)

The most successful entrepreneurs know what they do well, they know the market and the opportunities within it, and they choose those activities that create the most value. This is true in economic as well as political markets.

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.178, ch.7)

[W]hen the right elements come together at the right time and place and overwhelm the status quo, it is because special people make it happen. We call them political entrepreneurs.

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.176. ch.7)

While we started this book with Danny Biasone saving basketball, we end it with Norman Borlaug saving a billion lives. These stories are not that different. Both faced vested interests, which were reinforced by popular beliefs that things should be a certain way—that is, until a better idea came along.

Madmen, Intellectuals, & Academic Scribblers

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From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.174, ch.6)

Because there was a general belief that homeownership was a good thing, politicians found the public with open arms.... Everybody was winning—except Alfred Marshall, whose supply and demand curves were difficult to see through the haze of excitement at the time, and except Friedrich Hayek, whose competition as a discovery procedure was befuddled... In short, once politicians started getting credit for homeownership rates, the housing market was doomed.

Madmen, Intellectuals, & Academic Scribblers

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From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.166, ch.6)

Everyone responded rationally to the incentives before them. In short, the rules that guided homeownership changed over time, which in turn changed the incentives of these actors. And bad things happened.

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From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.153, ch.6)

They understood the economics. The ideas had already won in ... the regulatory agency itself. All that remained to be overcome were some vested interests and a handful of madmen in authority.

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.146, ch.6)

If the idea for auctions of spectrum use rights had been part of the public debate since at least 1959, why didn’t the relevant institutions change sooner? What interests stood in the way?

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.121, ch.5)

When an academic scribbler comes up with a new idea, it has to resonate well with widely shared beliefs, which in turn must overcome the vested interests at the table. Many forces come together to explain political change, even though it may seem like coincidence of time and place.

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.120, ch.5)

It’s the rules of the political game that deserve our focus, not politicians’ personalities or party affiliations.

Madmen, Intellectuals, & Academic Scribblers

The Economic Engine of Political Change

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From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.119, ch.5)

In short, ideas are a type of higher-order capital in society. Like a society that is poor in capital and therefore produces little consumer value, a society that is poor in ideas and institutions will have bad incentives and therefore few of the desirable outcomes that people want.

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