James Buchanan - Nobel Laureate

I attended a seminar with James Buchanan last week and was very impressed by GMU’s very own Nobel Laureate! I commented to Pete Boettke that I felt like I was listening to a legend. Boettke’s response was: “You are.” The more I reflect on what I heard that week, the more I agree.

Buchanan is one of the founders of the school of Public Choice, along with Gordon Tullock, another professor here at GMU with whom he co-authored the very influential book “Calculus of Consent”. Public Choice is the economic theory of politics, using the following 3 foundations in its analysis:

1. Methodological individualism
2. Homo economicus (rational self-interest)
3. Politics as exchange

Here’s a few gems I got from the first day of Buchanan’s lectures:

• “In the absence of individual interest, there is no interest.”
• “Public debt and welfare cause utility loss to future generations and intergenerational transfers cause loss to one generation for the gain of another.”
• "Public choice rejects the notion that the state is wiser than individuals.”

On the second day of lectures, we watched a video of Buchanan interviewing one of my all time favorite economists, F.A. Hayek. They spoke about topics ranging from how decentralized government in the US has led to successful markets, ideas for separating taxation from legislation, positing that government should have no discretionary powers of coercion. In the video, Hayek claimed that “social justice” has no meaning. The more I have thought about this over the last few years, the more I think he’s right. (Read Thomas Sowell’s Quest for Cosmic Justice to learn more about this.)

“Social Justice” sounds like a great idea, but has no objective basis to be measured against and presumes the knowledge and ability of people to be able to rearrange the world to establish justice for those who have been wronged in some way. The problem with this notion is that it is generally impossible to help one individual or group of people without harming another.

During Buchanan’s discussion of Hayek, he mentioned how he had Hayek over to his house here in Fairfax before. I was amazed thinking about these two great minds meeting and spending time together not far from where I was. Very cool.

Buchanan’s 87-year-old mind continues to be as sharp as a tack. He mad mention of individuals he’s come in contact with and/or researched ranging from Rawls to José Piñera (who I met last month), Hayek to the King of Sweden. Dr. Buchanan was definitely a treat to see.

Some of Buchanan’s most interesting thoughts came when he described the gradual transition over the years of American society from being religious and looking to God for security and comfort towards looking at the state as a god. Buchanan’s thesis was that people look for psychological comfort and ordering of the world from a higher source. As society’s belief in God has waned, it has been replaced by a deep-held belief in the state. I spoke to Buchan afterwards about this and he said he felt that the church in the US has failed in teaching the moral norms for society. He was particularly critical of “mainline” denominations, but felt that evangelicals are starting to fulfill this role today. He also mentioned that he thinks one of the difficulties classical liberalism faces is that it does not offer the psychological comfort of an ordered and protected world.

One of my favorite things Buchanan said was drawing an analogy between the American frontier and the free-market. He said that economists were failing to communicate the concept of the market in ways the public can easily understand and talked about how the market was like the frontier in the old American West. Like the frontier, a free-market allows you to enter and exit, an option not allowed by the state.

Other questions and comments he offered included:

• “Each man is his own economist.”
• “Economists need to teach the basics again and again.”
• “How would the US be different today if people coming off the boat were greeted with a welfare check instead of a shovel?”
• “One of the roles of the church is to keep people from looking to government to be a god.”
• “Do people want to be free?”
• “The decline and the breakdown of the family has also led to a loss of security.”
• To limit the power of government, we should have a generality norm in which any law or tariff has to be universally applied to all goods, people, etc. Examples of this include: imposing a tariff on one good means you have to impose an equal tariff on all other goods and a flat income tax. He said all “successful welfare states” (such as Sweden) apply a generality norm in some form or another. Most politics is caused by a conflict of interest and a generality norm would help alleviate this.

Perhaps the most humorous thing he had to say was in quoting his old professor, Frank Knight:

“I can’t figure out if people are bitching about the market because it works or because it doesn’t work.”

I feel incredibly blessed to have had a chance to hear Buchanan lecture over the course of a week. He truly is one of the economic greats and a tremendous man with great ideas that have helped to change the world.

Read more thoughts on Buchanan’s lectures last week by Frederic Sautet.