"LIBERTY MATTERS"

RESPONSES AND CRITIQUES

1. Response by Viktor J. Vanberg

When Geoffrey Brennan begins his assessment of James M. Buchanan’s work with remarks on the author’s authority in interpreting his own creation, he addresses a general issue that is of particular significance when the author is, as in Buchanan’s case, a paradigm-creator whose life-work centers around, as Brennan puts it, “an identifiable research program.” For those who carry such a research program because they consider it more promising than relevant alternatives, there are essentially two alternatives attitudes towards the paradigm-creator’s work. They can look at it as a contribution to what K. R. Popper calls the world of “objective knowledge” and see their own task in further solidifying and expanding the theoretical edifice for which the paradigm-creator laid the foundations, but which he may not have already worked out fully and consistently in all its ramifications. Or, alternatively, they can treat it as a definitive and authoritative doctrine proclaimed by a “master” who has left for them little more than the exercise of interpreting his work most faithfully. The first attitude promotes science as a cumulative enterprise that is advanced by – again in Popper’s terminology – “conjectures and refutations” or “trial and error-elimination.” The second attitude easily leads to sectarianism, a fate that the paradigm Ludwig von Mises created appears to have suffered in some libertarian quarters.

It is obviously the first attitude that informs Geoffrey Brennan’s restatement and reassessment of the “Buchanan position”; it is surely the attitude that Jim Buchanan would have wanted us to display when we approach his work, and more specifically his “constitutional contractarianism”; and it is in this spirit that I want to comment on the first two of the six “questions and queries” that Geoffrey poses in the latter part of his essay.

The first point that, under the heading “Buchanan as a Classical Liberal,” Geoffrey suggests for discussion concerns whether some parts of Buchanan’s work may not be inconsistent with a “true liberal individualism.” Specifically he refers to the argument, central to the Buchanan paradigm, that working out the rules of the social/economic/political game is an “intrinsically collective exercise,” and to Jim’s belief in “confiscatory estate and gift duties.” I will address each aspect in turn.

As far as the consistency of the Buchanan paradigm with a “true liberal individualism” is concerned I have argued on several occasions (e.g. in Vanberg 2001) that, in my assessment, it is Buchanan’s particular merit to have rectified a deficiency of the “free-market liberalism” that many libertarians claim to be the only doctrine consistent with the value of individual liberty. Advocates of free-market liberalism are surely right in emphasizing that market transactions are distinguished by the fact that they are voluntarily entered into by the parties involved, whose agreement testifies that each expects to gain, thereby conferring legitimacy on the transaction. They are also right, when they apply the same logic to collective arrangements – such as business organizations, clubs, or other kinds of associations – that are voluntarily entered into by market participants even if the “constitution” to which the contracting parties agree limits their in-period freedom of choice, such as employees who agree to follow, within defined limits, the orders of their employer, or stockholders who have to accept whatever decisions the agreed-upon corporate decision-procedures generate. Such judgments on within-market transactions and arrangements are derived from the presumption that when we speak of a “market” we thereby mean a social arena within which voluntary contracting is the only legitimate method by which participants can enlist the cooperation of others.

What free-market liberals easily lose sight of is the fact that markets as “arenas for voluntary cooperation” are not a gift of nature, but are rather social institutions the working properties of which depend on the presence and effective enforcement of “rules of the game” that define what strategies the market participants may or may not legitimately employ in pursuit of their self-interest. These rules may be, and as a matter of fact are, defined differently in different polities, and with differently defined rules the outcome patterns that result from legitimate market transactions may differ significantly. [1] Accordingly, the question arises of what provides legitimacy to the very institutional framework within which markets operate and which delimits the liberty individuals enjoy as market participants. What makes this question particularly relevant is that, as much as markets operating within “appropriate” rules can be trusted to work beneficially, markets cannot be expected to spontaneously generate and enforce the rules – at least not all of them – that are required for their beneficial working. Surely, for those rules of the market game that are by necessity subject to collective-political choice, free-market liberals face the question of how, by what criteria, they propose to judge the merits of potential alternative rules. And, upon further reflection, it should be apparent that rules that have evolved spontaneously cannot per se be exempt from critical scrutiny, but that for them, too, free-market liberals must specify the criteria against which they ought to be judged.

I neither want nor need to comment on how – if at all – free-market liberals have responded to the noted challenge, e.g., by invoking natural-rights doctrines. What I want to stress is that James Buchanan must be credited for having spelled out what, as I submit, is in fact the answer that a consistent adherence to a “true liberal individualism” requires. Buchanan’s contractarian constitutionalism simply insists that if a liberal individualism considers market transactions and arrangements legitimate because of their voluntary contractual nature, it must apply the same criterion of legitimacy, namely voluntary agreement among the parties involved, to the constitutional level at which the “rules of the game” are – explicitly or implicitly – adopted, be it the rules of the market or the rules of politics. In other words, Buchanan insists that a free-market liberalism that emphasizes individuals’ sovereignty at the subconstitutional level of within-market choices must be supplemented by a constitutional liberalism that respects individuals as sovereign choosers at the constitutional level as well, where they jointly decide on the rules under which they want to live.

Extending the fundamental normative principle of voluntary choice and voluntary contract to the constitutional level of course raises the question of how this principle can be meaningfully specified and secured at that level, a question that is obviously much more difficult to answer than in the case of market transactions where what “voluntary” means is defined in terms of the rules that constitute the market as an arena of voluntary cooperation. Yet the fact that the question is difficult to answer cannot be a legitimate excuse for classical liberals simply to ignore it. They should, instead, at least appreciate – if not join – the enterprise that Buchanan’s research program pursues: Inquiring into how the processes by which constitutional rules are adopted and reformed may themselves be framed by rules that advance and secure voluntariness in constitutional choice. That the political processes in modern democracies, not to speak of other regimes, have grave deficiencies in this regard has often and rightly been criticized from within the liberal paradigm. With his contractarian constitutionalism Buchanan reminds his fellow liberals that they ought to go beyond such criticism and face the task of suggesting institutional reforms in the democratic process that may help to strengthen individual sovereignty at the constitutional level -- to the extent that, given the inherent nature of collective-political choice, it can be realized at that level.

On the sub-issue that Geoffrey raises under the heading “Buchanan as a Classical Liberal,” namely Jim’s “passionate belief in confiscatory estate and gift duties,” I have only a very brief comment to make. It can, indeed, be viewed as an exemplification of what I noted at the beginning of my comment, namely, that there is little reason to expect a paradigm-creator to be always consistent in his own contributions to the theoretical edifice for which he laid the foundations. The very logic of his own paradigm implies that if Buchanan’s noted belief is meant to reflect more than his personal preference, it can only be treated as a proposal for constitutional reform that he conjectures to produce mutual gains for all members of the polity. Whether there are indeed good reasons to assume that this conjecture is correct is surely debatable. And whether it is a proposal that is likely to pass the agreement test is, as Geoffrey submits, rather doubtful.

The second question that, under the heading “The Double Role of Exchange,” Geoffrey poses concerns whether Buchanan’s insistence on agreement among the individuals concerned as “the ultimate test” of the constitutional economists’ conjectures about welfare-improving constitutional reforms means that the “actual constitutional contractors” are assigned the authority to determine the truth of claims that economists make about the factual working properties of institutions in markets and politics. As Geoffrey notes, it would indeed be “bizarre” if the contractarian-constitutional paradigm were to imply that, say, the members of a polity to whom a constitutional economist proposes what he conjectures to be a mutually beneficial constitutional reform were to determine, by their acceptance or rejection of the proposal, the truth or falsehood of the factual claims that are part and parcel of it. This is, however, definitely not the case, and it becomes apparent why this is so as soon as one explicitly distinguishes between the two subconjectures that are included in the constitutional economist’s conjectures about mutually beneficial constitutional changes, namely, on the one hand, conjectures about the change in outcome patterns that the suggested reform can be expected to produce and, on the other hand, the economist’s presumption that the addressees of his proposal will welcome the predicted changes and will, therefore, share a common constitutional interest in the suggested reform.

Accordingly, the “truth value” of the constitutional economist’s conjectures about mutually beneficial constitutional reforms will depend, on the one hand, on the correctness of his hypotheses about the factual working properties of rules and, on the other hand, on his conjectures about the addressees’ subjective evaluation of the consequences that the rules under consideration are predicted to have. If his reform proposal does not pass the agreement test, his conjecture that the suggested reform promises mutual gains for all persons involved must be regarded as refuted, at least for the time being. [2] Such refutation, however, does not at all mean that the economist’s hypotheses about the factual working properties of the pre-reform and post-reform rules are thereby falsified. The contractarian-constitutional paradigm respects the members of a rule-choosing group as the ultimate judges of what, in their own assessment, can count as a “welfare-enhancing” reform. Yet it definitely does not install them as judges on the truth or falsehood of the economist’s conjectures about the factual consequences that suggested constitutional reforms can be expected to produce.

End Notes

[1] Consider for example the different outcome patterns that can be expected to result if the property rights in urban plots include or exclude the right to use them for purposes such as, e.g., pig breeding or operating a shooting range.

[2] The qualifier “for the time being” is added to account for the possibility that the failure to gain agreement may be due to misperceptions on the addressees’ part, misperceptions that might be corrected by further information on the actual effects of the suggested reforms.

2. Response by Peter Boettke: "The Political Economist of His and Our Age: James M. Buchanan"

It is hard to imagine a more fitting person to write a tribute to James Buchanan than his longtime associate and coauthor Geoffrey Brennan. Few understand Buchanan’s subtle positions with respect to philosophy, politics, and economics as well as Brennan. And Brennan’s tribute also captures the critical attitude that Buchanan believed we must always take. From his teacher Frank Knight, Buchanan learned many things, but perhaps the most important one was to treat all ideas critically and to hold nothing as sacrosanct. The onward-and-upward call that characterizes Buchanan’s intellectual career is what we must also adopt as our own if we want to make progress in the field of political economy.

After years of studying Buchanan’s writings and assigning them to students, I have lots of questions, some of which overlap with Brennan’s questions. I also have lots of appreciation, but no doubt Brennan is right that the best way to honor the legacy of Buchanan is to push the boundaries, leave the comfort zone, and probe deeper into the research program of constitutional political economy and the relationship between social philosophy and political economy more generally.

Two big questions that remain for me about Buchanan’s system, which Brennan raises, relate to (a) endogenous preferences and (b) evolutionary explanations for the rules on which we agree. First, lets examine endogenous preferences. Brennan in joint work with Philip Pettit (e.g., Brennan and Pettit 2002) has raised this issue to a new level in Public Choice/political economy discourse. Yes, they argue, power may corrupt, but political office and the responsibility of leadership may ennoble the office holder. Julian LeGrande’s Motivation, Agency and Public Policy: Of Knights and Knaves, Pawns and Queens (2003) raised this endogenous preference critique of Public Choice theory as well. Buchanan himself seems to recognize this point in his essay “Natural and Artifactual Man” (1979a), where he makes a strong argument for the autonomy of the individual as a prerequisite for discovering the path to constructing his or her life. “Man wants liberty,” Buchanan states, “to become the man he wants to become.” Such an open-ended model of man raises a different set of questions from those that arise when Buchanan models man in the more closed-ended maximizing framework.

Anyone who follows Public Choice and Buchanan’s contributions to the field in particular will recognize immediately that he considers methodological individualism, homo-economicus, and politics-as-exchange as the three pillars on which the economic analysis of politics rests. But what actual purpose does homo-economicus play in Buchanan’s work when in essays like “What Should Economists Do?” (1979b) he seemingly rejects the maximizing model and the allocation paradigm? First, a careful reading demonstrates that Buchanan does not reject maximizing at the level of the individual. It is the intellectual sliding from the individual to the collective that he objects to. Individuals are teleological; economic systems are not. So treating the economic problem that society faces as the allocation of scarce means among competing ends is simply a nonstarter for Buchanan. This methodological restriction against carelessly sliding from the individual to the collective is also what underlies his critique of organismic views of the state (see Buchanan “A Pure Theory of Public Finance” 1949) as well as his critique of Arrow’s “Impossibility Theorem” (see Buchanan “Social Choice, Democracy and Free Markets” 1954).

It is perfectly legitimate in Buchanan’s system to see the individual as engaged in a self-interested rational choice; it is quite another to see society behaving collectively along these lines. It is also the case that Buchanan’s model of man is not one of narrow self-interest; a variety of arguments can enter the utility function. As Brennan points out in his remarks, Buchanan actually waffles back and forth between a position of pure logic, or philosophical understanding of human choosing, and the scientific/predictive theory. If men act like rats, Buchanan argues, then we can model them as maximizers; if men act like human choosers, engage in a quest to discover whom they want to become, then the maximizing model of man is not as useful a descriptor. So what use can it be put towards?

Here--and Geoff Brennan knows this better than anyone--Buchanan shifts the homo-economicus assumption from either an “as if” to explain economic behavior or a “normative benchmark” for decision theory to a tool in constitutional construction. This is the Humean move: In designing a government we must presume that all men are knaves and then build political institutions that guard against the knavishness in all of us. This is how a robust political and economic system can be cultivated--by rules that do not require us to become better people for their operation, but which work even when we are sometimes good, more often bad; sometimes smart, but more often stupid. The rules, not the behavioral assumptions, do the heavy analytical lifting in political economy.

Buchanan, like Hamilton in Federalist 1, wants us to address the challenge of whether our constitutions are going to be consequence of accident and force (historical evolution) or choice and reflection (constitutional craftsmanship). While not denying the power of historical evolution, Buchanan denies its “efficiency” in selecting the right rules by which we can live better together. Instead, he opts for choice and reflection, and that hope is to be found in constitutional contractarianism (to use Brennan apt phraseology). Buchanan’s use of a rational-actor logic--in a situation where the actor himself has no idea of his particular endowments of talents and position in the postconstitutional contract world--will produce agreement on fair rules. This constitutional agreement will be harder to broker the more concrete the rules of resource distribution under discussion, but easier to broker the more abstract and general the rules for the social game we are to play.

Since 2008 Buchanan sharpened his criticism of the over-optimism about the efficient evolution of rules governing the economic and political game of modern society. The New Chicago School, he argued repeatedly, had been led into an error by stressing the machine-like efficiency of the market economy without emphasizing that the market functions or fails to function on the basis of the rules within which it operates. And Buchanan held out particular criticism for a naïve form of libertarianism, which thinks that the market itself can produce its own rules through evolutionary selection. He attributes this position to Hayek and his followers. Buchanan makes some fundamental points about not only the reason of rules, but the necessity of rules and their enforcement.

I have argued repeatedly throughout my own career--which has been defined by the postcommunist transitions and the failure of development planning (see Boettke 1990; 1993; 2001)--that one of the really significant practical challenges in political economy is contemplating whether the “transition to the market is too important to be left to the market?” [1] I don’t want to emphasize the normative element of this but rather the positive political economy of this question. In many ways this is just an implications of taking Buchanan’s own admonition that we begin with the “here and now” in political economy analysis. When discussing transition economies, and failed and weak states, as Raghuram Rajan (2004) does, it is a mistake in economic analysis to treat the institutional framework as given when in fact the absence of that institutional framework explains why the situation is what it is.

While fully conceding Buchanan’s point about the misuse of evolutionary arguments, I have to respectfully disagree with my teacher. [2] I don’t think the mere move to social contract theory and veils of uncertainty at the rules stage solves the difficulties that Buchanan identifies. However sympathetic I am to Buchanan’s efforts, I think the more fruitful research approach is to take the challenge seriously and seek to identify the mechanisms operative in social evolutionary processes that serve a functional role analogous to property, prices and profit/loss within the market economy and which provide us with functional rules on which we can agree.

We must see constitutions as capable of being made from the “bottom up” rather than as always the consequences of “top-down” choice, precisely because in the situations of transition and development that we study, the institutional capacity to achieve order from the “top down” is absent almost by definition. It is important to stress that such constitution-making from the bottom up, along the lines discussed by Vincent and Elinor Ostrom in their respective work, does not commit the analysis to viewing constitutions as merely the product of historical accident and force, but instead as genuine products of reflection and choice. The rules that make possible self-governance and the overcoming of social dilemmas can be, but are not necessarily, limited to evolved informal social norms. Covenants without the sword of the state can take many forms--and we need to be open as economists and political economists to studying the details of the variety of design principles that enable effective self-governance. [3]

The open-ended model of choice, I would like to contend, fits with the bottom-up approach to constitutional craftsmanship. [4] The rules that enable us to turn situations of social conflict into opportunities for realizing the gains from social cooperation under the division of labor are those rules that Buchanan identifies in his reflection on constitutional construction. They are general; they minimize predation (including public predation and thus political externalities); and they introduce a structure of countervailing forces that check opportunistic behavior by pitting it against other opportunists rather than relying on saintly conversions among political actors.

James Buchanan is the political economist of his and our age. He thought deeply about issues in social philosophy and political economy that, among his contemporaries, perhaps only Amartya Sen also took on. He was a political economist in the Smithian sense of a moral philosopher in the age of economic scientism. In this sense he was very much following in the footsteps of his teacher Knight and also Hayek. Others were strong classical liberals, such as Milton Friedman, and still others were more hardnosed Public Choice economists, such as Gordon Tullock. But Buchanan waged a different intellectual battle--one for the soul of a discipline and an idea. The practice of economics had been derailed by excessive aggregation on the one hand and excessive formalism on the other by mid-20th century. Buchanan had to pick up his pen and try to counter these. The result is an amazing intellectual legacy for scholars to draw on in the fields of philosophy, politics, and economics.

End Notes

[1] Peter Leeson and I published a paper under that title (Boettke and Leeson 2003), and we also examine similar issues in our work on two-tiered entrepreneurship (Leeson and Boettke 2009), also see my overview papers on the topic (see Boettke 2011).

[2] For an appreciation of the central insights of Buchanan to the intellectual tradition of “mainline” economics, see my discussion of his work in Living Economics (Boettke 2012, 42-65; 241-61).

[3] On the Ostroms’ contributions to political economy of self-governance see Boettke (2012, 139-158; 159-171). Also see Aligica and Boettke (2010) for a book length discussion of the research program of the Bloomington School of Political Economy.

[4] On the open-ended model of choice and its implications for political economy see Richard Wagner’s Mind, Society, and Human Action (2010).

3. Response by Steven Horwitz: "Breaking Open the Black Boxes of Political Economy"

Geoffrey Brennan has given us a very comprehensive once-over-lightly treatment of the breadth of James Buchanan’s contributions. In reading it, I was struck again by that very breadth and how Buchanan was a major figure in several fundamental areas in economics. One of the great joys of reading his work is that, perhaps more than any other 20th century economist aside from F. A. Hayek, Buchanan asked questions that penetrated to the core of economics as a discipline. He was a master at stepping back from the conversation and asking us all to consider what it all meant and whether we were even talking about the right thing. His legacy, I believe, will be the ways in which he asked the kind of questions that undermined the conventional wisdom and led economists to look at their subject matter with new eyes. Once you see economics as about exchange and the institutions that frame it, as Buchanan does, you never see it the same way again.

One point Brennan raises in several places is Buchanan’s relationship with the Austrians, specifically with respect to their contribution to the debate over the feasibility of rational calculation under socialism. Starting with Ludwig von Mises’s 1920 paper [“Economic Calculation in the Socialist Commonwealth”] and 1922 book [Socialism], and extending through Hayek’s famous essays in the 1930s and 40s, the Austrians argued that central economic planners would lack the knowledge necessary to allocate resources with any semblance of economic rationality. As Brennan points out, Buchanan accepted this argument, but chose to ask a different question: If political actors did have the knowledge necessary, would they have the incentives to act on that knowledge in the right way? It is worth noting that one can view the Austrian contribution as asking the inverse question: Even if planners’ incentives are properly aligned, can they acquire the knowledge to do the right thing that they really wish to do?

Buchanan and the Austrians were looking at the same big questions in political economy from opposite sides of the street. I think this is not accidental. What they all shared was a dissatisfaction with the ways in which the emerging neoclassical mainstream of the interwar and postwar years was thinking about these issues. As formalism and technique began to squeeze out economic intuition and decades of accumulated knowledge about the operation of markets and politics, the discipline began to lose sight of how real-world institutions actually worked. Increasingly committed to a formalism that had no role for uncertainty and imperfect knowledge, economics lost its ability to understand perhaps the most fundamental question in the social sciences: How do we achieve social cooperation and coordination in a world of anonymous, self-regarding, and epistemically limited actors? The institutions of the market and politics had become black boxes that economic understanding could not penetrate.

What the Austrians and Buchanan did was break open the black boxes of the market and politics respectively and reveal their inner workings, which contrasted with the official models of the discipline. For the Austrians, Mises’s work on economic calculation and then Hayek’s work on the role of knowledge in the market process both challenged the emerging equilibrium-oriented formalism that was increasingly unable to understand how market institutions facilitated the use of knowledge through the price system, which in turn generated economic coordination among anonymous actors. Rather than the perfectly informed agents maximizing known preferences against known constraints using given prices of general equilibrium analysis, the Austrians saw the market as a process through which actors with epistemic limits engaged in social learning. This is the key lesson of Hayek’s series of knowledge papers in the 1930s and ’40s.

One important implication of this work is that it revealed markets as “imperfect” in comparison to perfectly competitive general equilibrium. The Austrian argument was never that markets solved every problem ideally, only that they did so better than a world in which they were absent. This point mattered because it was half of what would become a two-part challenge to the theory of “market failure” that was beginning to emerge. Developed in the same period as the Austrian work, but arguably codified after World War II in Samuelson’s Principles, this view argued that any way in which markets failed to live up to the perfectly competitive ideal was defined as a “market failure,” with the presumption that it could be remedied by appropriately designed government intervention. Market failure, by this definition, was omnipresent. What the Austrian argued was that the comparison to the perfectly competitive ideal was misguided: It relied on a view of human agency and knowledge that was at odds with the reality of human action and therefore presented a conception of “markets” that bore no relationship to the actual institutions of the market.

The other half of this challenge came from Buchanan. Just as the Austrians had broken open the black box of the market to challenge the blackboard models of midcentury economists, Buchanan and the Public Choice tradition broke open the black box of politics to challenge the blackboard models of the state held by economists, political scientists, and others. For Buchanan, even if markets “failed,” the question was whether the blackboard models of government intervention could work as promised. For example, pollution was often seen as a “market failure” caused by polluters imposing costs on third parties, rather than bearing them directly, which implied that they were producing more pollution than was optimal. The correction would be for governments to tax the polluters an amount that matched the social cost of the pollution, thereby discouraging their behavior and providing the revenue needed to compensate those harmed by the pollution. On the blackboard, this solution would bring about the efficient result the market could not achieve.

What Buchanan did was to point out that the problem with the “market failure implies political remedy” formula is that these models invoked a “behavioral asymmetry” about market and political actors. In the perfect-competition model, actors were assumed to be motivated by their self-interest in their response to costs and benefits. By contrast political actors were never modeled as thinking about their self-interest; they simply did what the blackboard models said they should do in the public interest. No one ever asked whether doing what economists said “should” be done was actually in the interest of political actors. To be precise, Buchanan’s contribution here was not to say that politicians are self-interested, but to simply demand that we treat economic and political actors symmetrically. That is, doing political economy responsibly means making the same assumptions about the motivations of political actors as economic ones. This is what Buchanan means by saying that we need “politics without romance.”

Breaking open the black box of politics meant that politics too now had to be seen as the realm of self-interested exchange. With voters, politicians, and bureaucrats all behaving in broadly self-interested ways in response to incentives, the idea that governments would do what economic models said they should was forever changed from an assumption to a question. Just as the Austrians pointed out that real-world markets are about the strivings of epistemically limited actors engaging in exchange rather than maximization, Buchanan pointed out that real-world political institutions are about self-interested actors engaging in exchange rather than automatically serving the public interest.

Breaking open these black boxes gives us a truly comparative political economy. With neither markets nor politics able to function like the blackboard ideal, we are forced to actually compare how each system works in its imperfect reality. This is where Buchanan’s emphasis on “rules of the game” moves to the forefront. A political economy that asks how well different sets of rules will function when the game is played by actors who are both epistemically limited and broadly self-interested will be, in Mark Pennington’s (2011) term, “robust” with regard to assumptions about human action and motivation. Sets of rules that generate wealth-increasing and coordination-enhancing exchanges even when knowledge is limited and knavery is afoot will be ones that we will want to adopt if we care about human progress.

Buchanan’s constitutionalism, which parallels many of the ideas in Hayek’s later work, such as The Constitution of Liberty (1960), is the natural resting place for both Public Choice theorists and Austrians. What modern Austrian economics can bring to Buchanan’s work is the question of whether constitutional rules must, as he believed, be imposed exogenously. As Brennan notes, Buchanan did not believe that market processes could generate all of their own rules. Rules that prevented destructive self-interest or channeled it into productive uses had to be the product of political deliberation. A younger generation of scholars in the Austrian tradition is challenging that view. Although they largely accept Buchanan’s analysis of the problems of politics, they are exploring whether markets and other nonpolitical processes can endogenously generate rules and norms that lead to effective self-governance in the absence of the state. They too are doing “constitutional political economy,” but the word “constitutional” refers not to a literal constitution, but to our ability to generate self-enforcing norms of that sort. Buchanan himself was indeed skeptical of the possibility of a stateless society, but his work, like Hayek’s, might point in a more radical direction.

4. Response by Loren Lomasky: "James Buchanan as Political Philosopher"

As the leading figure in the Virginia School of Political Economy, James Buchanan traversed several disciplines. His greatest fame, as certified by the Nobel Prize committee, is as an economist, but Buchanan saw himself as operating in a tradition that reckons philosophers Thomas Hobbes and David Hume as exemplary members. It is, then, appropriate on this occasion to ask what his work means to political philosophy.

If that is understood as a request for a description of the state of contemporary philosophical discourse, the indicated answer is “not much.” Although I have not undertaken a literature search, my own experience yields few sightings (or citings) of Buchanan in mainstream philosophical publications. This is not altogether surprising. The geography of contemporary academia is such that transit across disciplinary lines typically is slow and tentative. For example, in the immediate wake of the renaissance in political philosophy that followed the publication of John Rawls’s A Theory of Justice and Robert Nozick’s Anarchy, State, and Utopia, Friedrich Hayek was mostly invisible in philosophical exchanges. Now he is everywhere. [1] Recognition delayed is not necessarily recognition denied. Will Buchanan’s influence similarly wax in subsequent decades? I expect that it will, but even more I hope that it will. That is not because of filial piety to someone I liked and respected but because there is much that the practice of political philosophy can take away from his strategic commitments. I will briefly discuss two such areas below: (1) Buchanan’s distinctive contractarianism; (2) Public Choice’s homo politicus anthropology.

James Buchanan’s Constitutional Contractarianism

Much of Buchanan’s work subsequent to the 1962 publication of Calculus of Consent was directed at working out the ramifications of choosing rules at a constitutional level that will then govern the terms under which subsequent political bargains can be made. This program bears an obvious resemblance to Rawls’s derivation of principles of justice. Like Rawls, Buchanan is a constructivist. This means that rules are not chosen because they are independently ascertained to be authoritative but rather are authoritative because they are chosen (under a suitably defined set of background conditions that guarantee fairness). For Rawls fairness is achieved via a mechanism of standing behind a veil of ignorance that separates individuals from knowledge of their own individuating features and thus deprives them of a capacity to rig the rules in their own private interest. Buchanan’s less stylized characterization of the constitutional choice situation eschews a formal veil of ignorance but suggests that uncertainty about future circumstances is functionally similar. Any rule selected now will govern an indefinite number of choice situations in which one will occupy a vast and indeterminate range of roles. Accordingly, it is the part of rational prudence to opt for institutions under which one will do well in an expected sense whether in any given play of the game one happens to be advantaged or disadvantaged. These contractarian similarities may explain Buchanan’s affinity toward Rawls despite the considerable ideological distance separating them. [2]

The two constructions, however, are not interchangeable. Rawlsian contract is hypothetical and idealized, stripped of time, place and even the personalities of the so-called contractors. It aims to elicit invariant principles of social justice. For Buchanan there are starting positions but no Original Position. Rather, constitutional agreement is conceived like all other exchange as a means for getting from here to there, wherever “here” may be. If rules currently in force fail to allow some potentially productive exchanges to take place, then people can render themselves better off by judiciously altering those rules. This is a program for adjustment in medias res, not the moral foundationalism that characterizes Rawls’s theory and those of his contractarian predecessors such as Hobbes, Locke, and Kant. Which approach is better? The answer is: It depends for what. Without in any way wishing to diminish the significance of the philosophical tradition, I think the search for invariant principles can usefully be supplemented by strategies for principled adjustment.

Among the most challenging problems in the contemporary practice of politics is how to replace palpably substandard rules of decision-making by more robust ones. Let me offer what I hope the reader will agree is an especially salient example. The United States and most European Union countries have shown themselves discouragingly unable to get a handle on reining in intergenerational transfers. Both with regard to funding pensions of former public employees and to maintaining the medium- and long-term solvency of general governmental welfare programs such as Social Security and Medicare, amassing liabilities has proved to be electorally popular while working out realistic policies for picking up the tab remains well-nigh impossible. As I write this piece, barely two months removed from the near-death experience of hurtling toward the vaunted “fiscal cliff” and two days into the new age of sequester, it is clear that lurching from one ad hoc policy to the next is unequal to the task of rationalizing the budget process. Rather, what is called for is less focus on individual crisis response – which mostly amounts to kicking the can down the road – and redirection to consideration of the rules under which political actors operate. Here’s one thought: Perhaps legislatures would do better if supermajorities were required whenever transfers to current recipients will burden future generations. Frankly, I am not sure how or whether this could effectively be implemented, or whether it would be one of those many cases in which the proposed “cure” turns out to exacerbate the problem. What I am relatively sure of is that no extended consideration of the pros and cons of, say, Rawls’s Difference Principle or any similarly abstract postulate of justice is liable to make these problems any more tractable. On the other hand, Buchanan’s version of constitutional contract may aid us in thinking more clearly about how the rules of the political game could be altered in a manner that serves the long-term interests of all affected parties.

I confess that despite the above, I tend not to share Buchanan’s optimism concerning prospects for intelligent and effective rule change. His version of a veil of ignorance is apt in many cases to be insufficient to shield individuals from precise knowledge of their own expected gains and losses under a proposed new regime of rules. That is obviously so with regard to knowledge of the generational cohort to which one belongs and the gains or losses one thereby stands to realize Thus general support for rule-based solutions to the sorts of issues mentioned in the preceding paragraph are apt to be contentious. But what alternative strategy holds out more promise?

Homo Politicus

Buchanan insists that individuals who enter the political arena bring with them the same motivational profile that informs their market activities. Self-interest narrowly construed is what propels both kinds of efforts. Regardless of whether the individuals in question are office-holders or the voters who put them there, homo politicus reveals himself to be the self-same creature as homo economicus. That is what Buchanan means when he characterizes the theory of Public Choice as a “politics without romance.”

By way of contrast, philosophical thinking lays the romance on as thick as a Mexican soap opera. [3] From Plato’s philosopher-kings onward, politics is typically conceived as the disinterested and ennobling pursuit of a common good. Rulers as well as humble citizens are expected to set aside their private interests in favor of that which tends to advance the well-being of the greater community. [4] Rousseau set out with unequaled flair the opposition of a general will to private individual wills, Less dramatic but similarly romantic, the contemporary theory of “deliberative democracy” conceives the primary business of citizens to be, as the name has it, deliberating democratically. More specifically, deliberative democrats argue that it is not enough for people to cast the occasional election-day ballot or even to lend some thought to the nature of their own interests and which candidate promises to do best by them. Rather, they are to study – intensively, as opposed to consuming a handful of soundbites during off hours – the issues at stake and how the candidates stand on them. Crucially, they are then to estimate which among the available alternatives best serves the citizenry at large and then lend to it their efforts, which include but go well beyond the mere act of voting.

Is there a conflict between the pursuit of one’s personal projects and intensive engagement in political discourse? No – not if one happens to be a professor of political theory. For almost everyone else, however, political activity is orders of magnitude less central than making a living, raising one’s kids, upgrading to the latest iPhone model, attending (or staying away from) the house of worship of one’s choice, and all manner of other private pursuits. When politics does enter such an individual’s life, it is probably as an adjunct to these interests, not as the vehicle for pursuing an abstractly conceived common good. Some will argue that this amounts to civic irresponsibility. I am inclined instead to believe that more harm is done to the body politic by excessive political zeal than by too little, but this is not the occasion to enter into that discussion. Instead, I advance the modest point that a theory of democratic accountability optimized for a nation of political philosophers is apt not to fit well a populace whose priorities lie elsewhere. This isn’t to deny that there are lessons to be learned from utopian constructions; philosophy surely is ornamented by the contributions of Plato, Rawls, Nozick, and even that rascal Rousseau. In contemporary democratic theory, however, utopianism is excessive. Deliberative democracy and other utopian accounts [5] offer little assistance to the workaday job of piecemeal institutional improvement. If I may be allowed a brief descent into the jargon of the discipline, political philosophers distinguish ideal from nonideal theory, and it is to the former that they devote a disproportionate amount of attention. It can be argued that mainstream Public Choice theory errs in the opposite direction. [6] I interpret Buchanan as endeavoring to split the difference. Although illusion-free, homo politicus nonetheless is keen to improve his own lot along with that of his fellows by consensual agreements concerning the rules that govern them. Buchanan’s intermediate position can, I believe, support productive strategies for thinking about how democracies can be reengineered so as perform more smoothly.

Conclusion

As Geoff Brennan observes, Buchanan pursued a remarkably intensive and coherent research program over the course of more than 60 years. From it I have extracted two themes that complement the enterprise of political philosophy. If this mini-essay were longer, I would supplement them with others. Here are two that ought to be of special interest to libertarians: (1) the debate between anarchy and the limited state; (2) Buchanan’s unique intragenerational libertarianism coupled with substantial intergenerational redistribution in service of a view of social justice that is more commonly encountered on the left. Mostly, though, in these paragraphs I have been trying to persuade philosophers and the philosophically minded to reconsider the work of a theorist who belongs to them no less than he does to the economists.

Endnotes

[1] There is no mention of Hayek in the index of Rawls’s massive book.

[2] See Brennan’s preceding essay. At a conference for which he and I were co-organizers we observed that this respect was reciprocated.

[3] I recommend to curious readers the Univision network.

[4] A conspicuous exception is David Hume, who advises in “Of the Independency of Parliament,” “POLITICAL writers have established it as a maxim, that, in contriving any system of government, and fixing the several checks and controuls of the constitution, every man ought to be supposed a knave, and to have no other end, in all his actions, than private interest.”

[5] See, for example, David Estlund, Democratic Authority: A Philosophical Framework (Princeton: 2009), a splendidly ingenious and technically sophisticated volume that makes no concession to realism.

[6] See Loren Lomasky, “Public Choice and Political Philosophy,” Public Choice 152 (September 2012), pp. 323-27.

5. Response by Edward Stringham: "James Buchanan and the Economics of Anarchy"

How is order in society created? James Buchanan is well known for his work on the economics of politics and constitutional political economy, and Brennan (2013) and others do an excellent job summarizing these contributions. I, however, would like to highlight another area of my professor’s pioneering work, the economics of anarchy. [1] Buchanan was not afraid to ask big questions in political economy, including what would property rights and economics look like without government. Buchanan (1974) wrote: “It is high time to shift out of the pragmatic mind-set that has been our national characteristic. The grand alternatives for social organization must be reconsidered. The loss of faith in the socialist dream has not, and probably will not, restore faith in laissez-faire. But what are the effective alternatives? Does anarchism deserve a hearing, and, if so, what sort of anarchism?”

Buchanan was in many ways a traditional Hobbesian. Brennan (2013) is correct to write that Buchanan “rejected anarchy as a viable option, broadly embracing the Hobbesian argument for government and in the process adding his own kind of ‘rational reconstruction’ of the Hobbesian position.” Buchanan believed that under anarchy property rights would be insecure, often using the dictionary definition of anarchy that entails disorder, not just lack of government. On the other hand, Buchanan was not a traditional Hobbesian and had certain affinities toward individualist anarchism. [2] Buchanan wrote, “To the individualist, the ideal or utopian world is necessarily anarchistic in some basic philosophical sense.” [3]

Buchanan saw the study of anarchy as a worthy enterprise rather than something to be dismissed by assumption. He focused his study of anarchy at the Center for Study of Public Choice in the early 1970s after the arrival of his colleague, Winston Bush. Buchanan describes the importance of those years:

Winston Bush galvanized our interests in the theory of anarchy, an organizational alternative that had never seriously been analyzed. What were the descriptive features of Hobbesian anarchy? Could something like an anarchistic equilibrium be defined? Bush was instrumental in organizing a series of weekly workshops in 1972 during which each participant in turn presented papers on differing aspects of the theory of anarchy. As revised, these papers were published in Explorations in the Theory of Anarchy. Those weeks were exciting because never before or since have I participated so fully in a genuinely multiparty ongoing research effort, one that we knew to be relevant in some ultimate sense . . . . For me this brief period of research activity was important because it gave me a new focus on my whole enterprise. (1992: 116)

After contributing to the volumes Explorations in the Theory of Anarchy and Further Explorations in the Theory of Anarchy (Tullock 1972, 1974),[4] Buchanan wrote in The Limits of Liberty (1975), “‘Ordered anarchy’ remains the objective, but ‘ordered’ by whom? Neither the state nor the savage is noble, and this reality must be squarely faced.” In these early works, Buchanan focused on the insecurity of property rights under anarchy and analyzed why people would want to establish government.

Yet in some of his later writings Buchanan questioned some of his original work. In 2004 Buchanan wrote, “As I now reflect on that burst of interest in the theory of anarchy, I now realize that we were perhaps too influenced by the Bush-Tullock presumption to the effect that the behavioral hypotheses used were necessarily empirically grounded” (2004, 268). The Hobbesian beliefs about human behavior might not always hold. Buchanan wrote that their pessimistic assumptions “led us to neglect at that time any effort to work out just what an ordered anarchy would look like. What would be the results if persons should behave so as to internalize all of the relevant externalities in their dealings among themselves?” Buchanan did not end up answering these questions, but raising questions about his earlier conclusions show the signs of a true philosophical anarchist.

In what I consider one of his most underappreciated works, Buchanan, along with Winston Bush, seemed to question the viability of the entire constitutionalist enterprise. Buchanan and Bush (1974) published “Political Constraints on Contractual Redistribution” in the American Economic Review, but it has less than 1/100 of the citations of The Limits of Liberty. Here they make a simple but important point: Even if there is an agreement about a particular set of property rights in period one, people will use the government to rearrange those property rights in subsequent periods. Those less satisfied with any particular outcome will have an incentive to have the previously agreed-on rules jettisoned or changed for their personal gain. Property rights may be insecure under anarchy, but so too will they be insecure after the establishment of government. If one takes the insight seriously, to what extent is establishing government an improvement?

In 1986 Buchanan had a very positive review of Anthony de Jasay’s The State (1985), which Buchanan describes as accepting “the analysis of the anarcho-capitalists, like Rothbard.” Ultimately, Buchanan says he retains “a residual faith in some positive potential” for the state, but Buchanan admits, “If we are to be honest in our evaluation, the observed outreaches of modern politics seem to fit Jasay's model of the churning adversary state.” Not only was Buchanan open to the idea that government does not exist to protect people, he was also open to the idea that order comes independently from government. Buchanan (1994, 132) wrote, “Much of human activity takes place in a setting described as ‘ordered anarchy,’ by which I refer to the simultaneous presence of apparent order and absence of formal laws governing behavior. How is such ordered anarchy possible? . . .The answer suggested by my argument here is that interacting parties choose to constrain their separate choices in such fashion as to create non-intersecting and therefore nonconflictual outcomes.” Buchanan pointed to factors including morality in constraining a Hobbesian war of all against all.

Buchanan never was a traditional anarchist, but at many points he came close, and many scholars influenced by Buchanan have explored such a position in more depth (Boettke 2005). [5] Modern economists have used Public Choice to analyze the creation of government law enforcement as a way of generating revenue for the state (Benson 1994, Curott and Stringham 2010) [6] and analyzed ways in which private clubs enforce rules and regulations that are usually considered to be the domain of the state (Anderson and Hill 2004; Boettke 2012a,b; Leeson, 2011; Powell and Stringham 2009; Stringham 2006). [7] To these Public Choice economists the government is not created to fill a void that existed without government. One can analyze all of these questions from a purely positive point of view, but the work can have help influence our normative conclusions. Buchanan’s spirit of inquiry about the viability of anarchy should be viewed as a model for others to follow. One need not simply assume that order under anarchy is impossible or that the state will automatically solve problems. Instead, we can view these as open questions to be investigated in future explorations in the economics of anarchy. [8]

Endnotes

[1] See Stringham, "Overlapping Jurisdictions" (2006) <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1324407>

[2] See Stringham, "Anarchy and the law" (no date) <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1768172>

[3] Buchanan, The Limits of Liberty, chap. 1 The Commencement" <http://oll.libertyfund.org/title/1827/103247/2214426>.

[4] See Stringham, "Introduction" to Anarchy, state, and pubic choice (2005) <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2228946>

[5] See Boettke, "Anarchism as a Progressive Research Program in Political Economy" (2005) <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1538490>

[6] See Currott and Stringham (no date) "The rise of government law enforcement in England." <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1711665>

[7] See Stringham (2006) "Overlapping Jurisdictions" <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1674470>

[8] See Boettke (2012a) "Anarchism and Austrian Economics" <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1871727>