Liberty Matters

Peter Boettke’s second comment on Brennan et al.


Geoff (and Viktor) correctly argue (obviously because they are two of the closest thinkers to Buchanan) that Buchanan’s ultimate welfare test was agreement.  In fact, in Buchanan’s rightly famous 1959 paper, “Positive Economics, Welfare Economics, and Political Economy,” he negotiates the passion for reform that entices folks to study economics with the strictures of positive analysis via the concept of agreement.  The political economist qua reformer proposes his changes as hypotheses subject to refutation through the process of obtaining agreement from other political decision-makers.  If the reforms fail to generate a consensus, then they fail.
Buchanan’s political economy demands that the analysis must begin with the “here and now” and not imagine some start-state that could be easily perfected.  Since we begin with the here and now, and then propose changes that must meet with agreement or they are rejected, the Buchanan-style political economy reformer must be ready to follow the compensation principle through to its logical conclusion if Pareto improving-policies are to be instituted.
What if we find ourselves, as we do in our current world, where the status quo is biased in the favor of one group, or group of groups, and the proposed reforms are designed to upset that status quo?  In Buchanan’s framework, and here I think he is surely correct, we must propose reforms treating that status quo as given and any proposal must involve compensation to those who are supposed to voluntarily give up their privileged position.  In economic terms, we must be willing to provide the present value of the future income stream they expect from the privileged position they are to abandon, and we must be able to credibly commit to honoring that payment if we hope to get reforms off the ground.  Failure to either propose the compensation package or get the credible commitment will block reforms.
This is the reformers dilemma, and Buchanan gave us the analytical tools to think clearly about reforming the rent-seeking society. But this analysis is largely within an existing set of meta-rules about how society is organized in political life.  We are still at the rule level of analysis, so we are not engaged in public policy as conventionally understood, but we also aren’t at the highest level of constitution-making either.  Part of the problem is that our current situation emerged because at the highest level of constitution-making mistakes were made in the design principles.  If the design principles were right, then the rent-seeking state would not have emerged in the ordinary play of politics.  Remember Buchanan is striving for a political order that exhibits neither dominion nor discrimination.
In The Calculus of Consent (1962), Buchanan and Tullock explained how super-majority voting rules would bind political action from producing significant externalities in collective action.  They were often criticized by intellectual opponents for this deviation from simple majority rule.  In Politics by Principle, Not Interest (1998), Buchanan and Congleton run a different intellectual argument to address  political externalities.  They permit simple majority voting to determine policy, but they restrict what can be voted on.  Only policies that pass the “generality norm” can be subject to voting; all policies that benefit one party or small group of interested parties at the expense of others are eliminated from consideration.  The arguments in The Calculus and Politics by Principle would restrain our expression of political preferences, but do so by making sure to minimize the opportunity that collective choices have to impose significant externalities on others.
So Buchanan does rely on agreement, and in fact, prefers unanimity as the norm, but as his famous deviation from unanimity to “conceptual unanimity” (which Leland Yeager loved to famously say meant ”NOT unanimity”) demonstrates, he didn’t let his own logic ensnare him in intellectual traps.  This is how his endorsement of the “relatively absolute absolutes” gives him the wiggle room that perhaps we are not recognizing in this conversation.
Buchanan’s endorsement of the status quo is an analytical endorsement; a positive political economy position with absolutely no normative weight is attributed to the status quo. Thus in my reading no normative weight is given to agreements produced in light of proposed reforms.  If he did provide normative weight to those agreements, then why would he wish to restrict decision-making through super-majorities or a generality norm.  Obviously, the opportunity for collective action to produce significant externalities must be prevented.  Buchanan seeks to find ways to institutionally constrain our decision processes.