James Buchanan RIP

Nobel-winning economist James Buchanan, one of the founders of public choice theory, died yesterday at the age of 93. As with most pioneers, it’s a measure of his success that we no longer realise how controversial his ideas once were. Many of them now sound like truisms, even to people who would not count themselves as his allies.

His New York Times obituary provides a good summary of Buchanan’s life and work. You’ll find plenty of appreciations of him around the more or less libertarian parts of the blogosphere – for example, Steve Horwitz at Bleeding Heart Libertarians.

He had his detractors as well, of course. When he won the Nobel prize in 1986, Michael Kinsley penned a cynical takedown:

Scholarship theory previously held that academics strove to discover the truth about human affairs in order to add to our understanding of the world, and possibly to improve it. … Instead, by coming up with a lot of fancy theories to justify the self-interested desires of the business community – for lower taxes, less regulation, etc. – he may find himself earning a six-figure salary (one-third subsidized by corporations) as the head of his own center, and winning all sorts of awards to boot.

On republishing the essay in his book Curse of the Giant Muffins, Kinsley softened the tone, and explained “My purpose was not to suggest that Nobel Prize economist James Buchanan is a fraud. It was only to note that this is the conclusion you might reach using Buchanan’s own sort of analysis.”

And this of course is the problem with public choice: taken to extremes it undermines not only itself but any intellectual endeavor at all. It simply can’t be the case that self-interest is the only motive that explains our actions – or, putting it another way, we can’t interpret self-interest so narrowly as to exclude such things as the search for truth or the desire to help people. And if we extend that much interpretive charity to academics, we probably should extend some to politicians and bureaucrats as well.

But Buchanan himself didn’t make such extreme claims. The core of his work is the notion that we shouldn’t judge market behavior and government behavior by different rules. We can discover important things about how a market works by assuming that participants are trying to maximise the benefit to themselves – not because they are always and only doing that, but because the assumption is close enough to the truth to be useful. The same goes for participants in the political process.

Too often, despite the work of Buchanan and others, we compare apples with oranges: we compare the actual, imperfect market with some ideal but unrealistic vision of government. The market fails us in some way, as it often does, and we tell ourselves that the state could do better. And so it could: but that’s the wrong question to be asking. The question is not could the state do better, but will it – or if we give it the power, might we not find that government failure turns out to be worse than market failure?

It’s true that politicians and bureaucrats (and academics) are not always just out for themselves. But we need to be alert to the possibility, and sometimes the probability, that they are. And, just as with the market, we should do whatever we can to get the incentives right to make self-interested behavior work for the common good.

That was James Buchanan’s life work. It remains an ongoing project.