James Buchanan on Whether There is a "True Good Sociesty"

I am continuing to read works by James Buchanan. An article he published in Ethics in 1967 entitled, "Politics and Science: Reflections on Knight's Critique of Polanyi" is of relevance today. It deals with methodological issues about how science is done and whether the same approach can be made to the study of the political arena.  Polanyi's book was Science, Faith and Society and Polanyi argues for a somewhat realist approach to science--there is an underlying truth we are trying to discover.  In this, Polanyi was not a post-modern philosopher.  Polanyi evidently thought there could be a similar approch in the social sciences.  With this, Frank Knight, one of Buchanan's teachers I believe, was less confident.

Polanyi argued for a free and decentralized approach for science, and argued that the discoveries, challenges, and free discussion would ultimately lead to an idea of being closer to the truth. Hopefully, this is how science works.  But what about the political arena.  Buchanan writes, "If politics is not aimed at the discovery of 'truth' in any sense comparable to science, agreement among individuals cannot be expected to emerge as a result of free and open discussion. Enlightenment does not necessarily produce unanimity....Poltics becomes the proces through which divergent interests are compromised."

Buchanan then discusses whether there is one "good society." If there is, if there is a "truth" about the good society to discover, then there is no guarantee that free and open discussion will be the route there. If there is not a truth to discover but some believe there is and they have found it, it is likely they will seek to impose their view of truth and all others. Intolerance may be the result.  Buchanan then writes, "This attitude of intolerance seems especially to characterize the modern American left-liberal who dominates the academic setting and to whom there must always exist a set of prevailing 'truths,' politically determined, and from which open dissent becomes, somehow, 'immoral.'"

Does Paul Krugman come to mind?

Further Thoughts on James Buchanan

I wrote earlier about the death of James Buchanan and how I have read him more in recent years than I had earlier in my career.  I have read a lot of his work since his death, including two books--PUBLIC PRINCIPLE OF PUBLIC DEBT and DEMOCRACY IN DEFICIT: THE POLITICAL LEGACY OF LORD KEYNES (writen with Richard Wagner). While I was getting my Master's degree, I took a public finance class in which we used Buchanan's THE DEMAND AND SUPPLY OF PUBLIC GOODS as the text. Much of his writing was in the public finance area. However,  he is known more for helping create public choice.  I checked a couple of public finance textbooks as did my colleague, Sarah Estelle, who teaches public finance. It was interesting to see that Buchanan is hardly cited in them, and when he is, it is on a topics related to public choice rather than "pure" public finance.  The exception is a public finance book I have that was written in German and for the German market.  Buchanan is cited a lot, including his pure public finance work.

In a way, it is incorrect to separate public finance and public choice in Buchanan.  One of his first articles is, "The Pure Theory of Government Finance: A Suggested Approach," published in THE JOURNAL OF POLITICAL ECONOMY in 1949.  In the article, Buchanan says that the pure theory of government finance can be built upon one of two foundations--the "organismic" theory of the state or an "individualistic" theory of the state.  The organismic theory sees the state and all individuals in society as a single organic entity while the individualistic theory views the state as the sum of the individual members of society acting  in a collective capacity.  A theory of government finance that is built upon the first theory of the state may be totally inappropriate for the second theory of the state.

One place where Buchanan argued that this difference is important is in the treatment of public debt.  The modern approach is Keynesian, and says public debt is very different from private debt and public debt is not borne by future generations.  This may be appropriate if the state is "organismic," but inappropriate if the individualistic theory of the state is used.  A key reason is that those voting today, when confronted with choices that either increase government spending on popular programs or reducing taxes, and funding either by debt, will be more popular since the current generation will not bear the full costs of their decisions.  It is hard to refute his claim when examining public debt levels in the U.S. and Europe once Keynesianism became orthodox.

The arguments in this article suggest that Buchanan never saw a distinction between public finance and public choice.  Theories related to govenrment must pay some attention to institutions otherwise one would assume government actions are similar whether under Hitler or Stalin, or under representative democracy or Athenian democracy.  In some areas of economic analysis, pure theory can abstract from institutions, but surely not when trying to analyze actions of governments.

I think Buchanan is still worth reading and plan on continuing to do so.

James Buchanan Dies

James Buchanan died on January 9, a few days after the AEA meetings ended.  He won the Nobel Prize in econmics in 1986.  An obituary on him can be found here, and some comments on his importance by Tyler Cowen can be found on his blog. Buchanan was a very important economist and his Nobel was well-earned. In recent years, I have been reading him a lot more.  Since my major area in grad school was industrial organization and I never had a public finance course in grad school, I didn't read him much when I was younger.  But I have increasingly found him of more significance.  In one manner is that I no longer begin micro classes with the idea of scarcity but instead the idea that specialization of labor is productive. This is a point he made in his presidential address to the Southern Economic Association, "What Should Economists Do?",  and was published in the Soutern Economic Journal in January 1964. I am still struggling with his views on cost as found in his short book, Cost and Choice: An Inquiry in Economic Theory. The Liberty Fund has published the collected works of Buchanan, and it is 20 volumes. He had an extraordinary career.