Quotation of the Day…

by Don Boudreaux on September 1, 2011

in Country Problems, Myths and Fallacies, Seen and Unseen, State of Macro

… is from page xiv of Geoffrey Brennan’s elegant 1998 Foreword to Vol. 2 of The Collected Works of James M. Buchanan – which is Jim’s 1958 classic (and truly indispensable) Public Principles of Public Debt:

To the standard new orthodox claim that we owe internal debt to ourselves, Buchanan’s response is effectively: What’s this “we” business?….

[T]here is a kind of intellectual divide between those who conceive social phenomena in a disaggregated way and those of a more holistic, organic cast of mind.  Arguably, it is this intellectual divide that most distinguishes microeconomists from macroeconomist and a fortiori as a group from sociologists and many traditional political theorists.


Geoff immediately adds: “Within this divide, in Public Principles of Public Debt, Buchanan establishes himself firmly as an arch exponent of the individualist method.”

Indeed Jim does so distinguish himself (as he continues to do so 53 years later) – always brilliantly and vitally and productively.

Be Sociable, Share!



45 comments    Share Share    Print    Email


muirgeo September 1, 2011 at 10:28 pm

“…an arch exponent of the individualist method.”

The “individualist method” which exist no where in all the world and through all of time. The worlds successful societies are all filled with only varying degrees of We… There are no Me societies. They are radioactive… they are things of dreams and teen age novels decaying fast into all sorts of anarchy, monarchy, plutocracy and even social democracies. It’s got to be awful being such a stout individualist dependent every single day of your life and We the People….

Paul Andrews September 2, 2011 at 1:07 am

The point is that when it comes to debt, the important aspect is who is owed, and who owes? The answer is that one individual or entity owes to another individual or entity. If too many owe too much to others, that’s a problem for society as a whole, but the problem cannot be avoided by saying that “we owe it to ourselves”.

muirgeo September 2, 2011 at 1:22 am

So Paul, as it stands now our government has spent $14 plus trillion more then it has taken in. Some one received something for that $14 trillion. War contractors got paid, Veterans got medical care, Banks got free money ( lots of it) , Professors got grants, their students got government loans, retirees got social security and medical care, we all drive the highways and the government put satellites into the sky…. so who owes?

Before…. when a lot of this counties infrastructure was built and we didn’t have as much debt people on top paid a greater share. So now.. why do the new people on top…way on top feel they shouldn’t be so indebted?

Methinks1776 September 2, 2011 at 7:50 am

That is a sweet sweet deal. I can get all that stuff for free? I’m in. Working for a living is tough and time consuming. I’m going to quit and let We The People take care of me. I’m sure that’s…how do hippies put it?…oh yeah sustainable. It’s also greener! So, really, by letting you work to pay for me, Muirdiot, I’m doing Gaiaa a favour.

Paul Andrews September 2, 2011 at 9:22 am

Firstly, any individual or entity that defrauded the taxpayers owes the taxpayers the amounts defrauded, and this should be clawed back through legal means as far as possible.

For the amount that remains, taxpayers owe the individuals and entities that lent them the money – i.e. the bondholders.

How the burden is shared is a matter for the taxpayers and is decided through the political process. Those that are wealthiest hold disproportionate power and will make sure that their own taxes are minimized.

Of the wealthy individuals and entities, some are wealthy through their own honest efforts, others are wealthy through crime, and others are wealthy due to government largesse.

The more money the government spends, the more people there tend to be in the latter two categories. Therefore government spending distorts the process of burden-sharing more than would be the case without government spending.

Individuals in the latter two categories also use their influence to increase government spending to benefit themselves, creating a positive feedback loop that persists until the debt burden is simply too great. To have started that process was a grave mistake, and the longer we go without correcting it, the graver the consequences.

muirgeo September 2, 2011 at 9:30 am

” To have started that process was a grave mistake, and the longer we go without correcting it, the graver the consequences.”

I agree with most of your post. So when was the process…the grave mistake…. started? If I remember correctly in 2001 we had higher tax rates and a budget surplus. Also up until 1980 the debt ration was coming down. My point being one party that gets blamed for being the irresponsible spenders seems to actually have been the MORE responsible party on budget issues AND they consistently have produced better economic output by pretty much all measures.


tdp September 2, 2011 at 11:41 am

The top 1% of households account for 38% of all tax revenues, and the top 5% account for over 50% of all tax revenues. The United States has the most progressive tax system in the world, with the bottom 30% of income earners paying 6% of the taxes and the top 30% paying 65% of the taxes. In Sweden, the bottom 30% pay 14% of the taxes and the top 30% pay about 40% of the taxes. How can you honestly say “the rich” (defined as households with more than $250,000 for multiple income earners and $125,000 for single earners) manipulate the legislative process into paying lower taxes? Unless you are talking about people like Warren Buffet who don’t pay income tax and have the wherewithal to pour money into tax shelters while advocating higher income taxes on everyone else, or politically connected lobbies who get exemptions and exploit loopholes, like corporations that suck on the government tit (GM), you are completely wrong.

carlsoane September 2, 2011 at 11:48 am

Muirgeo: I’ve seen a number of people show that chart of Democrat vs. Republican administrations. I’m not sure what people get from it. If you include Truman and Roosevelt, it’s a wash between Democrat and Republican presidents. If you blame Truman and Roosevelt’s spending on the war, than you presumably need to let Bush II off as well. Clinton had a predominantly Republican congress, Reagan a predominantly Democratic one. And, as Democrats remind everyone whenever anyone points out that a higher percentage of Republicans voted for the Civil Rights Act than Democrats, the parties essentially switched personnel in the middle of the century.

Paul Andrews September 2, 2011 at 12:06 pm

“So when was the process…the grave mistake…. started? If I remember correctly in 2001 we had higher tax rates and a budget surplus. Also up until 1980 the debt ration was coming down. My point being one party that gets blamed for being the irresponsible spenders seems to actually have been the MORE responsible party on budget issues AND they consistently have produced better economic output by pretty much all measures.”

Looks like around 1980.

I don’ t see anyone blaming parties, just people opposed to government waste.

Paul Andrews September 2, 2011 at 12:09 pm

“Unless you are talking about people like Warren Buffet who don’t pay income tax and have the wherewithal to pour money into tax shelters while advocating higher income taxes on everyone else, or politically connected lobbies who get exemptions and exploit loopholes, like corporations that suck on the government tit (GM), you are completely wrong.”

Corporations on the government tit just about sums it up. The wealthy who pay their taxes are more likely to be those who truly earnt their wealth.

GhengisKhak September 2, 2011 at 4:15 am

Muirgeo, here is a list of pre-packaged bullet points you can use instead of having to continually come up with minor variations of phrasing for your inconsistent ideaology:
[ ] Libertarianism has been ruining the world since libertarian politicians began its practice after/during ________. (valid options for the blank are FDR, Reagan, Clinton, and GWB).
[x] Libertarianism has never been in practice, and therefore never will!
[ ] I hate Republicans, and you guys are Republicans. Therefore, I hate you guys.
[ ] Vote Democrat; they’re different!
[x] The government is involved in every aspect of life, some part of which you participate in. You therefore are a hypocrite.

muirgeo September 2, 2011 at 9:34 am

You left out my main point….policy matters. And of the two basic choices Democratic policy has been significantly far more productive than Republican policy.


These numbers are now outdated and they under represent the post Bush reality.

Anyway put that on your list of my bullet points A-hole

tdp September 2, 2011 at 11:50 am

That is some bullshit. You’re using
1) an opinion poll of people who don’t know jack shit about the economy or government spending
2) a NY Times poll
3) a poll about attitudes towards Bush, who started an extremely unpopular war and authorized the bailouts
4) a poll that shows distaste for a big spender who ran up huge debts. Guess what our current president is doing? (By the way, HIS approval rating has hit an all-time low).

The record, especially recently, that under Obama the economy’s performance has been far worse than any time since the 1970s and the deficit he has racked up in 3 years in office is already bigger than what any president before has ever racked up, even W.

The Democrats were the ones who pushed for subprime mortgages and low interest rates. The Democrats pushed for a huge “stimulus” that added a cool trillion to our deficit and caused unemployment to INCREASE to over 9%. Since the Democrats took over Congress in 2006 and the White House in 2008, this country has been going nowhere but downhill.

The policies enacted by the Democrats are worse than the ones enacted by Republicans. For all the pork, violation of individual liberties, cronyism, interventionism, Keynesianism, and general incompetence under recent GOP guidance, those problems have been 5 times as bad under Democrat rule, and are worsening rapidly.

Ghengis Khak September 2, 2011 at 3:04 pm

[x] Vote Democrat; they’re different!

Also, it is absolutely frightening that an MD can have so poor an understanding of statistics and causality to view the data in that link and think it means something.

Ken September 2, 2011 at 5:48 pm

I see you completely ignore what party is dominant in congress during those times. Or did you forget that all revenue bills HAVE to be originated in the House and is NOT something the president nor any part of the executive branch has authority over.

What you’ve linked to is called “not thinking”.


SaulOhio September 2, 2011 at 7:33 am

Yes, the old strawman version of individualism.

Get a clue muigeo. Read David Kelley’s “Unrugged Individualism: The Selfish Basis of Benevolence”.

SweetLiberty September 2, 2011 at 10:08 am

“…We the People”

It’s always rich when a socialist quotes the Constitution, the very document which they refuse to be bound by.

JS September 2, 2011 at 3:39 pm

You would cry the loudest if more was taken from you than given.

Social cooperation is a spontaneous phenomenon of individual private interest. The only time the collective concept ‘we’ is employed is when individuals use it to steal from each other.

Harrison September 1, 2011 at 10:50 pm

Rather, it depends on how “we” is defined. Coercion, anyone?

tdp September 1, 2011 at 11:29 pm

On an unrelated note, Fannie and Freddie are suing PRIVATE mortgage companies for being deceitful in offering subprime mortgages. Who was it again that had the bright idea to issue those mortgages and encourage them in the first place? Who created the low interest rates that led to the housing bubble? Who issued subprime mortgages themselves and have greater culpability in the whole fiasco than anybody else? Where the fuck does the government get off blaming this shit on anyone but themselves? This hypocrisy and finger pointing should be final, irrefutable proof that the current government and president don’t give a shit about fixing the economy, only getting control of everyone’s money and castrating the private sector so that nobody can get a job or make any money unless Uncle Sam is doing the hiring.

Mesa Econoguy September 1, 2011 at 11:49 pm

Jim Johnson.

Don Boudreaux September 1, 2011 at 11:57 pm

The name says it all – a crony ‘capitalist’ of first rank.

muirgeo September 2, 2011 at 1:25 am

Is there any other form of capitalism? It’s ALL crony as far as I can see.

ArrowSmith September 2, 2011 at 1:38 am

Of course you would say that.

vidyohs September 2, 2011 at 6:05 am

You just confirm what was established a long long time ago. You can’t see. But, we all know that, and we also know that it is unlikely that you will ever see.

Methinks1776 September 2, 2011 at 7:53 am

Yeah, but you’re blind.

muirgeo September 2, 2011 at 9:41 am

Oh… I thought maybe some one was going to give an example of Non-crony capitalism…. like maybe in the 50′s and 60′s when there were 300 lobbyist instead of the now 30,000+ lobbyist that boomed after Ronnie and your republicans opened the flood gates…. Anybody?… I didn’t think so.

Let me give you an emperic formula

Libertarianism = Crony Capitalism

I think there are some exponents and factors and stuff but I left them out.

SweetLiberty September 2, 2011 at 10:33 am

“Libertarianism = Crony Capitalism”

WRONG. Libertarians do not advocate for Crony Capitalism. In fact, the opposite is true. (But you know this. You just like to pretend otherwise.) Libertarians believe that government officials should not be allowed to pick the winners and losers in business, nor should the government bailout banks, corporations, or foreign nations. Democrat and Republican politicians are not libertarians (with the exception of Ron Paul and perhaps a couple of others), and therefore the Crony Capitalism that you claim to be against is not representative of libertarians.

However, if you are honest, you will recognize that your significant rise in lobbyists has not abated under your beloved Democrats when they have controlled Washington. How do you account for this? Answer: you don’t.

Again, Murgeo, you fail to see that you’ve won! You and those like you have Washington by the balls. You even had it under George W. Bush who was in favor of myriad non-libertarian policies. So the crony capitalism which you choose to rail against is a function of your philosophy, not libertarian.

And the lesson for you today is, Libertarian DOES NOT EQUAL Republican. Write that down somewhere.

tdp September 2, 2011 at 11:35 am

What is an “emperic” formula? Did you mean “empirical” formula, dipshit?

Ghengis Khak September 2, 2011 at 3:51 pm

“Let me give you an emperic formula
Libertarianism = Crony Capitalism”

[x] Libertarianism has been ruining the world since libertarian politicians began its practice after/during ________. (valid options for the blank are FDR, Reagan, Clinton, and GWB).

I will try this using only mostly small words (empiric lol). Crony capitalism is not, and cannot be, a feature of libertarianism since libertarianism is inconsistent with a central government powerful enough for cronies to be able to do anything useful. This is a very simple concept, and seemingly one that has been explained to you many times and in many different ways.

That you still recite this garbage shows that you are either stupid (which I don’t think is the case despite your best efforts to convince us otherwise), dishonest, or somehow out of touch with reality (driven by fervor?)

Methinks1776 September 2, 2011 at 4:07 pm

Ghengis Kak,

No matter how small and monosyllabic the words you use, they will be too large to be processed by his single-digit IQ.

It’s like trying to run high frequency algorithms in an Apple 2E.

Methinks1776 September 2, 2011 at 8:06 am

He may be a crony capitalist of the first rank, but you don’t expect anything else, do you?

The situation we’re in today is one where government cuts off virtually every legitimate avenue to earn an honest living. It closes down lemonade stands, confiscates assets (often for good and without ever filing charges), raises enormous regulatory barriers to entry and artificially increases the cost of labour.

And it creates rents for the connected. The yield on political connections today is much higher than the yield on invested capital in a growing number of cases. If government creates rent, it will be sought. You don’t really expect CEOs to stand on principle when they have obligations to their investors and an easy way to enrich themselves any more than Walter Williams expected Jesse Helms to kill his political career to stand on principle on the issue of farm subsidies, do you?

vikingvista September 2, 2011 at 4:28 pm

Or rather, those who would, soon disappear and are replaced by those who would not. Political natural selection.

HaywoodU September 2, 2011 at 6:31 pm

Hell no I don’t. I bought GE around $14 to play the Immelt(he sucks) trade. But why not?

JS September 2, 2011 at 3:44 pm

That coupled with the biggest abusers of the housing crises,Barney Frank and Chris Todd, legislating the financial markets is surreal.

One’s gotta read Dostoevsky’s famous chapter in The Brother’s Karamazov “The Grand Inquisitor” to draw the apprpriate parallel.

kyle8 September 2, 2011 at 12:11 am

Well even if we owe the debt to “ourselves”, that never struck me as a cogent argument. It is still debt, and when the service of the debt starts to outweigh the amount of cash coming in what then?

geoih September 2, 2011 at 6:22 am

I’m reminded of when I was a child and “we” would have steak for dinner. This actually meant that my dad would have a steak, while us kids would get one bite of steak and then have hotdogs. Such is the way of state debt.

rhhardin September 2, 2011 at 7:13 am

The next generation inherits the debt but also the means to repay the debt, namely the bonds.

What the next generation loses is its inheritance.

JS September 2, 2011 at 8:25 am

There is no such entity as ‘we’, except as a methaphor. The federal government is not ‘we’. It is more similar to a corporation, a legal entity, or a legal insitution with certain powers–such as to print money to pay its debt. We might say that as a nation ‘we citizens’ owe this or that, but that isn’t true. Holders of US bonds can’t legally make claims on US citizens for the debts of their government, and the government can always default, just as all the other private entities are allowed to do.
Methodological individualism is the terminology used by Mises to describe the approach used by Austrian theorists.

What is really laughable is when I meet people who claim ‘we’ own GM, Chrysler, or some of the banks and financial institutions that got bailed out. I always ask them to show me the stock certificate, and when are they going to receive their first dividend check?

The State is not ‘us’, but a separate and distinct legal entity that has power over us.

Methinks1776 September 2, 2011 at 8:36 am

The State is not ‘us’, but a separate and distinct legal entity that has power over us.

The Federal Family is coming for your family. It has the power to seize your assets and never give them back without charging you with anything. It can seize your property if you don’t pay taxes on it. It can require you to buy certain products. It can raise taxes on you without going through the legislative process. It extracts rents from you in order to enrich members of The Family and Family Friends. It can rob you of all of your property and your liberty if you balk at its abuse. It has become a soft tyranny.

JS September 2, 2011 at 8:55 am

This must not be confused with how Mises used the term ‘methaphysical dualism’, which he also stressed as a fundamental to his theory.

Materialist philosophy since the 18th century had tried to discover the scientific principles of cause and effect that not only would hold for our biological and pysiological reactions to stimuli, but for our mental faculties as well. Their ultimate goal sought to treat man as a machine that could be designed and operated according to a specification, or plan, that could be used politically. If we could only discover the chemistry of the human mind, the utopians could then proceed to plan the perfect society, etc.

Mises argued that economics had to proceed from a platform that treated the workings of the human mind as an ‘ultimate given’. For example, we don’t know the origin of an ‘idea’ or what processes causes man to reason as he does. In the study of all phenomena, science searches ’cause and effect’ back as far as it can go until it can’t go further. At that point, it is referred to as a ‘given’, which means that any further classification of it must be seen as metaphysical speculation. Science has not discovered a cause for human thought, so its cause must be classified as metaphysical. All we know is that it originates from within the individual.

So in Mises’s occaisional usage of the term dualism as a method, he is referring to the fact that the body/mind problem hasn’t been solved by science and as a result, each individual’s thoughts and actions are originally unique and distinct from others, and that external ’causes’ that we all know will affect all human body chemistries in a like manner, are unkown with regards to what we know about our thinking.

It is for this reason that the method of individualism is appropriate as a starting point of economic theory.

JS September 2, 2011 at 9:10 am

As an aside, the real objective of materialist monism was to declare that man doesn’t think for himself, but rather his thinking is governend solely by principles of chemistry that haven’t been discovered yet. The implications of this regarding human liberty do not need to be elaborated upon here, but suffice to know, Mises was battling the collectivists on the philosophical issues that would determine how economic theory would be based.

tdp September 2, 2011 at 11:54 am

The State as some being or cause to be glorified by the expendable individuals who serve no other purpose but to be ground up by the machinery of Statism for the ostensible benefit of the “State”, which as a concept and non-sentient entity cannot be glorified or satisfied, is a front for those looking to make others miserable and profit at their expense. The State in reality refers to the organizations and structures and people running them designed to preserve safety and protect liberty so individual people can do whatever makes them happy.

Reverend Moon September 2, 2011 at 1:57 pm

Here’s a couple of links that should help the people here understand our monetary system and government finance. The “we owe ourselves” talk is wrong not from a philosophical libertarian perspective but because it is not representative of the facts of non convertible currency. You know, the monetary system of the US.



John Kannarr September 2, 2011 at 5:30 pm

That old line about the national debt not mattering since “we owe it to ourselves” was always pure sophistry.

Let’s see, in the near future when there is not enough money available to pay out the promised social security benefits to retirees, and the federal government can’t borrow any more because its credit rating is so low and no one will buy its treasury instruments, I guess that “we owe it to ourselves” will mean that each month each social security recipient should just write themselves a check for the amount they owe themself.

Previous post:

Next post: