Fiction

by Don Boudreaux on June 25, 2017

in Antitrust, Books, Economics, Myths and Fallacies

As is true of GMU Econ alum Dan Mitchell, I haven’t yet read Nancy MacLean’s Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America.  And I’m unlikely to do so any time soon, for what I’ve read and heard about it, this book is a work of fiction masquerading as a work of non-fiction.  MacLean, I gather, tries to show that the scholarship of my late Nobel laureate colleague, Jim Buchanan, somehow fueled efforts by right-wing plutocrats to enrich themselves at the expense of the masses.

No one who has carefully surveyed Jim’s life work can encounter such an accusation without experiencing a sense of utter disbelief.  Agree or not with Jim’s economics and philosophy, MacLean’s apparent narrative is simply ludicrous.

As others have pointed out (and as yet others will in the future point out), Jim advocated confiscatory inheritance taxation.  Jim also advocated activist antitrust enforcement.  Such policies are unlikely to be embraced by rich plutocrats who own large and profitable corporations.  (I believe that Jim’s reasons for supporting these policies were weak, but support such policies he certainly did.)  And while Jim was indeed generally very skeptical of government intervention, that skepticism was chiefly borne of Jim’s fear that concentrated political power will be misused and abused.  The market, for Jim, was no perfect forum in which buyers and sellers bargain flawlessly; it was, instead, mainly a means of obliging each of us to pay heavy costs if we harm our fellows and to reap rewards if we help them.  As Jim said in his 1974 review of Richard Posner’s Economic Analysis of Law (original emphasis),

The market economy’s sociopolitical function is that of minimizing the necessity of resorting to internal ethical constraints on human behavior and/or external legal-governmental-political restrictions.  To the extent that men are allowed freely to trade, conceived in the broadest possible sense of the term, there is little need for the preacher or the administrative authority.

Jim’s opinion of human beings was realistic.  Like James Madison (one of his heroes), Jim knew that no human is angelic and, therefore, Jim (like James) knew that those with power pose dangers to others.  Best, then, to minimize the holding of power.  You might disagree with Jim (and James) on this matter, but to conclude that anyone who has such a fear of power is really an enemy of “the People” or of the poor is (to put it nicely) juvenile.  It’s an intellectual move that should embarrass a normal 10-year-old, yet in today’s academy and media outlets this move is as common as fleas on a stray dog.

The core of Jim’s work was a positive investigation into the actual properties of collective decision-making procedures, along with highly abstract philosophical explorations of how these procedures might be modified to enable each and every person to better secure gains from trade (as he would say) ‘broadly conceived.’

Did Jim’s work play any role in affecting policy – that is, any role beyond that which is likely played by anyone who writes and speaks about economics and politics?  Maybe; maybe not.  The one specific policy proposal that, I think, was nearest and dearest to his heart, at least during the final three decades of his life, was a Balanced Budget Amendment.  No such amendment to the United States Constitution has been ratified.  Nor is ratification of such an amendment on the horizon.  Relatedly, Jim was a staunch opponent of peacetime deficit spending by government.  Uncle Sam – even with Republicans controlling both its legislative and the executive branches – consistently ignores Jim’s counsel on this matter.

What about all the deregulation in the U.S. circa 1978-1995?  Perhaps Jim’s clear and forceful voice reminding people of the dangers of concentrated power in general, and, in particular, of the disproportionate control of that power by concentrated interest groups, helped to smooth the way for some or all of this deregulation.  But anyone looking for identifiable economists to blame (or to praise) for such deregulation should look first and foremost at the scholarship that poured out of the University of Chicago’s Economics department, business school, and law school during the middle of the 20th century.

One of the most notable deregulatory successes in the U.S. is the declawing, since mid-1970s, of antitrust.  If any single individual is to “blame” for this declawing, it’s not the protestant American Buchanan who was born and bred in Tennessee; it’s the Jewish Ukrainian-American Aaron Director (1901-2004), who – after immigrating to the U.S. in 1913 – grew up in Portland, Oregon.  A communist in the youth of his very long life, Director, more than any other individual, cast suspicion on antitrust policy.  Director did so by teaching generations of University of Chicago law-school students (including Robert Bork) how basic price theory discredits much of what for so long was believed to be good and useful about antitrust policy.

As for other bits of deregulation, my hunch is that the single most important source of economists’ influence was the scholarship that appeared, for about 30 years starting in 1958, in the pages of the University of Chicago’s Journal of Law & Economics.  Founded in 1958 by Aaron Director, editorship of this journal eventually passed (I think in 1964) to the mild-mannered English economist Ronald Coase (1910-2013).  Coase won the 1991 Nobel Prize in Economics.  (Apparently, editorship of the Journal of Law & Economics conduces to a very long life!)  The brilliant combination of basic microeconomic theory with relevant empirical analyses made these JLE papers sources of compelling arguments against the then-prevailing government regulation of surface transportation, commercial air travel, banking, and telecommunications.  And while Jim Buchanan did contribute some papers to the JLE, his were deeply philosophical.  They weren’t the sort that rich plutocrats latch onto as tools for prying loose the government’s regulatory grip.

…..

I can only imagine how Jim would react were he still alive to encounter MacLean’s arguments about his work and influence.  Whatever the details of that reaction, I’m sure of one thing: Jim would be stunned to learn of his alleged influence on the rich and powerful.

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