… is from page 66 of the 1999 Liberty Fund edition of James M. Buchanan’s and Gordon Tullock’s seminal 1962 book, The Calculus of Consent:
The private operation of the neighborhood plant with the smoking chimney may impose external costs on the individual by soiling his laundry, but this cost is no more external to the individual’s own private calculus than the tax cost imposed on him unwillingly in order to finance the provision of public services to his fellow citizen in another area.
DBx: Few people have trouble understanding that, say, a factory owner whose smokestack sends pollutants into the atmosphere whenever that owner produces outputs that he hopes to sell profitably to consumers imposes a cost on each nearby resident on whom the polluted air is inflicted without that resident’s individual consent. But many people have trouble understanding that a politician whose government policy sends forth tax collectors whenever that politician produces outputs that he hopes to sell profitably to special-interest groups or to his constituents imposes a cost on each person on whom any tax is inflicted without that person’s individual consent.
Note: to make this observation is to offer no assessment of the merits of the tax, either standing alone or relative to the merits of the operation of the factory. The tax might be justified or not, just as the factory’s operation might be justified or not. The point of this observation from Buchanan and Tullock is to remind all who will listen that transferring decision-making authority from the private sector to the public sector is to substitute one forum in which individuals are frequently affected without their explicit consent by the actions of others for another forum in which individuals are frequently affected without their explicit consent by the actions of others. This truth holds fast even in those many cases when a transfer of decision-making authority from the private sector to the public sector occurs precisely to protect individuals from private-sector externalities.
Despite its undeniable correctness and relevance, this observation by Buchanan and Tullock continues to be largely ignored (or discounted to the point of insignificance) by most scholars, politicians, and pundits when they propose or endorse government policies that allegedly are designed to protect people from market ‘imperfections.’ The accepted procedure continues to be to compare real-world market actors to idealized political actors. This procedure effectively sneaks in the assumption that the state, compared to the private sector, is god-like.
A final point: contrary to some grossly uninformed commentary, in The Calculus of Consent (and in other works) Buchanan and Tullock never proposed that routine political decision-making be done according to a rule of unanimity. One of the chief conclusions of Buchanan’s large lifetime body of work, and certainly a marquee conclusion of The Calculus of Consent, is that individuals can and often do agree to be governed by rules of non-unanimity – that is, by rules under which the individual consents to suffer or to enjoy, under wide swathes of market and political situations, the consequences of other’s actions without those others being required first to secure that individual’s explicit consent.
