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Quotation of the Day…

… is from page 34 of the 1991 collection of some of James Buchanan‘s essays, The Economics and Ethics of Constitutional Order; specifically, it’s from Jim’s 1989 essay “The Economy as a Constitutional Order” (brackets added; footnote excluded):

The tragic flaw in Keynesian inspired macroeconomics lay in its acceptance, and, hence, neglect, of structure while concentrating almost exclusive attention on the prospects and potential for “guiding” the economy toward more satisfactory target levels of aggregate variables.  It is not at all surprising, when viewed in retrospect, that this monumental misdirection of scientific effort should have occurred, given the dominance of the maximizing paradigm during the critical years of mid-century.  There was a general failure to recognize that the whole intellectual construction was inconsistent with a structure that allows for independent choice behavior of many participants in the economic nexus.  As Keynes himself recognized in his preface to the German translation of his book [The General Theory], the whole reinterpretation of the economic process in a normatively directed teleological model was more applicable to an authoritarian regime than to a democratic one….

Macroeconomic theory, in both its lower and its higher reaches, need not have been born at all, along with the whole industry that designs, constructs, and operates large macroeconomic models.