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Quotation of the Day…

… is from page 274 of my late Nobel laureate colleague Jim Buchanan‘s January 1989 Business Economics article, “On the Structure of an Economy,” as this article is reprinted in James M. Buchanan, Federalism, Liberty, and Law (2001), which is volume 18 of the Collected Works of James M. Buchanan (original emphasis):

Even [Adam] Smith, however, is subject to criticism in his selection of the title of his treatise.  By calling attention to the wealth of nations, Smith may be interpreted as setting up a single-valued criterion by which the functioning of an economy might be measured.  As I have noted, a much-preferred title would have been “The Simple System of Natural Liberty,” because what Smith demonstrated was that there is no need for us to conceptualize a single overriding or even an agreed-on purpose, aim, or objective for an economy, or for those political agents who may presume to take on the charge of furthering such purpose.

Properly understood, the economy has neither purpose, function, or intent.  The economy is defined by a structure, a set of rules and institutions, that constrain the choices of many persons in an interlinked chain of game-like interactions, one with another.

DBx: Contrary to the cardboard image of economists – and especially of public-choice economists such as Jim Buchanan – good economists believe neither that people do care only, or mostly, about maximizing their monetary incomes or wealth, nor that people should care only, or mostly, about maximizing their monetary incomes or wealth.  Good economists understand that money is not an end but a means – and that, as a means, the ends that money can be used to achieve are many and diverse.  These ends can be narrowly materialistic (for example, a diamond pinky ring or a Corvette) or they can be philanthropic (for example, a monetary donation to the Sierra Club or to Little Sisters of the Poor).  Good economists to not reserve special applause for those who are narrowly materialistic.  Good economists understand that the institutional setting within which the largest numbers of people are best able each to achieve his or her peaceful goals, whatever the details of those goals might be, is one that overwhelmingly features secure private property rights and freedom of contract.

The claim – by good economists – is not, and never has been, that such markets are “perfect” in any idealized or textbook sense.  Nor is the claim that such markets are normatively justified only if they are “perfect” or closely approach being “perfect.”  Imperfections abound, unavoidably.  Good economists’ support free markets because good economists understand that such markets provide the maximum possible potential and incentives for each of us to peacefully serve – rather than lord it over or prey upon – large numbers of our fellow human beings, most of whom are strangers to us.