Bonus Quotation of the Day…

by Don Boudreaux on January 25, 2020

in Complexity & Emergence, Economics

… is from page 6 of the original edition of James M. Buchanan’s 1960 textbook, The Public Finances (a book that isn’t included in Buchanan’s Collected Works) (typo corrected):

[In a market economy] No individual coerces any other individual; a market transaction represents a wholly voluntary exchange from which both parties expect to receive benefits. The market economy is an organized method of securing voluntary cooperation among individuals. It is essentially a system of spontaneous order which arises out of the individual participation of numerous buyers and sellers. Resources are allocated to the many possible employments; goods and services are produced and distributed without a direct central plan ever having been discussed, approved, formulated, or even contemplated. The first main advantage of this sort of economy is, therefore, that it “free” or “voluntary.”

The second main advantage is that the market economy incorporates a high degree of “efficiency.” This means quite simply that the individually inspired motivation of consumers, workers, property owners, and business enterprises combine to secure an over-all economic organization which is not grossly extravagant in its usage of scarce resources available for disposition. Decisions are decentralized private decisions and, therefore, mistakes are private individualized mistakes.

DBx: Note that Buchanan lists as the market’s first main advantage the fact that, within markets, individuals are free. No one can coerce anyone. If Jones wishes something from Smith, Jones must peacefully persuade Smith to give or to do that something – a reality that means that Jones, to get what he wishes from Smith, must give to Smith something that Smith wishes to have.

Efficiency in resource use is regarded by Buchanan as being only the second main advantage.

Note also that Buchanan’s description of market efficiency is not of some hyper-condition. Instead, as Buchanan describes it, market efficiency prevails when the use of scarce resources “is not grossly extravagant.”

I wish that people such as Oren Cass, Michael Brendan Dougherty, and Daniel McCarthy – people intoxicated with the notion that government should be given far more power to direct the allocation of resources – would learn some economics. They don’t have get degrees in the subject or even to take upper-level undergraduate economics courses. Instead, let them read, with careful attention, some Buchanan, some Hayek, some Alchian and Allen, some Demsetz, some Sowell, some McCloskey, some Gwartney and Stroup, some Landsburg, some Heyne-Boettke-Prychitko, some Cowen and Tabarrok. Let them read some solid economics to discover the error of their ways.

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