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Quotation of the Day…

… is the frontispiece of David Levy’s and Sandra Peart’s new (2020) volume from Cambridge University Press, Towards an Economics of Natural Equals: A Documentary History of the Early Virginia School; specifically, it’s from a letter that the late Nobel-laureate, and at the time Professor of Economics at the University of Virginia, James Buchanan wrote on October 17th, 1960, to Kermit Gordon, then a program officer at the Ford Foundation:

There seems to me to be two essential ways of approaching the study of problems of political, social, and economic organization. The first way is that of setting up independently certain criteria or goals for achievement and to examine existing and potential institutions in the light of their performance or expected performance in meeting these criteria. This approach, for purposes of exposition here, may be called the “social welfare function” or “social engineering” approach. It seems to characterize much of the current scholarship in the social sciences, and in economics especially. The second approach is that which deliberately avoids the independent establishment of criteria for social organization (such as “efficiency,” “rapid growth,” etc.), and instead examines the behavior of private individuals as they engage in the continuing search for institutional arrangements upon which they can reach substantial consensus or agreement. It follows from this difference in approach itself that “individual liberty,” in the sense of individual participation in the choices of appropriate constraints on human action, will tend to assume a necessary, and hence more prominent, role in the second than in the first. It is also true that the second approach will normally tend to place more emphasis on market organization than the first, not because there is some pre-conceived dogma or creed in favor of this first form of social order, but simply because it does represent one system upon which substantial consensus has been, and is, expressed.

DBx: Agree with the substance of his argument or not (I happen to agree, strongly): How many economists active today are as deeply thoughtful, as seriously philosophical, as was Jim Buchanan? Precious few.

It’s a source of sadness to realize how far the economics profession has fallen since scholars such as Jim Buchanan, Frank Knight, F.A. Hayek, Fritz Machlup, Ronald Coase, Armen Alchian, Yale Brozen, Gordon Tullock, Leland Yeager, Harold Demsetz, and Julian Simon were in their prime.