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Quotation of the Day…

… is from page 474 of my late Nobel-laureate colleague James Buchanan’s 1994 paper “Economic Theory in the Postrevolutionary Moment of the 1990s,” as this paper is reprinted in Economic Inquiry and Its Logic (2000), which is volume 12 of the Collected Works of James M. Buchanan:

Economic theory, as such, was born with the scientific discovery of the spontaneous coordination that emerges from the separated, locally directed, and self-interested actions of participants in a nexus of exchange.

DBx: Almost immediately in An Inquiry Into the Nature and Causes of the Wealth of Nations, Adam Smith marvels – even to the point of using several exclamation points! – at the extensive spontaneous coordination of individual efforts brought about by markets. An ordinary woolen coat of the mid-18th century, Smith observed with wonder, requires that the knowledge and actions of countless strangers somehow be coordinated – and they are coordinated, not by conscious design, but by prices set in competitive markets.

By the 20th century economists had identified, in principle, what the results of such coordination would look like if it were ‘perfect’ – that is, if such coordination were directed by the mind of god. And then economists looked upon the real world, and they were displeased. God seems not to operate in reality, at least not as an allocator of resources.

What to do? Why, summon the secular-god, State, and charge it with bringing about an allocation of resources closer to perfection. (Such summoning of gods is what passed during the past 100 years – and still passes today – in many elite quarters for economic “science.”)

Obsessed with deviations from perfection, many economists came to take the actual achievements of markets for granted. And when someone takes something for granted, that someone no longer studies that thing. That someone thus loses all but a superficial understanding of the thing.