James M. Buchanan: A Scholar for the Ages

(remarks delivered at George Mason University on October 14, 2009, in a celebration of Jim Buchanan's 90^th birthday)

Donald J. Boudreaux

Professor of Economics

GMU

How many Nobel laureate economists have fundamentally changed the way we see the world?  How many of the 64 men – and now women – who've won the Prize have altered the DNA of economists' world view?

Every one of the prize winners has made major contributions to the movement (I'll not say "advance") of the discipline.  Some have invented or perfected tools that better enable us to explore individual human behavior and how these behaviors hang together in the larger economy.

Some laureates have dramatically changed the way economists approach various aspects of the economy.

Milton Friedman and Bob Lucas changed the way economists think about inflation, monetary policy, and the effect on economic activity of monetary and fiscal policies.

Doug North and Bob Fogel changed the way economists do economic history.

Herbert Simon changed the way we think about administrative structures and behaviors.

Bob Mundell helped us to think more clearly about exchange rates, international monetary flows, and optimal currency areas.

Robert Solow gave us a framework for thinking about economic growth.

Vernon Smith showed that economists can indeed productively do controlled experiments.

But as I look at the list of the 64 economists laureates, I see at most only six of them whose work contains within it the power to change fundamentally the way economists understand society.

Paul Samuelson, Kenneth Arrow, and Gerard Debreu are in this elite group.  By recasting the economy as a relatively simple series of mathematical relationships, economists' understanding of the economy and of how all of its many components react to each other was changed fundamentally.

I don't regard this change as beneficial, but I do believe that it is fundamental.

Another force for fundamental change is Ronald Coase.

By showing that a surprisingly large number of institutions – including, importantly, law – exist to help human beings better cope with transaction costs – exist to help us more smoothly to "truck, barter, and exchange" while at the same time minimizing our impact on those who don't wish to be impacted by our trucking, bartering, and exchanging – Coase's insights fundamentally altered the DNA of economists' understanding of society.

Hayek is another.  Not so much his monetary theory, which, as important as it is, (1) was a relatively narrow contribution, and (2) has had no lasting impact on any appreciable portion of the profession.

But Hayek's insight that the market economy is a process, and that one of the chief functions of this process is to tap into and productively use the fragmented and dispersed knowledge of millions of people, is indeed an insight of fundamentally profound importance.

The only other Nobel economist in this camp is the man whose career we celebrate today: Jim Buchanan.

Jim, of course, helped us to better understand externalities, the burden of the public debt, the logic of clubs, the importance of increasing returns, and many other specific points that we would all do well to absorb.

But Jim's single greatest contribution is to make crystal clear the fact that political activity does not fundamentally differ from market activity.

Jim's work warns us not to be distracted by labels and by superficial appearances.  Politicians might be called "public servants" – but , being steeped in Buchananism, we understand that the root motivation of "public servants" is no different than the root motivation of corporate CEOs, lumberjacks, taxi drivers, or college professors.

A bureaucracy might be called the "consumer product safety commission," but being steeped in Buchananism, we look not at its name but at the incentives faced by its operatives to judge how likely this agency really is to promote consumer safety as opposed to other goals.

By challenging us to understand that exchanges take place not only within conventional markets – not only when the exchanges are mediated by money – but instead are a ubiquitous and many-faced phenomenon of human action, Jim Buchanan has expanded the scope and subject matter of economics intelligently and more productively than has any other living scholar.

Happy 90^th, Jim!