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January 11, 2013

James Buchanan, Leading Proponent of Public-Choice Theory, RIP

From CBD in the sidebar, Buchanan developed a theory which probably strikes you now as common sense but at one time was controversial.

The economic school he founded, known as public-choice theory, casts a skeptical eye on government officials and bureaucrats and points out that their work might serve the public less than a very private enterprise.

Previously economists had not studied the operations of government (at least not using the economic tools and assumptions of each person seeking to maximize his own wealth/power), believing government to be outside the scope of economic analysis. This cleared the field, at least intellectually, for political scientists to consider public policy choices in the same terms that politicians described them, that is, sanctimoniously, romantically, with the assumption that any public policy choice was about "the good."

Buchanan rejected that and applied the assumptions of economics -- political actors are self-concerned and act to maximize their own position -- and thus demystified and demythologized the Great Men of Politics, as conventional academic thought would term them.

I have always wondered whether Buchanan turned to the study of sanctimonious government officials and their interests because he spent time in graduate school on the South Side of Chicago in the late 1940s (the neighborhood where I was later born). Hyde Park was lively, but uneven. Little shops along 55th Street, just north of the university, might thrive, but poor black migrants crowded together in apartments with insufficient heat during the city’s tough winters.

Buchanan earned his doctorate in 1948, about the time the politicians and other civic leaders promised that bulldozing large swaths of the neighborhood and creating new public-private projects would yield a better Hyde Park, prettier and more racially integrated.

But the result felt wrong, especially to residents. The new apartment buildings, in the minimalist international style, themselves felt as cold as winter. Instead of bringing people together, they separated them: One complex quickly became known as Monoxide Island. With the stores gone, there was less life on the streets. Yet Hyde Park locals lacked the vocabulary to criticize the transformation we had been told was progress or reform. Who wants to be construed as “pro-slum”?

Buchanan supplied that vocabulary. Instead of calling urban renewal “reform,” as the officials did, he called it “politics.” It was important, he said, that all such projects, whether urban renewal in Chicago or elsewhere, be viewed honestly, that we look at “politics without romance.”

The housing redevelopment in Hyde Park worked to the advantage of certain interest groups, political or business. Yet the high-and-mighty tone of the anti-slum language masked something. No party involved was any better or any worse than anyone else: They were all pursuing their own interests. Politicians often promoted such ugly ambitious projects not because the projects were good. They did so because the projects enabled politicians to award contracts to important campaign donors.

It seems an obvious point now -- so obvious it doesn't even seem like it needs a full-fledged economic theory to support it -- but in fact he had to depart one university (the University of Virginia) because his heresies bothered the other professors there, who were thralls in the Cult of the Kennedys.

Per Wikipedia, the concept of "rent-seeking" flowed out of the public-choice school (though I don't know if Buchanan himself developed it, or if it was developed by other economists working on the theory):

A field that is closely related to public choice is "rent-seeking". This field combines the study of a market economy with that of government. Thus, one might regard it as a "new political economy." Its basic thesis is that when both a market economy and government are present, government agents provide numerous special market privileges. Both the government agents and self-interested market participants seek these privileges in order to partake in the resulting monopoly rent. When such privileges are granted, they reduce the efficiency of the economic system. In addition, the rent-seekers use resources that could otherwise be used to produce goods that are valued by consumers.

Again, very obvious... in retrospect. But there once was a world in which liberal academics took the claims of liberal politicians at face value.

Um.... I guess it's the same today. So putting it a different way: There once was a world in which liberal academics took the sanctimonious claims of liberal politicians at face value, and wasn't even any minority, contrarian theory to oppose them.


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posted by Ace at 12:44 PM

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