Stream of Conciousness Ramblings, Somewhat Related to James M. Buchanan
By Randall Holcombe • Saturday January 12, 2013 3:43 PM PDT • 2 Comments
A bottle of Jack Daniels is sitting on our kitchen counter, the result of a fire in our microwave oven. The oven was destroyed so we ordered a replacement, which was supposed to be installed a few days ago, but the installers who showed up couldn’t get the new oven into the spot where the old one had come out. We will have to wait for better installers. Meanwhile, the new oven sits on our kitchen floor, and Jack Daniels sits on the counter.
The installers removed the contents of the cabinets above the microwave, which included that bottle of Jack Daniels that we’ve had a long time. Years ago, when Jim Buchanan last came to Tallahassee to give a series of lectures at Florida State University, we had him over for dinner at our house, and knowing that Jim enjoys a bit of whiskey before dinner, we bought that bottle of Jack Daniels specifically for him. Jim lived 93 years, in pretty good health up until the end, so on this basis I’ve started to think of Jack Daniels as health food. But we don’t drink too much hard liquor in our house, so it is still here, half-full or half-empty, depending on how you look at it.
One of the things Jim wanted to do when he was in Tallahassee was visit his old friend and former colleague Marshall Colberg. Jim taught at Florida State in the mid-1950s with Marshall, and (a bit of Buchanan trivia) co-authored his first book with Marshall. I’ve heard more than one person say that Buchanan’s first book was his Public Principles of Public Debt, published in 1958, but in fact his first book was Prices, Income, and Public Policy: The ABC’s of Economics, an introductory textbook co-authored with Clark Lee Allen and Marshall Colberg, published in 1954. Allen, Buchanan, and Colberg, the ABC’s of economics. Get it?
When Jim visited, Marshall was in poor health and living in a nursing home. I drove Jim to see Marshall, and it was touching to see two old friends talking. Jim said to Marshall, “We really started something here at Florida State,” sharing credit with Marshall for starting the public choice revolution for which Jim won his Nobel Prize. You can see the public choice orientation in The ABC’s of Economics, as you can in all of Jim’s work.
Marshall passed away a few months after Jim had visited. That was Jim’s last visit to Tallahassee and I was trying to figure out when it was that he came. I was able to find out, thanks to Google, that Marshall passed away in August of 2000, so it must have been in early 2000 that Jim came to town, and that we bought that bottle of Jack Daniels for him. Google seems to know all. I’ve heard this thing about six degrees of separation, which I’m not sure I fully understand, but the father of Eric Schmidt, chairman of Google, was Wilson Schmidt. Wilson Schmidt (1927-1981) was chairman of the economics department at Virginia Tech when Jim Buchanan moved there to start the Center for Study of Public Choice, and Schmidt was one of my professors when I was a graduate student. That’s my connection, and Jim’s connection, with Google.
Buchanan’s academic work takes a process-oriented approach to economic analysis. He’s said that the subject matter of economics should be exchange, not maximization, though that comment probably means more to economists than to others. His book Cost and Choice emphasizes the subjective nature of cost, and as in much of his work, seems closely related to the approach to economics taken by the Austrian school. I won’t get into a debate about how “Austrian” Buchanan was — he never claimed an affiliation with the Austrian school — but when you read his work, you can see a relationship.
Buchanan’s work on constitutional economics emphasized constitutional rules as being generally accepted, rather than written in some constitutional document. As an example, his criticism of deficit financing emphasized that prior to the 1960s there was a general agreement that governments should balance their budgets during normal times, which was undone by the widespread acceptance of Keynesian economics. That balanced budget rule is an example of a rule that had emerged, through general agreement, even though it was not written in the constitutional document. Buchanan often argued that now that the rule was being violated, the Constitution of the United States should be amended to explicitly include it.
That idea is very consistent with Friedrich Hayek’s notion of a spontaneous order, in which order and efficiency can emerge “as a result of human action, but not of human design.” I love that phrase! Hayek didn’t coin it. It was first used by Scottish philosopher Adam Ferguson (1723-1816), but it was popularized by Hayek. This idea of the effectiveness of spontaneous orders — the results of human action but not of human design — is one of the most important lessons of economics, which we don’t emphasize nearly enough. We don’t need to have some central plan to get good results; the unplanned results of a spontaneous order often turn out better than anything that could be planned out ahead of time, even though those results cannot be foreseen.
A great example that illustrates this is language. Language was not designed by anyone. Language emerged as a result of human action but not of human design. Who invented adverbs? Nobody. They are the result of human action but not of human design. Another example is money. Nobody invented money. It emerged as a result of human action but not of human design. Some goods were naturally more acceptable in barter exchange than others, so people became more willing to accept them as a medium of exchange even if they had no use for the goods. They could easily trade them away to someone else, and money emerged as the most tradable of all commodities. Precious metals often filled that role, but what, exactly, emerged as money varied from society to society. Another great example is the market economy. Capitalism is a spontaneous order that evolved as the result of human action but not of human design. Nobody planned it out. Starting with simple barter, over time trading became increasingly sophisticated and evolved into modern capitalism, as a result of human action but not of human design.
I like that phrase, “the result of human action but not of human design,” enough that when my children were young I taught them a trick. When economist friends would come over to the house, I would ask them, “Who invented money?” They would respond, “Nobody invented money. It is the result of human action, but not of human design.” Many of my economist friends have been amused with that trick. I am not sure my children actually understood what the phrase meant, but they could repeat it.
When my teacher Jim Buchanan was last in Tallahassee and was coming over to my house for dinner, I was trying to instruct my children to be on their best behavior for Mr. Buchanan, and one of them said to me, “Dad, when Mr. Buchanan is here, don’t ask us who invented money!”