Buchanan broad themes include
public finance then
public goods, public choice, and public philosophy. In the late 1940s and 1950s he investigated voting and other topics not usually studied in economics. In 1948, Buchanan first read the Swedish economist, Wicksell's
Finanztheoretische Untersuchungen 1896 essay, "A New Principle of Just Taxation." He translated it from German and in his 1986 Nobel Prize lecture Buchanan said that Wicksell was an "important precursor of modern public-choice theory."had informed his own concept of unanimity-voting. he was influenced by Wicksell. to improve the rules and structure of politics, and particularly to recognize that politicians behave like most people, according to their own self-interests. It was a way of thinking about politics that was based on common sense reality, not romanticism. In that paper he called on economists to clarify their own assumptions about politics and to think about their political models before talking about "good taxation" and "good spending." In his 1989 address on Buchanan's contributions, Tony Atkinson said that it "reads like a manifesto for his life's work."reprinted in
Richard A. Musgrave 1959
Readings in the economics of taxationwas described as a "pioneering" paper by Musgrave. During the
recession of 1960–1961, Buchanan and Musgrave served on a
Brookings Institution's National Bureau of Economic Research (NBER) advisory committee on the needs, sources, and utilization of public finances. Brookings is a respected think tank that has a long history of producing influential commissioned reports for the United States government. In their discussion on equity objectives of fiscal policy, Musgrave cited Buchanan's recommendation that the central fiscal policy should consider individuals, not the "states", as a matter of equity. The requirement of horizontal equitythe "principle that equals should be treated equally" is more meaningful than that of vertical equitythe "requirement of differential treatment of unequals". In his
Public Principles of Public Debt published in 1958, Buchanan acknowledged that "the Italian approach to the whole problem of public debt was instrumental in shaping my views". rigorous analysis of the theory of
logrolling, macroeconomics,
constitutional economics, and
libertarian theory. He was the first anglophone economist to focus on this and included their work in his chapter, "The Italian Tradition in Fiscal Theory", in his 1960 textbook
Fiscal Theory and Political Economy. He discussed collective decision-making in
public financethe role of the government in the state's economy and fiscal theory. which was the catalyst for debate on social choice. The monograph was based on ideas Arrow first developed in 1948 as a RAND Corporation intern and in his PhD dissertation in 1950 combining social ethics, voting theory and economics in his social choice theory. Arrow concluded that it was generally impossible to assess the "common good", for example, the design of a social welfare function through a fair ranked voting electoral system because individual preferences within the aggregate differ. Although Tullock's PhD was in law and he had little formal training in economics, the two complemented each other; Buchanan as the philosopher and Tullock the scientist. In 1962, Buchanan and Tullock published
Calculus of Consent, Logical Foundations of Constitutional Democracy, in which they first outlined public choice theory. Buchanan said he was motivated to write
The Calculus of Consent, because he had a sense that those who should know what democracy actually was, did not. He started to question taxation, expenditure decisions, budgets and the political process. In it he analyzed how individual behavior affected fiscal institutions in situations related to collective choice, for example, the relationship between income tax and the public use of economic resources. Buchanan considered his work on public debt as an important extension of his work on public choice theory. Public choice theory examined political decision-making structures as applied to budget policy, specifically as related to fiscal deficit. Buchanan said that there was government overreach in totalitarian regimes but also in the 1960s in Western democratic welfare-state nations, such as President
Lyndon B. Johnson's
Great Society programs designed to eliminate poverty and racial injustice. As more people became critical of government programs during the 1970s, in his view public choice theory provided some common sense answers, as opposed to romance. He said that he did not want to "lead the way", he wanted to provide a way for people to "interpret better what they were seeing". In 1968, Buchanan left the University of Virginia and spent a year at the
University of California, Los Angeles. He published
The Demand and Supply of Public Goods, in which he described public finance methods using consensus politics developed by Wicksell and his student
Erik Lindahl (1891 – 1960) within the framework of their concept of the ideal state. Hayek had introduced their work to anglophone economists in his 1941
Pure Theory of Capital written while he was at the
London School of Economics (LSE). Buchanan traced the history of public goods theory to Wicksell and re-examined the Wicksellian unanimous solution in voting. He discussed tax shares as a variable in public finance theory and potential outcomes of public choice by majority rule. The
Lindahl tax share on public goods paid by individuals is based on the marginal benefits derived from the goodsa system designed to maximize efficiency for the individual while also providing optimal public good. The rate or share of taxation is related to the willingness to pay. Buchanan discussed challenges to achieving a Pareto-optimal position from Lindahl's concept of public goods, such as
free riders. Buchanan's 1969 work
Cost and Choice is often overlooked for its contributions in defining the parameters of
opportunity cost. In it, he writes that the costs to individuals determine what the price of a good or service is. For example, the physical work that is required to hunt an animal as well as the price of the tools necessary to hunt it and the time spent hunting all play a factor in the price an individual places on the meat. The asking price of the meat will vary from person to person because the input costs required for each person are not the same. In his 1964 article "What Should Economists Do?", which was based on his 1963 address to the Southern Economic Association (SEA), Buchanan distinguished between economics and politics. The former studies "the whole system of exchange relationships" while the latter studies "the whole system of coercive or potentially coercive relationships". One of Buchanan's definitive statements on the re-orientation of the two academic disciplines of economics and political science was found in this 1963 SEA address. Buchanan told his contemporaries in the field of economics that
Adam Smith's statement in his 1776
An Inquiry Into the Nature and Causes of the Wealth of Nations that the human "propensity to truck, barter, and exchange one thing for another" is what political economy is all about. In their article on Buchanan's politics as exchange, they described him as a classical liberal, who also incorporated
rational choice theory, and individual
utility maximization in his analyses. Buchanan began to develop applications based on
The Calculus of Consent using a multidisciplinary approach through the lens of both economics and politics . He emphasized that public policy cannot be considered solely in terms of distribution, but is instead always a matter of setting the rules of the game that engender a pattern of
exchange and
distribution. His work in
public choice theory is often interpreted as the quintessential instance of
economics imperialism; however,
Amartya Sen has argued that Buchanan should not be identified with economics imperialism, since he has done more than most to introduce ethics, legal political thinking, and indeed social thinking into economics. Crucial to understanding Buchanan's system of thought is the distinction he made between politics and policy. Politics is about the rules of the game, where policy is focused on strategies that players adopt within a given set of rules. "Questions about what are good rules of the game are in the domain of social philosophy, whereas questions about the strategies that players will adopt given those rules is the domain of economics, and it is the play between the rules (social philosophy) and the strategies (economics) that constitutes what Buchanan refers to as constitutional political economy". In his 1975 book,
The Limits of Liberty: Between Anarchy and Leviathan, which has been described as his
magnum opus, Buchanan examined the concept of a social contract. In the summer of 1975 at a Liberty Fund conference in Ohio with most of the economists in attendance saying there should be no estate tax, Buchanan passionately disagreed. He thought that there should be a 100% marginal tax on all estates over a relatively modest amount, to prevent an aristocracy from forming in America and to ensure equal opportunity. Buchanan was a vocal critic of the 1994
David Card and
Alan B. Krueger's
minimum wage study. Contrary to the consensus at the time, they found that "the increase in the minimum wage increased employment." In a 1996 response in the
Wall Street Journal, Buchanan wrote, "Just as no physicist would claim that "water runs uphill," no self-respecting economist would claim that increases in the minimum wage increase employment. [...] Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores."
Public choice theory Buchanan is the chief architect and the leading researcher of
public choice theory which was first outlined in his most well-known work,
The Calculus of Consent. Over many decades, Buchanan developed the theoretical formulation which straddled both economics and political science and became known as "The New Political Economy" or "Public Choice" for which he was honored with the Nobel Prize in Economic Sciences.
Anthony Atkinson cited the
Royal Swedish Academy of Sciences describing the significant role of Wicksell in the development of Buchanan's thinking. It was Buchanan who translated Wicksell's
A New Principle of Just Taxation from German in 1958. Within the framework of public choice, they described the potential for
logrolling as enhancing rather than reducing welfare. Tabarrok, who is the director of the Center for Study of Public Choice, and Cowen, Director of the
Mercatus Center and a CSPC faculty member, said that Calhoun's political philosophy writings, as developed in his 1851
A Disquisition on Government, proposed the rule by unanimity to reform the constitution, which as it then existed according to Calhoun, had resulted in a form of democracy that did not sufficiently protect liberty. In his analysis of Calhoun's work through the Virginia political economy perspective, the
Heartland Institute's Alexander Salter wrote that Buchanan's project regarding generality norm is supported by Calhoun's concurrent majority developed in the
Disquisition. Public choice theory assumes that people are mainly guided by self-interest, including politicians, bureaucrats, and government officials. which had become widely accepted in the United States in the 1960s and resulted in a shift in towards governance through "macro-economic engineering". Keynes had written his classic and influential
The General Theory of Employment, Interest and Money in 1938, but there was a lag between its publication and the widespread adoption of his ideas.
Constitutionalism Within
constitutionalism, Buchanan worked on developing the field of
constitutional economics. According to Buchanan, the ethic of constitutionalism is a key for constitutional order and "may be called the idealized
Kantian world" where the individual "who is making the ordering, along with substantially all of his fellows, adopts the moral law as a general rule for behavior". Buchanan rejected "any organic conception of the
state as superior in wisdom to the citizens of this state". This philosophical position forms the basis of constitutional economics. Buchanan believed that every
constitution is created for at least several generations of citizens. Therefore, it must be able to balance the interests of the state,
society, and the individual. The
Political Constitution of the Republic of Chile of 1980 came into full force in March 1981 constitution, establishing a market-oriented model based on Chicago School and Friedman's neoliberal ideas. In Chile, Buchanan provided policy advice He also allegedly provided an "analytical defense of military rule to a predominantly Chilean audience." ==Views on Anarchy==