Some links

Some interesting readings:

Dinesh has very interesting post on "Rahul ‘Neelkanth’ Gandhi"

Nitin on two and twenty three years later

Shruti on an economist who read economics without much romance!!

Deepak Lal on Buchanan- “Would citizens voluntarily agree to allow the government to exercise power quite unreservedly, or would they rather seek to impose constraints on the behavior of governments?”

Some links

"...they wrote in Indian languages and have perhaps paid a price for this by being forgotten by the exclusively English-speaking elite of today"

"I hope this is enough to show that Buchanan’s work, apart from its theoretical innovations, remains powerfully relevant for the most important problem of economic policy: how can Leviathan’s fiscal privileges inherent in a government’s power to take, and give to whom it chooses, be limited? It is a question that continues to haunt the Indian polity, and for which reading Buchanan remains essential."

All good works

Austrian School of economic thought gaining influence as nations tackle debt

A tribute to the Late James Buchanan, Noble Prize winner

Professor James M. Buchanan, no more

The most liked line from his work is this: “My task has been to ‘uneducate’ the economists.”

"James M. Buchanan, who died Wednesday at age 93, was one of history's greatest economists. Though he won the Nobel Prize in 1986, Jim at heart was always a farm boy from Tennessee—an old-fashioned, hardworking American who disdained unearned privileges as well as deeply distrusting the promises of politicians and the passions of collectives." More here. 

"As Buchanan put it in “Liberty, Market and the State” (1986), politics is “a process within which individuals, with separate and potentially differing interests and values, interact for the purpose of securing individually valued benefits of cooperative effort.” More here.

Government failures often much worse than market failures. a slice from this piece:

• "Buchanan believed that government is necessary to produce public goods (mainly security, but a few others too), hence politics as exchange. The problem in this sort of exchange is that the majority (or perhaps a minority, like bureaucrats) will be tempted to exploit the rest of the population. Rational individuals will want to protect themselves against this danger with a unanimous, if only implicit, social contract that constitutionally limits what the state can do. We must, as the subtitle of The Limits of Liberty indicates, stand “between anarchy and Leviathan.”

Why Amartya Sen likes Prof James Buchanan's theory of public reasoning?

Meeting different people is not all that bad even if some one is really thinking differently about them. I had brief opportunity to meet Prof Sen early this month. He had mentioned about one of his new article and that is the one I am citing here. It is worth to read the entire article for the below para alone.

• "Public reasoning is not only crucial for democratic legitimacy, it is essential for a better public epistemology that would allow the consideration of divergent perspectives. It is also required for more effective practical reasoning. It can bring out what particular demands and protests can be restrained in interactive public reasoning, in line with scrutinized priorities between a cluster of quite distinct demands. This involves a process of “give and take” which many political analysts, from Adam Smith and the Marquis de Condorcet in the eighteenth century to Frank Knight and James Buchanan in our time, have made us appreciate better."

What Do Economists Contribute?

That is the introduction chapter from Daniel B. Klein in a beautifully collected articles of eminent economists.
In his own words:

• "The essays gathered here speak of the choices economists make. Which subjects to write on, which premises to follow, which authorities to appeal to, which methods to use, which tones to assume, which audiences to address, which challenges to respond to, which social purposes to serve: all these choices are made each time an economist acts as an economist. Are economists today, in making their individual choices, led to promote ends of human betterment? Most of the present authors suspect that much choosing by economists is not for the better. 

• Economists are quick to find flaws in markets, governments, and other institutions. Yet they rarely aim their flaw-finding at their own professional institutions (not publicly, anyway). In such matters, their public attitude is rather like their attitude toward their children: acceptance without critical examination. Some economists harbor doubts about normal professional practice and standards, doubts confined to private thought and discreet conversations. A few, such as Arjo Klamer, David Colander, Thomas Mayer, Deirdre McCloskey, and Lawrence Summers express their doubts publicly.

• The impetus for the present volume stems from the belief that academic institutions are failing and that they take a dim view of certain research activities which do advance the sound practice of political economy. If so, economists might find that pressures to pursue academic work divert them from contributing to the art and science of political economy."

papers

The Constitutionalization Of Money By James M. Buchanan

The Great Crash Of 2008: Causes And Consequences by Deepak Lal

"Buchanan-esque"

James Buchanan and Virginia school of political economy

“Social Justice” and “Social Choice” are nonsenses: Friedrich Hayek and James Buchanan

John Gray on “A just society will accord its members a range of basic liberties but also the capabilities needed to make use of them”

From The Economist:

• AT THE disputed crossroads where economics and ethics meet stands Amartya Sen, a Nobel-prize-winning economist who thinks like a philosopher. In a dauntingly impressive flow of books and papers over 40 years he has done much to change both disciplines for the better, humanising the one, bringing content from the real world to the other. His work is technical, however, and the fine detail has sometimes hidden the shape of the whole. Mr Sen’s latest book answers both difficulties in magisterial style.
• In the courtliest of tones, Mr Sen charges John Rawls, an American philosopher who died in 2002, with sending political thinkers up a tortuous blind alley. The Rawlsian project of trying to describe ideally just institutions is a distracting and ultimately fruitless way to think about social injustice, Mr Sen complains. Such a spirited attack against possibly the most influential English-speaking political philosopher of the past 100 years will alone excite attention.
• Virtually every claim Mr Sen makes will be objected to by someone. Right-wingers who follow Friedrich Hayek or James Buchanan will treat “social justice” and “social choice” as nonsenses. Mr Sen wants to humanise canons of “maximising” rationality; behavioural economists, much in fashion, aim to ditch them altogether. Rawlsian liberals will rally to the defence of their hero.

The name is awkward

Amity Shlaes on PC:

“Who is the public and what is the choice? The theory originated with Nobel Prize-winning economist James M. Buchanan and is actually quite simple. It says that the laws of economics aren't suspended at the door to City Hall. Government reformers view themselves as morally superior, but that is an illusion. They are just like private-sector operators, who do things that are in their own interest, not society's, first. Those things include taking advantage of an economic crisis to aggregate power for themselves and their offices.”

Sea-frog and dog bite polity

Niranjan Rajadhyaksha quotes:

“Individuals choose, and as they do so, identifiable economic interest is one of the ‘goods’ that they value positively, whether behaviour takes place in markets or in politics. But markets are institutions of exchange; persons enter markets to exchange one thing for another,” said James M. Buchanan in a speech entitled The Constitution of Economic Policy that he gave on winning the Nobel Prize in economics in 1986.

“… The extension of this exchange conceptualization to politics counters the classical prejudice that persons participate in politics through some common search for the good, the true, and the beautiful, with these ideals being defined independently of the values of the participants as these might or might not be expressed by behaviour. Politics, in this vision of political philosophy, is instrumental to the furtherance of these larger goals,” Buchanan said.

Economists have no clothes

Was the new paper by James Buchanan who won Nobel Prize in Economics science in 1986 "for his development of the contractual and constitutional bases for the theory of economic and political decision-making" otherwise called The Theory of Public Choice.

• “Economists have been parading around, really very naked, walking around in space” ” Buchanan said. “It’s time to recognize that.” With the establishment of macroeconomics as a field of study, economists have developed models and algorithms that make people think the numbers can be manipulated, he said.

If anyone wanted to read all about Prof Buchanan should read this fantastic brief. For long I was confused about the notion of policy advice to The State or government. Prof Buchanan says:

• “First, I have been influenced by Frank Knight and F. A. Hayek in their insistence that the problem of social order is not scientific in the standard sense. Second, I was greatly influenced by Knut Wicksell’s admonition that economists cease acting as if government were a benevolent despot. Third, I rejected, very early in my thinking, the orthodox economist’s elevation of allocative efficiency as an independent standard of evaluation.”

And more importantly:

• “I resist, and resist strongly, any and all efforts to pull me toward positions of advising on this or that policy or cause. I sign no petitions, join no political organizations, advise no party, serve no lobbying effort. Yet the public’s image of me, and especially as developed through the media after the Nobel Prize in 1986, is that of a right- wing libertarian zealot who is antidemocratic, anti-egalitarian, and antiscientific. I am, of course, none of these and am, indeed, the opposites. Properly understood, my position is both democratic and egalitarian, and I am as much a scientist as any of my peers in economics. But I am passionately individualistic, and my emphasis on individual liberty does set me apart from many of my academic colleagues whose mind-sets are mildly elitist and, hence, collectivist.”

On his personal economics:

• “I like space around me. I bought this century-old log cabin and started fixing it up and added to it and so forth. I kept buying more land, more land, more land. I found out something about my utility function as I did that, because I found out that every step I took toward genuine self-subsistence really gives me a big charge. If I can build a fire in my wood stove and don’t have to depend on electric heat if we have a power outage, then I’m that much happier. Or if I can go across the street to the spring and get a bucket of water as opposed to having an electric pump to the well, that gives me a charge. Or if I grow my own vegetables or pick my own berries, which I’m doing now. This year there is a good blackberry crop. I became more and more interested in having at least a backup, so self-subsistent existence really did give me a lot of utility.”

In Search of a Monetary Constitution

"Buchanan said, teaching people to think about aggregate economics in terms of the measurements by which the economy today is understood – national product, income, rates of growth and so on. But no comparable advance has occurred since."

Wisdom of Untersuchungen...........

Now, we are in once again hardcore election time if anything matter at most in economics is the public finance in which the elected government will do its job as business as usual. 

There are differences in assessment of the performance of a company or consumer behaviour (read as benefits or gains or loss) from a market: buying and selling things. 

But when it comes to the assessment of a representative of people in a democracy it is always a difficult job and the odd will prevail at most. In other words as Buchanan said “..in political exchange, there is no decentralized process that allows "efficiency" to be evaluated deontologically, akin to the evaluation of a market. Individuals cannot, by the nature of the goods that are collectively "purchased" in politics, adjust their own behavior to common terms of trade. The political analogue to decentralized trading among individuals must be that feature common over all exchanges, which is agreement among the individuals who participate. The unanimity rule for collective choice is the political analogue to freedom of exchange of partitionable goods in markets.” 

Though, Mr Bob McTeer President, Federal Reserve Bank of Dallas said economist Johan Gustav Knut Wicksell  “…favored a mild form of socialism, achieved gradually and built on the foundations of a welfare state”. 

But public choice theory economist James M. Buchanan Jr quoted in his Nobel lecture and is quite interesting to ponder. In fact it is also right time to remember what he has said decades ago. Excerpts from his lecture: 

• “The science of public finance should always keep... political conditions clearly in mind. Instead of expecting guidance from a doctrine of taxation that is based on the political philosophy of by-gone ages, it should instead endeavor to unlock the mysteries of the spirit of progress and development. (Wicksell, p. 87.). 

• If utility is zero for each individual member of the community, the total utility for the community cannot be other than zero. (Wicksell, p. 77.) 

• ... neither the executive nor the legislative body, and even less the deciding majority in the latter, are in reality ... what the ruling theory tells us they should be. They are not pure organs of the community with no thought other than to promote the common weal.
• ... members of the representative body are, in the overwhelming majority of cases, precisely as interested in the general welfare as are their constituents, neither more nor less. (Wicksell, pp. 86, 87.) 

• It would seem to be a blatant injustice if someone should be forced to contribute toward the costs of some activity which does not further his interests or may even be diametrically opposed to them. (Wicksell, p. 89.) 

• ... whether the benefits of the proposed activity to the individual citizens would be greater than its cost to them, no one can judge this better than the individuals themselves. (Wicksell, p. 79.) 

• The ultimate goal ... is equality before the law, greatest possible liberty, and the economic well-being and peaceful cooperation of all people. (Wicksell, p. 88.)”