John Blundell, General Director and Colin Robinson, Editorial Director, Institute of Economic Affairs, London
JIM BUCHANAN AND THE IEA
In May 1999 we celebrated the 100th anniversary of the birth of FA Hayek with a reception at the Institute of Economic Affairs (IEA). Eight speakers gave 3 minute presentations. They were Dr Eamonn Butler, Adam Smith Institute; Professor Kenneth Minogue, London School of Economics; Professor Norman Barry, University of Buckingham; Professor Lawrence H. White, University of Georgia, Athens and Dr. Laurence Hayek, Mrs Esca Hayek, Lord Harris of High Cross and Dr. Arthur Seldon CBE,
In her remarks Esca Hayek (the great man’s daughter-in law) recalled Hayek’s twice- a-year visits to her home in Totnes, Devon. During one such visit Hayek discovered the British TV series Yes, Minister and its sequel, Yes, Prime Minister. He liked them so much, she said, he roared with laughter and they became his clear favourite.
The two series are categorised as comedies although a prominent British politician, the Rt. Hon David Davis MP, Chairman of the House of Commons Public Accounts Committee, often says ‘they’re not comedies, they’re training films’. They run the world over, are constantly being rerun and are sold on video cassettes in many countries.
To anyone versed in economics these programmes are not only entertaining but also pure public choice. In the mid 1990s one of the co-authors of the series, Sir Antony Jay, came to lunch at the IEA. A fellow guest commented on how insightful these comedies were to which he replied ‘Oh, yes, I learnt my public choice theory from James Buchanan through the IEA.
The purpose of this note is to acknowledge the influence of Jim Buchanan on the publications of the Institute of Economic Affairs.
Some far-sighted economists had, by the mid 1960s, already begun to realise the significance of emerging public choice theories. For example, Harry Johnson, in his Inaugural Lecture at the London School of Economics in 19671, pointed to ‘...the emergence of an economic theory of political democracy' as one of the most important developments in economic analysis, citing Anthony Downs’ book on the economics of democracy2. But most economists in Britain ignored public choice theories, persisting with the notion of government as the impartial servant of the public good.
By the mid-1970s, Ralph Harris and Arthur Seldon at the IEA realised the potential of public choice theory. Consequently, in 1978 they arranged a seminal event - a conference at which the key paper was given by Jim Buchanan. The proceedings of this conference were subsequently published3 in a volume which became the principal reference source for British economists wishing to understand public choice theory (or ‘the economics of politics' as it was often described in Britain). In particular, it represented a straightforward guide to the then new subject of public choice which academic economists could use for their own enlightenment and include on reading lists for their students.
The effect of The Economics of Politics on IEA publications was profound. It provided a firmer grounding for the idea, which can be found in IEA publications from the beginning, that it is inappropriate and inconsistent in a subject which claims to follow scientific method to seek out market ‘imperfections' and ‘failures' whilst disregarding government failure. In Jim Buchanan’s words, there should be no place in economic theory for ‘bifurcated man' - a person who acts in his or her own interests when in the private sector but is miraculously transformed into someone with only the ‘public interest' at heart when employed in the ‘public' sector4.
Given this firmer theoretical grounding, under the editorial guidance of the Institute, authors were asked to keep public choice theory in mind and to avoid making policy recommendations without recognising the failings of political action. The Economics of Politics and the subsequent burgeoning writings of Jim Buchanan and his followers in the public choice school provided IEA authors with the intellectual basis they required to challenge the presumption that government action will always improve the market outcome. The ideas of the public choice school have so permeated the Institute’s publications that virtually every IEA monograph since The Economics of Politics has had those ideas at its heart. With public choice, as with the Chicago School and monetarism and the Austrian School and market process theory, the IEA has acted as the transatlantic bridge, bringing the great theoreticians to address audiences and then publishing their work in readily accessible form.
Public choice theory still has a long way to go in penetrating the academic establishment in Britain. Many university economics departments find it convenient to stay within the confines of neo-classical theory: to the extent that they make policy recommendations, they implicitly assume omniscient and altruistic governments. But that assumption is hard to maintain with the more perceptive students who turn to the publications of the IEA for the liberating insights of public choice theory.
Moreover, while economics departments eschew public choice, it is becoming more prevalent in political science. At a recent student event at the IEA with Professor Gordon Tullock, not one of the economics undergraduates had taken a public choice course whereas every political science student said it was compulsory. While most people have never heard of public choice or the economics of politics, there can be no doubt its influence has spread. Journalists, in particular, ask better questions of politicians and bureaucrats today than (say) 25 years ago.
An organisation such as the IEA, which aims to spread its message to a wide audience, must nevertheless establish and maintain a reputation which means that the intellectual community acknowledges it as a voice which should be heard. A sine qua non for that reputation is the presence of a sound intellectual basis for the views expressed by its authors. Without the theoretical foundations laid by Jim Buchanan and his followers, the IEA would not have had that basis and it could not have achieved the success it has enjoyed.
1Harry G.Johnson, The Economic Approach to Social Questions, The London School of Economics and Political Science, 1967, page 16.
2Anthony Downs, An Economic Theory of Democracy, New York, Harper and Bros., 1957.
3James M. Buchanan et al, The Economics of Politics, Readings 18, Institute of Economic Affairs, 1978.
4James M. Buchanan, 'Summing Up' in the The Economics of Politics, op cit., p 156.