Center for Business and Policy Analysis (SNS)
The inspiring influence of Jim Buchanan
- from a former graduate student to Jim Buchanan on his 80th birthday
The UCLA economics department in the late 1960’s was a truly stimulating place - especially for a graduate student from Sweden like myself. In the three years 1966-69 I was exposed to the ideas of economists who at that time were not on any reading lists at the University of Stockholm, and probably not at most universities in the United States, but who 10-20 years later were to be awarded the Nobel Prize in Economics. I was privileged to take classes from outstanding and unforgetable economists like Armen Alchian, James Buchanan, Milton Friedman and Axel Leijonhufvud. In those years I became an "economist" in the sense that Jim Buchanan uses the term in Better than Plowing (Ch. 5). Before then, I was - like Jim - "blissfully ignorant of the coordinating properties of decentralized market process, an ignorance that made me vulnerable to quasi-Marxist arguments…" In fact, in my first year at UCLA I was such a believer in benevolent and rational politics - what Jim has called a "libertarian socialist" - that I was selected to argue the advantages of economic planning in developing countries in a class-room debate with Milton Friedman!
I want to share my own conversion to economist, not only because Jim Buchanan played an important role in it but also because he has wondered (also mentioned in Better than Plowing) whether others "who purport to pass as professional economists" have had experiences akin to his own. I am sure many have. I know I have.
Jim attributes his becoming an economist to Frank Knight’s teachings. I attribute my own conversion to Armen Alchian’s and, somewhat later, to Jim Buchanan’s teachings. From Armen Alchian I learned about the individualist value norm, the role of markets in coordinating individual behavior and the effects of interfering with those coordinating mechanisms. Few could have communicated those insights in the way that Armen Alchian did. Armed with that understanding, Jim Buchanan’s course in public choice became my next dramatic eye opener.
Public choice, I found, was the extension of the analysis of markets to the political sphere. Political economy was no longer a technical field in which certain tools of economics - such as benefit-cost analyses - were applied by social engineers in a vacuum called the public sector. Instead, public choice invited us as economists to analyze the political market. Individuals were the same utility maximizers in the public sphere as in the private sphere. Political activity was the result of the demand for and supply of policy. Demand and supply were transmitted through political institutions. Jim’s The Demand and Supply of Public Goods, 1968, and Public Finance in Democratic Process, 1967, particularly stick in my mind from those days.
I did not get to know Jim as a person at UCLA. Having taken public finance already before Jim came to UCLA, I merely audited his class and never became a real student of his. I got to know him better later, however, once when I visited him in Blacksburg in the early 1980’s and in 1986 when he came to Stockholm to receive the Nobel Prize in Economics. I found Jim to be an immensely likeable person: modest, kind, with genuine regard for individual rights and protective of individual liberty, with a searching mind, always trying to understand and clarify issues as an economist. He was, and is, very different from those with a right-wing bent who see public choice as intellectual ammunition against all government. I remember Jim saying that he wished he could be dissociated from such supporters.
Although Jim’s teachings had made me a convert to public choice, my own professional career and research after I returned to Sweden in 1969 took me in a very different direction. I did, however, apply public choice theory in popular writings in newspaper articles, including as a columnist and a brief stint as an editorial writer in Sweden’s largest daily morning paper. I think that some of that writing has helped open some eyes in Sweden.
It is only recently that I have been able to apply public choice in a more "serious" context. The first occasion was as a member of special expert commission on the dramatic crisis in the Swedish economy in 1993. The Swedish welfare state and economy was in "free fall" at the time. GDP was falling precipitously and unemployment had risen from 3 to 14% in a short time. The commission was made of a small group of economists and chaired by Sweden’s most respected economist, Assar Lindbeck. Everyone expected "the Lindbeck Commission" to deliver short-run cures to an acute crisis, especially since the report was to be produced in only a couple of months. Instead, one of the Commission’s main conclusions, which I strongly supported, was that Sweden’s economic problems in an important way were the result of failings in Sweden’s political institutions. These failings had caused policy decisions to be overly driven by short-run and special interest considerations at the expense of the long-run general interest. The Swedish economic crisis of the early 1990’s was, in the view of the Commission, not just the result of specific policy mistakes but also "a crisis of politics and of political institutions" and restoring Sweden’s long-term economic health required fundamental reform of those institutions. The title of the Commission’s report in Swedish, literally translated, was "New conditions for economics and politics". In English the report was entitled Turning Sweden Around (MIT Press, 1994.) The report was widely discussed in Sweden and "special interest" became a term that anyone with even a fleeting interest in policy became familiar with.
Subsequently, I tried to interest other Swedish economists in writing a volume in Swedish on why and how political rules of the game matter for economic policy. The idea was to convey the insights of public choice or political economy about the role of constitutional rules for outcomes to a Swedish audience - something which had not been done. For various reasons the book has taken a long time to materialize and in the end there were only four authors left. But it is coming out this year under the title, again literally translated, The Power over Politics - On Constitutional Rules and Policy Outcomes. My own chapter owes almost everything to Jim Buchanan - most fundamentally, the use of the "veil of uncertainty" and the analysis of why it is likely to be in everyone’s long-run interest to be concerned about the rules of the political game and constitutional constraints.
Another activity, which I helped launch and with which I am currently involved, is a major research project on constitutional reform options for Sweden. The basic motivation for the project is that Sweden’s constitution is deficient in many ways. In fact, Sweden can hardly be said to have a constitution insofar as it is very easy to change (it only takes a simple majority and an intervening general election) and consequently is changed constantly. The research is directed from the Swedish Center for Business and Policy Studies, a private, non-partisan, non-profit organization with which I am affiliated, and it will engage political scientists, lawyers and economists both in Sweden and abroad in the actual research over a five-year period. Jim Buchanan is on the advisory board of this project. I am hopeful that this project will definitely, in the end, put constitutional reform on the political agenda in Sweden.
Finally, I am also involved in what at the moment (May) seems like a more high-risk project. The five members of the 1993 (Lindbeck) commission on the Swedish economy have again teamed up, this time to do a study of Sweden’s political institutions. The focus is on transparency and accountability. The report is due to be published in January of 2000. Right now I feel that we are in over our heads - taking on far too much in the time that we have at our disposal – but maybe that is how it should feel…
My own inspiration in all of these studies on political institutions is Jim Buchanan. So, finally - after thirty years - I am now tapping the ideas and the interest that Jim awakened in me in graduate school at UCLA. I hope to continue to do so. And perhaps, just perhaps, this will actually make a practical difference in one small country - a country which today is as far as one can imagine from the constitutional ideal of the founder of constitutional public choice. Whether I together with others succeed or not, I want to thank Jim for inspiring me to make the effort.
Center for Business and Policy Analysis (SNS)