BUCHANAN.wpd 99 Je 3-28

Leland B. Yeager


James Buchanan began influencing me before I even met him. Prices, Income, and Public Policy: The ABC's of Economics (McGraw-Hill, 1954) is a concise Principles text written by Clark Lee Allen, James M. Buchanan, and Marshall R. Colberg. I used that excellent book in teaching a one-semester course at the University of Maryland. It helped me face two challenges: of distinguishing between essential ideas and fringe refinements of economics and of putting the essentials across to students in one semester. Although ensuing years offered me fewer and fewer opportunities to teach the Principles course, I never thought that teaching it was a degrading chore. Economists avid to demonstrate technical expertise should remember that the strands of economics of which ignorance does the worst damage are precisely the basics, not technicalities giving rise to the most easily gradable test questions.

Jim Buchanan brought me from Maryland to the University of Virginia in 1957. A year or more of discussions had apparently been triggered by his liking a paper of mine on growth theory and money in the March 1954 AER. At a cocktail party following my job seminar in the spring of 1957, when asked what I would like to drink, I replied ABourbon and water.@ Jim told me afterwards that that was the correct answer.

Jim assured me that if I moved to U.Va. I would receive promotion and tenure on a prompt schedule. Strange as it may seem nowadays, when impending tenure decisions cause so much anguish, I hardly gave the matter any further thought; and Jim=s assurances did come true.

While I was still new at U.Va., Jim and Warren Nutter established the Thomas Jefferson Center for Political Economy. The Center brought distinguished economists to live and lecture at the University for several weeks or months at a time. We Virginia economists thus got to know such eminent figures as Frank Knight, T. W. Hutchison, Overton H. Taylor, and Maurice Allais. Gordon Tullock joined the Department as a postdoctoral fellow and later, after a few years at the University of South Carolina, returned to U.Va. as a faculty member. Buchanan and Nutter put me in charge of a series of lectures that wound up composing In Search of a Monetary Constitution (Harvard, 1962). Lecturers included Buchanan himself and visitors such as Milton Friedman, Jacob Viner, Murray Rothbard, Clark Warburton, Clarence Philbrook, and Willford King.

I am grateful to Jim Buchanan for his patience with me during a period of depression. I am especially grateful becauseBor so I understandBnot everyone enjoys the benefit of his patience. My blue mood started around 1959 or 1960. I managed to keep muddling through with my regular duties, though painfully. I can mention the episode now, but in those days I hesitated to discuss it or seek professional help for fear of staining my medical record. My sociability, never great, plummeted further. I finally managed to shake off the gloom, thanks to self-help books and to a beneficial change of scene made possible by a leave of absence. I spent the academic year 1961-62 partly in Arlington, Virginia, and later as a visiting professor at Southern Methodist University. There the benevolent understanding of Mathilda Homan was particularly helpful.

Especially after returning from SMU, I took pleasure in the monthly dinner meetings of the Political Economy Club of Virginia, which had been organized by Buchanan and Nutter and eminent faculty members in other parts of the University. Early meetings, in 1959, featured talks by Rutledge Vining on his vision of political economy, and by Ronald Coase, who published his paper the following year as "The Problem of Social Cost". After unfortunately falling apart, the club was briefly reorganized under a new name after Buchanan and Tullock had moved to VPI. It held meetings in Charlottesville and Blacksburg but fell apart again because of the policy-induced gasoline shortage of 1974.

I admired Buchanan=s stance in misunderstandings between the Department of Economics and the U.Va. Administration. Ignorant gossip had given the Department a wildly inaccurate reputation for antiintellectual right-wingery, even as a wholly owned subsidiary of the John Birch Society. Partly because of this reputation, the University failed to accord Ronald Coase and Gordon Tullock and others the deserved recognition necessary to keep them on the faculty. In 1968, making good on his warnings, Buchanan himself resigned.

Now I'll return to Buchanan=s influence more specifically on my thinking as an economist. Economics, he insists, is not properly an assortment of quasi-mathematical exercises in maximization subject to constraints. That conception would make economics almost a kind of engineering. Economics properly investigates not so much the optimal allocation of resources as the coordination of millions of interdependent but separately decided activities. Coordination involves mobilizing scattered knowledge and bringing diverse entrepreneurial insights to bear. I remember Jim's excellent talk on these themes at a one-day Charlottesville conference on Austrian economics. By the way, although Buchanan's views overlap Austrian economics in several respects, he was never a card-carrying member of the Austrian school. He is too independent a thinker.

Buchanan's conception of a market economy as the coordination of diverse activities and knowledge carries over into the money-macro field. It is perverse to conceive of macroeconomics as the study of conditions under which aggregate demand is excessive or deficient or is just at the Goldilocks level for absorbing aggregate supply. The apparatus of aggregate demand and supply apparently appeals to textbook publishers as a device for building on what students supposedly learned in microeconomics. The rationale of the apparatus is very different and much weaker in macro than in micro, however, so that the mistaken analogy is actually subversive of the student's understanding.

A fruitful approach to macroeconomics builds on Buchanan's conception of economics as a study of processes of voluntary cooperation. Prosperity or full employment prevails when the activities and decisions of millions of diverse persons and organizations mesh together well. Recession or depression is a state of discoordination. Then, for example, unemployed persons would gladly spend their wages on more goods and services if only they could find jobs, and firms would gladly hire more workers if only they could sell more goods and services. What keeps these desires from meshing? Significantly, the apparent scarcity of jobs and customers prevails widely across almost all sectors of an economy in recession. Conceivably, and apparently in fact in a few historical episodes, the discoordinating disturbance is a real, nonmonetary one. Overwhelming historical experience, however, readily understandable with micro and monetary theory, points to a mismatch between the demand for and quantity of money. It is along this line of research that Buchanan=s emphasis on coordination and discoordination directs us.

To mention a more specific influence, Buchanan=s "Ceteris Paribus: Some Notes on Methodology@ (SEJ, Jan. 1958) carries a widely applicable message. It is illegitimate to theorize about the consequences of one specified change in conditions while trying to hold constant other conditions that simply cannot remain constant in the face of the one specified change. It is pointless to give high marks to a supposed set of institutions having verbally attractive properties (Ademocratic socialism@, perhaps) but whose components are mutually inconsistent. Buchanan also influenced me in discussions over my early manuscript on Methodenstreit over Demand Curves@ (JPE, Feb. 1960); he even supplied the title of that article.

Like the Austrians, Buchanan has championed subjectivism in economics. One of its greatest triumphs was his own demonstration (in Public Principles of Public Debt, 1958) that the burden of government spending can indeed be partly shifted into the future by bond-financed budget deficits. Conventional wisdom had been unduly materialistic: the burden cannot be shifted through time, economists had claimed, since resources are used when they are used. Buchanan recognized that a burden is something subjectively perceived. Persons who willingly give up current command over resources in exchange for government bonds that they find attractive perceive no burden in doing so. It is in the future that peopleBin general, people other than the original bond-buyersBwill bear the burden of paying taxes to service the debt or of losing through its outright or inflationary repudiation.

Besides demonstrating sound methods at work, Buchanan has written many welcome paragraphs of countermethodology, trying to free his fellow economists from harmful methodological badgering. He deplores the diversion of attention from real-world questions on which economics at its best can contribute answers, and indeed the disparagement of such attention, by a Ascientistic@ turn that cultivates displays of mathematical and econometric technique practically for their own sakes. As he has famously written, an article chosen at random out of any modern economics journal is unlikely Ato have a social productivity greater than zero.@ As he recalled in his 1986 Nobel lecture, he has Ararely been teased by either the currency of policy topics or the fads of academic fashion, and when I have been so tempted my work has suffered.@

To return to influences that Buchanan has exerted beyond economics narrowly interpreted, I=ll mention that his conversations and writings over the years have given me insights into a kind of egalitarianism, or at least a kind of reaction against economic privilege, that is not clearly incompatible with classical liberalism and individualism.

Buchanan=s many writings on contractarianism have influenced my thinking on political and economic philosophy. I wind up more an adherent of the brand of utilitarianism championed by David Hume, Ludwig von Mises, F. A. Hayek, and Henry Hazlitt. But as I have sometimes tried to explain, those two apparently different philosophies differ less in substance than in terminology.

One final example of why I feel gratitude to Jim Buchanan is his consent, a few years ago, to become the first Associato Distinguite (Distinguished Fellow) of Union Mundial pro Interlingua. UMI strives to promote knowledge and use of interlingua, which is the product of teams of professional linguists working over many years. Interlingua standardizes the vocabulary possessed in common by the Romance languages and English, a vocabulary activated by a simple but complete grammar. That language can serve well as an easy-to-learn means of international communication. Furthermore, its naturalistic quality and objective nature give it great interest for linguists and social scientists. Members of UMI are grateful for Buchanan=s support.