James M. Buchanan

Buchanan’s next big conversion came while reading an article in German by Swedish economist Knut Wicksell. The obscure 1896 article’s message was that only taxes and government spending that are unanimously approved can be justified. That way, argued Wicksell, taxes used to pay for programs would have to be taken from those who benefited from those programs. Wicksell’s idea contradicted the mainstream 1940s view that there need be no connection between what a taxpayer pays and what he receives in benefits. That is still the mainstream view. But Buchanan found it persuasive. He translated the essay into English and started thinking more along Wicksell’s lines.

One of the products of his thinking was a book he coauthored with Gordon Tullock titled The Calculus of Consent. In it the authors showed that the unanimity requirement is unworkable in practice and considered modifications to the rule that they called “workable unanimity.” Their book, along with Anthony Downs’s An Economic Theory of Democracy, helped start the field of public choice and is now considered a classic. Together, Buchanan and Tullock also started the academic journal Public Choice.

Perhaps Buchanan’s most important contribution to economics is his distinction between two levels of public choice—the initial level at which a constitution is chosen, and the postconstitutional level. The first is like setting the rules of a game, and the second is like playing the game within the rules. Buchanan has proselytized his fellow economists to think more about the first level instead of acting as political players at the second level. To spread this way of thinking, Buchanan even started a new journal called Constitutional Economics.

Buchanan also believes that because costs are subjective, much of welfare economics—cost-benefit analysis, and so on—is wrongheaded. He spelled out these views in detail in Cost and Choice, an uncommonly impassioned economics book. Yet Buchanan has not persuaded most of his economist colleagues on this issue.

Buchanan was awarded the 1986 Nobel Prize in economics for “his development of the contractual and constitutional bases for the theory of economic and political decision making.” Buchanan was born in Murfreesboro, Tennessee, and has spent most of his academic life in Virginia, first at the University of Virginia, then at Virginia Polytechnic Institute and State University, and most recently at George Mason University. In 1969 Buchanan became the first director of the Center for the Study of Public Choice. He was president of the Southern Economic Association in 1963 and of the Western Economic Association in 1983 and 1984, and vice president of the American Economic Association in 1971.