The passing of Nobel laureate economist James M. Buchanan, one of the greatest proponents of limited government and free markets in the 20th century, leaves a giant void at a time when Western democracies are expanding the size and scope of government and threatening the future of liberty.
The news of Buchanan’s death on January 9, at the age of 93, has saddened all who knew and respected him. His vast body of work, however, will live on and remind us that liberty under a just rule of law, or what F. A. Hayek called “the constitution of liberty,” is essential for the emergence of a spontaneous market order.
Like Adam Smith, Buchanan was interested in the institutions that would allow individuals to pursue their own self-interest (happiness) while benefiting others through a system of what Milton Friedman has called “free private markets.” Buchanan considered “the principle of spontaneous order”—that is, the harmony and wealth creation that emerges through voluntary exchange when government is limited and rights to life, liberty, and property safeguarded—to be “the most important central principle in economics” (see What Should Economists Do?, pp. 81–82).
The question that occupied Buchanan during his long career is the problem of constitutional choice—that is, the choice of rules that would best allow individuals the freedom they need to increase their range of choices and bring about social harmony. The proper balance between the state and the individual—or between coercion and consent—is at the foundation of constitutional political economy.
Although Buchanan made substantial contributions to the field of public choice, he was primarily interested in the choice of regimes and how alternative rules would influence incentives and behavior—not in how individuals act within a given set of rules. His classic book The Calculus of Consent, co-authored with Gordon Tullock, implied that a just constitution is one based on consent, even though for practical reasons post-constitutional choices will be based on some sort of majority rule.
For Buchanan, limited government comes first and should constrain democratic impulses that violate the principle of freedom (see, e.g., The Logical Foundations of Constitutional Liberty, Vol. 1 of The Collected Works of James M. Buchanan). Today the welfare/regulatory state contradicts the constitution of liberty, increases uncertainty, and upsets the spontaneous market order. Freedom requires responsibility and an ethos of self-reliance. The growth of government has eroded that ethos and politicized economic life.
In the case of both fiscal and monetary policy, Buchanan argued for rules rather than discretion. He wanted predictability and clear limits on government spending and the printing press. He considered excessive government debt to be immoral besides damaging to economic growth. Government should stay within its constitutional bounds and not deprive individuals of their economic or personal freedom. Like Hayek and Friedman, he was a classical liberal or libertarian, not a conservative.
Buchanan strongly criticized citizen and policy myopia. Accordingly, he argued, “Until and unless we begin to take the long-term perspective in our private and in our public capacities, including the adoption of new and binding constitutional constraints on the fiscal and monetary powers of government, we are doomed to remain mired in the muck of modern politics” (in The Search for Stable Money, edited by J. A. Dorn and A. J. Schwartz, p. 126).
Jim was a friend of liberty and a friend of Cato. His voice will be sorely missed.