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Long Live the Constitutional Rules - Mourning the Loss of James M. Buchanan
 
 Author:Unirule  
Time:2013-03-04 09:47:04   Clicks:


James M. Buchanan is one of the founders of Public Choice School as well as the father of Constitutional Economics. The great scholar died on January 9th, 2013 in Blacksburg, Virginia, at the age of 93. Buchanan got famous for his theories of Public Choice and Constitutional Economics. In 1986 he won the Nobel Memorial Prize in Economic Sciences for his contribution to the development of the contractual and constitutional bases for the theory of economic and political decision-making.

 

The strongest power in the world may be the power of the mind, as it can transform people. Before  entering the University of Chicago in 1946, Buchanan was a sincere socialist. He said that he thought of himself as a libertarian socialist but soon became a staunch supporter of market economy after being influenced by his tutor Prof. Knight in the early period of his studies at the University of Chicago. He remained a libertarian and a constitutionalist for all his life. Coincidentally, another Nobel Prize-winning economist Hayek had similar experience as Buchanan. Hayek used to be a Fabian Socialist in his early age, hoping to solve problems in the market by state intervention. However, later he turned away and became a libertarian and a constitutionalist after being influenced by his teacher Mises.

 

Public Choice mainly involves non-market decision-making. Research tools and methods utilized by this theory are those of economics, including price theory. Public choice theory regards politics as a market, namely the political market. Voters, interest groups, bureaucrats, politicians and other actors are interpreted as economic men (homo economicus) in a political market, who are self interest-oriented utility maximizers. Public choice theories regard the votes of voters in the political market as being similar to the consumers' money in the economic market, both serving as means of exchange.

 

Since the Great Depression in the 20th century, most economists were content with busily blaming “market failures”. On the contrary, Buchanan directly attacked “government failures”. Buchanan once claimed in 1972 that what we ought to do is to use the methods of inspecting defects and deficiencies of a market economy, which were used in the past 40 years, to inspect problems in all the departments of state as well as in the public economy. Represented by Buchanan, the Virginia School of Public Choice adopts the hypothesis of economic man as one of its core hypotheses. Before the birth of public choice theory, economics and politics were regarded as two separate domains, suitable for different hypotheses. This implies that social beings have a "dissociative identity disorder": in the economic field, people are thought to be self interest oriented while in the political field, they are regarded as being altruistic. Let’s take a fictional example. There was a powerful tycoon in the real estate market, we may call him Mr. Ren. Economists say that Mr. Ren, in his position as real estate tycoon, could be regarded as

[Page]homo economicus, a self interest oriented utility maximizer. However, if Mr. Ren decides to step into the political circle and becomes president, economists, especially public finance economists, will say that he should be regarded as being altruistic. It seems that Mr. Ren became a patient suffering from "dissociative identity disorder". He is thought to be self-interested orientated in the economic field but altruistic in the political field. However, I would like to draw attention to the fact that instead of Mr. Ren it is the economists who are suffering from such a disease. This is because economists take a person as being sometimes evil minded but sometimes good minded in their methodology. Mr Ren is still Mr Ren, no matter in the economic or in the political field.

 

After the birth of the theory of public choice, along with public choice economists, more and more people accepted that economy and politics are not two separate domains. Whether in the economic or in the political field, all actors can be assumed to be economic men, self interest oriented utility maximizers. Economic man hypothesis does not mean that human nature is only self interest oriented, without having any altruistic side. But economic man hypothesis is quite powerful. Based on this hypothesis, public choice economists derive basic rules, which constrain the behavioral agents. The basic rules are called "constitutions" by Buchanan, or “constitutional rules” here.

 

The analysis of constitutions in Public Choice laid foundation for constitutional economics that Buchanan founded and paid special attention to. Constitutional economics involves economic analysis of basic rules. It is to some extent a higher level of public choice theory. Constitutional economics mainly deals with two stages of collective decision-making, i.e. constitutional stage and post-constitutional stage. The former is the stage of rule making, involving choices among rules; the latter is the stage after rule making, involving choices within a given set of rules.

 

Looking at the situation in China, it is required to distinguish between the above two different stages, namely the stage of choices among rules and the stage of choices within a given set of rules. A reform often involves choices among different rules, not just choices within a given set of rules. A well-functioning society should follow some basic rules. It reads "In Compliance with the Constitutional Rules" in the ancient history book ‘Discourses on the States’ (Guo Yu) or “Long Live the Constitutional Rules" in the ancient history book ‘Old History of Tang Dynasty’ (Jiu Tang Shu). Those are true imperatives we have to follow. Many of the so-called “reforms” in current China are just some tiny repairs of the existing rules while vested interests are being preserved. Real reforms often need to break with the existing rules and constellations of vested interests. We should establish and maintain a constitutional order rather than obey a privileged order. [Page]

 

The great scholar Buchanan passed away, but he left us with an invaluable treasure of thought which empowers and benefits the people. Many of Buchanan’s works have been translated and introduced to Mainland China. I was personally lucky to participate in the organization of the translation and publishing of Buchanan's book ‘Constitutional Economics’ in 2004. This book actually consists of two books: ‘The Power to Tax: Analytical Foundations of a Fiscal Constitution’ written by Brennan and Buchanan in 1980 and ‘The Reason of Rules: Constitutional Political Economy’ written by the same authors in 1985. In the beginning of ‘The Power to Tax,’ Buchanan quotes the Chief of Justice John Marshall’s famous dictum: "The power to tax involves the power to destroy" (McCulloch v. Maryland). No wonder, Buchanan spared no effort to analyze and deduce the basic rules of limiting the government’s power to tax in the book. In the Unirule New Year Wishes of Goodwill Meeting held on January 10th, 2013 Madame Hu Shuli pointed out that next stage would be the era of the constitutional economists. In other words, it would be the time for Buchanan’s “resurrection”. The great intellectual heritage of Buchanan will always be remembered and praised. Long live the constitutional rules!




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