A Case Study of the Pioneers
Chapter 6: James Buchanan and Public Choice Theory
At approximately the same time as Friedman was developing the monetarist model as one of the theoretical underpinnings for the revival of laissez-faire, James McGill Buchanan (b. 1919) was fashioning a second theoretical case for a rules-based macroeconomic policy. This case grew out of the work for which he received the Nobel Prize in Economics in 1986: ‘his contributions to the theory of political decision-making and public economics’, also known as public choice theory. Due to the timing of his work, Buchanan’s research offered a second theoretical foundation for laissez-faire as the Keynesian orthodoxy began to break down in the 1970s. Over his career, an assortment of events has brought Buchanan into contact with the laissez-faire pioneers. He began doctoral studies at the University of Chicago in 1946, studying with both Knight and Friedman during the two years he spent there, and they ‘are men with whom, broadly and generally, I agree on principles of politicalphilosophical order’ (Buchanan 1964, p. 215). However, unlike Friedman, Buchanan chose to build his analysis on some of the ideas he had learned from Knight, in particular his notion of indeterminate uncertainty. In the course of developing his sub-discipline of expertise, public finance, Buchanan also read and was influenced by the work Simons did on personal income taxation. As an early member and the 1984–85 president of the Mont Pelerin Society, Buchanan also shared an allegiance to liberalism and laissez-faire with Hayek. Some of the elder’s ideas found their way into Buchanan’s work, in...
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