Economists and the State

Economists and the State

What Went Wrong

Timothy P. Roth

Adam Smith is widely regarded as the ‘founder of modern economics’. The author shows, however, that Smith’s procedurally based, consequence-detached political economy, an approach shared by America’s Founders, finds no expression in the economist’s utilitarian, procedurally-detached theory of the state. This ‘wrong turn’ has meant that, if economists are ill-equipped to address an expanding federal enterprise in which utilitarian considerations trump the Smithian/Madisonian idea that means and ends must be morally and constitutionally constrained, they are also ineffectual bystanders as growing institutional skepticism, demands for ‘social justice’ and metastasizing rights claims threaten our self-governing republic.

Chapter 7: What should economists do?

Timothy P. Roth

Subjects: economics and finance, political economy, public choice theory, politics and public policy, political economy, public choice


7.1 JAMES BUCHANAN, JOHN RAWLS, ADAM SMITH AND THE FOUNDERS The Nobel laureate James M. Buchanan died January 9, 2013. Writing a day later in The Wall Street Journal, Donald Boudreaux reflected on Professor Buchanan’s work: ‘Jim regarded his work as simply extending and applying the insights of America’s founding generation, especially those of James Madison’ (Boudreaux 2013). This understanding of the nature of his work is affirmed by Buchanan’s own words: ‘The Madisonian vision … is difficult to recapture once it is lost from the public consciousness. The simple, yet subtle, distinction between strategic choices within rules and institutional choices among sets of rules … must inform all thinking about policy alternatives … We must attend to the rules that constrain our rulers, and we must do so even if such attention may not seem to be a part of a rational-choice calculus’ (Buchanan [1989a] 1999, pp. 372–3). Equally revealing is Buchanan’s acknowledgement of the influence of John Rawls and the Founders on Buchanan and Tullock’s seminal book, The Calculus of Consent: You will, of course, recognize the affinity between [the] approach that Tullock and I used in The Calculus of Consent and that developed in much more general terms by John Rawls in his monumental treatise, A Theory of Justice (1971) … Our book was a mixture of positive analysis of alternative decision rules and a normative defence of certain American political institutions that owe their origins to the Founding Fathers, and to James Madison in particular. We considered that our...

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