Handbook on Contemporary Austrian Economics
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Handbook on Contemporary Austrian Economics

Edited by Peter J. Boettke

This Handbook looks through the lens of the latest generation of scholars at the main propositions believed by so-called ‘Austrians’. Each contributing author addresses key tenets of the school of thought, and outlines its ongoing contribution to economics and to the social sciences.
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Chapter 2: Economics as the Study of Coordination and Exchange

Christopher J. Coyne


Christopher J. Coyne* 2.1 Introduction In his 1963 presidential address to the Southern Economic Association, James Buchanan asked, “What Should Economists Do?” In doing so, Buchanan was challenging the prevailing orthodoxy that treated the economic problem of society as one of allocating scarce resources among competing ends. According to Buchanan, the allocation paradigm misconstrued the nature of the science of economics as well as the role of the economist. Instead of focusing on the issue of allocation, Buchanan argued that economists should focus on exchange relationships and the institutions within which exchange takes place. According to Buchanan, the allure of scientism tends to pull economists away from the exchange paradigm and toward the allocation paradigm. The allocation paradigm focuses on the “problem” of how to allocate scarce resources, which in turn presupposes a solution to be found by economists. The result is that the study of economics becomes one of computation and maximization instead of focusing on purposeful human action and the process through which individuals interact and coordinate their often differing plans and goals. The allocation paradigm, Buchanan argued, drained the study of economics of purposeful individual action, as well as the process of learning and choice. Choice is fundamentally a human endeavor plagued with uncertainty instead of a mechanical procedure performed by automatons. The study of economics is not one of maximization, but instead one of understanding the various institutional contexts within which imperfect humans must interact and exchange. The message delivered by Buchanan in his presidential address...

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