Liberty, Market and State: Political Economy in the 1980s

Most economists read more than they write. James Buchanan manages to write more than most economists can read. Because his varied writings on social philosophy and political economy are necessarily scattered among publications around the globe, Buchanan’s latest book, Liberty, Market and State, should prove to be a valuable collection to Buchanan watchers. It brings together his writings under therubric of“constitutional political economy,” or what I prefer to call “constitutional economics.” This book is of significance to the readers of this journal for two fundamental reasons. First, it breaks irrevocably with the conventional wisdom among economists, namely, that economics as a discipline, per Se, has little or nothing to contribute to ourunderstanding ofnormative matter, including justice, fairness, and morality. Economists are able to assume the role of the detached observer-analyst largely because the rules of the market and/or political game are assumed to be given, meaning the distribution ofpower, an intrinsically ethical matter, has already been determined. With matters of power given by assumption, economists are largely free to discuss how people trade to improve their lot. “The predictive ‘science of economics,’” Buchanan writes, “is positively valuable to government agents, business firms, andprivate individuals. Persons can ‘play better games’ if they can predict their opponents’ strategy more accurately” (p. 33). However, the realm of the “science of political economy” has, according to Buchanan, a much different purpose: “to evaluate the structure of the constraints, ‘the law,’ with some ultimate objective of redesign or reform aimed at securing enhanced efficiency in the exploitation of the potential mutuality of alternative systems” (p. 33). ,The science of (constitutional) political economy cannot sidestep normative matters or even the question of how alternative systems of constraints can and should be evaluated. Throughout the book, Buchanan espouses general agreement as the critical normative test for adoptions of social systems or reforms in those systems: