[James] Buchanan (who won a Nobel 1986) is the kind of economist that did not disguise he read and engaged with philosophers (especially Rawls) throughout his life.…Digressions&Impressions
More than a century ago, the effective operation of the public economy was a significant, active concern of economists. With the insurgence of market-centrism and rational choice economics, however, government was devalued, its role circumscribed and seen from a perspective of “market failure.” As Backhouse (2005) has shown, the transformation in economic thinking in the latter half of the 20th century led to a “radical shift” in worldview regarding the role of the state. The very idea of a valid, valuable public non-market has almost disappeared from sight....
Because mainstream economists in the U.S. and elsewhere have been so market-focused for so long, production outside the market has been erased from the equations of economics. So now, government action is regarded as an “intervention” that “distorts” smooth operation of an otherwise beneficent market. Government is considered to have an economic role only (or primarily) in cases of so called “market failure.” Consequently, there is no viable and explanatory concept of an actual, let alone a legitimate, public non-market economy. So pervasive is the creed that government only “intervenes” in what is thought to be the valid, market economy that even literature from the Congressional Research Service (Labonte, 2010) relegates government to an outsider role....
As I noted earlier, the “public choice” school has become the framework to which economists default for an explanation of the public economy. Backhouse (2005) outlines the development of the public choice school, which stems from a cluster of works published in the 1950s and 1960s by James Buchanan, Gordon Tullock, Mancur Olson, and Anthony Downs. It became a school, and a movement, when James Buchanan and Warren Nutter found a home for their efforts at George Mason University in Virginia. In the mid-1980s George Mason opened the Center for the Study of Market Processes, with its largest supporter being the Koch Family Foundations. Stretton and Orchard (1994) have demonstrated the anti-government, anti-democratic stance of public choice theorists in their extensive treatment of the school in Public Goods, Public Enterprise, Public Choice; Theoretical Foundations of the Contemporary Attack on Government. After critiquing the theory in economics terms, they suggest that public choice “reasoning seems to arise from the theorists’ reluctance to ‘come out’ and identify themselves as open enemies of democracy or at least of universal suffrage…Governments are viewed as exploiters of the citizenry, rather than the means through which the citizenry secures for itself goods and services that can best be provided jointly or collectively.”...
Sometimes the obvious is hard to perceive. Debate about “Ricardian equivalence” may be missing the obvious: forward-looking, ‘rational’ households should expect fiscal policy to work, and their future incomes to be higher. A Ricardian perspective is therefore supportive of counter-cyclical fiscal policy.
Back in 1992, New Jersey raised the minimum wage by 18 per cent while its neighbour state, Pennsylvania, left its minimum wage unchanged. Unemployment in New Jersey should — according to mainstream economic theory — have increased relative to Pennsylvania. However, when economists Alan Krueger and David Card gathered information on fast food restaurants in the two states, it turned out that unemployment had actually decreased in New Jersey relative to that in Pennsylvania. Counter to neoclassical demand theory we had an anomalous case of a backward-sloping supply curve.
Lo and behold!
But of course — when facts and theory don’t agree, it’s the facts that have to be wrong …Read the rest where James Buchanan makes a fool of himself without being savvy enough to realize that, "It's the ideology, stupid."
To begin, a theory of resource allocation is right to treat debt as an internal allocation mechanism of real resources in the economy.
In a my household, for example, I can lend my wife money to treat herself a new dress today. If we were accurately keeping internal household accounts that would be a transfer from myself to her. In real terms, my consumption of resources decreases and hers increases.
Next week the debt is ‘repaid’ according to our internal accounts when my wife lends me money to take the kids to the football.
When we look at our household as an aggregate entity, our total resource consumption is unchanged by the debt, which merely represents an internal reallocation.
There were no future resources brought forward for my wife to consume. The debt did not leave a cost to our children. Even if it was never repaid, I already paid for my household’s debt with the resources I didn’t consume when I transferred purchasing power to my wife.
It surprises me that on this crucial point the core mainstream concepts are consistent with the functional finance or modern monetary theory perspective, yet there remains animosity between these groups. I have come to believe that this is mostly a result of inadequate understanding of their own conceptual apparatus by the mainstream (here’s an example of how the noisiest mainstream commentators remain confused about their own theories). [emphasis added]
Much of the mainstream has equated 'looking through' debt to the real resources of the economic with ignoring the money creation aspect of debt altogether. This has lead to further confusion in the analysis of banking and economics generally, with the Bank of England recently having to explain the process to the economics community.Fresh Economic Thinking
These core economic concepts are easily confused when one fails to properly understand the complete accounting of the system at all points in time. Specifically the use of overlapping generations (OLG) models can confuse more than inform, and many students come away from learning these models believing in the possibility of inter-temporal reallocations of resources.…
We were surprised to learn that a gay president was in the White House between 1857 and 1861.
Specifically, James Buchanan was gay.Washington's Blog
Kathy also mentions this article that Becker wrote in 1997 about the Chicago Boys who worked in or with the Pinochet regime. Becker’s conclusion about that episode?Oh, what the heck, the Allies forgave all the capitalists and scientists that worked with Hitler on the Nazi war machine.In retrospect, their willingness to work for a cruel dictator and start a different economic approach was one of the best things that happened to Chile.No real surprise there. Many free-marketeers, including Hayek, either defended the Pinochet regime or defended those who worked with it.
