E208 -

Richard E. Wagner joins us for a discussion on life and thought of James M. Buchanan, who was one of the founders of public choice theory.

Aaron Ross Powell
Director and Editor
Trevor Burrus
Research Fellow, Constitutional Studies

Richard E. Wagner is the Hobart R. Harris Professor of Economics and is Graduate Director of the Economics Department at George Mason University. He works primarily in the fields of public finance and public choice.

Richard E. Wagner joins us for a discussion on life and thought of James M. Buchanan, who was one of the founders of public choice theory.

Show Notes and Further Reading

Wagner’s latest book is James M. Buchanan and Liberal Political Economy: A Rational Reconstruction (2017).

A good portion of what we discuss in this episode deals with Nancy MacLean’s account of Buchanan in Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America (2017).

Aaron mentions this article by Lee Fang in The Intercept, “Sphere of Influence: How American Libertarians Are Remaking Latin American Politics.”

Buchanan and Gordon Tullock co‐​wrote The Calculus of Consent: Logical Foundations of Constitutional Democracy (1962), considered one of the landmark works of public choice theory.

Our other podcast episode with Wagner gives a pretty good introduction to public choice theory, but listeners may also be interested in this episode on the same topic.



Trevor Burrus: Welcome to Free Thoughts. I’m Trevor Burrus.

Aaron Powell: And I’m Aaron Powell.

Trevor Burrus: Joining us today is Richard E. Wagner. He’s the Hobart L. Harris professor of economics at George Mason University. He’s the author of many books, the newest of which is James M. Buchanan and Liberal Political Economy. Welcome to Free Thoughts, Richard.

Richard Wagner: Well, thank you for having me here, guys. I’m glad to be here.

Trevor Burrus: The end of the book, you have an appendix discussing James Buchanan [00:00:30] and you and the personal relationship you had for about 50 years if I’m correct. You have a great little anecdote in there where you walked in Buchanan’s class as a grad student at the University of Virginia and he asked you, and you describe it almost like cold calling. Aaron and I both went to law school, so we can sympathize cold calling. He asked you, he said, “Mister Wagner, what’s wrong with the American tax system?” Now, I have two questions following that. One is what did you say? Two is [00:01:00] why would he ask that? What does it say about James Buchanan’s thought that that’s something he would just ask a grad student in his class?

Richard Wagner: Okay. On your first question, I had spent a fair amount the preceding summer reading works by Buchanan, works on public finance, works by his dissertation supervisor, who subsequently I found Buchanan didn’t think much of him. Anyhow‐

Trevor Burrus: That was at Chicago, correct?

Richard Wagner: Yeah, Chicago. Later, I found out that [00:01:30] Buchanan didn’t like what he encountered as public finance in Chicago and wanted to create a whole different approach to public finance. Anyway, the standard public finance stuff was still standard today pretty much, broaden tax basis, close loopholes, things like this. Buchanan asked the question. I had read these works and shot up my head and answered what I thought was quite a good answer. When I finished, kind of had a smile to myself [00:02:00] at how well I had done, and Buchanan said, “Mister Wagner, you have no business answering a question like that, because we’re democrats here. We’re not autocrats.”

I didn’t know what he meant by that. Later I found out that what he meant was that standard public finance theory viewed governing officials as some kind of [00:02:30] parents or lords of the manor whose job was to tend to people, whereas Buchanan regarded himself as a genuine democrat in the sense that what he was trying to do with his work, starting from day one, was to ask how could you, if you took seriously the idea that democracy should be a system in which people govern themselves [00:03:00] as against being a system where some people govern others, how would you put that idealization into effect? That was the core of his whole life’s work, which I came later to realize. At first, that first day, I was just stunned.

Trevor Burrus: What kind of person was James Buchanan?

Richard Wagner: Well, on a personal level, you might say in large groups he was a fairly reserved person. Even [00:03:30] in seminars, he wouldn’t say very much, but what he said was almost invariably very incisive and to the point and everyone paid attention to it. I think he had two kinds of loves in his life. One was his scholarship, and the other he liked to engage in what you might call gentlemanly farming. In his time in Blacksburg, he had [00:04:00] a fair amount of property. He liked, besides growing vegetables, picking blackberries and stuff. He liked to make wine. His blackberry wine was quite good. He also made zucchini wine, and that really tasted kind of green.

Aaron Powell: What was the core of … he’s the founder of public choice.

Trevor Burrus: A founder wouldn’t he be?

Aaron Powell: Or a founder of public choice, the Virginia school. What is the core of that? What [00:04:30] makes public choice economics distinct from regular economics as we might think about it?

Richard Wagner: This distinction comes down to the question of how do we conceive of government. We have an economic theory of markets where the core of the theory of markets explains how it is that a system of people, each of whom relates to each other within the basic [00:05:00] principles of private property and freedom of contract, how that kind of interaction generates coherent patterns of economic activity that are beneficial to all. Then Buchanan asked the question how can you inject governmental activities into that system of order? The usual presumption is that government [00:05:30] is a kind of planning agency that observes what is wrong about markets and acts to correct them.

That’s a theory that goes back to the very early 19th century. It’s going under the heading of one big branch of that’s called the theory of public goods. An example being a lighthouse where the claim is that people wouldn’t provide [00:06:00] lighthouses through market processes, so government has to do that. Another big branch of that is the theory of externalities that says that market transactions can cause troubles for other people that the transactors don’t take into account. That was a standard kind of theory.

What Buchanan set about doing, and not just Buchanan but some other people working with him like Ronald [00:06:30] Coase and so forth, was to explain that that’s not right. You can get lighthouses provided through market like transactions. You can get externality problems settled as well through market transactions. The economic literature subsequently came to display a wide variety of kinds of illustrations. [00:07:00] Ronald Coase for instance explained how lighthouses were provided in the 17th and 18th century in England through a form of market transaction. Someone like Steve Chung probably 40 years ago illustrated how the claims of the impossibility of getting enough pollination services with bees was handled through market contracts [00:07:30] between beekeepers in the one hand and various kinds of pasture owners on the other hand to relocation where bees are any season.

What came out of this was also I think a recognition that government itself is not some kind of planning entity, because the sheer complexity of modern life [00:08:00] means that no agency, no person can manage the affairs of an entire nation. Government has a decentralized market‐​like structure that operates under peculiar kinds of institutional arrangements. I think the ideas [00:08:30] behind public choice was to say, “Well, let’s just apply economic ideas to political activity and see where it goes.” That was the starting point from Buchanan’s work is it started off that he just wanted to develop the theory of public finance in a different way where if you say, “Well. If public finance is not a subject that … a public finance theorist doesn’t [00:09:00] tell a politicians what would be a good act of state, but rather the public finance theorist is simply trying to understand and explain what it is that governments do ho they do it, and why they do it.” Public finance becomes a scientific activity and not a kind of prescriptive activity. That was the basis of Buchanan’s work, what his starting point was.

Trevor Burrus: You have a great [00:09:30] little analogy that I’m going to use in future lectures when I talk about public choice, and you talk about in Buchanan’s public finance discussion where if you are trying to figure out the reasons why a monarch is funding, taking certain taxes or funding in certain ways, you do a basic individual choice. Why does that monarch make those choices? Maybe he really likes flowing blue gowns, so they’re funding [00:10:00] a bunch of indigo or whatever. That’s just individual choice. If it’s an oligarchy, you have to figure out how a bunch of people make decisions, and if it’s a democracy or something resembling it, you have to have a whole different theory about how choices emerge from the people and rules that they play by, which is what Buchanan was very much focused on.

It’s amazing to me that that took so long, that idea, that obvious idea that there’s something different about it. Like when you just say, the government [00:10:30] decided, it’s not the same as saying Henry VIII decided, but a lot of times we talk like it is as opposed to figuring out all the forces that go into the quote/​unquote “government” deciding. Why did it take so long for someone like Buchanan to come along and say, “You’re missing huge parts of what’s interesting about this”?

Richard Wagner: I don’t know. One of Buchanan’s prime intellectual heroes was a Swedish economist, Knut Wicksell. In 1896, he published the piece of [00:11:00] work that Buchanan centered on in his constitutional work about the importance of unanimity at one stage. Wicksell has a famous quotation in his book there to the effect that up to his time, 1896, the theory of public finance is based upon the presumption that the world is ruled by autocrats.

Aaron Powell: Can I just jump in and can you define [00:11:30] public finance? We’ve used the term a lot, but what exactly is public finance?

Richard Wagner: Public finance is the study of the economic activities of government. That’s pure and simple, budgeting as well as regulating.

Trevor Burrus: Both how it collects money and how it spends it?

Richard Wagner: Yes. The way in which it had traditionally been studied was that this was the domain of state craft, of rulers. The [00:12:00] task of public finance was, among other things, to advise a ruler on what would be a good tax system or what would be the right amount to spend on this activity or that activity. The attack that Buchanan took goes back to Wicksell and some Italians was to say well, governments do things for the same reason ordinary people do things. Now, to say there are [00:12:30] politicians who have desires that they want to pursue. They face various kinds of constraints in pursing their desires, and you ought to be able to generate an explanation or explanatory theory of public finance, and that’s what became public choice. There was some precedence there in a group of Italians starting in the very late 19th into the [00:13:00] early 20th century who thought or tried to do much the same thing, but it was Buchanan who really carried that forward and it became public choice.

Trevor Burrus: I’m sure that we talked about this before a little bit before we started recording, but maybe some of our listeners have particularly tuned into this episode because they’ve heard of a book called Democracy in Chains by a woman named Nancy MacLean from Duke University. [00:13:30] Now, you were writing this book for a while. It came out a month before Nancy MacLean’s book, Democracy in Chains. I’m sure you weren’t planning on heading it off before it came out, but it is kind of interesting that Nancy MacLean wrote a trade book that is largely about James Buchanan.

The subtitle of the book if any listeners are not familiar with it, just to give you an idea of the flavor, The Deep History of the Radical Right’s Stealth Plan for America. This is her task. It’s nominated for a National Book Award now. There’s been a lot [00:14:00] of discussion, and we’ll put some links.

Aaron Powell: Do you regret giving away the stealth plan a month before her book came out?

Trevor Burrus: Yeah, exactly. You published it beforehand. They could have just gone to your book. I mean, we were talking beforehand. You don’t want to ask about it, because the book contained so many errors that you almost don’t want to raise it to the point that it’s part of the discussion, but you said you had read the book. You felt obligated to. You knew Buchanan for 50 years. You’ve written much about his work. You’ve written books with James Buchanan.

[00:14:30] I guess I could ask you generally what she gets wrong about him, but that would be too big a question. Let me just ask a specific question. She claims that James Buchanan was very angered or galvanized by Brown v. Board of Education and his sort of appreciation for decentralized education and maybe some racism, but she never comes outright and says that he’s totally racist but strongly implies it and that that was a huge thing that he was going for to try and break down democracy [00:15:00] and to produce local control, which included the possibility of segregation. Did you ever hear James Buchanan mention Brown v. Board or like any of those goals in what he was pursuing?

Richard Wagner: On a number of occasions, he and I talked that he was very much an egalitarian in his basic sentiments. He had no objection to Brown decision. He [00:15:30] believed in decentralization and parental choice, student choice, but he did so within an orientation, in a liberal orientation of people being able to develop their talents and abilities. He was certainly an opponent [00:16:00] of the segregated schools that existed at the time, and I don’t know where Nancy MacLean got these kinds of ideas. I think as far as I can tell from reading her that she very strongly has you might say enlisted in a kind of Antonio Gramsci, kind of progressivist march through the institution so to speak where I think she sees her fundamental [00:16:30] challenge are participating in this kind of effort to undermine the traditional American institutional arrangements of limited governments, individual responsibility for one’s doings, free markets, decentralized governments, and so forth.

I mean she’s just a very standard kind of lefty in this regard who I think with the idea of [00:17:00] the long march through the institutions that may not be the creation of Antonio Gramsci, who was an Italian communist. It might have been Lenin, but still the idea was that in order to set the conditions for the new collectivist way of living in modern western societies, you had to destroy a lot of kind of institutional remnants. You couldn’t just have one big idea [00:17:30] the people would embrace, but rather you had to go through and tear down a lot of the kinds of structures of living and thinking and believing to set the conditions for a new system to arise.

I think she recognized that one of the obstacles to that march has been the development of public choice theorizing that puts political figures, political institutions on [00:18:00] the same level as everything else in society. It demystifies politics and politicians, where I think her program very much requires some certain mystification of the political or some elevation of the political. I think in her eyes, Buchanan is really a symbol of that. I mean, she knows nothing about Buchanan’s economics, his way of thinking. She says so [00:18:30] in her book. For her, Buchanan is a symbol of everything that she regards as bad in modern life. To make that symbolic point, she tells numbers of kinds of stories that aren’t true in terms of Buchanan’s own work.

For instance, she refers to the Southern Agrarian David Davidson, who was a known kind of racist and so forth, [00:19:00] because Davidson used the term leviathan. Buchanan never cited Davidson in any of his work. He never talked about him with me ever, and leviathan of course goes back to Thomas Hobbes. Hobbes was a major political thinker that Buchanan‐

Aaron Powell: A little bit higher than David Davidson I would say, yeah.

Richard Wagner: Yeah. It was this kind of thing. Or again, another example was that her very first chapter was titled [00:19:30] I think something like the marks of the master class or something like that.

Aaron Powell: Something like that, yeah.

Richard Wagner: It was John C. Calhoun. Again, because never cited Calhoun, but what MacLean took about Calhoun was his slave owning characters and qualities and thought that everything about Calhoun was pro‐​slavery. I have no idea what [00:20:00] Calhoun’s position was on these things, but it’s also notable that Calhoun was a very major political thinker. In fact, Calhoun’s ideas about federalism are to some extent found within the Swiss constitution, which is a widely recognized, quite successful democracy that has much kind of decentralization, has various kinds of built in procedures by which sets of cantons can reverse national legislation. Which [00:20:30] isn’t exactly like Calhoun, but it’s in that kind of family of how do you operate a federal system of government where one of the tendencies to be fought against is the federal government to act as a kind of a cartelizing agent that thereby the states and the federal government act as an entity through such things as federal grant programs and things like this. [00:21:00] The Swiss, they have certain features of their constitutional arrangements are very much in the spirit of Calhoun’s thinking.

Trevor Burrus: But did you hear Buchanan ever mention Calhoun?

Richard Wagner: No.

Trevor Burrus: MacLean, I think her actual term is intellectual lodestar. Buchanan’s intellectual lodestar is John C. Calhoun, which seems to me intellectual malpractice at the very least.

Richard Wagner: It’s terrible intellectual [00:21:30] malpractice, but I guess you might say that from her point of view as an enlistee in this long march through the institutions to advance the cause of progressivism, she happened to hit upon Buchanan as symbolizing a lot of the style of thinking that supports a lot [00:22:00] of the resistance to this progressivist march. I think that probably, I don’t know her, but I imagine that was … why does a scholar select a certain topic for a book?

Trevor Burrus: Going to her title, Democracy in Chains, maybe trying to put ourself in her position as much as we can, why might someone who reads Buchanan think that he does want to constrain democracy or put it in chains? I mean is there something in Buchanan that would actually lead [00:22:30] someone to think that?

Richard Wagner: Well, she says right up front that she doesn’t understand what Buchanan is thinking, doesn’t care to, made no effort to. How she could say that, I don’t know. Sure, there is a sense of democratic government as being constrained, but that’s nothing mysterious. It goes back to the simple question, how [00:23:00] can you even talk about democracy as a system of self governance? We can imagine monarchy. We say there’s a monarch. He wiggles his nose and something happens. That’s the theory of monarchy. It’s a theory of choice.

But now we go to democracy, and the idea of democracy is that people are self governing people. Suppose you have a small group, say 500 people, [00:23:30] let alone 300‐​plus million people. Suppose you have a small group of 500 people. How can they self govern themselves? Well, 500 people by itself is just a mob, which means those people are going to have to construct some kind of institutional organizational arrangements. They’re going to have to do things like what are the kinds of offices, [00:24:00] are there going to be committees, there’s going to be a chairman, what procedures by which you even give a speech. 500 people can’t speak at once, which means in turn that there’s going to have to be some kind of office of a chairman who can recognize speakers, limit speech.

These are all chains if you want to use that term, because rules govern [00:24:30] all interactions. Rules, conventions, standards, however you want to label it. To talk about democracy in chains I think does not at all reflect a serious scholarly effort, but rather reflects a certain kind of ideological effort to create an image that might resonate with readers. That’s all I can think of.

Aaron Powell: I think there’s [00:25:00] also a tendency, and this seems to be on display here, the kind of progressivism, the radical progressivism that someone like Nancy MacLean advocates requires restricting democracy a fair amount in and of itself, because the reason that we don’t have a radically progressive country right now is because most Americans don’t agree with the full platform of radical progressivism. If you gave Americans what they wanted, we wouldn’t end up with that. [00:25:30] That seems to be her book, and you saw this with the blow up over the influence of the Koch brothers. There was a recent long article in The Intercept by Lee Fang about how Atlas, the small international think tank‐

Trevor Burrus: Down the street from us.

Aaron Powell: Down the street from us is basically controlling all of Latin America, and that’s why we don’t have socialism throughout Latin America.

Trevor Burrus: Although it’s about 40% or so, so it’s doing pretty well.

Aaron Powell: [00:26:00] If Atlas were bigger.

Trevor Burrus: Yes, of course.

Aaron Powell: I mean, I think libertarians do this too. We have this tendency to say like the reason that our ideas are not more popular or have not been affected at a larger scale is because there’s some various influence behind the scenes, whether it’s dark money, or it’s these people at the University of Virginia and George Mason really controlling [00:26:30] things, or it’s government schools indoctrinating the children. If only we cleared away the nefarious actors, the secretive cabals, our ideas would dominate and everyone would accept them, when in fact the much more likely explanation is simply like you haven’t convinced people. Your ideas, they disagree with you, maybe rightly, maybe wrongly. Maybe if they had more information, they’d be more likely to agree with you. Maybe if they had more information, they’d be even less likely [00:27:00] to agree with you, but that’s where it is. Pointing at people like James Buchanan, or the Kochs, or the teachers unions, or whoever else is just a way to deflect I think like maybe your own rhetorical failings, or the lack of rigor in your own ideas, or simply just the fact that it’s hard to convince masses of people of any particular set of ideas.

Richard Wagner: I think that’s an excellent point. I would sort of add to that [00:27:30] I guess my own observation in a sense that I think it’s important to accept the notion that societies are to some extent inherently venues of simmering societal civil warfare. I mean, you hope that the warfare intensity is simmering and not boiling, but I think there’s something in human nature and our interest in striving for improvement that is [00:28:00] going to bring us in conflict with one another in various ways. What the dimensions of that conflict are, the axes of that conflict, are themselves emergent products of human imagination and invention.

Who for instance ever walked out somewhere and found say 10 people with a round ball and say, “Let’s all stand here [00:28:30] or there and see how many times in 15 minutes say we can pass the ball up and down, see how many goals we can make.” That’s stupid. They’re going to say, “Well, let’s divide up into teams and contest each other.” I think that contestation is part of human nature, and faction is part of human nature. This is one of the fundamental features of going back to the Federalist Papers was recognition that faction in humanity was never something that was going to be abolished. All you [00:29:00] can hope to do is live productively inside of it.

What economic theory fundamentally tries to explain is how it is that a social system where relationships among people are governed by those legal principles of private property and freedom of contract will tend to generate progressive, wealthy, peaceful societies. Whereas to the extent those relationships are governed by the ideas of common [00:29:30] property, common ownership where with common ownership it means that if I make a bad decision, things don’t do well, I don’t pay for it. Everyone contributes and pay for it, so who pays for it? Taxpayers pay for it. Then to boot if taxpayers become an increasing shrinking part of the total electorate, you get increasingly into a world where for many people government is almost free. Basic [00:30:00] economic theory would say that that’s a recipe that’s going to increase the intensity of the simmering that’s always going to be present in societies anyway, because I think that kind of striving for superiority, for glory to use Hobbes’ term, is part of our natures.

Trevor Burrus: We talk about James Buchanan, and you mentioned previously that he would have considered himself a real democrat, [00:30:30] someone who deeply believed in democratic, but it was democratic warts and all it seems to some extent, that it was trying to take people and figure out what is the best way to construct the government that they want. What was he mainly trying to present with a book like The Calculus of Consent, which is maybe you call the urtext of Virginia political economic school with Gordon Tullock. What is that book for example, what [00:31:00] is Buchanan discussing in that book?

Richard Wagner: The Calculus of Consent had a couple I think of objectives. One simple one was to say that the American constitution had a very coherent economic logic behind it. You get going back to 1885, Woodrow Wilson published Congressional Government, and in that book Wilson excoriated [00:31:30] the kind of American system of checks and balances and so forth and wanted to have a streamlined kind of centralized state run by the right people. Which is always an interesting thing if you think about it how it is that all presidents promise to uphold the constitution when they take the oath of office, and yet most of them are dedicated to subverting‐

Trevor Burrus: To undermining it.

Richard Wagner: One form or another. Probably have to go back to Calvin Coolidge [00:32:00] to find someone really dedicated to upholding the constitution, but still. This was the main focus of The Calculus of Consent saying that there is a sensible logic to checks and balances contrary to the whole progressivist notion that chaotic results come out of democracy. Going back to another part of the question you asked about Buchanan’s very deeply felt democratic sympathies [00:32:30] was that again he was deeply concerned with the normative position that people together, the activities people undertake together should be of value to all of those people. That’s what he means by self governance.

Another way of putting that idea is that people shouldn’t really have the experience of being [00:33:00] bossed in life, pushed around in life. Sure, you might agree to work for someone under the conditions they lay out for you, so you show up on time and so forth, but you’re not really being bossed there. You’ve agreed to it. This kind of quality of not being bossed, of self governance, that’s what led him to think, “Well, that’s fine as an ideal, but how might [00:33:30] you go about putting some institutional structure to that?” Like for instance one of Buchanan’s lifelong interests was in federalism as a form of government. The idea there is that you talk about self governing republics, but what are the boundaries of the republic? [00:34:00] Because you’re talking about some boundaries that’s going to cover a set of people. Are those boundaries just posed, or do people create them in various ways?

The organization of governments, the idea that you could have some activities undertaken by a national government, some by towns is very much a part of this thinking, which leads in turn into questions [00:34:30] as to whether that kind of arrangement is going to be a highly competitive system of governance or is going to turn out to be a cartelized system. There’s a fellow at the GMU law school, Michael Greve, who just … I guess not just, a couple years ago now put out a book, important book on cartel federalism and going through the tendencies for our federal system to morph from an open competitive [00:35:00] system into a cartel system. This again was very much part of Buchanan’s extreme democracy.

His work on public debt is the same thing, reflects the same kind of concerns, which is a matter of how can a democratic system [00:35:30] handle the situations where political figures today are making decisions or judgements that will not manifest for say 20 years. Within the market framework of property and contract, even at my age I can reasonably go out and invest in say an oak grove, even though when those [00:36:00] trees are ready to be harvest, I might be dead. It can go to my estate, my heirs. Thereby, I will have good reason to manage it well. But if I were in the position of being a politician, it means I have a lease hold to this force for the term of my office. When the term expires, I’m gone. How do I manage the forest [00:36:30] in that setting? In the case of public debt, if you have the recognition that politicians much prefer to tell constituents what good things they can do for them rather than what cost they have to bear to receive those good things, I think you’re set up for kind of a systematic tendency towards budget deficits, which is a kind of a democratic [00:37:00] irresponsibility.

It doesn’t mean, in Buchanan’s estimation and his judgment, that therefore you should not do things today to take care of the future, but rather perhaps suggests things like if a government is going to borrow today for long run projects, it should perhaps assign liabilities today to who’s going to [00:37:30] pay those projects in the future. Just like you assign liabilities for mortgage debt, car debt, and so forth, those debts stay with you. If you sell your house or your car, you have to make good on those future payments. It’s not denying democracy, but saying how do you marry responsibility or bring responsible action into a democratic setting.

Trevor Burrus: I think that a good … it just [00:38:00] occurred to me that the famous quote, which I’m not sure where it came from originally, but democracy is two wolves and a sheep voting over what’s for dinner. Maybe you could say to sum up Buchanan’s thought is to say that he was trying to keep democracy from being that. If you did have two wolves and a sheep, what are the rules and institutions that would actually have the sheep be okay with being in the voting block with the wolves. In this situation, the sheep could be the minority or it could be the people in the future who have to pay [00:38:30] the debts that they’re going to put on them, and just try to keep it from that while keeping the legitimacy of democracy.

Richard Wagner: That wolf and sheep illustration is a wonderful one that reminds me that an early 20th century fellow, Vilfredo Pareto. At that time, there was a big discussion. It has contemporary relevance. I still discuss it, about what a good government should do to maximize social welfare. This is the standard public finance question. [00:39:00] Pareto responded to this controversy that had been going on and said, “What do you mean by maximizing social happiness, when social happiness for the wolf requires eating the sheep, while for the lamb it requires the avoidance of being eaten?” That, what Pareto was doing was getting away from [00:39:30] this idea that government was some kind of shepherd managing the flock. The question became how the different parts can cohere and manage themselves, which was again what liberal institutions of private property are really fundamentally about.

In this case too, it’s a matter of, I’ve often thought, whether you think about the problem of public policy is [00:40:00] a problem of herding sheep. That’s the standard kind of vision is that we have this office we call policymaker, and they herd sheep and sheep just go along. Whereas if you put the problem of how do you herd cats? Well, you don’t. That I think is the real democratic setting. If it were a matter of herding sheep, we wouldn’t have had a [00:40:30] backlash against Prohibition in the 1920s. We wouldn’t have had it against wars on drugs today and so forth, because people would all be sheep and do it, but it makes a huge difference is the social problem is one of dealing fruitfully with cats or with wolves and lambs, and how the whole you might say social ecology works there. I think the basic lessons [00:41:00] of economics and of public choice is that social ecology works better the moreso human interactions are governed by principles of private property and liberty of contract.

Aaron Powell: Does this theory of democracy depend on or I guess demand taking a dimmer view of voters, of the electorate, than we tend to get from politicians and their rhetoric? We tend to get, “The people are wise.” Then [00:41:30] going back to the undo influence stuff, that if only the people really got what they wanted, we would choose well, that people can see the public good. When in fact, some of the stuff you described like the running deficits, like one of the reasons that we run deficits is the same reason that people run credit card debt. We like to spend now, and we don’t really want to think about how we’re going to pay for it in the future, because that’s not as fun as spending. People get all sorts of crazy [00:42:00] ideas, and sometimes those crazy ideas can spread very quickly and can consume large portions of the population. Does this theory of democracy require to some extent being less democratic or being more willing in the cause of making the government work to overrule or ignore the will of the people?

Richard Wagner: This is a very important question that digs right into some of the core [00:42:30] of democratic ideas and democratic theory. It goes back, as far as that goes, it goes back to the debates between the Federalists and the Antifederalists going back prior to the Constitutional Convention where the Antifederalists gave more emphasis upon the smaller governments and upon the importance of what you might call civic virtue. Civic virtue within the Antifederalists especially was, I think, it’s [00:43:00] an important quality. It’s something that is cultivated naturally within markets. For instance, within the system of private property and freedom of contract, if you buy a car on time and find your loan payments are too high and you’re not willing to make them, you’ll have to sell the car and walk or whatever else you might do. [00:43:30] You can’t borrow, because there’s a disciple because the rules of the market mean you’re going to be liable for the value consequences of your actions.

Now, the democratic form gets away from that by saying, well, if a government spends too much on something so it’s not worthwhile, there’s no person who’s responsible. If a private business [00:44:00] undertakes a bad project, that owner is liable for the consequences, and government no. It’s taxpayers who are liable for the consequences. Now, with respect then to civic virtue, see there’s a problem. The basic idea of equilibrium theory in economics is that any promise you make to someone about some [00:44:30] benefit they’re going to receive is going to imply a complimentary promise made about the cost they’re going to have to bear. That’s just a simple fact of economic theory that we have a demand side and a supply side.

Now, if you look at political programs and speeches, almost all of them refer to what people are going to receive. Rarely do they [00:45:00] refer to what they’re going to have to do to make that possible. If they do refer at all to cost, it’s going to be some amorphous kind of notion of other people pay the cost, you don’t pay the cost. Well yet, even take a simple thing, a small entitlement like Herbert Hoover’s old chicken in every pot kind of claim. That claim of emphasizes chickens. You receive chickens. [00:45:30] What even you don’t think about there is do you want to go out and work on the chicken farm to make chickens possible? But you can’t have a chicken in every pot unless there are people who are working to provide those chickens. I think civic virtue is kind of the ability to live in recognition of promises made to receive benefits simultaneously [00:46:00] entails obligations to make those possible.

I think one of the dangers in contemporary democratic politics is the severing of this duality between promise and obligation. Whereas in basic private action principles, a promise simultaneously is an obligation. When we get into politics, [00:46:30] in a world where everyone pays the same tax, you could say that a promise is close to an obligation. Everyone’s in it together. But you get to a world increasingly where some people pay taxes, many people don’t, or also you have various kinds of rates of tax. All these things work to weaken the duality between promise and obligation. Yet [00:47:00] maintaining that duality is an important part, I would submit, of responsible action.

Trevor Burrus: To Buchanan, if we’re talking about sort of how we conceive of voters within public choice theory and acknowledging that voters may not have high incentive to be very politically informed and some of the things that you kind of mentioned there, I’m sure Buchanan agreed that that was part of the limitation of voting. Did that mean [00:47:30] he judged voters excessively for not being informed? Was he against voting or against voters and against voter ignorance as something that made him mad? Was that the kind of … because I think that someone like Nancy MacLean who’s very into democracy purportedly and voter education, Get Out the Vote campaigns is the most important civic act you can do. What would James Buchanan generally think about voting?

Richard Wagner: I never asked him that particular [00:48:00] question directly, but I certainly had a number of conversations with him and I certainly know that he wouldn’t think much about these Get Out the Vote campaigns. These would be missing the point, which has to do with what you might call the environment within which rational, responsible action is undertaken. The main thing there is that there are some [00:48:30] kind of environments within which people act that promote responsible, clear headed kinds of action.

Again, markets are a lovely example of that. Whether it be you’re a producer who wants to add a new location to a store you open because you think that’s going to increase the net value of your firm, if you’re mistaken in that judgement, [00:49:00] you bear the consequences. In turn, that means you’re going to be reasonably thoughtful and sincere in trying to make a judgement as to whether that’s good or bad, because you are responsible for the value consequences of your actions.

Now, when you get to collective action, governmental action, nobody individually is responsible for the actions they take. Now what does that suggest in a world where perhaps there are some actions that [00:49:30] need to be undertaken collectively but many don’t? You certainly don’t have any need to have collectively supported health insurance for instance, but this would suggest that the wider the range over which collective action takes place, the less the informational substance that goes into decisions that are going to be made, the more fully those kinds of actions are [00:50:00] going to be determined by people who have very high investments in the outcome of different kinds of policies, which is far removed from any kind of notion I think of reasonable self governance. All the things like Get Out the Vote do and stuff like that is validate the kind of current system and its direction of movement.

I think just a simple comparison [00:50:30] of the properties of a system of social organization where in the one hand what you choose to do, you’re the owner of versus a system in what you choose to do, you don’t own. A simple illustration that I think all students recognize would be if 100 people go into a restaurant and they each have to pay for [00:51:00] their own meals, you’re going to find various decisions made, but each person is going to make his or her choices based upon what he or she likes compared to what they’re going to pay. Then you say, “Well, we’re going to … there’s no tab for each of you. At the end of the night, I have your credit card numbers, and I’ll divide by the number of people in attendance.” What you’re going to find is the total bill [00:51:30] is going to be substantially higher, that many people will choose to order something because they don’t have to pay for it, that they might have otherwise done something cheaper. That’s the fundamental democratic setting.

In the restaurant case moreover, I use the example of 100 people, each of whom pays 1% of the [00:52:00] total bill. Wherein modern tax systems, our tax system as a way of charging, within the federal income tax roughly half the taxpayers are free of tax. Now, they pay Social Security tax, but that kind of system nonetheless is one that breeds irresponsible conduct because people don’t for the most part bear the [00:52:30] value consequences of their actions.

Trevor Burrus: Now, I want to go to this question. You write a couple times for example talking about Buchanan and John Maynard Keynes. You write, “Keynes’s social philosophy could reasonably be described as guided or controlled liberalism in contrast to Buchanan’s genuine liberalism.” Now on this question of being a genuine liberal, I’m going to go back to the MacLean book and [00:53:00] read a quote from Buchanan from an essay he wrote called Why I Too am Not a Conservative. “The classical liberal is necessarily vulnerable to the charge that he lacks compassion in behavior toward fellow human beings, a quality that may describe the conservative position, along with others that involve paternalism on any grounds. George W. Bush’s compassionate conservatism can be articulated and defended as a meaningful normative stance. The comparable term compassionate classical [00:53:30] liberalism would approach oxymoronic classification. There is no halfway house here. Other persons are to be treated as natural equals, deserving of equal respect and individually responsible for their actions, or they are to be treated as subordinate members of the species, akin to that accorded animals who are dependent.” That’s Buchanan.

Here’s how Nancy McLean writes that quote, and then I want you to comment on what this says about both Buchanan and MacLean. ” [00:54:00] Koch,” this is Charles Koch or possibly Fred Koch. “Koch learned as a young adult from his mentor Baldy Harper that the great social problem of our age is that of designing the preventive medicine that will stop the eroding of liberty in the body politic. Harper warned that once the disease had advanced, a bitter curative medicine is required to gain already lost liberty. James Buchanan revealed just how bitter the medicine would be. People who failed to foresee and save money for their future needs, Buchanan wrote in 2005, [00:54:30] are to be treated as subordinate members of the species, akin to … animals who are dependent.” That is how MacLean described what Buchanan said about people as subordinate members of the species.

Now, aside from the critically intellectual malpractice of how bad of a misquote, why would Buchanan come along and say there is no middle ground in classical liberalism, there is no coherence to the idea of compassionate classical liberalism [00:55:00] or liberalism, and why does that make him a genuine liberal?

Richard Wagner: I don’t know why Buchanan would say that actually. I never liked particularly much that particular‐

Trevor Burrus: That essay?

Richard Wagner: Essay of his. I guess I don’t draw that rigid a distinction between liberalism in its proper meaning and conservatism, if you say that what you want to do is [00:55:30] conserve useful, workable institutions. Hayek and Edmund Burke had a lot of points in congruence with one another actually. I think in that respect, I often refer to Benjamin Franklin where at the end of the Constitutional Convention, a woman was reported to have asked Franklin, “What kind of government did you people [00:56:00] create?” He responded, “A republic if you can keep it.”

Now, in that kind of response lies a recognition that the kind of system of liberty that was created doesn’t automatically maintain itself. It has to be fought for and against forces of erosion, just like in natural sciences there’s [00:56:30] the concept of entropy, of order becoming disorderly. At the same time, I think in societies there’s certain kinds of forces of entropy at place that a system governed by market arrangements, liberal arrangements, is not something that’s going to maintain itself. It’s been going through a lot of erosion over the past century of so, although I think the basic [00:57:00] support for that system still resides and still exists.

I think the quote you read from Nancy MacLean is just backwards in the sense that what it illustrates is in fact the understandable erosion of the kinds of prudent actions that people would take to care for themselves within [00:57:30] a market arrangement. Yes, they have been eroding, and much of that erosion has taken place through the expansion of governmental activity as far as caring for people and so forth. Our whole history is full of various kinds of philanthropic organizations, mutual aid societies. There was a historian some maybe 20 years ago, David Beito, who wrote a wonderful book on [00:58:00] mutual aid societies prior to the welfare state, and how those forces were undone through the coming of the welfare state, and how within realms of private charities that …

The basic idea I think of liberalism is kind of a humane, tolerant kind of spirit. A charitable kind of spirit are all part of I think the liberal [00:58:30] orientation and attitude. The liberal attitude I think is rightfully one that treats people as individuals, not as instruments to be manipulated. I think they become instruments to be manipulated within the progressivist scheme of thoughts that sees people as children and wants to keep them there in tutelage or in bondage [00:59:00] rather than seeing them as people who have the capabilities of being fully function individuals. What she’s describing is, yes, it’s the expected result of the undermining of traditional liberal institutions that have taken place to this extent is going to, to [00:59:30] the extent people come to think that I’m not going to have to pay for what I order in the restaurant but it’s going to be a general charge about the government, I’m going to eat better. But that’s the problem.

Then the problem is there is a problem of how do you get back, or how do you restore a system of liberal government? It’s not an easy question. I don’t think there is any recipe there. It’s something that those of us [01:00:00] who believe in the importance of liberty and responsible action have the obligations and the talents to make our cases in the various best ways we can. But I would just simple remind everyone, at least it’s my social theory is that recognition should be that, and it goes back to Hobbes [01:00:30] at least, is that societies are battlegrounds, and that humanity is going to have divisions, and that the political problem is always one of contending for how we’re going to conduct our lives. I think that’s just human nature.

The German [01:01:00] political theorist from the early 20th century, Carl Schmitt, once posed the problem, “Well, are humans dangerous creatures or not?” How you answer that question says a great deal about how you approach the problem of political economy. Buchanan approached it as they’re dangerous creatures who … Robert Frost had this beautiful poem. I forget. The Mending Wall I think was [01:01:30] the title. The closing line there was, “Good fences make good neighbors.” Frost wasn’t trying then to separate people, but rather saying if you knew where your boundary was, I knew where mine was we could be fine neighbors. Whereas if that was up for grabs, then we have no option but to fight. That’s the real message of liberalism, of Buchanan’s liberal political [01:02:00] economy. Very much the underappreciated notion in play today is that liberal political economy, liberalism is not, contrary to Nancy MacLean, a matter of a few rich people trying to run the world as they would see fit as puppet masters, but as a way of bringing everyone into a [01:02:30] world in which they can choose the adventures and activities that they want to have with other people within the framework of market institutions of property and contract.

Trevor Burrus: Thanks for listening. This episode of Free Thoughts was produced by Tess Terrible and Evan Banks. To learn more, visit us on the web at www​.lib​er​tar​i​an​ism​.org.