A Presidential Tribute to James M. Buchanan: In Appreciation of the Man, His Work, and His Example

[Author Affiliation]Dwight R Lee, * O'Neil Chair of Global Markets and Freedom, Cox School of Business, Southern Methodist University, Dallas, TX 75275, USA; E-mail: leed@smu.eduJR Clark, [dagger] Probasco Chair of Free Enterprise, The University of Tennessee at Chattanooga, 313 Fletcher Hall, Department 6106, 615 McCallie Avenue, Chattanooga, TN 37403, USA; E-mail: j-clark@utc.edu ; corresponding author1. IntroductionEveryone presenting an article in this session has been a student of Jim Buchanan, either through the privilege of sitting in his classes, being a colleague of his, or through his influence on how we thought about a wide range of economic issues. Many of us would agree that without Jim's example and encouragement when we were young and struggling economists, we would not have followed him as president of the Southern Economic Association (SEA). In order to express appreciation for Jim, his work, and his example, and using his 1963 SEA Presidential Address as a starting point, we hope to illustrate some of his connections with, and influence upon, our own published work and careers. Some of my more direct connections to Jim's influence arise from jointly authored work with J.R. Clark, Secretary/Treasurer of the SEA; thus, I have enlisted his able assistance in this effort.Jim's SEA Presidential Address (Buchanan 1964) is a methodological piece making the case that the study of economics is best approached by concentrating on exchange and the coordination that arises spontaneously when people pursue their interests subject to market constraints. Jim contrasts his position to that of Lionel Robbins (1932) who saw economics as the science of the choices necessitated by scarcity. Jim's sharp contrast with Robbins fomented the rise of the two major economic methodologies widely discussed in the literature today as the "value paradigm" and the "exchange paradigm." But, the roots of the contrast, according to Wagner (2007), find seed as far back as Leon Walras and Karl Menger. More importantly, however, both Kohn (2004, 2007) and Douglass (2012) provide evidence that Robbins' value paradigm is increasingly being replaced in contemporary economics by the exchange paradigm advocated by Jim Buchanan. Boettke, Fink, and Smith (2012, p. 1219) rename the distinction as between mainline (exchange economists) and mainstream (choice-necessitated-by-scarcity economists) offering significant evidence that "over the period 1970 to 2007 mainline [exchange] economists had more of an impact than mainstream economists."We find this increasing appreciation for, and impact of, the exchange methodology rewarding since it has been the lens through which much of our own work has been developed. After discussing Jim's position on exchange in his Presidential Address, we relate it to a few of his comments on the broader nature of exchange from work that both preceded and followed his address. Finally, we see this work as segueing into some of our own published work.2. It Takes at Least Two to Make an EconomyBuchanan argues that economists have relegated themselves to doing nothing more than solving engineering problems by accepting Lionel Robbins' view that economics is about allocating limited resources to achieve a clear objective (maximizing a utility function), subject to specified constraints. Instead, Buchanan sees economics as the study of Adam Smith's (1759) invisible hand, or how markets coordinate the actions of individuals pursuing their own interests by making genuine choices. The problem with Robbins' approach to economics, in Buchanan's view, is that it has led economists to begin with the assumption that "the utility function of the choosing agent is fully defined in advance" (Buchanan 1964, p. 217). But this means thatno "decision," as such, is required; there is no weighing of alternatives. On the other hand, if the utility function is not wholly defined, choice becomes real, and decisions become unpredictable mental events. …