Nobel laureate economist James M. Buchanan, who died this week at the age of 93, helped make the case that government cannot take the place of private, local charities in providing for social needs.
Dr. Buchanan’s book, The Calculus of Consent, coauthored with Gordon Tullock, challenged the dominant thinking about the role of government when it was published in 1962. At that time, there was increasingly widespread acceptance not only of the possibility but the necessity of big government: the small-government approach of President Coolidge was held to be largely responsible for bringing about the depression while president Roosevelt’s “New Deal” was credited with pulling out nation out of depression.
It seemed that a vastly expanded government had led not only to triumph over the Nazis but a roaring U.S. economy in which G.I.-bill educated men could provide a standard of living for their families vastly above what had experienced as children. President Kennedy’s “New Frontier” and President Johnson’s “Great Society” further extended the activities of government that were meant to address a vast array of social ills, from illiteracy to childhood poverty to decrepit housing.
Not only did there seem to be evidence of the success of government in addressing social ills, but this success was explained by the theories of Keynesianism, which justified government spending to stimulate the economy and provide for public welfare.
Buchanan and Tullock’s Calculus of Consent challenged the consensus among the public and intellectual elites who were convinced only big government could address social and economic challenges.
Buchanan’s central contribution was to bring a key assumption in economics -- that people respond to incentives -- to the analysis of politics. Buchanan, in the Calculus of Consent and throughout his prolific career, argued that elected officials seek to be reelected and bureaucrats seek to extend their power, and so they pursue programs that advance these self-centered objectives instead of, or at least in addition to, programs that best serve the public.
As noted in Buchanan’s Washington Post obituary:
“His big contribution,” Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, said Wednesday, “is that he got our profession to think of government policymakers not as platonic philosophers but as interested parties in their own right who are furthering their own views, at least some extent.”
This fact of government officials being “interested parties” has contributed to what Robert Woodson, president of the National Center for Neighborhood Enterprise, has called “a government-financed poverty industry that has claimed a monopoly on social services.” When government bureaucrats have jobs and positions of influence that depend upon their being social problems to solve, they have some interest in those problems persisting -- or at least some interest in not having private, charitable groups step in to solve those problems.
Over his long career, Buchanan was able to persuade other economists to take politics seriously and to persuade political scientists to think more carefully and shrewdly about how government officials’ private interests shape government programs -- an achievement recognized with Buchanan’s receipt of the Nobel Prize in Economics in 1986. As a result of his work, we have a better understanding of why we can’t rely simply on government but need private, local groups to address social ills -- groups whose incentives prompt them more purely to solve a problem than to advance their careers.