Abstract
This essay discusses the arguments in Buchanan’s 1964 paper, ‘What should economists do?’, in the light of recent developments in behavioural economics. Criticizing the preference-satisfaction criterion of neoclassical economics, Buchanan argues that the central concern of economics should be to design and maintain institutions that allow individuals as much opportunity as possible to make their own choices and to engage in voluntary cooperation. He worries that using preference rather than choice as the fundamental normative concept might license social planners (and economists who see themselves as their advisers) to set themselves up as the judges of what individuals ‘truly’ prefer. This is exactly what behavioural welfare economics is now doing by using the satisfaction of (supposed) latent preferences as its criterion. Following Buchanan, I propose an opportunity-based criterion and argue that the contractarian justification for this criterion is unaffected by behavioural findings.
Some of the ideas presented in this essay were developed in discussions with Malte Dold, Alan Hamlin, Shaun Hargreaves Heap, and Christian Schubert. My work is part of a project that has received funding from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme, grant agreement No. 670103.
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Notes
- 1.
The ideas in that paper appear in a more fully worked-out form in Sugden (1985).
- 2.
I defend this view of Hume’s Treatise in Sugden (2006).
- 3.
This work is brought together in Sugden (2018).
- 4.
A similar thought is implicit in David Gauthier’s (1986, pp. 83–112) account of the market as a ‘morally free zone’. Gauthier’s contractarian theory treats a competitive market as morally equivalent to an archipelago of mutually isolated one-person island economies: ‘Each person is thus a Robinson Crusoe, even in the market’ (p. 91).
- 5.
This is a conception of individual agency as a continuing locus of responsibility. I say more about this in Sugden (2004).
- 6.
Approval of unilaterally self-imposed constraints is a recurring theme in Buchanan ’s work, aligned with his advocacy of constitutional rules to restrict day-to-day political decision-making. His analysis of the ‘Samaritan’s dilemma’, for which the solution is a self-imposed rule against generosity to would-be ‘parasites’, is an example (Buchanan 1975a).
- 7.
In fairness to Buchanan ’s adversary, I should add that I was fortunate in being able to go one of the ‘new universities’ established in Britain in the 1960s on the recommendation of a committee chaired by the then Lord Robbins. My education there had all the properties that tend to foster self-creation .
- 8.
Many of these effects were known, to psychologists and to some economists, long before the explosion of interest in behavioural economics . (For example, Wicksteed’s [1910] exposition of neoclassical economics includes psychologically acute discussions of many now-familiar ‘anomalies’.) What is new is the widespread recognition of the economic significance of these effects.
- 9.
There is far too much evidence about these and other ‘anomalies’ for specific citations to be useful. A representative sample of this evidence is collected in Kahneman and Tversky (2000).
- 10.
As far as I can recall, issues arising from behavioural economics did not feature in any of the many conferences at which Buchanan and I were co-participants. In his later years, I would have been reluctant to initiate discussion of topics on which I expected the two of us to have fundamental disagreements.
- 11.
References
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Sugden, R. (2018). What Should Economists Do Now?. In: Wagner, R. (eds) James M. Buchanan. Remaking Economics: Eminent Post-War Economists. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-03080-3_2
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