Abstract
This tribute to the late James Buchanan is an elaboration of themes he developed on the importance of processes in real, experienced time, especially for individual choice. The conventional way of modeling choice is to think of it as the solution to a constrained maximization problem. If, however, we look at choice as a process in time it is inseparable from the evolution and self-development of the individual. Preferences emerge in the process of their becoming. The fundamental characteristic of choice is thus the expression of autonomy and not the satisfaction of given preferences. The implications of this for normative economics are explored.
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Notes
There have been 44 prizes to 71 Laureates as of June, 2013.
Letter dated March 11, 1998 to Israel M. Kirzner and Mario J. Rizzo.
Much of Buchanan’s tribute to Frank H. Knight applies equally well to Buchanan himself. “To Frank Knight nothing was sacrosanct, not the dogmas of religion, not the laws and institutions of social order, not the prevailing moral norms, not the accepted interpretations of sacred or profane texts. Anything and everything was a potential subject for critical scrutiny, with an evaluative judgment to be informed by, but ultimately made independent of, external influence. The Knightian stance before gods, men, and history embodies a courage and self-confidence that upsets the self-satisfied propounders of all little orthodoxies, then and now” (Buchanan 1991: 244 245).
In fact, both the rolling-out and the teleological perspectives amount to the same thing. The former can be called radical mechanism; the latter radical finalism (Rizzo 1982). In either case, nothing new is added by the process. To paraphrase the philosopher Henri Bergson in the quotation above: If the process adds nothing, it is nothing.
The term “choice-like events” is used here and the word choice is put in quotations marks later on when discussing Samuelson’s revealed preference because in this approach references to the mind are eschewed. Strictly speaking, the strong behaviorist (not behavioral) theme struck in Samuelson’s original article (1938) is inconsistent with any recognizable idea of a choice. Choice means renouncing certain options and accepting others. These are acts of the mind.
When I write of preferences existing prior to the moment of choice, I do not mean that they are not supposed to exist at the moment of choice as well. I mean simply to exclude preferences that exist only at the moment of choice. These are often viewed as unstable or “tautological” preferences. (See the next section in the text below.) Preferences that exist prior to the moment of choice and at the moment of choice are often referred to as “stable preferences.”
The choices exhibit transitivity which suggests that somehow they are all pre-reconciled before any one choice is made. If mental preferences do not exist prior to the choice, however, then how are they pre-reconciled? This is yet another difficulty in the Samuelsonian perspective.
Just as logic is about the relations among propositions and is independent of human psychology, so too the logic of choice is about relations among preferences (such as transitivity) and is independent of human psychology.
In many respects the literature on choice theory is a messy mixture of revealed preference and the Hicks-Allen indifference approach. In the former approach, as developed beyond the initial article by Samuelson (1938), the economist will use the data of choices to “recover” the utility function [Varian 2010: 122–123]. This is a very misleading notion. It connotes the idea of an independently-existing utility function that is recovered—after it somehow vanished from view or at least was hidden from view. But it is supposed to have existed. This is the Hicks-Allen element in the common messy synthesis. In truth, however, the economist has simply constructed the utility function from the data.
A third error is that the economist could be wrong about whether an agent’s choice increases or decreases the agent’s well-being. For some reason, the third possibility is rarely entertained by behavioral economists.
Counterfactual preferences raise difficult issues we cannot examine here.
Consider two bets. The first is a $100 gain with probability 0.08. Call this the $ bet. The second is a $10 gain with probability 0.8. Call this the P bet. They each have the same expected value. In experiments, however, people give the $ bet a higher monetary value; yet when asked to choose they prefer the P bet. One explanation is the “prominence effect.” When comparing alternatives relative to each other, people may focus on the more prominent outcome which is here a high chance of winning $10. A low chance of winning $100 recedes into the background. See Cartwright (2011: 112–117).
“[I]t is more plausible to claim that we construct preferences and values in the consent process [than uncover a person’s existing values]. The goal of a consent procedure, therefore, is more to enable a person to realize her autonomy than it is to assist her in promoting her well-being” (679).
In Greek tautologos means “repetition of what has been said,” made up of tautos “identical” and logos “word or idea”.
For some purposes the assumption of pre-existing preferences may be adequate to the task as in the examination of repetitive or familiar choices.
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The author is indebted to Simon Bilo for his very valuable assistance. Remaining errors or infelicities of expression are the author’s responsibility.
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Rizzo, M.J. James M. Buchanan: Through an Austrian window. Rev Austrian Econ 27, 135–145 (2014). https://doi.org/10.1007/s11138-014-0260-1
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DOI: https://doi.org/10.1007/s11138-014-0260-1