The Constitution of Economic Policy

Abstract

On this of all occasions I should be remiss if I failed to acknowledge the influence of that great Swede, Knut Wicksell, on my own work, an influence without which I should not be making this presentation. Many of my contributions, and especially those in political economy and fiscal theory, might be described as varied reiterations, elaborations, and extensions of Wicksellian themes; this paper is no exception. One of the most exciting intellectual moments of my career was my 1948 discovery of Wicksell's unknown and untranslated dissertation, Finanztheoretische Untersuchungen (1896), buried in the dusty stacks of Chicago's old Harper Library. Only the immediate postdissertation leisure of an academic novice allowed for the browsing that produced my own dramatic example of learning by serendipity. Wicksell's new principle of justice in taxation gave me a tremendous surge of self-confidence. Wicksell, who was an established figure in the history of economic ideas, challenged the orthodoxy of public finance theory along lines that were congenial with my own developing stream of critical consciousness. From that moment in Chicago, I took on the determination to make Wicksell's contribution known to a wider audience, and I commenced immediately a translation effort that took some time, and considerable help from Elizabeth Henderson, before final publication. Stripped to its essentials, Wicksell's message was clear, elementary, and self-evident. Economists should cease proffering policy advice as if they were employed by a benevolent despot, and they should look to the structure within which political decisions are made. Armed with Wicksell, I, too, could dare to challenge the still-dominant orthodoxy in public finance and welfare economics. In a preliminary paper (1949), I called upon my fellow economists to postulate some model of the state, of politics, before proceeding to analyze the effects of alternative policy measures. I urged economists to look at the constitution of economic policy, to examine the rules, the constraints within which political agents act. Like Wicksell, my purpose was ultimately normative rather than antiseptically scientific. I sought to make economic sense out of the relationship between the individual and the state before proceeding to advance policy nostrums. Wicksell deserves the designation as the most important precursor of modern public choice theory because we find, in his 1896 dissertation, all three of the constitutive elements that provide the foundations of this theory: methodological individualism, homo economicus, and politics-as-exchange. I shall discuss these elements of analytical structure in the sections that follow. In Section V, I integrate these elements in a theory of ecot This is the lecture James Buchanan delivered in Stockholm, Sweden, December 8, 1986, when he received the Nobel Prize in Economic Science. The article is copyright ?The Nobel Foundation 1986, and published here with the permission of The Nobel Foundation.