Wednesday, October 3, 2012

I know it's bad form to do this on his 93rd birthday...

...but this line from Buchanan quoted by Don Boudreaux is just wacky. I like Buchanan's work on constitutional economics and public choice a lot. But whenever he writes about Keynes or Keynesianism it always seems to degenerate - not just into something I might disagree with - but complete nonsense.

It's like Hayek on "scientism" for me. It reads like a completely different (nonsensical) Hayek.

Here's the quote:

"The whole Keynesian edifice [the Council of Economic Advisors] was constructed on the preposterous supposition that economic advice is offered to a genuinely benevolent despot, an entity devoid of its own interests, and presumably willing and able to implement, without resistance, the advice offered to it. The early monetarist challenge was directed to the Keynesian analysis and, in itself, did not question the implicit political supposition... Effective authority lodged with an hereditary monarch might represent the closest historical parallel to the implicitly presumed Keynesian model of politics."

American political leadership has sought advice on economic policy from the beginning of the republic. Exactly what about the CEA supposes a benevolent despot? And given that we all recognize this world is not governed by benevolent despots, isn't a council of economists advising the President exactly what you would want? I mean, if we were governed by an idealized benevolent despot, what would be the point? The whole value of the CEA lies precisely in the fact that men are not angels and are not ruled by angels either.

This is not the only time Buchanan distorts the record to promote public choice theory (which really doesn't need the distortions to be promoted - it's a good set of ideas), of course. He's also mangled Pigou in that effort. Last year I was reading through Pigou's Economics of Welfare in the library. This is supposed to be the classic "first, assume a benevolent despot" sort of treatment - largely because Buchanan characterized it as such.

Read it.

It's entirely different from how it's usually characterized. Pigou regularly discusses the problems of implementation that we now call "public choice theory". All the important points that Buchanan has raised were already in Pigou.

Which is fine. We revamp old theories all the time. Part of the fun of reading old economics books is the realization that they're not as dated as you might expect.

What's not OK is painting Keynesians and Pigovians and Keynes and Pigou as being ignoramuses.

Here is a recent article by Backhouse and Medema on the fallacies of Demsetz, Buchanan, and Coase in their treatment of Cambridge welfare theorists, and Pigou in particular.

I am curious what David Henderson (and anyone else who has worked at the CEA) thinks of this assertion. Were you ever under the impression that you were meant to be advising a benevolent despot?


  1. I genuinely don't get this mentality. Scott Sumner does it too.

    I don't understand why you would make something up about someone that admittedly disagrees with you on a lot of other points to make it look like your argument has fewer adherents than it actually does.

    Why do that?

    Is it because otherwise you don't feel like you're making a contribution?

    I think people recognize that Buchanan made a contribution to public choice, and we even recognize that a lot of his views were anticipated far earlier than Keynes and Pigou. Why make things up about others? Wouldn't you be better off saying "see, even the guy that disagrees with me on all these other things agrees with me on this!"

  2. I don't understand your point about CEAs being useless with benevolent despots.

    Let's imagine the CEA persuades Obama that eliminating the mortgage-interest deduction is the policy most in the public interest. Well, for all we know, that has already happened. It would never go through the legislatures, it would be unpopular (aka never proposed) and a number of special interest groups would kill the bill if it ever made it anywhere. In other words, the CEA's persuasion of the President has absolutely no effect.

    Compare that to the same situation with a benevolent despot. Well, he's benevolent, so of course he's going to try to implement that policy which he thinks best. And he's a despot, so he will be successful by definition. The CEA has done lots of good.

    Wise advice is best given to those who can and will implement it. It is wasted on those who can not or will not follow it.

    1. When I said "idealized benevolent despot" I was thinking of the stereotypical omniscient, rational benevolent despot - presumably in no need of such advice.

    2. Given the focus of the quote, I'm not sure that's a fair answer to the point made by Buchanan. He clearly was referring to the leader's willingness and ability to implement such a plan. Not the leader's pre-advice knowledge.

  3. "We revamp old theories all the time. Part of the fun of reading old economics books is the realization that they're not as dated as you might expect."

    Agreed, Daniel Kuehn. There's a reason why Malthus and Pigou still have intellectual influence years and decades after their passings!


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