Edited and written by David Gordon, senior fellow of the Mises Institute and author of four books and thousands of essays.

Myth Of The Voluntary State

POST-SOCIALIST POLITICAL ECONOMY: SELECTED ESSAYS
James M. Buchanan
Edward Elgar, 1997, ix + 285 pgs.

Professor James Buchanan, the 1986 Nobel Laureate in Economics, has achieved fame through public choice economics, which he, together with Gordon Tullock, invented. According to this discipline, economic analysis does not stop with market participants. The state consists not of impartial arbiters, but of agents anxious to advance their own interests. Professor Buchanan applies his insight into politics to great effect in one area of American politics. Unfortunately, he fails to develop this insight, and several others almost as important, to the fullest extent possible.

If politicians avidly pursue their own interests, what are the rest of us to do about this? One response, that of libertarian anarchists such as Murray Rothbard, suggests getting rid of the state altogether; but this is entirely too radical for the public choice school. Rather, it suggests that the malign effects of self-seeking politicians can be considerably alleviated through a federal system.

If political power is decentralized into small units, and a country's citizens enjoy the right to move freely among these units, then competition limits governmental abuses. If, for example, a state imposes high taxes on corporations in its jurisdiction, they will flee to more congenial climates.

All this is hardly news, but Professor Buchanan applies the federalist point in a way that illuminates a crucial period in American history. He writes: "We know now that the Madisonian enterprise [of federalism and limited government] failed. The great American Civil War removed forever the threat of secession by the states. This basic constitutional change more or less insured that, eventually, the United States would be transformed into a centralized majoritarian democracy with few, if any, checks on ultimate political authority. In this modern setting, democracy dominates society" (p. 220).

Well said! But if one adopts this perspective, will not the Rothbardian position soon follow as a reasonable extension? If states may secede from the Union, why may not individuals secede from the state? I do not suggest that there is a logical contradiction in defending state secession but rejecting an individual's right to secede. But does not the same reasoning that sees secession as a deterrent to oppression by the central government also suggest that the right of individual secession limits the power of the states to do bad? If not, why not?

And if individuals may secede, have we not in effect arrived at a Rothbardian position, in which individuals do not surrender their natural rights to a state at all? But this view Buchanan rejects as extreme. Or does he?

In one brilliant essay, he seems to transcend his customary perspective of "constitutional political economy." He speaks favorably of self-ownership, the key theme of Rothbard and his followers. "We can refer to private ownership in person, in the individual's own capacities to produce economic value. Such property-in-person exists when the individual is at liberty to choose when to submit to the direction of others concerning the use of his or her own labor services and when there exists also freedom to choose among locations, occupations, and professions, both as offered by the market and as potentially created by the individual's own entrepreneurial initiative" (p. 193).

Our author, I fear, is no master of English prose, but it is the thought that counts. He takes the second crucial Rothbardian step also, as the passage just quoted suggests. He recognizes that individual self-owners may acquire rights to property. These rights are valued by the individuals as a means of enhancing liberty. Unlike Chicago school economists, Professor Buchanan does not view property titles solely as a means to maximize efficiency. "[P]ersons desire ownership of property in order to secure and maintain liberty over the disposal of resources, without which liberty there could be no hope of bettering the conditions of life" (p. 192).

Before I go on with the line of argument Mr. Buchanan's defense of liberty and property suggests, allow me a digression. (After all, this is my publication.) The Canadian political philosopher C.B. Macpherson once raised an interesting objection to the free market. Proponents of the market, Macpherson noted, claim that individuals in a laissez-faire economy are free to make any exchanges they wish. All voluntary transactions, then, take place only if all participants expect to benefit. Perhaps so, said Macpherson, but are individuals free to leave the market altogether? How many people can become fully self-subsistent farmers? And if you are not free to exit the market, is your freedom to exchange as significant as advocates of capitalism think?

Professor Buchanan does not mention Macpherson, but several of his remarks enable us to construct a reply to the objection. He points out that ownership of long-term assets reduces direct dependence on the market. "Consider ownership of a house. As the owner of this asset that yields services over time, the individual is producing these particular services for himself or herself. To the extent that self-production is made possible, the owner is insulated from direct dependence on the market" (p.194). Macpherson failed to see that exit from the market need not be total. The force of his objection to the market is thus blunted.

But this is by the way. Although Professor Buchanan travels a good deal down the road with Rothbard, he stops short. He rejects complete laissez-faire because of that dread specter--public goods. As our author sees matters, individuals must be coerced, in some cases, to do what they themselves recognize as in their own collective interest.

An example will clarify what Professor Buchanan means. If I hire a policeman to protect my house, his presence also helps you, if you are my neighbor. Prospective burglars who see him will probably avoid your house as well as mine. An externality results: any neoclassical theorist worth his salt can readily show that the market outcome is "inefficient."

Is there not available an easy escape? Why not an agreement by the concerned individuals to produce the public good--in our example, protection--at the optimal amount? Unfortunately, matters are not so simple. Individuals who make such an agreement might find it rational to break their word. If I can get a public good without paying for it, will I not be better off than I would be if I had paid the share agreed upon? Unfortunately for me, everyone else is in the same position. Since each of us foresees that it will be rational for each of us to renege on an agreement to produce a public good, no such agreement will be made in the first place. The result will be, horribile dictu, a nonoptimal supply of public goods.

Here, in Mr. Buchanan's view, the state comes to the rescue. By forcing people to adhere to their agreements, public goods are produced in amounts most beneficial to all. Optimality is at hand: all is for the best in this best of all possible worlds.

What is one to make of this? Arguably, self-owners in Rothbard's sense can voluntarily agree to establish an agency to compel them to observe an agreement. But unless someone actually joins in such an arrangement, force against him cannot be justified. To claim that he would have entered into an agreement, had he been rational, does not suffice. Nor does it suffice if the majority of people in someone's society accept an arrangement: so long as a person has not explicitly consented, an attempt to compel him to contribute to a public good violates his rights.

So, at any rate, a consistent supporter of self-ownership will argue. The upshot, of course, is that no actually existing state respects people's rights, since there has never been the explicit agreement oncoercion that self-ownership mandates.

Professor Buchanan, I regret to say, wants to have it both ways. Even though he recognizes that in existing states, there has been no actual agreement by everyone to use the state as a coercive agent, he nevertheless retains the agreement or exchange model. "At this point, those who defend contractual or exchange models find it useful to introduce conceptual as opposed to actual agreement as a device for retaining some explanatory value.... Could the existing rules that define the overall operations of the polity have been agreed upon by all citizens if, indeed, there could have been some imagined initial dialogue? At this point, the potential conflict among the separate interests of persons and groups is mitigated by resort to constructions that introduce a veil of ignorance or uncertainty" (p. 176).

To his credit, Professor Buchanan recognizes that hypothetical consent poses problems, and he also finds attractive a Hobbesian view of the state as a predatory agency. Yet at the end he refuses to abandon the "exchange" model; and he is left with the nonsense-concept of a state that is coercive but nevertheless voluntary.

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