US economist and the founder of ‘public choice theory’, the economic study of non-market decision-making or, alternatively expressed, the attempt to complete the theory of market exchange with a corresponding theory of the functioning of political markets. In 1986 he received the Nobel Prize for Economics.
What makes public choice theory part of economics is that it is squarely based on the standard assumption by economists of man as a rational utility-maximizing agent. Individuals agree to assign the monopoly of force in society to a government because they believe it will serve their self-interest; in so doing, they accept a set of rules, a constitution. Why and how such rules are adopted, and whether some rules are better than others, is the subject of Buchanan and US economist Gordon Tullock's ground-breaking book, The Calculus of Consent: Logical Foundations of Constitutional Democracy (1962), which virtually created public choice theory.
Early in his career, Buchanan's work was deeply influenced by the study of certain 19th-century European and particularly Italian writers on public finance, whose approach to questions of taxation was totally different from that of leading Anglo-American writers: the European authors emphasized a concept of government based on mutual agreement among citizens in which taxes are seen as ‘payments’ for services rendered by government. In consequence, Buchanan argued that unanimity was the only really defensible ‘calculus of consent’, but that a political democracy based on majority rule might nevertheless be freely chosen by everyone if minority rights were adequately protected. The question then became that of discovering those constitutional rules that preserved the original consensus. Buchanan had no difficulty in showing that the growth of government activity in recent years had departed widely from this ‘optimal’ constitution and his writings, therefore, abound in suggestions for additional constitutional constraints on government and its multifarious agencies. Indeed, he called for a ‘constitutional revolution’ to reassess the entire spectrum of constitutional rights of individuals.
Buchanan was born in Murfreesboro, Tennessee. He received his BA from the University of Middle Tennessee in 1940, his MA from the University of Tennessee in 1941, and his PhD from the University of Chicago in 1948. In 1955 he spent a year in Italy as a Fulbright scholar to study the European tradition of public finance. Returning from Italy in 1956, he became a professor of economics and director of the Thomas Jefferson Center of Political Economy at the University of Virginia. In 1962 he founded the Public Choice Society with Tullock and promoted a new journal called Public Choice, which stimulated others to work in the field. In 1969 he became a professor and director of the Center for Study of Public Choice, first at the Virginia Polytechnic Institute and State University and then at the George Mason University of Fairfax, Virginia.
He was a president of the Southern Economic Association in 1963, a vice-president of the American Economic Association in 1971, president of the Western Economic Association in 1983, and president of the Mont Pèlerin Society from 1984 to 1986.
His publications include Public Principles of Public Debt (1958), Public Finance in a Democratic Process (1966), The Demand and Supply of Public Goods (1968), Cost and Choice (1969), Theory of Public Choice: Political Applications of Economics (1972; with R P Tollison), The Limits of Liberty (1975), Freedom in Constitutional Contract (1977), Democracy in Deficits: The Political Legacy of Lord Keynes (1977; with R E Wagner), The Power to Tax (1980), and The Reason of Rules: Constitutional Political Economy (1985; with G Brennan).