The Thomas JeffersonCenter Foundation Political Economy 1957-1982 James J\i Buchanan The C. Warren Nutter Lectures in PoliticalEconomy The C. Warren Nutter Lectures in Political Economy The G. Warren Nutter Lectures in Political Economy have been in­ stituted to honor the memory of the late Professor Nutter, to en­ courage scholarly interest in the range of topics to which he devoted his career, and to provide his students and associates an additional contact with each other and with the rising generation of scholars. At the time of his death in January 1979, G. Warren Nutter was director of the Thomas Jefferson Center Foundation, adjunct scholar of the American Enterprise Institute, director of AEI's James Madison Center, a member of advisory groups at both the Hoover Institution and The Citadel, and Paul Goodloe Mcintire Professor of Economics at the University of Virginia. Professor Nutter made notable contributions to price theory, the assessment of monopoly and competition, the study of the Soviet economy, and the economics of defense and foreign policy. He earned his Ph.D. degree at the University of Chicago. In 1957 he joined with James M. Buchanan to establish the Thomas Jefferson Center for Studies in Political Economy at the University of Virginia. In 1967 he established the Thomas Jefferson Center Foundation as a separate entity but with similar objectives of supporting scholarly work and graduate study in political economy and holding conferences of econ­ omists from the United States and both Western and Eastern Europe. He served during the 1960s as director of the Thomas Jefferson Center and chairman of the Department of Economics at the University of Virginia and, from 1969 to 1973, as assistant secretary of defense for international security affairs. James M. Buchanan delivered the sixth G. Warren Nutter Lec­ ture at the American Enterprise Institute for Public Policy Research, Washington, D.C., on April 20, 1983. Earlier lectures were delivered by Thomas H. Moorer, George J. Stigler, R. H. Coase, Milton Fried­ man, and Herbert Frankel. Additional copies of these lectures may be obtained from the American Enterprise Institute 1150 Seventeenth Street, N.W. Washington, D.C. 20036 Political Economy 1957-1982 James .7i1 Buchanan }AMES M. BucHANAN is University Professor at George Mason Univer­ sity, Fairfax, Virginia, and general director of the Center for Study of Public Choice at the University. He was professor of economics from 1951 to 1956 and chairman of the Department of Economics at Florida State University, 1954-1956; chairman of the James Wilson Department of Economics, University of Virginia, 1956-1961; Paul G. Mcintire Professor of Economics, University of Virginia, 1962-1968; director of the Thomas Jefferson Center for Political Economy, Uni­ versity of Virginia, 1958-1968; and University Distinguished Pro­ fessor at the Virginia Polytechnic Institute and State University and general director of its Center for Study of Public Choice, 1969-1983. ISBN 0-8447-1363-5 © 1983 by the American Enterprise Institute for Public Policy Research, Washington, D.C., and London. All rights reserved. No part of this publication may be used or reproduced in any manner whatsoever without permission in writing from the American Enterprise Institute except in the case of brief quotations embodied in news articles, critical articles, or reviews. The views expressed in the publications of the American Enterprise Institute are those of the authors and do not necessarily reflect the views of the staff, advisory panels, officers, or trustees of AEI. "American Enterprise Institute" and @) are registered service marks of the American Enterprise Institute for Public Policy Research. Printed in the United States of America American Enterprise Institute for Public Policy Research 1150 Seventeenth Street, N.W., Washington, D.C. 20036 Foreword G. Warren Nutter was one of the public policy scholars who worked most closely with my father, the late William J. Baroody, Sr., in de­ veloping the American Enterprise Institute. Now both are gone, but not before AEI became the kind of public policy institution that they had dreamed about and labored for throughout a substantial part of their lives. My first meeting with Warren occurred some twenty-five years ago, when he was among a group of scholars who gathered at our home for dinner and discussion. Warren had a great intellect. With his ideas, research, and writings, he helped my father foster AEI from a small, little-known organization analyzing proposed federal legislation into a leading public policy research institution. Warren understood the role that intellectuals play in creating and shaping public policy. Some of his earlier studies helped mold defense strategy for years. His analysis of Russian strengths and weaknesses, pub­ lished nearly thirty years ago, was a landmark work. He continued influencingpublic policy until his death. In the early 1970s, I worked closely with Warren in the Depart­ ment of Defense. He distinguished himself as assistant secretary for international security affairs, using the common sense that he had brought with him from his native Kansas. Professor Nutter was a superior scholar, whose life was entwined with the American Enterprise Institute. Thus, we are proud to publish these memorial lectures, dedicated to one of the nation's finest scholars. WILLIAM J. BAROODY, JR. President American Enterprise Institute Introduction William Breit To introduce James Buchanan would be an honor ori any occasion, but is a most special honor to me on this one. For Warren Nutter and James Buchanan were the leading luminaries of the University of Virginia's economics department when I arrived there as an untenured faculty member in 1965. Both of them had been names on my reading lists in graduate school. They had made the University of Virginia's economics department famous on the national scene as being unique. The word was out that political economy was being resuscitated at Virginia, and the Thomas Jefferson Center for the Study of Political Economy, which Jim Buchanan and Warren Nutter had founded, was a beehive of scholarly activity investigating the new political economy and its ramifications. The opportunity to join them as a colleague at Virginia I found impossible to resist. Excitement was in the air. The controversy stirred up by Nutter's recently published book on the Soviet economy, challenging the Establishment view of Soviet industrial growth, was still rever­ berating from the rafters. I remember well from those days the embattled, tough-minded Warren Nutter, with his soft-spoken man­ ner, his keen sense of humor, the easy laugh, the penetrating insight. Down the hall a bit was James Buchanan, slightly more aloof than Warren Nutter, at first seemingly less approachable. Often the two would huddle together to discuss policy matters, exchange a bit of professional gossip, or more often, to argue some point of economics. I was fortunate to be in on the beginning of the journal Public Choice, then called rather infelicitously, Papers on Non-Market Decision Making. Other members of the Thomas Jefferson Center were Alexandre Kafka, Gordon Tullock, and Leland Yeager, no slouches as scholars in their own right. 2 The graduate students were almost uniformly excellent, having been attracted by the stimulating atmosphere that was widely known to prevail in Charlottesville in that department at that time. Best of all I became the personal friend of both Nutter and Buchanan. My most vivid recollection from those days involves the daily lunch period. The topic for discussion typically centered on a recent issue of the American Economic Review or Journal of Political Economy. It was automatically assumed each individual had read the latest articles in his field. You were certain to be asked your opinion, and it was not considered good form to stare back blankly when your turn came. At Virginia my education in economics began all over again. Or, as some at Virginia would have said, my education in economics began. In introducing James Buchanan to this audience I will use a technique that is the counterpart of what in art is called pointillism. Since we do not see others "as complete images but as processions of 1 flashing points," I shall give you my portrait of Buchanan in a pointillistic fashion, with each fact a dot. That is the way my own image of Buchanan was formed. • He is fivefeet, ten inches in height and stands very straight. • His father was a farmer, and he grew up in rural Tennessee. • He believes that being a college professor is better work than following a plow. • He sports a mustache and combs his hair back in a way that makes him look as if he might be playing the part of the heroic general in a war movie. • He does not suffer fools gladly, and he starts with the assump­ tion that everything he reads in economics is chock full of flaws. • He is an excellent host, and he and his wife, Ann, serve the best victuals in town. • He is a prodigious worker and can write a twenty-page article, ready for publication in a leading journal, in a single· afternoon. • He is a considerate referee and will return a manuscript with detailed comments on the day he receives it. • He was once a flaming socialist. • He thinks that Knut Wicksell was the greatest economist of all time. • He is the author or coauthor of fifteen books, the most famous 1 Owen Hatteras, Pistols for Two (New York: Alfred A. Knopf, 1917). 3 of which is The Calculus of Consent, written with Gordon Tullock. • His favorite dish is fried white corn. • He recently received an honorary doctorate from the University of Giessen in Germany. • He believes there is no such thing as a benevolent government. • He is a fellow of the American Academy of Arts and Sciences.