James M. Buchanan 1919-2013

James M. Buchanan was a leading and founding member of the Virginia School of Political Economy.    In my view, his central contribution was to frame public finance as voters choosing to fund government spending programs with taxes.    (Buchanan aways explained that this framing came from Wicksell.)      This is opposed to the mainstream tradition of determining what taxes are the least harmful way to fund "necessary" government spending.   Or to take this to its most grandiose extreme, to determine both the optimal provision of public goods and the least distortionary form of taxation so that "social welfare" is optimized.    At least, that was the focus of his Public Finance course at Virginia Tech.

 Buchanan's approach led to a focus on what constitutional rules would allow ordinary voters to choose taxes and government spending in the least harmful way.    How government debt and money creation could distort those decisions was a key concern.  That was certainly what I took away from his  Constitutional Economics course at George Mason.

In my view, Buchanan's views on monetary theory harked back to "old Chicago."   Simons, Mints, and the like.   There is a basic framing of money as hand-to-hand currency issued to fund government spending.   And further, that this power of money creation needs to be restricted by some kind of rule.    Like most of those in the Virginia School, for years, Buchanan was persuaded by the "new" monetarists, (most centrally, Milton Friedman,) that a rule restricting the quantity of money is the best option.

Just last spring, I was fortunate to participate in a Liberty Fund conference on the monetary constitution.   For the most part, the participants were divided between advocates of free banking and a gold standard, and those who favored some kind of monetary constitution to restrain the monetary authority.   Buchanan mostly listened, but made a presentation where he strongly advocated a constitutional restriction on money, requiring stabilization of the price level.  

My views on current events--things like the debt limit and the platinum coin "gambit"--are very much influenced from what I learned from James M. Buchanan.