Sunday, October 8, 2017

Buchanan, Calhoun and Rothbard--More of MacLean's Follies

Nancy MacLean's Democracy in Chains follows its fictional introduction , the imaginary "Meeting in Dixie" with a prologue, "The Marx of the Master Class."   There she claims that Calhoun was James Buchanan's "lodestar."   As has been pointed out by others, there is a serious problem.  Buchanan never cited Calhoun.  He was hardly developing and elaborating on Calhoun's political insights.

Murray Rothbard, however, does cite Calhoun.  He was quite gushing about some of Calhoun's ideas.  Charles Koch at one time provided financial support to Rothbard and he also provided support for Buchanan.   Surely, then, Rothbard and Buchanan's views can be conglomerated together as all so much propaganda for the Koch cause?

However,  Rothbard and Buchanan were not at all on the same page.   Phil Magness and Art Carden's review in Regulation cites private correspondence where Rothbard absolutely rejected Buchanan and Tullock's analysis in the Calculus of Consent. 

More importantly, the very book by Rothbard that MacLean cites, Power and Market, includes Buchanan in its index.   What did Rothbard say about Buchanan there?  It is in the preface:
"In recent years, economists such as Anthony Downs, James Buchanan, and Gordon Tullock (many of them members of the Chicago School of economics) have brought economic analysis to bear on the actions of government and of democracy.  But they have, in my view, taken a totally wrong turn in regarding government as simply another instrument of social action, very much akin to action on the free market.  Thus, this school of writers assimilates State and market action by seeing little or no difference between them.   My view is virtually the reverse, for I regarding government action and voluntary market action as diametric opposites, the former necessarily involving violence, aggression, and exploitation, and the later being necessarily harmonious, peaceful, and mutually beneficial for all."
MacLean apparently missed Rothbard's claim that his approach was totally different from that of Buchanan, and instead cites a section of his second chapter "The Fundamentals of Intervention" where he discusses Calhoun's analysis of taxation.  Rothbard included a long quotation from Calhoun.   From a "Virginia School" perspective, the quoted analysis of taxation is very incomplete.   There is no mention of the benefits generated from whatever government service is being funded.   From his earliest work in the late forties, Buchanan followed Wicksell in emphasizing the relationship between the benefit of the public expenditure and the tax cost to each person.

The only "benefit" mentioned by Calhoun is the receipt of tax funds.   To use a 19th century example. suppose the government levies a tax to fund the construction of a fortress to protect a port.   The contractor who builds the fort may also be subject to the tax, but if the total revenue from the government payment is greater than the amount of taxes he paid, then this contractor is a net tax consumer according to Calhoun.   Meanwhile, suppose a cotton planter sells some small part of his crop to the government which uses it for the flag that goes on top of the fort.   While the planter receives some tax money from the sale of this small amount of cotton, if the total amount of tax paid is greater than the amount earned from the cotton used for the flag, then this planter is a net taxpayer in Calhoun's view.   According to Rothbard, the building contractor is necessarily exploiting the cotton planter.

What about the benefits provided by the fort?  Perhaps it is protecting the port from pirates, resulting in lower shipping fees and increased income for the planter who uses the port to export cotton.    And while it is certainly true that the particular contractor building the fort benefits from this business, determining the net benefit is not primarily a matter of subtracting off the contractor's tax payments but rather his opportunity cost--the value of the other construction projects the contractor has forgone.  While the scenario of perfect competition that would reduce this net benefit to zero is unrealistic, in a competitive market the net benefit to the contractor might be quite small.   Further, the added demand for construction services may increase the incomes of contractors doing private sector work, even though they receive no direct payment of tax monies.

Calhoun, of course, was no economist.  Rothbard has less excuse for ignoring the opportunity costs of those selling to the government.   However, the question is not really whether Calhoun or Rothbard (and Rothbard's more devoted libertarian followers) provided a reasonable analysis of taxation.  The question is what does this have to do with Buchanan and public choice economics?

In the pages MacLean references, Rothbard accuses other free market economists of failing to see that taxation should be counted as intervention in the market.    Surely, this should have signaled to MacLean that Rothbard wasn't simply repeating some standard view that could be attributed to any other economist, much less Buchanan.   In fact, few economists share Rothbard's goal of defining and defending strict laissez-faire.  Most economists, even those with free-market views, are not worried about whether taxation counts as government intervention.   Few economists indeed would feel a need to argue that taxation is not government intervention in the market because if it were, it would be illegitimate.  How many economists would argue that all government intervention is necessarily illegitimate?  (My view is that taxation is government intervention, but that doesn't mean that it is not sometimes a necessary evil--the least bad option.   I believe Buchanan would say that if it is the least bad option, then it cannot be described as any kind of evil, necessary or not, and instead must be described as a positive good, or at least optimal.)

It is difficult to separate Rothbard's analysis of taxation from his anarchism.   MacLean quotes Rothbard as stating that Calhoun is correct that public finance is the "keystone."   However, Rothbard's stated rationale is that all the other government intervention is funded by taxation.   The implication is that if there were no taxation, then there would be no illegitimate government activity, which according to Rothbard, is all government activity.  Obviously, whether or not Calhoun really believed that his analysis of taxation was any kind of "keystone," his rationale would be quite different.  Calhoun was no anarchist. 

MacLean almost immediately takes off into Calhoun's well known support for slavery as a positive good, implying that Rothbard (and Buchanan) would agree.   Again, in the very section she cites, Rothbard expressly includes slavery as a type of "binary" intervention into the free market, just like taxation.  Rothbard plainly rejected slavery as illegitimate.

Further, Rothbard begins the chapter cited by MacLean, not with Calhoun, but rather with Franz Oppenheimer.  A few pages before the pages cited by MacLean, Rothbard's shares his true "lodestar."   It is Oppenheimer's distinction between the "economic means" of obtaining wealth through production and exchange in contrast to the "political means" of obtaining wealth through theft and exploitation.   Rothbard does little more than introduce the terms in Power and Market, but in his later and more popular work, For A New Liberty, he makes it plain that he sees the genesis of the state in conquest with the feudal overlords exploiting the newly enserfed peasantry (p.61)   For Rothbard, slavery is the epitome of the illegitimate political means of obtaining wealth. 

Buchanan undoubtedly shared Rothbard's highly negative views regarding various despotic regimes both in the past and in the present.   However, Buchanan's fundamental vision of constitutional democracy is that it is a way for people to come together and provide for the production of desirable public goods.

For Rothbard, government is always the master exploiting the slave.   As Rothbard's quote from his preface makes clear, he recognized that this is completely different from Buchanan's basic view of government and democracy.   Too bad MacLean failed to take note.