More great words from James Buchanan (with Viktor Vanberg this time)

[S]ocialism failed not only because of incentive incompatibility and an inability to utilize knowledge effectively; socialism failed, also, because it allowed little scope for the exercise of creative choice on the part of the participants in the economic process. Or, to state [this] somewhat differently, universalized benevolence could surmount the incentive incompatibility; universalized omniscience (in its usual meaning) could surmount knowledge limits. But even perfect altruists who know everything must live and work in real time. The best of intent will not allow the future to be brought within the present, no matter how perfect the knowledge of the present may be. And if the institutional structure embodies the presupposition that such a feat is possible, stagnation and failure must emerge.


If there is one central constitutional implication of radical subjectivism, it is the recognition that a constitutional framework which accounts for the creativity of the human mind has to be one that allows for, and provides, favorable conditions for learning and adaptation at all levels at which we engage in problem solving, including the level at which we choose the constitutional framework for all other efforts. It should be a framework within which experimenting and exploration are possible, yet one that imposes constraints on the explorative process that make for responsiveness to constituents’ interests as well as for viability in a broader environment. Markets are, as we have suggested above, a paradigm case for such a framework, and the constitutional implications of radical subjectivism may also be stated in the form of a recommendation that we ought to seek, in general, at all levels of problem-solving activity, to provide for market-like frameworks for competitive exploration of alternative solutions. To recommend, in this sense, the market as a model for explorative, adaptive systems, is not to say that we ought to leave everything to “the market,” in the ordinary sense. It is to say that we ought to expose our solutions to the various problems we face to competitive constraints that work like market constraints.

James Buchanan & Viktor Vanberg (2002) ‘Constitutional Implications of Radical Subjectivism, The Review of Austrian Economics, Vol. 15, No. 2/3, pp. 121–129.

The benefits of ‘the market’ are not present simply because the market is some sort of mythological ‘perfect institutional form’. The market works because it ceaselessly cranks through the evolutionary algorithm – ‘variation-selection-retention’ as it is often succinctly put. Buchanan and Vanberg recognise the importance of creativity, experimentation, learning, and adaptation – and rightly state that centralised, monopolistic, or monocentric institution forms (i.e., intrusive social democratic government, socialism, totalitarianism, and so on) suppress economic evolution. In this sense decentralised institutional systems can be thought of as more ‘dynamically efficient’ (as opposed to benevolent, omniscient central planning, which, if it existed, might be considered ‘statically efficient’) – though a better word is ‘evolvable’.

But then, how do we apply an evolutionary algorithm to constitutional craftsmanship? Stay tuned for a radical subjectivist reinterpretation of the constitutional design problem as evolutionary search!


James M. Buchanan & Alberto Di Pierro in 1969

When ventured at all, predictions of permanence and stability in sociopolitical institutions are now made with caution. General malaise seems to characterize modern attitudes about civil order, and revolution is more widely discussed than at any other time in the last half-century. The aging positivist idol, the benevolent nation-state, neither commands obedience nor inspires respect, and men search for a new god. Materialist ideals are challenged by young and old alike, and the cliches of middle-aged and liberal politicians are treated with nearcontempt. The individual suffers alienation, social claustrophobia, and frustration in a congested, collectivized civilization that he feels powerless to control. Democratic process seems out of kilter, and faith in political leaders seems almost wholly extinguished. Fundamental values are being questioned, even by those who do not claim to be philosophers; yet policy making and policy advising move piecemeal along predetermined and predictable patterns.

James M. Buchanan & Alberto Di Pierro (1969) ‘Pragmatic Reform and Constitutional Revolution’, Ethics, Vol. 79, No. 2, pp. 95-104.

Great opener to the paper – and truer now than ever. It’s the beginning of the end for the (hitherto-conceived) nation-state. Well, here’s hoping!