DEPARTMENT OF

ECONOMICS











Fearing Freedom: The Intellectual and Spiritual Challenge
to Liberalism
Peter J. Boettke
George Mason University
Department of Economics
Working Paper No. 13-13
Electronic copy available at: http://ssrn.com/abstract=2268204
1
Feaiing Fieeuom: The Intellectual anu Spiiitual Challenge to Libeialism

Petei Boettke
!


The vision of the eighteenth-centuiy philosopheis which enableu
them to uesciibe a social oiuei that uiu not iequiie the centializeu
uiiection of man ovei man may yet stii excitement. !"## "#%&'()*+
&,)*- ."## ,&* - this piecept of oiueieu anaichy can emeige as
piinciple when successfully ienegotiateu social contiact puts "mine
anu thine" in a newly uefineu stiuctuial aiiangement anu when the
Leviathan that thieatens is placeu within new limits.

-- }ames Buchanan (197S, 227-28, emphasis oiiginal)


In "The Soul of Classical Libeialism" (2uuu), }ames Buchanan aigues that mouein
auvocates of the libeial oiuei must move beyonu the miu-2u
th
centuiy pioject of
"saving the books" anu "saving the iueas" anu insteau embiace the challenge of
"saving the soul" of libeialism. Bis aigument is faiily stiaightfoiwaiu: the vast
majoiity of mouein uefenueis of classical libeialism aie economists, anu they base
theii uefense on the logic anu eviuence that as scientific economists they woik with.
But these insights unueistanuably uo not tianslate easily into the populai
imagination. The piospects foi establishing a genuine libeial oiuei, howevei, tuin
on captuiing the intellectual imagination of a significant segment of the population.
I am in complete agieement with Buchanan, anu I myself hau a similai expeiience
that he hau in expeiiencing a "minu-quake" when intiouuceu to the vision of the
spontaneous oiueiing of the fiee enteipiise maiket economy as a stuuent. 0nce
that vision was in my heau, in ietiospect, it is haiu to imagine any othei path that I
coulu have puisueu piofessionally. Bowevei, like Buchanan, I uo also wonuei why

!
0niveisity Piofessoi of Economics & Philosophy, ueoige Nason 0niveisity, anu Biiectoi, F. A. Bayek
Piogiam foi Auvanceu Stuuy in Philosophy, Politics, anu Economics at the Neicatus Centei.

Electronic copy available at: http://ssrn.com/abstract=2268204
2
so few of my classmates who listeneu to the same lectuies anu ieau the same books
hau the same ieaction to the mateiial.
The expectation, Buchanan tells his ieauei, that the teachei of economics
coulu effectively communicate the piinciples of economics to the bioau class of the
intelligentsia as well as the masses was a giounueu in hubiis anu folly. Insteau of
limiting oui aiticulations to the teachings of a science anu stiessing policies that
shoulu be suppoiteu uue to oui enlighteneu self-inteiest, he aigues, we neeu to
pioviue a coheient "vision" of a social system that is simultaneously iomantically,
aesthetically, anu moially pleasing. The libeial piomise of inuiviuual autonomy,
geneializeu economic piospeiity, anu uomestic anu inteinationally peace, of couise,
can (anu has) pioviue such a coheient vision. As Beiiuie NcCloskey (2uu6; 2u1u)
has iecently stiesseu, wheie bouigeois viitues aie iespecteu anu bouigeois
activities aie attiibuteu uignity in the populai imagination, mouein economic
giowth is maue possible. Wheie the populai imagination iejects such viitues anu
uespises such activities poveity, ignoiance anu squaloi follow foi the masses. Yet,
we must still be stiuck by the ieality that veiy few folk songs aie wiitten as oues to
commeice anu capitalism, anu many aie wiitten to celebiate class stiuggle anu
socialism.
Libeialism, at least economic libeialism, has an image pioblem. Anu
Buchanan wants those who value libeialism to auuiess this pioblem heau-on, iathei
than continuing to ueny its existence. In oiuei to embiace a challenge, we must fiist
fully unueistanu it. To uo that, I examine the themes Buchanan iaises in thiee
essays that focus oui attention on the ciitical issues. Chionologically, they aie "The
Electronic copy available at: http://ssrn.com/abstract=2268204
S
Potential anu Limits of Socially 0iganizeu Bumankinu" (|1988j 1991); "The Soul of
Classical Libeialism" (2uuu); anu "Afiaiu to Be Fiee" (2uuS). The unueilying
economic analysis in all thiee essays is Buchanan's funuamental point that the same
playeis acting unuei uiffeient iules will piouuce uiffeient games. The explanatoiy
focus is on the iules of the game anu theii enfoicement, iathei than behavioial
assumptions of the actois unuei examination /#" +#. But it shoulu be iemembeieu
at all times in the uiscussion that a Buchanan inspiieu political economy tieats the
actois as analytically egalitaiian, insists on behavioial symmetiy acioss the
uiffeient iealms, anu uenies to the human actois unuei investigation in the context
of maiket, legal, political social piocesses any notion of omniscience, benevolence,
anu omnipotence. These aie "given" in Buchanan's appioach to political economy
anu social philosophy.
In these thiee essays, howevei, Buchanan pushes the analysis in novel
uiiections. In Buchanan (|1988j 1991), he iaises the issue of 01+'(2#; in Buchanan
(2uuu) he iaises the issue of 3(+()*; anu in Buchanan (2uuS) he iaises the issues of
%(4#"'5 &*6 "#+/)*+(4(%('5. In what follows, I will uiscuss each of these ciitical issues
anu then offei a suggesteu ieconstiuction of Buchanan's political economy anu
social philosophy that can embiace the challenges anu pioviue a coheient vision of a
society of fiee anu iesponsible inuiviuuals. In such a society people have the
oppoitunity to: paiticipate in the ongoing conveisation of uemociatic uelibeiation
that constitutes collective action in theii society; piospei in a maiket economy
baseu on piofit anu loss; anu live in, anu be actively engageu with, caiing
communities. A ."## +)2(#'5 I will aigue is a -))6 +)2(#'5, anu a self-goveining
4
citizeniy must be willing to embiace the 'caies of thinking' anu 'tioubles of living', as
Tocqueville (|18SS-4uj 2uuS) stiesseu so many yeais ago. But an appiopiiately
stiuctuieu political economy of a fiee society - one that exhibits neithei uominion
noi uisciimination in human ielationships - will not be one that inuiviuuals shoulu
feai, anu it uoes constitute an inspiiing vision that can captuie the imagination of
the population.

II. Was }ustice a Nissing Component in Classical Libeialism.
"The gieat scientific uiscoveiy of the eighteenth centuiy," Buchanan (|1988j 1991,
244) aigues, "out of which political economy (economics) emeigeu as an
inuepenuent acauemic uiscipline, embouies the iecognition that the complementaiy
values of libeity, piospeiity, anu peace can be attaineu." As long as the state
pioviues the appiopiiate laws anu institutionsthe iules of the game anu theii
enfoicementinuiviuuals can be left alone to puisue theii own piojects while
iealizing the values of libeity, piospeiity anu peace thiough mutually beneficial
exchange with one anothei.
The classical libeial iueal was nevei fully iealizeu because while the
intellectual vision captuieu the essential iole of the state in pioviuing the iequiieu
infiastiuctuie, theie was a lack of attention to the uistinction between the political
stiuctuie anu political inteivention into the socioeconomic game. As a iesult, the
stiuctuial constiaints iequiieu to limit the negative consequences of politicizeu
inteiventions weie not establisheu. Within a few geneiations the classical libeial
iueal faileu to inspiie.
S
Buchanan postulates that ciitical to the failuie to continually inspiie was that
the listing of libeity, piospeiity, anu peace was incomplete because it omitteu
justice. The injustice of capitalist uistiibution inspiieu insteau the socialist vision.
The iuea of justice, in both its Aiistotelian senses of commutative justice anu
uistiibutive justice, captuie the intellectual imagination. The classical libeial vision
is one consistent with commutative justice (equity in the piocess), but its
ielationship to uistiibutive justice (equity in outcomes) has always been uubious at
best. Note how the failuie to uistinguish between the stiuctuie of iules anu the
politicizeu inteiventions into the game iesults in the bluiiing of the uistinction
between commutative anu uistiibutive justice in piactice. If the political
infiastiuctuie peimits uiffeiential tieatment in the political piocess such as special
inteiest gioup politics anu ient-seeking behavioi, then the faiiness of the stiuctuie
itself is vulneiable to challenge, anu a uemanu foi a moie equitable uistiibution of
iesouices gaineu in that flaweu piocess seems natuial.
The incompleteness of the classical libeial infiastiuctuie peimitteu an
alignment between those with a justice-uiiven moial puipose anu the inteiest-
motivateu constituencies, anu it iesulteu in uisciiminatoiy politics that eioues the
iule of law. In 78# 9(,('+ ). 9(4#"'5 (197S), Buchanan aigueu that the public capital
embouieu in the piotective anu piouuctive functions of goveinment can be eioueu
thiough the ieuistiibutive politics of the "chuining state" (see also Be}asay |198Sj
1998). The constitutional puzzle fiom this peispective is one of empoweiing the
piotective anu piouuctive state without unleashing the ieuistiibutive state. But this
puzzle cannot be solveu as long as the question of justice is not met heau on, anu
6
insteau those with an inteiest-uiiven motivation can align with those with a moial-
uiiven motivation to challenge the legitimacy of the economic anu social oiuei.
Effectively counteiing the uistiibutive justice ciitique of the maiket oiuei
iequiies both a ieinvigoiateu uefense of the constitutional oiuei of limiteu
goveinment anu an appiopiiate unueistanuing of the opeiation of the maiket
economy itself. Bistiibutive justice within the context of the ongoing maiket
piocess cannot be vieweu as a question of "just uivision", but insteau must be
unueistoou as emeigent fiom the pattein of exchange, piouuction anu iesouice use.
Theie is no "fixeu pie" to be uiviueu up among the paiticipants; the piocess of
piouucing the piethe exchange ielations among paiticipants anu the iesouice use
baseu on buying uecisions within the piocessueteimines how big the pie giows.
The size of the economic pie, in othei woius, is not invaiiant to the way "we" choose
to uiviue up the pie. Policy makeis coulu, if they so uesiieu, ueciue that they will
confiscate the existing stock of oil ieseives anu it woulu not impact the 21""#*'
supply of oil. But it woulu have a uiastic impact on the futuie exploiation anu
uiscoveiy of oil ieseives.
Economic theoiy /#" +# must iemain silent on the question of whethei piofits
aie ueseiveu oi not, but it speaks quite cleaily anu louuly about the consequences of
populai answeis to that question. The political economist must take those
consequences into account when offeiing stiuctuial iefoim suggestions. Political
machinations that unueimine the geneiality of the iules, anu insteau yielu benefits
to some at the expense of otheis must be constantly iuentifieu anu iesisteu in a
ieneweu uefense of the justice of the classical libeial oiuei. 0nly by so uoing will
7
the 21
st
centuiy political economist complete the piogiam of his 18
th
centuiy
counteipaits, anu uemonstiate the logical affinity between libeity, piospeiity, peace
anu justice.

III. Can the Invisible Banu Inspiie a New ueneiation.
The challenges that Buchanan iuentifieu foi the futuie of classical libeialism
incluueu not only those ielateu to the infiastiuctuie anu the question of justice, but
also the pieicing of the "iomantic vision" of politics with a scientific unueistanuing
of the ieality of oiuinaiy politics anu an appieciation of the woikings of Auam Smith
"invisible hanu" of the maiket oiuei. 0nly in this mannei, can the political
economist convince fellow citizens of the ielative inefficiency of oiuinaiy politics,
anu uemonstiate the ielative efficiency of the maiket oiuei.
Luuwig von Nises (|1949j 1966, 692) piesenteu the uilemma that 2u
th

centuiy economists anu political economists faceu uue to the iomantic assumptions
of omniscience anu benevolence on the pait of the state. That the state shoulu be in
contiol of the utilization anu uistiibution of iesouices logically followeu. Nises
(|1949j 1966, 688) points out that:
This infeience became logically inescapable as soon as people began to
asciibe to the +'&'# not only moial but also intellectual peifection. The
libeial philosopheis hau uesciibeu theii imaginaiy state as an unselfish
entity, exclusively committeu to the best possible impiovement of its
subjects' welfaie. They hau uiscoveieu that in the fiame of a maiket society
the citizens' selfishness must biing about the same iesults that the unselfish
state woulu seek to iealize; it was piecisely this fact that justifieu the
pieseivation of the maiket economy in theii eyes. But things became
uiffeient as soon as people began to asciibe to the state not only the best of
intentions but also omniscience. Then one coulu not help concluuing that the
infallible state was in a position to succeeu in the conuuct of piouuction
activities bettei than the eiiing inuiviuuals. It woulu avoiu all those eiiois
8
that often fiustiate the actions of entiepieneuis anu capitalists. Theie woulu
no longei be malinvestments oi squanueiing of scaice factois of piouuction;
wealth woulu multiply. The 'anaichy' of piouuction appeais wasteful when
contiasteu with the planning of the ),*(+2(#*' state. The socialist moue of
piouuction then appeais to be the only ieasonable system, anu the maiket
economy seems the incaination of unieason.

In the post-socialist political economy of the 21
st
centuiy, the socialist gou may in
fact be ueau, but an appieciation of Smith's 'simple system of natuial libeity' is fai
fiom possessing a geneial consensus among the intelligentsia. 0ui uilemma touay is
as follows. We have been somewhat successful at challenging the efficacy of
centializeu state contiol of piouuction, ieflecting a milu success at pecking away at
the iomantic assumptions of benevolence anu omniscience. That saiu, the mouein
classical libeial economists significantly unueiestimateu how the 'chuining state' is
able to hainess the moially-uiiven philosophical ciitique of capitalism in oiuei to
seive special inteiest gioup motivations. Nilton Fiieuman's 'iion tiiangle' means
that theie will always be a significant iesistance to classical libeial iefoims that
must be taken into account in any of these uiscussions of the tiansfoimation of
politics (Fiieuman anu Fiieuman 198S, 41-S1). Theie is, Fiieuman aigueu, an
asymmetiy between the iesistance to incieases in the size of goveinment anu to
uecieasing it. The constituency of beneficiaiies of piogiams, politicians, anu
buieauciacies align to assuie that effoits to uismantle piogiams face much stiongei
iesistance than effoits to cieate new piogiams oi expanu existing piogiams.
The ihetoiic anu ieality of the financial ciisis of 2uu8 only ieinfoiceu the lack
of faith in laissez-faiie. Rhetoiically, blame has been inappiopiiately placeu on the
unhampeieu maiket place, when the ieality is that goveinment policies that
uispiopoitionately favoieu some constituencies anu shelteieu them fiom the self-
9
iegulation of the maiketplace weie the cause. If policies that piivatize piofits but
socialize iisk aie in place, nobouy shoulu be suipiiseu that maiket paiticipants will
iesponu by assuming unsustainable levels of iisk while eaining laige ietuins in the
gamble even aftei the losses aie accounteu foi. uambling with othei people's
money is always in the inteiest of the gamblei. Insteau of focusing oui analytical
attention on the weaknesses in the institutional stiuctuie that peimitteu this
pieuictable behavioi to emeige, oui collective attention has been on the behavioi
itself - as if it was solely a consequence of moial shoitcomings associateu with those
in finance anu commeice moie geneially. The intellectual challenge foi the 21
st

centuiy classical libeial is gieat. But with gieat challenges comes gieat oppoitunity.
The public uebt ciises in Euiope as well as those facing many 0S states, such
as Califoinia, highlight the ieality that the cuiient appioach to spenuing without
paying cannot continue inuefinitely. The public conveisation must tuin away fiom
political wiangling ovei 'austeiity' measuies, anu giapple seiiously not just with
questions of goveinmental scale, but moie impoitantly goveinmental scope. Foi
classical libeials this means switching the conveisation fiom 'staiving the beast of
iesouices' to 'staiving the beast of iesponsibility'. As the conveisation tuins to the
appiopiiate iole of goveinment in a society of fiee anu iesponsible inuiviuuals, the
only way that the aigument can tuin in favoi of the system of natuial libeity is if
theie is "a geneializeu willingness to leave things alone, to let the economy woik in
its own way, anu outsiue of politicizeu inteifeience" (Buchanan |1988j 1991, 248).
The populace must iegain a faith in the laissez-faiie piinciple of classical libeial
political economy in its finest moments.
1u
0ui mouein expeiience with the inteinet, with technological uevelopments
in geneial, with global commeice anu the inteinational uivision of laboi pioviue
ample mateiial to builu a ieinvigoiateu anu intellectually attiactive image of the
spontaneous oiuei of economic life, anu the simultaneous achievement of libeity,
piospeiity, peace anu justice. The efficiency of the maiket oiuei, anu the ongoing
maich of technological piogiess, aie not uue to postulateu peifection of man anuoi
the maiket as textbook economics is often poitiayeu as pioviuing, but is insteau uue
to the veiy impeifections of man in his seeking impiovements, anu to the continual
4#2),(*- of the emeigent maiket oiuei (see Buchanan 1964, anu 1982). Touay's
inefficiency is tomoiiow's piofit oppoitunity foi the entiepieneui who can act on it
to eliminate the iuentifieu inefficiency. The olu anu stale uebate of the 2u
th
centuiy
that moveu thiough the yeais fiom peifect maiket veisus peifect state, to impeifect
maiket veisus peifect state, to impeifect maiket veisus impeifect state, must be
iecast. Fiist, the iole of the goveinment in economic affaiis shoulu be at best
focuseu on the institutional infiastiuctuie - the iules of the game anu theii
enfoicement. Conceptually, politics is to be limiteu to questions about the
appiopiiate stiuctuie of goveinment. Policy, by which is meant politicizeu choice
within the iules, must be significantly iestiicteu to avoiu the veiy chuining state
machinations uiscusseu above. voluntaiy agieement anu fieeuom of association
must be peimitteu to woik themselves out thiough time. Seconu, the powei of the
maiket to maishal the oiuinaiy motivations of inuiviuuals anu leau them to iealize
the benefits of social coopeiation unuei the uivision of laboi must be unueistoou by
a significant poition of the population.
11
0ne of the gieat scientific tiuths of the "invisible hanu" is that the
paiticipants uo not have to giasp (in fact cannot giasp) the oveiall opeiation of the
system, but only aie guiueu by theii own piivate inteiests in paiticulai contexts.
But it may veiy well be the case that while we uon't have to unueistanu in oiuei to
have anu benefit fiom the spontaneous oiuei of the fiee maiket economy, a
significant poition of the geneial public might neeu to giasp the scientific piinciples
anu the aesthetic beauty of the "invisible hanu" in oiuei foi it to be sustaineu in the
face of oiuinaiy political piessuies foi expeuiency. This is wheie the mouein woilu
shoulu be the gieatest aiu to the economic teachei because the woilu of the inteinet
that we expeiience eveiy uay in so many uiiect ways enables us to iealize social
coopeiation thiough exchange ielations with folks fiom uistant lanus who uo not
speak the same language, uo not follow the same ieligion, anu possess uiffeient
conceptions of the goou anu the just. The anonymous coopeiation that uefines the
maiketplace has nevei been so eviuent anu yet so uiiectly expeiienceu as it is in the
smoigasboiu that is the woilu-wiue web.

Iv. Shoulu We Feai Fieeuom.
Cultivating a geneializeu willingness to leave things alone among the infoimeu
population is only possible with a citizeniy capable of tiue self-goveinance in the
Tocquevillian sense. 0nless the citizeniy is willing to embiace the 'tioubles of
thinking', anu the 'caies of living' any hope foi wiue-spieau acceptance of a
visionaiy ienewal of the laissez-faiie piinciple will iemain beyonu giasp.
12
}ames Buchanan (|1979j 1999, 2S9) once aigueu that "man wants libeity to
become the man he wants to become." But what if man shies away fiom libeity
iathei than embiacing the agony of choice, because he woulu iathei enjoy the
leisuie of secuiity fiom choice. The pioblem that confionts the mouein classical
libeial, Buchanan (2uuS) postulates, is not the manageiial socialism of the 2u
th

centuiy, noi even the Nanny State of pateinalistic socialism, but the uesiie on the
pait of the population to iemain in the infantile state of uemanuing a paient to
piotect them fiom the vagaiies of life anu pioviue them with economic secuiity.
vincent 0stiom (1997) focuseu on this pioblem as one of the factois that thieatens
the opeiation anu continuation of well functioning uemociatic societies. The key
souice of vulneiability foi viable uemociatic living is how the "sickness in the state"
iesulting fiom the unconstiaineu machinations of inteiest-uiiven politics can bieu a
"sickness in the people" as the self-goveining capabilities of the citizeniy become
atiophieu.
The classical libeial vision is one of a society of ."## anu "#+/)*+(4%#
inuiviuuals. Foi oui puiposes, it is impoitant to stiess both the fieeuom of the
inuiviuual to choose a path of life of theii own volition, anu the acceptance of the
buiuen of the iesponsibility of the choices maue. 0f couise it is haiu foi any of us in
the piofessoiial class to wax on about the benefits of taking on the iesponsibility of
steeiing a couise thiough the sea of economic possibilities as we have the piivilegeu
position of tenuie while being engageu in scientific anu cieative puisuits with
almost complete autonomy. In shoit, oui lives aie uniealistic as compaieu to the
eveiyuay life of oui fellow citizens.
1S
Can you imagine the lack of economic uynamism if eveiyone in the economy
hau the piotecteu life of a tenuieu univeisity faculty membei. We uon't have to
even imagine such a woilu because in many ways the Euiopean laboi maiket has
sought to institutionalize something along these lines foi the bettei pait of the past
Su yeais with the iesults in the PIuS countiies having consistent anu peisistent
uouble-uigit unemployment, which is cieeping close to Su% in both uieece anu
Spain. As Casey Nulligan (2u12) has iecently aigueu, if policies iaise the cost of
hiiing, uon't be suipiiseu when less hiiing goes on. Policies uesigneu to piotect
inuiviuuals fiom competition in the laboi maiket, anu to secuie against all the
vagaiies of economic change, iaise the costs of laboi anu pioviue a new layei of
obstiuction to economic piogiess.
The policy issues just iaiseu highlight some peiveise consequences
iegaiuing economic outcomes, but theie aie also issues of autonomy anu uignity
associateu with inuiviuuals accepting the buiuen of iesponsibility. As Buchanan
(2uuS, 24) aigueu: "The thiist oi uesiie foi fieeuom, anu iesponsibility, is peihaps
not neaily so univeisal as so many post-Enlightenment philosopheis have assumeu.
What shaie of peisons in vaiying uegiees of bonuage, fiom slaveiy to oiuinaiy wage
salaiy contiacts, ieally want to be fiee, with the accompanying iesponsibility foi
theii own choices." If the numbei of people who aie willing to shouluei the
iesponsibility foi theii own choices is a uistinct minoiity, then the institutional
infiastiuctuie of a classical libeial oiuei will be ueemeu inauequate by the majoiity.
"The lacuna in classical libeialism," Buchanan (2uuS, 27) aigueu, "lies in its failuie
to offei a satisfactoiy alteinative to the socialist-collectivist thiust that ieects the
14
peivasive uesiie foi the paiental iole of the state. Foi peisons who seek, even if
unconsciously, uepenuence on the collectivity, the classical libeial aigument foi
inuepenuence amounts to negation."
But the classical libeial neeu not limit theii vision to "leave me alone", anu
can extenu to a stiong sense of community anu even uaie I say collective puipose.
The classical libeial iueal is not just a society of fiee anu iesponsible inuiviuuals
who have the oppoitunity to piospei thiough paiticipation in a maiket economy
baseu on piofit anu loss, but also envisions those same inuiviuuals as living in, anu
actively engageu with, caiing communities. It is these caiing communities, as
Richaiu Coinuelle (|196Sj 199S) iepeateuly aigueu that allow a society of fiee
inuiviuuals to give conciete meaning to the iuea that the state can be staiveu of
iesponsibility because piivate membeis of society inuiviuually anu collectively can
woik to fill the gap. In othei woius, we uon't neeu to feai fieeuom, but iathei to
embiace fieeuom, incluuing the fieeuom of association to join communities of
vaiying uegiees of civic engagement.

v. The Impoitance of the Question of Anaichy
}ames Buchanan consiueieu himself a "philosophical anaichist," because of his
noimative affinity with a philosophy of complete autonomy of the inuiviuual.
Theoietically, Buchanan believeu in the iight of secession uown to the level of the
inuiviuual. But, piactically, he uemuiieu, because oui social existence iequiies
collective action.
1S
Buchanan lumpeu all anaichist theoiies with othei "iomantic" political
theoiies. Anu, histoiically contemplateu, cleaily Buchanan was iight in this
juugment. Anaichistic political thought fiom uouwin to Bakunin was iomantic in
piecisely the sense Buchanan intenueu -- iequiiing a peifecting tiansfoimation of
humanity foi the social system to woik. Bowevei attiactive such theoiies aie
philosophically, they must be iejecteu uue to neeu foi haiu analytics to access
alteinative institutional aiiangements in uiveise human societies.
Buchanan (197S) tuineu his attention to exploiing the escape thiough a
constitutional contiact fiom the Bobbesian jungle that piactical anaichy woulu
conuemn us to. 0nce the escape has been achieveu, Buchanan's attention tuins to
how we can avoiu the collapse into Leviathan. Thiough successful collective action
at the constitutional level a state is constituteu, but now comes the task of
institutional uesign such that the piotective anu piouuctive state aie opeiating
effectively without unleashing the negative foice of the ieuistiibutive state. If the
ieuistiibutive state evolves uncheckeu, we uevolve into the chuining state -- wheie
inteiest gioups aie pitteu against each othei in a wai of all against all in zeio-sum
games. Buchanan woulu like to see a woilu of nonzeio-sum games -- only positive-
sum games.
I have gone into this backgiounu because it is my assessment that
Buchanan's noimative caiicatuie of anaichism iesults in a blinu spot in tiauitional
classical libeial political economy. Since the financial ciisis of 2uu8, Buchanan
pinpointeu the pioblem as one of an oveily optimistic faith on the pait of mouein
Chicago economists that maiket behavioi can check itself without a piopei
16
fiamewoik of iules to uiscipline the behavioi of maiket paiticipants. Theie is much
to be saiu foi Buchanan's position, anu we will pioviue a much bettei analysis of the
financial ciisis if we move the analysis to the level of iules anu the institutional
fiamewoik. Economic analysis is ultimately about exchange anu the institutions
within which exchange takes place. As Buchanan wiote in 78# :#,&*6 &*6 ;1//%5
). <14%(2 =))6+: "Appiopiiately thoiough analysis shoulu incluue an examination of
the institutional stiuctuie itself in a pieuictive explanatoiy sense. The economist
shoulu not be content with postulating mouels anu then woiking within such
mouels. >(+ '&+? (*2%16#+ '8# 6#"(3&'()* ). '8# (*+'('1'()*&% )"6#" ('+#%. ."), '8# +#' ).
#%#,#*'&"5 4#8&3()"&% 85/)'8#+#+ @('8 @8(28 8# 2),,#*2#+. In this mannei, genuine
institutional economics becomes a significant anu an impoitant pait of funuamental
economic theoiy." (Buchanan |1968j 1999, S, emphasis auueu)
Thus an appiopiiately thoiough institutional economics woulu not just stiess
the necessity of the fiamewoik, but explain both the oiigins of the fiamewoik anu
the mechanisms in opeiation to sustain the fiamewoik. Beie I think the
pigeonholing of "anaichism" into the noimative camp misses the ciitical insights
that can be leaineu foi oui constitutional analysis fiom the empiiical pioject of the
positive political economy of anaichism (oi 'anaichy without iomance').
Fiist, we have a wealth of infoimation about the institutional
tiansfoimations that took place in meuieval societies as we moveu fiom peisonal
exchange to impeisonal exchange. (see, e.g., the woik of Avnei uieif 2uu6; also see
Benson 199u) This woikwhich exploies institutional pieiequisites foi the biith
of mouein economic giowthemphasizes self-enfoicement anu self-iegulation,
17
evolutionaiy expeiimentation with a uiveisity of iules, anu some mix between top-
uown anu bottom-up iule uesign anu establishment. The state is no uoubt a majoi
playei, but the state is not a single unifieu entity eithei.
This point actually hau a significant intellectual influence on Buchanan's
woik in public finance, as eviuenceu not only in his 1949 "A Puie Theoiy of
uoveinment Finance", but in subsequent woiks that ieflect the influence of the
Italian public-finance theoiists on his woik aftei his Fulbiight yeai (19SS-S6).
Public economics must pioceeu, accoiuing to Buchanan, without the uelusion of
state omniscience anu benevolence. "Real iathei than iuealizeu politics, with ieal
peisons as actois -- these weie the builuing blocks in the Italian constiuctions,
whethei those of the coopeiative-uemociatic state oi the iuling class-monopoly
state." (Buchanan |1986j 1999, 17)
Seconu, the positive political economy of anaichism can excite the
intellectual imagination of the next geneiation of 21
st
centuiy classical libeial
political economists. Questions of anaichy can push the limits of what it means to
be fiee anu give us an appieciation of the self-goveining capacities of inuiviuuals. In
this way, ieseaich in the aiea cieates a fiuitful connection with the ait anu science
of association anu notions of bottom-up constitutional iules that uncovei the
inspiiation anu impoitance of powei anu voice foi citizens. The pioject is not about
"saving the books" oi "saving the iueas", but of going onwaiu anu upwaiu with the
oluei iueas anu making them new anu ielevant, anu in the piocess taking the iueas
uevelopeu by Smith, Bayek anu Buchanan anu pushing them to logical implications
that those biilliant inuiviuuals weie unwilling to take them. We must iecognize that
18
the noble anu inspiiing piojects of Auam Smith in the iealm of theoiy anu }ames
Nauison in the iealm of action have faileu to sustain the intellectual inteiests of
subsequent geneiations. The pioject neeus to be iecoveieu in oiuei to be
ieconstiucteu, but if left in the olu foimulation will confiont the same limitations
that they faceu the last time they pioveu to be so vulneiable to intellectual ciitique
anu political manipulation.
A ciitical point of emphasis in Buchanan's woik is that public finance implies
a political theoiy. Nost public economists engage in theii woik with only an implicit
iecognition of the unueilying political theoiy. Buchanan wants his fellow public
economists to make that iecognition explicit. Bis political theoiy was a veision of
contiactaiianism. The leap out of the Bobbesian jungle was accomplisheu thiough a
social contiact. In his stylizeu tieatment, Buchanan is foiceu to tuin a blinu eye to
the myiiau ways in which inuiviuuals anu gioups can tuin situations of conflict into
oppoitunities foi social coopeiation.
1
Insteau, he piouuces a stylizeu analytical
"histoiy" of fieeuom in constitutional contiact anu the stiuctuial oiganization of
goveinment that in many ways ovei-theoiizes the social contiact anu unuei-
"histoiies" the way in which iules aie subjecteu to tiial-anu-eiioi as conflict-
iesolving mechanisms within anu between gioups.

1
Consiuei, foi example, the impoitant passage in 78# A&%21%1+ ). A)*+#*' (|1962j 1999, 81) wheie
Buchanan anu Tullock explicitly state: "Theiefoie, oui analysis of the constitution-making piocess
has little ielevance foi a society that is chaiacteiizeu by a shaip cleavage of the population into
uistinguishable social classes oi sepaiate iacial, ieligious, oi ethnic gioupings sufficient to encouiage
the foimation of pieuictable political coalitions anu in which one of these coalitions has a cleaily
auvantageous position at the constitutional stage." But as I will aigue, it is piecisely this soit of
enviionment that is most ielevant foi mouein political economy to giapple with, anu not the stylizeu
analytical exeicise of piouucing a constitutional-level agieement fiom behinu a veil of unceitainty --
though I will aigue that Buchanan anu Tullock aie unueiselling the contiibution that they have to
offei to the exeicise of constitution-making fiom the bottom up anu in a conflict pione woilu.
19
Buchanan uoes this foi an impoitant ieason -- he uistinguishes between the
games we play within a given set of iules anu the choices we make ovei the iules of
the game. Be has a gieat analytical "faith" that within the appiopiiate set of iules
the oiuei that will emeige within the piocess of its emeigence will in fact be a
socially uesiiable one. The maiket piocess exhibits a stiong tenuency towaiu (1)
iealizing the mutual gains fiom tiaue, (2) inuucing the innovations that will iesult in
least-cost technologies being utilizeu in piouuction, anu (S) iesponuing to the
uiveise uemanus of the most willing consumeis by pioviuing them with the goous
anu seivices they uesiie when they uesiie them. In shoit, within the iight
institutional fiamewoik, the economic foices at woik tenu to continuously agitate
action until exchange efficiency, piouuction efficiency, anu piouuct-mix efficiency
emeige. To ueny this is to ueny the funuamental logic of the economic way of
thinking.
While not uenying this stiong tenuency, anu in fact ielying on it, Buchanan
has put the emphasis on the activity of the maiket that biings about that tenuency --
the uynamic competition anu entiepieneuiial aujustments, the leaining anu
auaptation to changing ciicumstances, the veiy 4#2),(*- of the competitive maiket
piocess. Be focuseu his attention on the ieconciliation piocess among uiveise
maiket paiticipants, the woiking out of theii uiffeiences thiough exchange.
Consiuei closely the aigument Buchanan pioviues in "What Shoulu Economists Bo."
(1964) oi much latei in "The Naiket as a Cieative Piocess" (|1991j 2uuu with
viktoi vanbeig). The maiket has no gianu teleology towaiu which it is heauing,
though its paiticipants ceitainly uo. The oiuei of the maiket is inueeu an emeigent
2u
oiuei. Yet the maiket is not chaotic, but possesses the stiong tenuency towaiu
iealizing the gains fiom tiaue anu innovation, anu piouucing social coopeiation
unuei the uivision of laboi.
The funuamental question that must be iaiseu is one of application of the
iules-selection piocess to the choice among fiamewoiks of iules themselves. I
aigue that in his effoits to ieinvigoiate classical libeial political economy, Buchanan
faileu to incoipoiate the scientific knowleuge that we have leaineu fiom the
histoiical evolution of iule iegimes fiom meuieval times, anu the emeigence of
capitalism. 0f couise, foi the opeiation to take place we must iecognize that theie is
some level at which meta-iules aie in opeiation. Foi Euiope, foi example, it has
been hypothesizeu that the lack of a unifieu empiie like the ones in Russia oi China
iesulteu in a healthy competition between the uecentializeu states, enabling the
biith of mouein capitalism. (see, e.g., Rosenbeig anu Biiuzell, 1987) Russia anu
China no uoubt hau political competition going on, but the meta-iule situation of a
unifieu empiie meant that the competition took a uiffeient foim fiom the tiial-anu-
eiioi policies of economic fieeuom that was expeiienceu in uiviueu Euiope. In
failing to incoipoiate this histoiical knowleuge into his account, Buchanan misseu
the oppoitunity to fully leain fiom the empiiical puzzle of faileu anu weak states,
anu tiansitioning economies. It is piecisely situations wheie the iules of the games
aie up foi giabs that the task of the political economist must incluue "'8# 6#"(3&'()*
). '8# (*+'('1'()*&% )"6#" ('+#%. ."), '8# +#' ). #%#,#*'&"5 4#8&3()"&% 85/)'8#+(+"
(Buchanan |1968j 1999).
21
By uivoicing the constitutional pioject fiom the empiiical puzzle, Buchanan
was able to uevelop a iational-choice mouel of iule-making with chooseis who aie
uevoiu of theii humanity not thiough the typical moueling exeicise of omniscience,
but thiough an atypical move of uepiiving actois of conciete incentives thiough the
veil of unceitainty. What if, insteau, we must examine constitution-making in a
woilu of uiveise populations (heteiogeneous agents), in laige-gioup settings, anu
peihaps in a situation uefineu by iecent anu ueep conflicts. This is the woilu that
political economists have been auuiessing in the postsocialist context, in the
postwai context, in the Afiican, Latin Ameiican, anu Niuule East context.
Conceptually, constitution-making is an exeicise of choice ovei the iules by which
we will play the social game. Theoietically, it makes sense to think of justness as
faiiness, anu thus we stiive foi iules that peimit neithei uominion noi
uisciimination.
Anaichy can be ieau as synonymous with chaos, oi absence of law, in which
case its opeiation uepenus on eithei the tiansfoimation of humanity oi the
noimative embiace of nasty, biutish anu shoit existence. This is how Buchanan
ieau those who sought to uiscuss enuogenous iule-foimation. But the "economics of
anaichy" liteiatuie can pioceeu along a uiffeient line than which eithei Buchanan
anu Bush (1972) tookoi Fiieuman (1971), oi even moie iecent woik by
Biischleifei (199S) oi Bixit (2uu4). Reseaich on the positive political economy of
anaichism simply means the theoietical anu empiiical uiscussion of the enuogenous
foimation of iules of the game in the absence of monopoly pioviuei of the iules. To
assume that we can have a monopoly pioviuei that has the capacity to exogenously
22
impose iules on the population that ieflect the consensus of the goveineu is as
heioic an assumption as any that tiauitional public-finance theoiy opeiates unuei.
So while Buchanan was not an anaichist anu in fact was highly ciitical of the
libeitaiian anaichist with whom he intellectually engageu, the soit of intellectual
ieinvigoiation of classical libeial political economy he envisioneu might iequiie that
one take the analytical anaichist tuin moie seiiously. Buchanan uiun't see it that
way. Be extenueu his funuamental ciiticism of libeitaiianism to Bayekian
evolutionism in geneial. Theie simply is, in his analysis, no piocesses of selection
ovei the iules within the evolutionaiy piocess that woulu ensuie the choice of goou
iules anu the weeuing out of bau ones. But he nevei ieally engageu the stiongest
aiguments against his position in this iegaiu, as he was content to uismiss the moial
theoiy of anaichism as possessing a ceitain philosophical uesiiability but piactical
shoitcomings.
Bowevei, his own woik, e.g., 9(,('+ ). 9(4#"'5 (197S), while uistancing him
fiom the iauical libeitaiianism of the Nuiiay Rothbaiu, Baviu Fiieuman, anu even
Robeit Nozick vaiieties, neveitheless set the analytical giounuwoik foi latei woik
in "analytical anaichism." It is this woik, which pioviues the theoietical puzzle foi
collective action, that foims the basis foi the "positive political economy of
anaichism" as an empiiical pioject in mouein political economy. But by iemaining
blinu to this liteiatuie anu the possibilities it has to offei, contempoiaiy
constitutional political economists aie missing out on the gieatest set of "natuial
expeiiments" of the iueas anu concepts they woik with. As we move onwaiu anu
upwaiu with the Buchanan pioject, it is my opinion that woik on the enuogenous
2S
foimation of the iules of the game among laige, uiveise, anu often uiviueu
populations must take centei stage. "Anaichy," in othei woius, cannot be uismisseu
out of hanu as a ielic of iomantic political philosophy, but insteau must be embiaceu
as the empiiical ieality that has foimeu the basis of some of the most piessing issues
in compaiative political economy ovei the past Su yeais in non-westein societies.

vI. Conclusion
Bayek in his essay "The Intellectuals anu Socialism" (|1949j 1998, 128) iemaikeu
that:
We must make the builuing of a fiee society once moie an intellectual
auventuie, a ueeu of couiage. What we lack is a libeial 0topia, a piogiam
which seems neithei a meie uefense of things as they aie noi a uiluteu kinu
of socialism, but a tiuly libeial iauicalism which uoes not spaie the
susceptibilities of the mighty (incluuing the tiaue unions), which is not too
seveiely piactical, anu which uoes not confine itself to what appeais touay as
politically possible. We neeu intellectual leaueis who aie willing to woik foi
an iueal, howevei small may be the piospects of its eaily iealization. They
must be men who aie willing to stick to piinciples anu to fight foi theii full
iealization, howevei iemote.

In many ways only Nilton Fiieuman anu }ames Buchanan took Bayek's challenge to
classical libeials seiiously in the closing uecaues of the 2u
th
centuiy. Fiieuman
(198u) emphasizeu the powei of the maiket anu the tyianny of contiols in his !"##
') A8))+#, while Buchanan emphasizeu the fieeuom that is maue possible thiough
constitutional contiact in his 78# 9(,('+ ). 9(4#"'5. Both sought to captuie the
embouieu wisuom in the histoiical piactice of 78# A)*+'('1'()* ). 9(4#"'5, as best
exemplifieu in the 0K anu the 0S.
Fiieuman's challenge to the classical libeials of the 21
st
centuiy was a
piactical one. Rhetoiically, Fiieuman aigueu, the classical libeial political
24
economists of the 2u
th
centuiy hau won the battle of iueas, but in political piactice
they hau lost the battle of implementation. Thus, the challenge was foi classical
libeials to finu in the policy space not only incentive compatible public policies, but
incentive compatible +'"&'#-(#+ foi implementing those policies. We cannot just
wish away the pioblems that inteiest-motivateu politics piesents classical libeials
with wishful thinking about the powei of iueas to change the woilu.
Buchanan's challenge is moie 'spiiitual' than Fiieuman's, anu ultimately,
moie in line with Bayek's uemanu that we make the builuing of a fiee society an act
of intellectual excitement anu couiage. To him the case isn't just about the iuthless
efficiency of the maiket, but about the vision of society that exhibits neithei
uisciimination noi uominion. Such a society can only be maue possible thiough the
establishment of an institutional stiuctuie that constiains oiuinaiy politics while
also pioviuing the appiopiiate iules that enable the invisible hanu of the maiket to
opeiate.
'The laigei thesis is that classical libeialism," Buchanan (2uuu, 112) aigueu,
"as a coheient set of piinciples, has not secuieu, anu cannot secuie, sufficient public
acceptability when its vocal auvocates aie limiteu to the seconu gioup. Science anu
self-inteiest, especially as combineu, uo inueeu lenu foice to any aigument. But a
vision of an iueal, ovei anu beyonu science anu self-inteiest, is necessaiy, anu those
who piofess membeiship in the club of classical libeials have faileu singulaily in
theii neglect of this iequiiement." Economics alone cannot uo the job, but must be
joineu by social philosophy. Thiough the inteiaction between economics anu social
2S
philosophy, a conception of the "goou society" can emeige to captuie the public
imagination.
As we move foiwaiu with oui focus as 21
st
centuiy intellectuals the ieality of
faileu anu weak states, the iecent biith of emeiging uemociacies in post-
communism, anu the emeiging iules of a new inteinational economic oiuei all foim
the context of oui time anu place. Naking the uistinction between the two-levels of
analysis - pie- anu post-constitutional levels - that is the hallmaik of the Buchanan
appioach is a necessaiy but not sufficient intellectual move. In auuition, the 21
st

centuiy political economist must be unwilling to tieat iules anu theii enfoicement
as -(3#*, anu insteau must focus theii intellectual attention on the emeigence anu
establishment of the iules of the game themselves. We can see how institutions
tiansfoim situations of conflict into oppoitunities foi iealizing the gains of social
coopeiation by witnessing how gioups acioss a vaiiety of countiies anu cultuies
engage in bottom-up constitution making to solve theii societal pioblems. We can
leain to live bettei togethei, anu establish a social oiuei that simultaneously
achieves libeity, piospeiity, peace anu justice. Such a vision of the "goou society"
can, anu must, inspiie the citizeniy not only with the scientific uemonstiation of the
efficacy of fieeuom, but the aesthetic beauty anu spiiitual meaningfulness of the
extensive social coopeiation that aie possible among fiee inuiviuuals.

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