Friday, June 08, 2007

Bad People or Bad Institutions

The James Buchanan problem

I was lucky enough to attend a talk by economics Noble Laureate James Buchanan yesterday. He is a southern gentlemen, and an inspiration. Buchanan helped open my eyes to the fact that idealism is the enemy of rational deliberation. And also to the fact that there are really no absolute solutions to our problems. The solutions are indeed on the margins with people freely associating and exchanging with each other.

David Levy, another interesting economist associated with George Mason U., said problems might be "bad people or bad insitutions." David Hume said our institutions should be constructed so that even bad people act good.

Back to Buchanan. Buchanan said he was against the fact that the social sciences were turning towards evolutionary theory (in fact this has been happening a long time, but again he is 8o some years old and historic time is relative anyway. The classics said "everywhere and at all times" alot in the 18th century). Yet, as Hayek (and before that the German and American Institutionalists) wrote, institutions grow out of the culture habits instincts of a people. Moral behaviour however is timeless (which is why I will never in a million years understand those supporting forced redistribution).

Buchanan in his talk said that many institutions exist which should not (we all know that once a government institution is created it is very hard for it to go away). Institutions it seems to me that are created through free-association and spontaneous order also come about through evolution. So it is not just government institutions which evolve through the democratic process.

Thus the Buchanan problem. Which institutions should exist and how do you get rid of those that should not ? We now have a huge central government for our overly large country of 300 million people and it is making millionaires of rent-seeking lobbyists and military contractors, and corrupting our political process. Not to mention monetary policy which makes millionaires of financiers when we would all be be better off if the money supply and interest rates were just left alone - but that, as they say, is another story.

How does one devolve govermment if not through evolution in the democratic process? Revolution is not really an option without killing your fellow man, and of course no amount of money is worth that.

Under social contract theory institutions collectively approved at a moment in time then of course are not part of the social contract of those living in future generations. Hume said that even the rich want a government and social order the poor will support so that there will be peace.

So we've identified the problem. You can't devolve things that wont dissolve. The market and social acceptance at a moment in time weed out those institutions which are no longer necessary. But this does not happen to institutions created by government mandate. Buchanan sharpened analysis of the problems of rent-seeking in collective action. But I am not sure if he identified how to undo those institutions created under our monster federal government on the backs and rational ignorance of the people.