Economics Dictionary of ArgumentsHome
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| Markets: A market in economics is a physical or virtual place where buyers and sellers come together to exchange goods and services. Markets allow people to specialize in different areas of production, they provide competition, and promote innovation. See also Competition, Progress, Economy, Goods, Exchange, Trade, Innovation._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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James M. Buchanan on Markets - Dictionary of Arguments
Boudreaux I 57 Market/Buchanan/Boudreaux/Holcombe: Buchanan saw the market mechanism as a spontaneous order in which individuals cooperate for the mutual gain of all who engage in voluntary exchanges. Those exchanges further the welfare of the individuals who participate in them; the evidence being that they voluntarily choose to exchange. Thus, Buchanan says, “For the scientist in the academy, understanding such principles does, or should, translate into reasoned advocacy of classical liberal policy stances” (Buchanan, 2000(1): 114). Armed with an understanding of economics, Buchanan saw a scientific basis for promoting a classical-liberal social order. By allowing individuals the liberty to make their own choices, and by enabling them to cooperate with others to achieve their goals, individuals are best able to improve their own welfare while not infringing on the liberty of others to do likewise. The social sciences, which study how people interact with each other, treat liberty as an instrumental value - that is, as a means to a higher end. About this treatment of liberty Buchanan wrote: Boudreaux I 58 „Classical liberals themselves have added confusion rather than clarity to the discussion when they have advanced the claim that the idealized and extended market order produces a larger “bundle” of valued goods than any socialist alternative. To invoke the efficiency norm in so crude a fashion as this, even conceptually, is to give away the whole game.“ (Buchanan, 2000(1): 116) Buchanan understood the strong temptation to make this efficiency argument. Boudreaux: It is, after all, correct. But to make this argument shifts the terms of the debate to that of socialists and other critics of the market order. Yes, a market order is indeed more productive. Yet for Buchanan the ultimate and sufficient justification for a market order is that it is essential to protect individual liberty. Ultimately, individuals want to make their own choices. They do not want others to tell them what to do. Fortunately, a market order allows them to make their own choices. In addition, a market is more productive than is a system in which some persons force their decisions on others. But this efficiency advantage should not distract the classical liberal from advocating liberty as a fundamental value. >Agreement/Buchanan. Boudreaux I 97/98 Market/Buchanan/Boudreaux/Holcombe: Buchanan insisted that the focus of economic analysis should be on markets, that is, on institutions of exchange, rather than on resource allocation. Buchanan says of economists who “are wholly concerned with the allocation of scarce resources among competing ends or uses… that theirs is not legitimate activity for practitioners of economics, as I want to define the discipline” (Buchanan, 1964(2): 216). The reason Buchanan insisted on this distinction (…) is that to conceive of economic activity as an exercise in resource allocation is to unwittingly assume that society is rather like a giant sentient individual with preferences all its own. Given its preferences and its income, society has only one “correct” way to “choose” - that there is one optimal allocation of resources. Society/Buchanan: But, (…) society is not a giant sentient individual with its own preferences and brain for choosing. Society is the complex interactions of many individuals each in pursuit of his or her own goals. Solution/Buchanan: An “economy,” Buchanan observed, is the name that we give to the on-going process of many different individuals (and other organizations, including households and firms) pursuing their own individually chosen goals but with no overarching shared goal such as “the goal of the national economy.“(3) Boudreaux I 99 „The market or market organization is not a means toward the accomplishment of anything. It is, instead, the institutional embodiment of the voluntary exchange processes that are entered into by individuals in their several capacities. This is all there is to it. Individuals are observed to cooperate with one another, to reach agreements, and to trade. The network of relationships that emerges out of this trading process, the institutional framework, is called “the market.” It is a setting, an arena, in which we, as economists, as theorists (as “onlookers”), observe men attempting to accomplish their own purposes, whatever these may be.“ (Buchanan, 1964(4)). 1. Buchanan, James M. (2000). “The Soul of Classical Liberalism,” Independent Review (Summer). 2. Buchanan, James M. (1964). “What Should Economists Do?” Sothern Economic Journal (January). 3. Ibid. 4. Ibid, p. 219_____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
EconBuchan I James M. Buchanan Politics as Public Choice Carmel, IN 2000 Boudreaux I Donald J. Boudreaux Randall G. Holcombe The Essential James Buchanan Vancouver: The Fraser Institute 2021 Boudreaux II Donald J. Boudreaux The Essential Hayek Vancouver: Fraser Institute 2014 |
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