Buchanan Trusted Market Mechanisms Because He Trusted Individuals

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James Buchanan, one of the most influential economists of the twentieth century, believed that individuals were able to voluntarily devise private and market-like institutional arrangements to solve problems of public goods and externalities. Why was he so optimistic?


Editor’s note: The current debate in economics seems to lack a historical perspective. To try to address this deficiency, we decided to launch a Sunday column on ProMarket focusing on the historical dimension of economic ideas. You can read all of the pieces in the series here.

James M. Buchanan, the 1986 Nobel laureate in economics and one of the most influential economists of the twentieth century, was a pro-market economist who nonetheless admitted that markets failed to deal with public goods, public bads, and externalities. Such failures should not, however, mechanically lead to government intervention. Partly because governments are flawed themselves but also, Buchanan…

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