Grasping Reality on TypePad, by Brad DeLong

Again, from the perspective at century's end, it seems naive to think that "the market," or "capitalism," as some vaguely defined and general system can operate effectively under any and all possible structures of constraints. Who could expect that "the market" could adjust quickly to a dramatic reduction in the politically-influenced and unpredictable supply of money? It must remain forever mysterious as to why Keynes and the Keynesians were willing to neglect prospects for institutional reforms in the effective monetary constitution, while, at the same time, proposing radical changes along other more specific dimensions of policy.... The Keynesian tragedy is locatcd in the timidity of its nostrums in the face of existing institutions, accompanied by its willingness to replace market evaluations by politicized controls over particular choice vectors (employment, investment)...

And I really, really want a copy of James Buchanan's 1956 mission statement for the "Thomas Jefferson Center for Political Economy and Social Philosophy". Anybody have one they can ship to me? Or do I need to block out a couple of hours the next time I am in Charlottesville?

Nancy MacLean:

As 1956 drew to a close, Colgate Whitehead Darden Jr., the president of the University of Virginia, feared for the future.... In Virginia, outraged state officials... force[d] the closure of any school that planned to comply [with Brown]. Some extremists called for ending public education entirely. Darden... could barely stand to contemplate the damage such a rash move would inflict. Even the name of this plan, “massive resistance,” made his gentlemanly Virginia sound like Mississippi.

On his desk was a proposal, written by the man he had recently appointed chair of the economics department at UVA. Thirty-seven-year-old James McGill Buchanan liked to call himself a Tennessee country boy. But Darden knew better.... To most Americans living in the North, Brown was a ruling to end segregated schools—nothing more, nothing less. And Virginia’s response was about race. But to men like Darden and Buchanan... Brown boded a sea change on much more.... States’ rights... were yielding in preeminence to individual rights. It was not difficult for either Darden or Buchanan to imagine how a court might now rule if presented with evidence of the state of Virginia’s archaic labor relations, its measures to suppress voting, or its efforts to buttress the power of reactionary rural whites by underrepresenting the moderate voters of the cities and suburbs of Northern Virginia. Federal meddling could rise to levels once unimaginable.

James McGill Buchanan was not a member of the Virginia elite. Nor is there any explicit evidence to suggest that for a white southerner of his day, he was uniquely racist or insensitive to the concept of equal treatment. And yet, somehow, all he saw in the Brown decision was coercion. And not just in the abstract. What the court ruling represented to him was personal. Northern liberals—the very people who looked down upon southern whites like him, he was sure—were now going to tell his people how to run their society. And to add insult to injury, he and people like him with property were no doubt going to be taxed more....

I can fight this, he concluded. I want to fight this. Find the resources, he proposed to Darden, for me to create a new center on the campus of the University of Virginia... a new school of political economy.... He could win this war, and he would do it with ideas. While it is hard for most of us today to imagine how Buchanan or Darden or any other reasonable, rational human being saw the racially segregated Virginia of the 1950s as a society built on “the rights of the individual,” no matter how that term was defined, it is not hard to see why the Brown decision created a sense of grave risk among those who did.

Buchanan... made clear that he would devote himself passionately to this cause.... What animated Buchanan, what became the laser focus of his deeply analytic mind, was the seemingly unfettered ability of an increasingly more powerful federal government to force individuals with wealth to pay for an increasing number of public goods and social programs they had had no personal say in approving.... To Buchanan, what others described as taxation to advance social justice or the common good was nothing more than a modern version of mob attempts to take by force what the takers had no moral right to: the fruits of another person’s efforts. In his mind, to protect wealth was to protect the individual against a form of legally sanctioned gangsterism....

The most powerful social movement back then was what Buchanan’s proposal referred to as “the labor monopoly movement,” or what most of us would today call organized labor. But other movements... the increasingly influential civil rights movement... elderly citizens.... From his vantage point, it did not matter whether the movement in question consisted of union members, civil rights activists, or aging women and men fearful of ending their lives in poverty. Nor did the justness of the cause they advocated, the pain of their present condition, or the duration of the injustice they were attempting to reverse move him in any way. The only fact that registered in his mind was the “collective” source of their power—and that, once formed, such movements tended to stick around.... How was this fair to other individuals? How was this American?...

So Buchanan understood that asking Darden to fund what was in essence a political center at a nonprofit of higher learning was highly inappropriate. To avoid criticism that “an organization with extreme views, or a propagandizing agency” was being established on campus, he recommended that the center should not have the words “economic liberty” in its name, even if this phrase captured “the real purpose of the program”.... The enemy became “the collective order,” a code phrase....

The private mission statement for the Thomas Jefferson Center for Political Economy and Social Philosophy that Buchanan submitted... promised to be guided by two traditions: that of the “old-fashioned libertarians” whose ideas encouraged laissez-faire economic policies in nineteenth-century England and America, and that of “the Western conservatives,” who feared the “revolt of the masses,” as the title of one text put it, and sought new ways to ensure “social order.” The document also made clear who would “not be allowed to participate”: anyone who, even inadvertently, would value “security”—the New Deal’s mantra—above liberty, and who would “replace the role of the individual and of voluntary association by the coercive powers of the collective order.”...

Buchanan... pledged to train “social philosophers,” men (for the university admitted only men then) ready to put into effect a society based on liberty. With a hint of defensiveness, knowing that such exclusiveness was, indeed, unusual in an academic enterprise, he assured: “To start in a small way to produce such a line of new thinkers is an eminently legitimate endeavor for a great university.” The center’s members, Buchanan vowed, would take up such matters of concern to Virginia’s governing elite as the growing power of labor unions; the correct relationship between the federal government and the states (made all the more urgent by Supreme Court decisions such as Brown); what he depicted as the “problems of equalitarianism” (among them “income redistribution,” “the welfare state,” and “the tax structure,” his archaic way of speaking of egalitarianism an indicator of how his program would approach them); and “the social security system and [its threat to] individual initiative.” More specifically, the center aimed to combat what its founders referred to as “social engineering” by changing the way people thought. They hoped to break “the powerful grip that collectivist ideology already had on the minds of intellectuals”....

Buchanan understood the authority and commitment of those whose arguments he set out to counter. But having had his fill of Ivy League northerners in the Navy, he was unafraid. He relished the opportunity to build a team of intellectuals who would develop political-economic arguments to “preserve a social order based on individual liberty” and thereby lay the groundwork for an intelligent pushback against federal power. The economist’s vision meshed almost perfectly with what Virginia’s elite sought, while avoiding the pitfalls.

Buchanan never mentioned race in outlining his program, for example. He named his center the Thomas Jefferson Center for Studies in Political Economy and Social Philosophy, after UVA’s founder, noting privately in his précis to the president that the venture needed an innocuous name that would not draw attention to its members’ “extreme views... no matter how relevant they might be to the real purpose of the program.”...

The intellectual and the activist in him worked side by side, but one had enormous success while the other did not appear to be making much headway. Buchanan’s penetrating analyses of how incentives guide government action would be awarded the Nobel Prize in Economic Sciences in 1986. That award was the supreme vindication of his intellectual achievement. But the other Buchanan, the deeply political foot soldier of the right, experienced mounting despair....

Again and again in his later years, Buchanan told a story of how flint had lodged in his soul in the New York City Naval Reserve Officer Training Corps. “I was subjected to overt discrimination based on favoritism for products of eastern establishment universities,” he recounted. In the initial appointment of cadet officers, he was passed over, and not simply for Ivy League graduates, but for a Rockefeller; it was, he said, “blatant discrimination.” The episode fortified his “populist preconceptions,” his conviction that northeastern elites gained at the expense of “southerners, midwesterners, and westerners.” Few would argue that meritocracy prevailed at this moment. Yet what is notable in Buchanan’s formulation is the Davidson-like framing of the problem in regional terms that missed the most egregious impact of bigotry: on Catholics, Jews, Mexican Americans, working-class white men, and, above all, African Americans. Indeed, rather than sympathize with the plight of black Americans, Buchanan later argued that the failure of the black community to thrive after emancipation was not the result of the barriers put in their way, but rather proof that “the thirst for freedom, and responsibility, is perhaps not nearly so universal as so many post-Enlightenment philosophers have assumed”. It was a breathtakingly ignorant claim, a sign of a willful failure to see what his paradigm would not allow him to. Both Koch and Buchanan would make similarly blind and insulting claims about others who did not do well in the labor market these men chose to believe was free and fair...

Meanwhile, the state of Virginia had done nothing to integrate its public schools; instead, its officials continued to bluster, with massive resistance.... The militant standoff was also buying time to set up a new infrastructure of private academies that, being private, had no obligation to integrate under Brown. And while liberals all over the country, north and south, east and west, continued to see the issue at stake as one of race and equal treatment under the law, not to mention finally giving African Americans a chance at the American dream, pioneering northern libertarians—a term then just coming into use—all but lined up to show their support for the Virginia elite....

Who exactly were these libertarians and what so excited them? For New Yorker Frank Chodorov, the founder of the cause’s first publication, The Freeman, and an inspiration to many, it was the opportunity the resistance to Brown presented to finally do away with the “public school system,” and see its buildings “leased off to individual groups of citizens and operated on a private basis.” For the Southern California–based Robert LeFevre, whose soon-to-be-founded Freedom School would attract nearly all the leading thinkers of the cause as well as the wealthy entrepreneurs who subsidized dissemination of their ideas... in the "aroused and embittered South" would find allies among northerners who wanted to fight federal overreach....

After James Kilpatrick, the Richmond editor, wrote the piece heralding public school closures in any district in Virginia that agreed to integrate, Regnery urged him to write a full-length book on the topic. The book that resulted in early 1957, The Sovereign States, drew plaudits from advocates of economic liberty on both sides of the Mason-Dixon Line. In it, Kilpatrick blended his Calhounian case for states’ “right of interposition”—or “veto” of federal action—to protect their peculiar interests with an argument that the high court’s current interpretation of the Constitution’s Commerce Clause, which since 1937 had enabled all federal regulation, was a departure from the original intent of the founders. By his lights, the Wagner Act, the Social Security Act, and the Fair Labor Standards Act were as unlawful as Brown.... The William Volker Fund, which subsidized so much of the early free-market cause, underwrote bulk purchases of The Sovereign States to distribute, free of charge, to some 1,200 college libraries and 260 private schools, and planned an educational outreach “program for selected editors.”...

Virginia’s fight against federal power excited those on the right who had come to feel they had no real home in the Democratic or Republican parties of the 1950s. “We [voters] really have only one party now,” a New Jersey businessman complained to Jack Kilpatrick: “the New Deal Party!” He suggested that “a new party, headed by a conservative Southern Democrat but welcoming a conservative Republican” would have “a fair chance of succeeding in 1956.”...

Back in Virginia that September, James Buchanan, fresh from the recent Switzerland meeting of the Mont Pelerin Society, privately called Eisenhower’s “dispatching of troops” to Little Rock a terrible mistake. “The whole mess” of school segregation versus desegregation, he argued, should have been “worked out gradually and in accordance with local sentiment.” He never acknowledged that this is exactly what the school board of Little Rock and those in three districts in Virginia that wanted to admit some black students to white schools had tried to do, only to be overruled by the power elites of their states....

James Buchanan and Warren Nutter did not put forward their proposed solution to the school crisis until early 1959. When they did, it was as if they had pulled down the shades on every window, cancelled their subscriptions to all the newspapers, and plugged their ears to a new set of voices in Harry Byrd’s Virginia....

Many did see themselves as patriotic, law-abiding citizens, and so were unwilling to defy a court ruling, even on the matter of race. Federal courts had instructed their communities to desegregate, without further delay, particularly schools that had been the focus of NAACP lawsuits, and they planned to comply. Those local plans triggered the implementation of the 1956 state massive resistance legislation empowering the governor to close any white school that planned to admit any black students....

On February 10, eight days after Norfolk reopened its schools, they sent a “private” report to all the members of the new commission. The economists made their case in the race-neutral, value-free language of their discipline, offering what they depicted as a strictly economic argument—on “matters of fact, not of values.” Yet they were, in effect, urging the state to ignore its concerned white parents and continue to stonewall the African Americans seeking equal schooling. And they knew it, which is why they noted that by intervening, they were “letting the chips fall where they may.” While most Virginians now assumed that the path forward would include gradual integration in most parts of the state, albeit with mechanisms holding it to a minimum, Professors Buchanan and Nutter made the case for the very opposite: unlimited privatization of education. As believers in individual liberty, they said, they approved of neither “involuntary (or coercive) segregation” nor “involuntary integration.”

Tax-funded private schools were the answer. They offered a plan they believed could salvage what remained of massive resistance while surviving court review. How? Privatize education, but do so on the basis of strictly economic arguments. First and foremost, they contended that public schools, which they insisted on referring to as “state-run schools,” had an effective “monopoly.” They lacked adequate competition, because on their own, few parents could afford alternatives. As a result, like all monopolies, state-run schools had no incentive to improve. “Privately operated schools,” by contrast, would have to compete for students, so they would have a strong incentive to try out a “diversity” of curricula, not only encouraging experimentation but meeting different tastes. In essence, “every parent could cast his vote in the [educational] marketplace and have it count.” To foster this system, Virginia should provide a tax-subsidized voucher to any parent who wished to send a child to a private school for any reason. Those schools, being private, would enjoy autonomy, admitting or rejecting students as they chose to, without government interference.

The importance of the economists’ case rested less on what they proposed than on how their proposals were framed to undercut the arguments of the parents and others who were saying that Virginia simply could not afford to subsidize private schools to salvage segregation. Not so, the Chicago-trained scholars countered: those who argued this way were making an accounting error by failing to consider the significant dollar value of existing school facilities. If authorities “sold all the buildings and equipment to private owners”....

It was a radical proposal, no question about it, the work of ideologues so committed to their own postulates that they disdained evidence to the contrary, including the cries of colleagues outside economics.

Indeed, about ten days before they reached out to the state legislators, over one hundred and fifty moderate local professors had released a petition urging “respect for law and order”; that is, compliance with the federal courts.... “We emphatically believe, in keeping with basic democratic principles,” they concluded, that local people have the right to “solve our school problems ourselves,” an implicit reproach of the state government closing schools in local communities that wanted to obey the courts, such as Charlottesville. Buchanan and Nutter disagreed: to them, as to Kilpatrick, that would be bowing to federal coercion....

Even Buchanan’s University of Chicago mentor, Frank Knight, expressed some concern about “racists” before a visit to Charlottesville. Buchanan responded that Chicago had far more “race hatred” than any place he had lived in the South. He assured Knight that “the Virginia attitude on the whole mess” stemming from Brown had not been based on racism. “The transcendent issue,” he instructed his former teacher, was “whether the federal government shall dictate the solutions.”...

Throughout those five years, as James Buchanan developed the Virginia school of political economy, he remained mute about the well-publicized tragedy. He saw no reason to distinguish the liberty white county leaders claimed as self-justification for denying education to a community that had dared to challenge them in federal court from what he was seeking to advance with his new school of thought. Quite the contrary, he aggressively defended his adopted state. As the Prince Edward schools remained padlocked and Virginia used tax revenues to build up an infrastructure of segregated white private schools (in a formally color-blind voucher system that survived court challenge until 1968), while keeping black voters from the polls, another southern-born economist, Broadus Mitchell, reached out to Buchanan.

Mitchell, who had resigned from Johns Hopkins University two decades before over its refusal to admit a black student, challenged the Thomas Jefferson Center to leave the realm of fine philosophical abstraction and hold a program on “democracy in education”—and, in the name of “social decency,” stand up for the integration of UVA. Buchanan answered curtly that “Virginia, as a state, has, in my opinion, largely resolved her own problems” in education. He then sent the new university president his own rebuke to the “annoying” letter, calling Mitchell “a long-time joiner of all ‘soft-headed,’ ‘liberal’ causes,” and lied that his critic had made “no notable contributions” as a scholar...

“Working Papers for Internal Discussion Only” (December 1956), record group 2/1/2.634, box 9, Office of the President, Papers of the President of the University of Virginia, Office Administrative Files, Manuscripts Division, Alderman Library, University of Virginia. The best introduction to Darden’s thought is Guy Friddell, Colgate Darden: Conversations with Guy Friddell (Charlottesville: University Press of Virginia, 1978)...

James M. Buchanan, “Afraid to Be Free: Dependency as Desideratum,” first draft, Buchanan House Archives, Center for Study of Public Choice, George Mason University, Fairfax, VA (hereafter cited as BHA), 9, later published in Public Choice 120, no. 3 (September 2004)...