Cost and Choice: An Inquiry in Economic Theory

by James M. Buchanan

Overview

"As he usually does, Professor Buchanan has produced an interesting and provocative piece of work. [Cost and Choice] starts off as an essay in the history of cost theory; the central ideas of the book are traced to Davenport and Knight in the United States, and to a series of distinguished writers associated at various times with the London School of Economics. The author emerges from this discussion with what can be described as the ultimate in subjectivist cost doctrines. . . . Economists should learn the lessons offered to us in this little book--and learn them well. It can save them from serious errors."--William J. Baumol, Journal of Economic Literature

Product Details

ISBN-13:	9780865972247
Publisher:	Liberty Fund, Incorporated
Publication date:	12/01/1999
Series:	The Collected Works of James M. Buchanan , #6
Edition description:	Volume 6
Pages:	113
Product dimensions:	6.00(w) x 9.00(h) x 0.35(d)
Age Range:	18 Years

About the Author

James M. Buchanan (1919-2013) was Professor Emeritus and Advisory General Director of the James Buchanan Center for Political Economy at George Mason University, where he also established the Center for the Study of Public Choice. He authored several books, including his most famous work, The Calculus of Consent, which he co-authored with Gordon Tullock. Buchanan was awarded the Nobel Prize in Economics in 1986 for his work in public choice theory.

Table of Contents

Foreword xi Preface xiii Acknowledgments xvii 1. Cost in Economic Theory 3 Classical Economics 3
Marginal-Utility Economics 9
The Marshallian Synthesis 12
Frank Knight and American Neoclassical Paradigms 13 2. The Origins and Development of a London Tradition 17 Wicksteed and the Calculus of Choice 17
H. J. Davenport 18
Knight on Cost as Valuation 19
Robbins, 1934 19
Mises, Robbins, and Hayek on Calculation in a Socialist Economy 21
Hayek, Mises, and Subjectivist Economics 23
The Practical Relevance of Opportunity Cost: Coase, 1938 26
G. F. Thirlby and “The Ruler” 29
Mises' Human Action 33
The Death of a Tradition? 34
Appendix to Chapter 2: Shackle on Decision 35 3. Cost and Choice 37 The Predictive Science of Economics 37
Cost in the Predictive Theory 40
Cost in a Theory of Choice 41
Choice-Influencing and Choice-Influenced Cost 42
Opportunity Cost and Real Cost 43
The Subjectivity of Sunk Costs 45
Cost and Equilibrium 46 4. The Cost of Public Goods 49 The Theory of Tax Incidence 50
Costs and Fiscal Decision-Making: The Democratic Model 52
Costs and Decision-Making: The Authoritarian Model 55
Costs and Decision-Making: Mixed Models 55
The Choice Among Projects 57
The Costs of Debt-Financed Public Goods 59
Ricardo's Equivalence Theorem 61
Tax Capitalization 63 5. Private and Social Cost 65 Summary Analysis 65
A Closer Look 66
Internal Costs, Equilibrium, and Quasi-Rents 69
An Illustrative Example 70
Pigovian Economics and Christian Ethics 72
Narrow Self-Interest and Alternative-Opportunity Quasi-Rents 74
Conclusion 76 6. Cost Without Markets 77 Prices, Costs, and Market Equilibrium 77
Resource-Service Prices as Final-Product Costs 78
Market Equilibrium, Costs, and Quasi-Rents 80
The Cost of Military Manpower: An Example 81
The Cost of Crime: Another Example 84
Artificial Choice-Making 86
Socialist Calculation and Socialist Choice 87
Costs in Bureaucratic Choice 89 Author Index 93 Subject Index 95