Cross Pollination: Journalists and Economists

Every orchid sexual encounter is a ménage à trios— an orchid which wants to deliver its pollen to another orchid and a pollinator that is seduced into being their delivery boy. The hummingbird, of course, has no interest in this love tryst but is bribed with nectar into doing their reproductive work. - Carol Siegel, Orchids And Hummingbirds: Sex In The Fast Lane

Our economy is based on a division of labor.  Simply put, few people are a jack of all trades.  Specialization has greatly boosted productivity.  However, sometimes it really seems like the division of labor goes... boink.

Today I read this story... Death to the Mass: Media must rebuild its business around relevance and value, not volume.  It was wonderfully written by Jeff Jarvis who is a journalist and a professor at CUNY-J.  Yesterday I read a great overview of the general problem... John Oliver isn’t responsible for saving journalism.  It was written by Joe Amditis who is a grad student at CUNY-J.  In his story, Amditis shared this video...






All the media experts are scratching their heads and spending lots of money in order to try and find the solution.  Here's how Jarvis concluded his story...

To accomplish that, I believe the industries need cross-pollination. Perhaps the greatest benefit of Google’s Digital News Initiative and its Newsgeist events is that each side learns more about the other. At our next convening of product development executives in news, we will invite product (sorry: not business development) people from platforms so they can dig into specifics on small matters (e.g., Facebook and Google treat a news organization’s desire to update the news differently) and large (can we begin to build standards for data exchange?). News companies are desperate to hire technologists. I also suggest that the platforms would be well-served to hire senior journalists — just a few — not to build competitive news operations (who wants to go into that business?) but to act as translators between our cultures and, more importantly, to help the platforms better serve their own users. That is what we all want to do. None of us are kings. We are all merely servants of the public.

Jarvis is correct that cross-pollination is needed... but even though he argued that media should focus on value... he really doesn't seem to see the relevance of economists.  So here I am!  Kinda like a hummingbird!

Amditis is correct that John Oliver isn’t responsible for saving journalism.  But there's absolutely no need for Oliver to save journalism.  A Nobel Prize economist saved journalism half a century before it even needed to be saved!!!


1954: The Nobel Prize winning economist Paul Samuelson writes The Pure Theory of Public Expenditure. It has been cited nearly 8,000 times and is by far the most widely cited (popular) economic justification for government.  Samuelson's surprisingly short, yet quite dense, paper was basically about the free-rider problem.  He argued that we can't trust people to honestly communicate their valuations of public goods.  Why buy the cow when you can get the milk for free?

So did Samuelson save journalism?  Nope.  He correctly recognized that the free-rider problem was a real problem... but his solution was taxation (subscription) and planners (editors) simply assuming people's preferences.

1956: A young whipper snapper, Charles Tiebout, challenges Samuelson's conclusion by writing... A Pure Theory of Local Expenditures. It's been cited around 15,000 times. So it's even more popular than Samuelson's paper. Tiebout argued that people can and do honestly communicate their valuations of public goods... simply by moving to municipalities that offer bundles of public goods which more closely match their preferences. Aka voting with their feet... "foot voting".

So did Tiebout save journalism?  Nope.  Like Samuelson, he correctly recognized that the free-rider was a real problem.  And like Samuelson, his solution was taxation (subscriptions) and planners (editors) simply assuming people's preferences.  The difference is that in Tiebout's story, taxpayers (subscribers) communicate their preferences simply by moving to whichever municipality (newspaper) supplies the bundle of public goods (articles) which most closely match their preferences.  Of course this is a much better solution for articles than for other public goods because it's incredibly easier to move to a new newspaper than it is to move to a new city, state or country.  However, this is one of the solutions currently being used to save journalism... and it's obviously not working.

1963: The Nobel Prize winning economist James Buchanan writes The Economics of Earmarked Taxes. It's by far the least popular paper out of the three and has been cited less than 300 times. Buchanan basically argued that since people are paying taxes anyways, how they would earmark/allocate them, if given the opportunity to do so, would accurately communicate/reflect their preferences for public goods.

So did Buchanan save journalism?  Yes!  Very yes!  Like Samuelson and Tiebout, Buchanan recognized that the free-rider problem was a real problem.  So he appreciated the necessity of taxes.  However, unlike Samuelson and Tiebout, Buchanan had a problem with planners (editors) simply assuming people's preferences.  So his solution was for taxpayers (subscribers) to allocate their taxes (fees) to the public goods (articles) which most closely matched their preferences.

To be perfectly honest I wasn't quite sure if an editor was the closest equivalent to a government planner.  So I searched for "role of editors in newspapers" and found this...

The news editor is called upon to use his discretion, discrimination and imagination in reading the public mind and select the stories which have real news value and can be called important by his readers-quite a large number to be allotted a "splash" position on the main news pages according to the subject matter [or] field of activity they are concerned with. - Praveen Karthick, What is the Role of News Editor of a Newspaper?

Samuelson had quite a bit of faith in the ability of planners to accurately read the public's mind...

The Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive. - Paul Samuelson

Buchanan really did not share Samuelson's faith.  With newspapers, the assumption of omniscience doesn't have horrible consequences because it's relatively easy for unsatisfied customers to "move" to a different newspaper.  Of course, the less newspapers there are... the more problematic the assumption of omniscience becomes.

But even if there is some optimal number of newspapers for consumers to choose from... why rely on omniscience?  Why not give subscribers the opportunity to use their fees to communicate their valuation of the articles?

Reading through the replies on Javis's story I found this one by Collin Ferry:

I’ve been envisioning automatic (but refundable) micropayments on a per-content basis as an alternative to paywalls and ad-blockers. It could be more lucrative than advertising, create a premium experience, reduce dependency on advertising and eliminate the widespread use of click-bait articles.  Do you have an opinion on micropayment solutions Jeff?

Jeff Jarvis replied:

Yes, and you’re not going to like my opinion. I do not see micopayments saving us any more than pay walls have. Same problems: we produce a commodity — information — rather than a unique product like entertainment. There’s no end of competition. The half-life of our value is the length of a click. There’ll always be someone to undercut your price, even if it’s micro.

Jarvis incorrectly assumes that it's micropayments OR paywalls.  However, Buchanan's solution was micropayments AND paywalls.  Subscribers would use their fees to communicate, via micropayments, their valuation of the articles.

Let's take Medium for example.  Right now Medium doesn't have micropayments OR paywalls.  Here's what it might look like if we added coin and dollar buttons below the stories...

If Jarvis valued my story, then he could click on the $0.50 button in order to clearly communicate his valuation of my content.  Fifty cents would be automatically withdrawn from his digital wallet and deposited into mine.  The total value of the story would also automatically increase by 50 cents.  When people searched for stories the default sorting would be by total value.  So it would be super quick and easy to find the most valuable stories.

It should be really intuitive that it's beneficial for society when it's easier, rather than harder, for people to give each other money.  Giving each other money is a very important form of communication.  So we can do some substitution and say that.... it should be really intuitive that it's beneficial for society when it's easier, rather than harder, for people to communicate with each other.  Well yeah.  Obviously.

Facilitating micropayments would solve the payment problem (eliminate payment costs)... but it wouldn't solve the free-rider problem.  Why should Jarvis "buy" my story when he can read it for free?  That being said, around $300 billion dollars are donated each year in the US.  So the free-rider problem doesn't mean that nobody will pay anything... it simply means that we can reasonably expect voluntary payments to be a lot less than people's true valuations...

allocations < valuations

With micropayments though... when valuing a story is as easy as "Liking" it.... then we can reasonably suspect that lots of people will be happy to chip in a few cents.  However, we can also reasonably expect that, because of the free-rider problem, their allocations will be less than their valuations...

allocations < valuations

In order to tackle the free-rider problem.... Medium could create a small paywall by charging people a very reasonable $1 dollar/month.  Each month subscribers would have 100 pennies to use in order to communicate their valuation of the stories.  They'd have absolutely no incentive to understate their valuations because doing so wouldn't decrease their fees.

Maybe it's just me but semantically it feels a bit awkward to think of these payments as voluntary.  So I think maybe we can instead say that these payments are "pragmatary".  Heh, that's pretty awkward as well but I think there are pretty important distinctions between...

1. voluntary payments (donations)
2. pragmatary payments (allocating your fees)
3. coerced payments (no choice where your payments go)

It would be very easy to ascertain whether $1 dollar/month was a truly reasonable subscription fee.  The earlier in the month that subscribers allocated all their pennies... the more reasonable the fee.  If most subscribers allocated all their pennies half-way through the month.... then perhaps the fee was too reasonable and it could be reasonably increased to $2 dollars.  But if, on the other hand, there were too many subscribers with unallocated pennies at the end of the month... then perhaps the $1 fee wasn't very reasonable.  However, this situation wouldn't last very long!

When subscribers use their fees to communicate their valuation of the content, they would be creating value signals...

Like Batman sees the bat signal and responds to it... talented writers would see and respond to the value signals created by the allocations of subscribers.  This would logically increase Medium's supply of valuable stories... which would logically lead to more subscribers... and brighter value signals.  It would be a virtuous cycle.  A larger pool of subscribers would be able to support a wider variety of niche topics.

Let's consider Netflix.  A while back I sat down and figured out how I might allocate one month’s worth of fees ($10 dollars)…

1. Amelie: $1.50
2. Black Mirror: $0.25
3. Castaway on the Moon: $0.25
4. Rake: $1.25
5. Shaolin Soccer: $0.50
6. Sidewalls: $0.25
7. Snatch: $0.25
8. Spaced: $1.00
9. The League: $0.75
10. The Man From Earth: $4.00


These were all movies and shows that I had given 5 stars to.  But the graph should make it painfully and obviously clear that I don't value all this content equally.   Maybe the star rating system is better than no communication between producers and consumers... but the value signals they create are very inaccurate.

For sure though it's a lot easier to rate content with unlimited stars than it is to valuate content with very limited fees.  It was really hard to figure out how to allocate my fees!  I truly and sincerely felt the opportunity costs.  But consumers considering the opportunity costs of their allocations is the only way to ensure the optimal brightness (accuracy) of value signals.  Accurate value signals are the only way to ensure that we don't waste society's limited creativity and talent on less valuable endeavors.

Ok, let's review...

1. Buchanan provided solution to media problem decades before it was even a problem
2. The media isn't aware of Buchanan's solution

Is it really fair though to blame the media's lack of awareness on the division of labor?  Well no.  The division of labor isn't the problem.  The problem is that experts in different fields can't clearly see each other's value signals.  In other words, the problem is a lack of accurate communication between experts in different fields.

Right now, with the current system, it's pretty easy to see which scholarly papers are the most popular... but we have no idea which papers are the most valuable.  How could we solve this problem?  We could easily solve this problem by applying Buchanan's solution to scholarly papers!  Subscribers would use their fees to clearly communicate which papers were most worthy of the public's attention.  Journalists would be able to easily see the brightest value signals in the different fields and use their wonderful words to help the public understand the importance and relevance of the most valuable papers.      

At this point maybe I should mention that I'm a little... unclear... about the division of credit for Buchanan's solution.  Clearly Buchanan didn't argue that we should apply his solution to Medium or Netflix.  But why didn't he argue that we should apply his solution to scholarly papers?  Unfortunately, he's no longer around for us to ask.  So I'll be happy to take a reasonable and fair amount of credit for, and ownership of, this immensely valuable intellectual property.  And accordingly, I'll expect a reasonable and fair amount of compensation for any implementation of this idea.  What's reasonable and fair?  Ideally that should be up to some group of subscribers to decide.  These subscribers should be able to decide how to divvy up their fees among all the different people responsible for breathing life into Buchanan's idea.  If Jarvis, for example, takes Buchanan's idea and runs with it farther and faster than I have been able to ... then it's only fair and reasonable that he should receive more fees than I would.  If subscribers decide that some technologist was largely responsible for bringing Buchanan's idea to life... then they should use their fees to communicate their valuation of his contribution.

So far I'm the only one trying to breath life into Buchanan's idea.  As far as I know, nobody else seems to appreciate how his idea solves the problem with government and media.  And it's entirely possible that there are some minor, or major, details that I'm missing!  But it's not like Jarvis, for example, is arguing that Buchanan's solution is the wrong solution because of... x, y and z.  Jarvis doesn't seem to realize that Buchanan's solution even exists!

It's sort of a catch-22 because it's not like I can allocate my fees to Buchanan's paper in order to help bring it more people's attention.

In conclusion maybe I should say something about the fact that all the economists that I've mentioned in this entry are dead.  So yeah... it's a ménage à trois with dead economists and live journalists and... me... the hummingbird.  Heh.  Well... we certainly have a lot to learn from dead economists but I probably should give a shout out to a few live economists...

1. Alex Tabarrok - My favorite living economist but a bit economically incoherent.
2. Peter Boettke - Loves Buchanan, hates the assumption of omniscience, but rarely, if ever, writes about the importance and relevance of earmarking.  It's a mystery.  
3. John Quiggin - His implied rule of economics is really wonderful.  But he doesn't seem to know how we can avoid breaking it.  

Paul Romer also comes to mind... but I'm heartbroken that he didn't want to solve my pretty puzzle.

Should PETA Merge With The NRA?

Context: The Demand For Defense?

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Xero: Why should PETA and the NRA be completely separate entities while the EPA and the DoD should... errr... not be completely separate entities?

Galloism: If PETA and the NRA decided to merge for some reason into a single entity (National Animal Association?  People for the Ethical Treatment of Rifles?) then donations and membership dues to the organization could be separated by that organization's one single board of directors as it sees fit.

Xero: What are the chances that PETA and the NRA would merge?  Why would they ever want to merge?  Can you think of any good reasons why they should merge?  Let's say that you managed to get the leaders of both organizations into the same room.  How would you sell the idea of both organizations merging?

You say that if both PETA and the NRA merged... then donations/dues could be allocated by the new organization's board of directors.  Would you mention this in your pitch to convince both organizations to merge?  Yeah?  And if somebody asked what the benefit would be of only having one board of directors... then how would you respond?   To be clear... you're mentioning this to defend your view that it's beneficial to have congress (one board) allocate everybody's taxes (dues) as it sees fit.  If the government thinks it's a good idea then how could PETA and the NRA not think it's a good idea?

I'm sure that there are plenty members of PETA that secretly want to join the NRA and vice versa.  So I really doubt that even a single member of PETA or the NRA would let their membership lapse if both organizations merged together.  In fact, I'm sure that revenue would skyrocket once they merged.  Hah... no.  Revenue would plummet.  The only way to prevent revenue from plummeting would be to force people to pay their dues.  Actually... the EPA and DoD are merged and people are also forced to pay their "dues"!  Wow!  What a coincidence!

If the EPA and the DOD, and every other government agency, was unbundled then taxes could easily be raised.  People would have no problem paying more money for the public goods that they truly value.  *gasp*!?   Sorry if I blew your mind.  I know that it's a revolutionary concept.

Galloism: You haven't argued that the EPA and DoD should be split into completely separate entities. In order to do that, they would need to be NOT answerable to the president or Congress, collect their own taxes, pass their own laws, etc.

As long as the president is still their executive and they have a single board of directors over both, they are not independent entities.

Xero: Prior to debating with you I never saw the need to argue that the EPA and DoD should be split.  I never saw them as being together in any logical or rational way.  Their products are bundled but the organizations themselves are separate.  The EPA doesn't directly determine how the DoD spends its money and vice versa.

Yes, in a pragmatarian system, the EPA and DoD would have to facilitate payments.  But if the NRA and PETA can handle payments then I'm pretty sure that the EPA and DoD wouldn't have a problem handling payments.  If they did have a problem with such a simple task... then we really shouldn't be giving them our money in the first place.

What do you mean by the EPA and the DoD not being answerable to the president or congress?  In a pragmatarian system the president and congress would still be there.  If the president/congress orders the EPA/DoD to do something stupid... and they do it... then taxpayers would boycott them.  The president can still say "follow me"... whether or not the people respond with "lead the way" depends entirely on how much they value the direction that he wants America to go in.  If he wants America to go to war with Canada for no good reason... then I don't think people would give him or the DoD very much money.  

One of the reasons that markets really work is that most organizations always want more money.  This desire motivates organizations to provide the greatest possible value for consumers.  It's very beneficial for consumers when they are the ones holding the carrot on the stick.  When consumers aren't the ones holding the carrot on a stick... then they have it really rough.  Right now consumers are holding the carrot on the stick in the private sector... but they aren't holding it in the public sector.  Yet you're happy with this arrangement!  As if it doesn't really matter whether or not consumers are the ones holding the carrot on the stick.  So why not have congress hold the carrot on the stick in the private sector as well?  Because... it sure would be a good idea to bundle the NRA and PETA together.

Galloism: You know what's funny about this?

 I went down to Wal-Mart yesterday to get a few things.  I don't like them, but I don't have a hell of a lot of choice when I need something today.  Here's a business that sells medicine, provides automotive repair services, cell phone service, groceries, rifles, and fish.  They also provide basic banking services.  They don't sell rabbits, but they DO sell both guns and animals.

And yet, you don't argue that I should be able to dictate to wal-mart, by division, how they can spend their money.  Why is that?

Edit: Heh heh. Just thought about this further - they sell trees too. Both guns AND trees.

Xero: You're absolutely correct that Walmart sells a very wide variety of products.  In fact, its variety of goods is probably greater than the government's variety of goods.  The difference is... when you're at Walmart surrounded by an incredibly wide variety of goods... you're the one who decides how much of which goods to put into your shopping cart.  You're the one who decides.  You you you you you you.   Markets work because they are all about you.  Markets work because they are based on the premise that your preferences/differences matter.  The alternatives fail because they don't even know how much you like donuts.  If they can't get the supply of donuts rights... then why should we trust them to get the supply of anything really important right?

The alternatives know nothing really specific about you.  This is why public goods are far less diverse than private goods.

Coincidentally, my third favorite liberal, Noah Smith, recently tweeted the following...

Proposal: Economists should replace "bundles" with "backpacks" as the standard term for a collection of goods.

When you go to Walmart... salespeople don't hand you a "backpack" filled with goods and expect you to pay for it.  What would be the point of even going to shop at Walmart when the shopping has already been done for you?  Walmart could simply send your backpack to you.  "Backpack"?  Backpack doesn't really feel right.  Does it?  It feels too small.  Like, you couldn't fit a very big tree or rifle in a backpack.  Like, maybe a bonsai and a pistol.  Although I'm not sure what would be a better term.

Walmart certainly sells bundled items... but Walmart really doesn't choose which goods, bundled or otherwise, go into your shopping cart.  The government, on the other hand, does choose which goods go into your shopping cart.  You get the same bundle as everybody else.

The problem with bundling is that it's hard to replace the individual components.  Imagine if the only way that you could replace your tires was by selling your car.  You'd have to buy a car every time you needed new tires.  That would suck.  But because cars are moderately modular... you can simply replace the tires when you want to without having to replace your entire car.  Clearly it would be pretty stupid for cars to be entirely monolithic.

The reason that we make a lot more progress with markets is because we can easily replace and upgrade individual goods.  I can easily switch to energy saving light bulbs without having to wait a few years to convince you, and the rest of the country, to do so as well.  The freedom that we have to make these marginal improvements ensures that society makes a lot more improvements in a lot less time.

In terms of the NRA... if I'm a member and I have an epiphany about shooting animals for sport... then I can simply replace the NRA with a better organization.  I'm under absolutely no obligation to convince every other member to join me.  The economic term for this is easy "exit".  Exit becomes a lot less easy when you have to convince all the other members to exit with you.  Of course if you could manage to convince all the other members to exit, then you would no longer have a reason to exit.  The NRA would simply remove its support of killing animals for sport.

Easy exit means faster evolution.  When people can easily replace goods and organizations...  then goods and organizations more quickly evolve to meet the rapidly changing and diverse needs of society.  If you have a problem with the NRA... but can't find a better organization... then you can simply start one.  The creation of a new organization would increase the competition for members/dues.  Markets are all about survival of the fittest organizations/goods with "fitness" being defined by consumers.  If it was as easy to start a country as it was to start an organization... then it wouldn't be as inefficient to have "foot voting" as the only selective pressure placed on countries.

Galloism: The fact that you've continuously failed to make a good argument on this forum doesn't mean I'm going to go out and make an argument for you.  A failure on your part does not constitute a need on mine.

Xero: I asked you to make an argument for me?  Errr... I have no problem making my own arguments.  If you don't want to do any homework then don't be shy about it.  Just say, "I don't want to do any homework".

Magical Moral Mushrooms

Reply to: Minimum Wage Arguments: Job Loss

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Your income wouldn’t be so tight if Medium paid you to write stories. Right now Medium is paying you $0.00 dollars an hour for your labor. Medium is exploiting the heck out of you. But here you are complaining that Starbucks is only paying people a measly $7.25 dollars an hour for their labor. 

What is it, exactly, about Starbucks paying people some money for their labor… that impregnates you with the idea that Starbucks has the moral obligation to pay people more money for their labor? 

Your income is tight so I suppose that you can’t afford to pay me $7.25/hour to write stories. But I’m sure that you can afford to pay me $0.01/year to write stories. And if you do so… well… thanks! Even though it’s a microscopically marginal improvement in my income… it’s still an improvement. 

Here’s where the moral magic happens. As soon as you pay me $0.01/year to write stories then voila! Immaculate conception! You’re pregnant with the idea that you have a moral obligation to pay me more. Doing some good obligates you to do more good. It’s a moral virtuous cycle. Or a moral slippery slope? Kinda like how it’s morally impossible to eat just one chip. 

Don’t you think it’s a little…ummm… iffy… to bundle doing some good with doing more good? Like, if giving a homeless guy a dollar morally obligated you to give him three more dollars… then wouldn’t you think twice about giving him a dollar in the first place? If spending one day a month picking up litter at your local park morally obligated you to spend one day a week removing graffiti… then wouldn’t you think twice about picking up litter at your local park?

Doing some good isn’t good enough? 

If you help one person by giving them a job… then you have a moral obligation to help three more people by giving them jobs. If you help one person by paying them $7.25/hour… then you have a moral obligation to help them by paying them $15.25/hour. 

If you help one person by baking them a cake… then you have a moral obligation to bake cakes for three more people. If you help one person by baking them a small cake… then you have a moral obligation to bake them a big cake. 

And life becomes more wonderful when these magical moral obligations become magical legal obligations.  

Guy, you’re not rational. You’ve overdosed on magical moral mushrooms. If you stopped tripping then, assuming your brain wasn’t entirely fried, you’d realize that legally obligating business owners to do more good is as monumentally moronic as it would be to legally obligate donors and volunteers to do more good. 

Pre-tributes to James M. Buchanan

The Nobel laureate economist James M. Buchanan passed away yesterday.  Two days before he passed away, my favorite Crooked Timber Liberal, John Holbo, posted an unintentional pre-tribute in his blog entry...Shirky, Udacity and the University...

Here’s a slightly more concrete way to cash out ‘story’: we tend to operate with notions of the proper form and function of the university that are too closely tied to pictures of the ideal college experience that are, really, too atypical to function as paradigms. ‘We’ meaning pretty much everyone still: academics, our students, their parents. Shirky’s idea is that MOOCs are going to unbundle a lot of stuff. You don’t have to buy the 4-year package to get some learning. It’s pretty obvious there’s more unbundling to come – it’s gonna make buying individual tracks on iTunes seem a minor innovation – and it will put pressure on current higher education’s strong tendency to bundle a lot of functions together to the point of indistinguishability (teaching, research, socialization, credentialing).

The prediction that "there’s more unbundling to come" is one that Buchanan, more than any other economist, would have appreciated.  Here's what he wrote in 1967...

General-fund financing is analogous to a market situation where the individual is forced to purchase a bundle of goods, with the mix among the various components determined independently of his own preferences. The specific tie-in sale is similar to general-fund financing, that is, nonearmarking. - James Buchanan, Earmarking Versus General-Fund Financing

Don't get bundled!  Your preferences really do matter!

If the individual can make separate fiscal choices for each public-goods program, which a structure of earmarked taxes conceptually allows him to do, directly or indirectly, he is informed as to the alternatives that he confronts, at least to the extent that the payment institutions allow, and subject, of course, to all of the qualifications noted in previous analysis. The uncertainty that he faces is clearly less than that which is present in the comparable decision on a “bundle” of public goods or services, with the mix among the separate components in the bundle to be determined in a separate decision process or through the auspices of a delegated budget-making authority. If this mix is not announced in advance to the voter-taxpayer, he must try to predict the outcome of another decision process, in which he may or may not participate, a process that need not exist at all in the more straightforward earmarking model where all revenue sources are specifically dedicated. - James Buchanan, Earmarking Versus General-Fund Financing

Three days before Buchanan passed away...I offered my own pre-tribute by creating Wikipedia entries for the benefit principle, club theory and the preference revelation problem.  Yesterday, over at the Ron Paul Forums, I posted an overview of these concepts...Voluntary Exchange Theory...and today I posted this comment over at Daniel Kuehn's blog.

Like I said in my comment...James Buchanan was far closer to the actual problem and the actual solution than any other economist.

I'll leave you with a few of my favorite passages by Buchanan...

Before taxes could be levied on the people, representative bodies were given the right to grant their approval. No consideration was given to the spending side of the account because public expenses were assumed to benefit primarily the royal court, at least in the early days of constitutional monarchy. Taxes were viewed as necessary charges on the people, but they were not really conceived as any part of an “exchange” process from which the people secured public benefits. It was out of this conception of the fiscal process that both the modern institutions and the modern theory of public finance developed. - James M. Buchanan

This greater complexity of political choice is compounded by an inability to gain from any investment in knowledge. In a market setting, a person can gain by storing food during the boom periods; it is a simple task to profit directly from knowledge. In a political setting, however, even if a person has acquired knowledge about the more complex question of "why," there is no way that he can profit from his knowledge because a change in policy will take place only after a majority of people have come to the same conclusion. Consequently, it is rational to be considerably more ignorant about general policy matters than about matters of market choice. - James M. Buchanan

Good things come at a cost, whether they be provided by the government or the grocery store. - James M. Buchanan

The introduction of the debt alternative to taxation makes the bridge between cost and benefit more difficult for the individual to construct. - James M. Buchanan

Over time, any individual in the community will expect this rule to produce unfavorable results in particular instances, results that run counter to his own preferences. Public-goods projects which he urgently desires may not be undertaken because a majority of his fellow citizens does not agree with his evaluation. Or, conversely, he may be required to contribute to the costs of projects that he considers to be worthless. - James M. Buchanan

The motivation for individuals to engage in trade, the source of the propensity, is surely that of "efficiency," defined in the personal sense of moving from less preferred to more preferred positions, and doing so under mutually acceptable terms. - James M. Buchanan

The answer to the whole highway problem lies in “pricing” the highway correctly. The existence of congestion on our streets and highways is solely due to the fact that we do not charge high enough “prices” for their use. This is one of the main functions of price in our free enterprise economy... [p]rice relieves potential congestion around our meat counters, our motels, and our models. Why do we shun its usage in the case of highway services? - James M. Buchanan

The state did, indeed, become God. - James M. Buchanan

The entry and exit options provided by the market serve as the omnipresent frontier open to all participants. And economists could well have done more to exploit the familiar frontier experience by instancing the analogue here. Their failure to do so illustrates the point made above, that adherents of classical liberalism, and especially economists, have not been sufficiently concerned with preaching the gospel of independence. Classical liberalism, properly understood, demonstrates that persons can stand alone, that they need neither God nor the state to serve as surrogate parents. But this lesson has not been learned. - James M. Buchanan

But what if Nietzsche is right? What if God is dead? What happens to the person who is forced to recognize that the ordering presence of God is no longer real? What if God cannot be depended on to clean up the mess, even in some last resort sense? Who and/or what can fulfill the surrogate parent role? Who and what is there beyond the individual that can meet the yearning for family-like protectiveness? Who and what will pick us up when and if we fall? Who and what can provide the predictability that God and his agency structures seemed to offer? - James M. Buchanan

In short, persons are afraid to be free. As subsequent discussion will suggest, socialism, as a coherent ideology, has lost most of its appeal. But in a broader and more comprehensive historical perspective, during the course of two centuries, the state has replaced God as the father-mother of last resort, and persons will demand that this protectorate role be satisfied and amplified. - James M. Buchanan