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Alternative Traditions in Public Choice

Frank Knight and the Origins of Public Choice

Frank Knight et les origines de la Théorie des choix publics
David C. Coker et Ross B. Emmett
p. 9-28


Frank Knight a-t-il joué un rôle dans la formation de la théorie du Public Choice ? Nous soutenons que plusieurs aspects de la pensée de James Buchanan, qui forment bon nombre des idées fondamentales de la théorie du choix public, deviennent plus claires lorsqu’on les compare aux travaux de son professeur, Frank Knight. Buchanan est catégorique quant à sa dette envers Knight ; il l’appelle « mon professeur » et se réfère fréquemment à son travail. Pourtant, le caractère direct de cette reconnaissance a peut-être servi à court-circuiter l’analyse autant qu’à la stimuler. Notre analyse sera centrée sur le livre Knight’s Intelligence and Democratic Action, un recueil de conférences données en 1958 (et publié en 1960), alors qu’il était invité par Buchanan à l’Université de Virginie. Ces conférences reprennent un certain nombre d’idées tirées d’autres ouvrages, tout en présentant un lien étonnamment clair avec les idées que Buchanan allait présenter au cours des deux décennies à venir. En ce sens, à travers son influence sur Buchanan, Knight peut être considéré comme l’un des ancêtres largement méconnus de la théorie des choix publics.

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  • 1 For instance, in the index for Knight’s The Ethics of Competition and other essays we find Henry Ad (...)

1Frank Knight is universally recognized as an interesting and provocative thinker. However, his influence on modern economic practice has been difficult to pin down. The next generation of theorists at the University of Chicago (Friedman, Stigler, Becker, etc.) seemed to line up in opposition to Knight on many of the questions he considered central (see Emmett, 2009b). We will argue that Knight influenced the emergence of public choice theory at the beginning of the 1960s, even though Buchanan did not include Knight as a significant precursor in his Nobel Prize lecture (Buchanan, 1986). The portion of Knight’s work we will engage with displays considerable sweep and generality, and utilizes and assumes considerable philosophical background. What is perhaps most significant about Knight is his ability to recognize and address political economy across what are now separate disciplines. For Knight, economics could not be, and should not be, isolated from the political and moral environment in which it is embedded. This requires considering political elements specifically, but also abstractly and generally. It also requires the theorist to address the portions of political and moral philosophy that undergird and structure our views of markets and political systems. This is a challenging assignment, one that economists over the last hundred years have largely neglected, in the name of increased specialization. It harkens back to the work of Smith and Hume, and later to John Stuart Mill and Edgeworth. Philosophically it extends back to the ancient Greeks.1 These dimensions do not harmonize well with current practice, or with economics at the time when public choice was coalescing as a school (1960’s on). They are at most tangentially present, for instance, in the welfare economics of Bergson and Samuelson. It was an assignment that was, however, at least apparent to Buchanan.

  • 2 Buchanan was certainly not content to stay with received wisdom. The absence of Knight in Buchanan’ (...)

2But for all Buchanan’s verbal assurances and respectful mention about Knight’s impact, he was frequently critical of Knight.2 Nevertheless, the usual assumption is that Knight’s influence does run through Buchanan. Where does that leave us? This paper will explore particular ways in which Knight’s influence on Buchanan, and hence on public choice generally, was substantial. The central text for tracing Knight’s influence will be his Intelligence and Democratic Action. Examining this work has great potential: it is the series of lectures Knight prepared to give at the University of Virginia, at the invitation of Buchanan and the Thomas Jefferson Center. Its dates—given 1958/published 1960—put it at a possible tipping point in Buchanan’s thought, as he is contemplating and composing elements that would become his joint work with Gordon Tullock, The Calculus of Consent (1962), as well as his essay “What Should Economists Do?”, given as the presidential address for the Southern Economic Association in 1963 (published 1964).

3Buchanan’s central place in the formation of public choice needs little elaboration. Yet the pivotal place of The Calculus of Consent is perhaps less obvious. Its publication marked the beginning of the public choice research program (Johnson, 2014), and even served as an advertisement for the University of Virginia and the Thomas Jefferson Center (Wagner, 2004). Medema (2000) also locates it at public choice’s inception point, “Buchanan and Tullock were very much responsible for the institutionalization of the field, and their efforts on this score were largely derivative of the reception accorded to The Calculus.” Thus Knight’s presence on the campus in 1958, and his lectures, serve not only as potential influence on a primary figure (Buchanan), but take place at a seminal moment as well. The Committee for the Analysis of Nonmarket Decision-Making was formed in 1963. In October 1963, the first meeting of what would become The Public Choice Society (then the Conference on Nonmarket Decision-Making) was held at The University of Virginia. By 1966 and ‘67 the conference meetings became more national, being held in New York City and Chicago, respectively.

  • 3 We will use the publication dates hereafter.

4In his 1960 lectures,3 Knight returned frequently to the idea of progress. He emphasized the notion that a future noticeably different from generation to generation was a recent development, historically speaking. For both him and Buchanan, the possibility of progress, and hence an open, undetermined future, turns out to be a crucial background assumption to their work on politics and economics. They each address social concerns by linking, in some manner, the unknownness of the future to their conceptions of how politics and economics intersect. The paper’s first section, then, will address the implications of the future as “open” in their work. The second section will discuss Knight’s and Buchanan’s use of the metaphor of rules as opposed to the run of play in the game. And the paper concludes with a discussion of what these issues suggest about Knight’s possible role as a forerunner of the public choice program.

1. The Open Future

5Knight characterized the medieval period as one of largely fixed values, where one’s decision-option was not how to improve inherited norms, but simply how and whether to conform to them (see Knight and Merriam, 1945). The staid acceptance of the past, in Knight’s narrative, changes, beginning with the Renaissance, when ecclesiastic power gave way to power resident in the new states. Knight viewed the newer power as “not as opposed to change, as dogmatic, as the ecclesiastical order” (Knight, 1960, 59). This shift gained scope and impetus by the time of the Enlightenment. And it was paralleled by scientific advancement:

The new picture of the solar system might almost be called negligible in comparison with the radical change in the conception of Truth itself. The previous idea that all humanly relevant knowledge had been given once and for all, by revelation, gave place to the antithetical view of it as progressive, subject to constant revision, through free investigation, discussion, and publication. (Ibid., 62; emphasis in original)

6Knight provides an extended discussion of history, recurring in various forms throughout the lectures. Indeed, the frequency of recurrence is intended to bring us to a consideration of the uniqueness of the modern individual’s situation. In the Enlightenment, individuals realized that their future outcomes could be influenced by their present actions. That is, rather than the ancient creed that the world remained “as it was in the beginning, is now, and ever shall be, world without end,” moderns believed that our actions determine the world we will live in. The optimistic version of that belief saw freedom as the sole prerequisite for progress. Knight was not so confident, having lived through the aftermath of the Civil War, spending his college years studying rather than fighting the war to end all wars, and then watching the world torn apart again twenty years later. For him, the future might involve progress, but it is not predetermined. “Intelligent control of the future course of history is the problem, and action is constantly being taken to that end, if indeed it is not the nature of all social action undertaken” (Ibid., 150; emphasis in original). The future remains open-ended, and may yield improvement, or not. Placing this basic insight at the center of his thought moves Knight’s economics in some surprising directions.

  • 4 Buchanan also endorses the use of “progress” in his “Natural and Artifactual Man”, “We find stateme (...)
  • 5 “The primary consideration for democracy, is free agreement; the conclusion actually reached is sec (...)

7For Knight, the possibility of progress puts a new burden on individuals, who now face greater responsibility in their role as citizen. Modern political activity revolves around the idea of progress.4 And this responsibility is accompanied by a new focus on the requisite knowledge to ensure that change is progress, and how agreements to achieve it should or might be made. And it automatically shifts Knight’s thought away from much standard economic thinking. The traditional means-ends question, and the maximizing exercises honed to answer such questions, are now of secondary importance. The key idea about the future in a social setting is not centered on goals, but on process: we proceed by open discussion.5 And this has a corollary for economics: individuals do not have well-ordered preferences, and proceed to act to best answer those wants. They instead are concerned to improve their wants; they are searching for and refining what they actually do want. This process is at base both dynamic and open. Knight’s idea of fashioning wants is broached as early as his “The Ethics of Competition” (1923). There he argues against what he terms “a balance-sheet view of life”:

  • 6 The divergence between “old” and “new” Chicago is underlined here; the Stigler-Becker “De Gustibus (...)

We cannot accept want-satisfaction as a final criterion of value because we do not in fact regard our wants as final; instead of resting in the view that there is no disputing about tastes, we dispute about them more than anything else; our most difficult problem in valuation is the evaluation of our wants themselves and our most troublesome want is the desire for wants of the “right” kind. (Knight, [1923] 1935, 580)6

8These seemingly obvious points are in fact antithetical to much traditional economic thinking. The notion of equilibrium, as focused on knowns, becomes of minor importance. And for social questions, static analysis of almost any kind becomes vulnerable to being based on assumptions that Knight viewed as invalid. Knight is concerned with the search for what we desire to maximize in the first place—actually maximizing anything is very much a secondary concern. Thus, he turns Lionel Robbins’s strictures on their head. Knight was critical of his friend’s formulation; he does not feel that our preferences are well-ordered because in the context of the search for new and better wants that order is always in flux. Buchanan will accept this formulation and conclusion, and build on it in a distinctive way.

  • 7 Knight argues explicitly in terms of the utility function as well, “Ultimately, the real ends of ac (...)

9Knight’s assertions that we face an open future, and that wants are not to be assumed, are critical to Buchanan’s developing thought. Knight cautioned that if our wants are specified in advance, the actual business of fulfilling them becomes mechanical. He uses as illustration the startling image of slot machines trading with each other (Knight, [1939] 1947, 21). Buchanan in “What Should Economists Do?” makes a similar argument, but in terms of utility functions.7 Like Knight, he believes that specifying wants (here, the utility function) takes us away from economics’ center, and renders human decisions mechanistic:

In one sense, the theory of choice presents a paradox. If the utility function of the choosing agent is fully defined in advance choice becomes purely mechanical. No “decision”, as such, is required; there is no weighing of alternatives. On the other hand, if the utility function is not wholly defined, choice becomes real, and decisions become unpredictable mental events. (Buchanan, 1964, 216-217; emphasis added)

10The specificity of goals is rejected by Buchanan on the societal as well as the individual level. Discussing welfare economics in The Calculus of Consent, Buchanan outlines that approach:

  • 8 For an examination of Buchanan’s view of public goods and the social welfare function, see Desmarai (...)

One approach recognizes that definitive meaning can be attached to “social welfare” or the “public interest” only if a social-welfare function is fully described. … However, in order to describe this function, some individual must make quite explicit his own value judgments. There is no escape from the responsibility of individual ethical decision. In this construction the “public interest” is what the individual says it is. We have rejected this approach. (Buchanan and Tullock, 1962, 284-285)8

11Both prongs of Buchanan’s analysis—the individual and the social—insist that the roadmap into the future is not to be assumed. Assumptions for Buchanan are frequently a negative force in economics. Assumptions not only lead astray; they cloud the center of the discipline itself.

A market is not competitive by assumption or by construction. A market becomes competitive, and competitive rules come to be established as institutions emerge to place limits on individual behavior patterns. It is this becoming process, brought about by the continuous pressure of human behavior in exchange, that is the central part of our disincline, if we have one…. (Buchanan, 1964, 218)

12Buchanan (and Knight’s) attention to assumptions generates a number of insights critical to public choice theorists. Public choice generally criticizes the assumption of governmental correction or oversight of the market as being superior to the market itself. Buchanan admits the potential usefulness of economics as prediction, but argues that when those predictions are falsified, the implied need for “correction” is misplaced. The model of homo economicus is largely justified, yet to use it as part of an argument to illustrate market failure, is to rely on it too much. In Cost and Choice, he follows Knight’s suggestion that if Smith’s deer and beaver ratio were to be falsified—that is, if the actual exchange value failed to match the “time cost” of procurement—then the obvious conclusion is that some non-economic consideration came into play: the enjoyableness of hunting deer, for instance. Buchanan’s lesson from this is that when examining outcomes, the “logical” view must supersede the predictive one. We have to trust, not the absolute assumption of economic man, but instead trust the market process itself. The goal, here and in his political analysis generally, can only come out of free choices; we can’t work backwards from goals to criticize subjective preferences. We must keep the proper direction of analysis in place: from process to an open future, not backwards from a given future to process. Much in public choice, from translation of voter preference to coalition-formation to rent-seeking, relies on this sense of an undetermined future, and what the dynamics of traveling towards it look like.

  • 9 Knight mentions how our pre-modern routines can become animal-like also: “In primitive society peop (...)

13The openness of the future continues to be critical in Buchanan’s thought. In “Natural and Artifactual Man”, Buchanan suggests that we consider ourselves as being composed of two dimensions. In one sense we are animals concerned with our continued existence—what he terms the “squirrel dimension”. Buchanan doesn’t discount its importance, affirming that “I am not proposing to deny that there is a lot of squirrel in each of us, to our credit perhaps” (Buchanan, [1978] 1999, 248). And in the context of mere survival, of given ends, the maximizing paradigm finds a natural home. But there is a second dimension, the sense in which we attempt to change or become different. His dog, he suggests, does not desire to become different than he is. Yet we do, on occasion, desire exactly that.9 Buchanan labels this aspect “becoming”. He insists that economics as currently practiced (1978) fails to come to grips with this dynamic.

I am trying to develop this argument for a purpose, which is one of demonstrating that modern economic theory forces upon us patterns of thought that make elementary recognition of the whole “becoming” part of our behavior very difficult to analyze and easy to neglect. (Ibid., 247)

14Buchanan explicitly credits Knight’s argument about wants. “Wants … not only are unstable, … it is their essential nature to change and grow; ….The chief thing which the common-sense individual actually wants is not satisfaction of the wants which he has, but more, and better wants” (Knight, [1922] 1935, 458). Buchanan does acknowledge the limitations on this impulse to change, which are “historical, geographic, cultural, physical, genetic, sexual” (Buchanan, [1978] 1999, 250). Yet within those limits possibilities exist. This emphasis has implications for economics: “Nonetheless, the prospects of becoming are sufficient to channel action, to divert resources away from the automatic routine that utility maximization, as normally presented, seems to embody” (Ibid., 251).

  • 10 “… neither man nor his world can be understood in terms of categories derived from the exigencies o (...)

15This is the second major attack on utility maximization, and on the idea of individuals having well-ordered preference structures. Putting aside Robbins’s separation of social welfare valuations from economic practice (with which Buchanan generally agrees), this is another attack on Robbins’s methodological scheme. And his argument aligns with assessments in Knight, as he indicates.10 It links, as well, to considerations of social change:

If man can envisage himself as a product of his own making, as embodying prospects for changing himself into one of the imagined possibilities that he might be, it becomes relatively easy for him to envisage changing the basic rules of social order in the direction of imagined good societies. (Ibid., 258)

  • 11 Buchanan rhetorically wonders, “Does the manner in which men model their own behavior affect, and p (...)

16Buchanan and Knight both see the larger scope of economics as the interplay of economic and political activities, and how the study of the first illuminates the second. And each therefore fears that this transition into the political or social will be doomed from the start if that starting place is misconfigured.11 This inevitably leads them into methodological questions. Buchanan’s “What Should Economists Do?” is clearly one such foray, and “Natural and Artifactual Man” would be another. In the first of those essays, Buchanan quotes George Stigler as saying “it is folly to become concerned with methodology before the age of sixty-five”. Clearly Buchanan is, in writing his essay at age 44, dissenting from this view. In this Buchanan is, again, with Knight: “The general repugnance to methodology, to clarifying the basic concepts is one of the main obstacles that economics, and especially political economy, has to face” (Knight, 1960, 67). And for Knight, methodology is not just requisite inquiry for economists, rather it is a key to economic thinking required of the average voter, containing “a good deal of what the citizen needs to know to be intelligent and educated and competent for his role” (Ibid., 67).

2. The Game and its Rules

the competitive economic life has value implications on the production side, the most notable of which is its appeal as a competitive game.

Knight (The Ethics of Competition)

17The degree to which Knight utilizes the game metaphor is probably already clear to the reader of this paper. Nonetheless, before moving to Buchanan’s usage, a brief recapitulation might be in order. Knight reiterates in a number of different essays that the point of economic activity is not so much the material gains on offer. Once past the survival stage, the process becomes attractive much in the way that playing a game is. This links to the overall theme of the open future; part of the allure of the game is the uncertainty, the working out of the game.

And the social interest, which is the concern of the social scientist, is precisely the interest in keeping up the game, preventing it from deteriorating, and beyond that in making it a still better game. From the social point of view, the question of who is to win does not and cannot arise…. (Knight, 1935, 302, emphasis added)

18Knight believed that we were beginning to care too much who won, and not enough about preserving “play of game”. He also thought that power tended to accumulate over time in the hands of the few, and that this alone could fatally unbalance the game, and predetermine outcomes. However, Knight doesn’t surrender his hold on the idea of progress, which is “the real social problem” (Ibid., 303). This idea displays significant continuity in Knight’s thought; the above quote is strikingly parallel to wording and concerns in his 1960 lectures.

  • 12 “Beyond this fact of majority dominance, further limitation [sic] on freedom are set by the inheren (...)
  • 13 “Enforcement of rules and prevention of cheating is, however, but the minimum function of the polit (...)

19Buchanan took this idea and innovated with it. And it became a central piece—perhaps the central piece—in his theoretical program. Knight attacks the problem of agreement with a certain slogging despair. Like Buchanan (and Wicksell), he puts forth unanimity as a standard, only to immediately dismiss it as a realistic possibility. He suggests that, moving beyond “self-evident propositions”, one soon runs into “issues that are insoluble” (Buchanan, 1960, 145). The problems are substantial. He begins one argument by saying, “The first commandment, with respect to any intelligent action is self-evident: ‘compare the alternatives’, beginning with understanding what they are. But that is what people dislike doing” (Ibid., 145). Knight uses the doctor metaphor to illustrate the selection of political representatives. One may have control as the principal, but your agent—here, the doctor—then makes decisions “for you” which can have life or death consequences. Knight feels this accurately describes the degree to which political agents are under citizen control. And the knowledge problem requires delegation, into the hands of experts.12 This is where Knight’s analysis winds up, and there is a level of exhortation aimed at those involved, to seek Truth in a largely impersonal sense. He is not sanguine about the entire enterprise. Yet the insight that apparently keys Buchanan’s thought is present in Knight’s explication—it is simply not emphasized. Knight repeatedly talks about not just the game, but the rules of the game. He asserts that players want rules such that there is a better game.13 But it is not just the impulse towards a better game that Buchanan seems to find of interest, it is the division between the game and the rules. What is critical is that players view the making of the rules, and the playing of the game, differently.

  • 14 Knight’s influence on Buchanan applies even to terminology. The word “romantic” is used by Knight e (...)
  • 15 We are over-simplifying here a bit; Buchanan recognized that voters may have “social” effects in mi (...)

20Buchanan accepts the model of the game, and its value. But he tweaks some of the ancillary conclusions. First, he argues that the reliance on exhortation of any sort is a losing proposition. Individuals conform to their incentive structure; if you wish to change behavior, you must alter that structure. This approach focuses on how institutions influence choices. He begins with the obvious, yet strangely revolutionary, assumption that actors are similar in their predispositions, in either the economic or political sphere. This is certainly not original to Buchanan, or to Downs who used this assumption before him. Yet public choice has made considerable use of it as a foundation stone. Mueller in his public choice overview, writes on the first page of the introduction, “The basic behavioral postulate of public choice, as for economics, is that man is an egoistic, rational, utility maximizer” (Mueller, 1979, 1). Ignoring the fraught reference to utility maximization, the quote indicates a parallelism between economic and political agents. Buchanan emphasized this with his phrase “politics without romance”.14 We should not expect political actors to be public-spirited, Buchanan is saying, while we expect private actors to be self-interested. If we model economic actors as primarily self-interested, we should model political actors the same way.15

21There are two issues that Buchanan sees in Knight, around which he tries to navigate. One is the fact of political decision-making as “distorted” by self-interest. Knight’s particular spin on this is to see it as a striving for power, and this striving, once the scales begin to tip, delivers a more and more lopsided distribution of that power. Buchanan views it as simple self-interest at work, and Tullock and others will expand and refine that into the concept of rent-seeking (Tullock, 1967).

22The second problem is that of agreement itself. Knight provides lengthy lists of what problems impede agreement. Agreement achieved by any standard that Knight approves of appears virtually impossible. Buchanan, however, takes the idea of rules, and sees them potentially not as laws—subject to all the problems Knight enumerates—but as meta-laws: constitutional rules. Realizing that he cannot “solve” Knight’s problems, Buchanan finds a way to circumvent them. And yet this innovation was in Knight all along, simply conceived slightly differently. There is a dramatic divide between rules and the playing of the game in Knight that is more of a divide than that between legislation and economic practice. Buchanan recognized how wide that divide was, and what implications could follow. Legislation can in fact be highly particularized and targeted quite specifically. Laws are more like making up the rules of the game while we play. Constitutional considerations are the pre-agreed rulebook; they operate on a more abstract plane than does day-to-day lawmaking. This abstraction has several advantages, but primarily it clouds the self-interest impulse, making it more difficult to see where that interest actually leads. And obscuring self-interest allows greater influence available to public interest, however one wishes to define that. Buchanan makes a fairly startling claim:

At the constitutional level, identifiable self-interest is not present in terms of external characteristics. The self-interest of the individual participant at this level leads him to take a position as a “representative” or “randomly distributed” participant in the succession of collective choice anticipated. Therefore, he may tend to act, from self-interest, as if he were choosing the best set of rules for the social group. Here the purely selfish individual and the purely altruistic individual may be indistinguishable in their behavior. (Buchanan and Tullock, 1962, 96)

23This emphatic assessment is in high contrast to Knight, yet it is a contrast more for its complete reversal of tone (optimism) than it is conceptually distinct. Buchanan feels headway can be made through situational differences, which in themselves shift perspective and relative valuations. Buchanan argues that considering (constitutional) rules that are much more general and abstract does produce a meaningful perspectival shift. Knight’s distinction between making rules and playing the game is the key to gaining this situational/perspectival change.

  • 16 Not surprisingly, Buchanan has more faith in Knight’s idea of rules than does Knight himself. On th (...)

24Part of the reason Knight did not see his own rules/game distinction as fruitfully as Buchanan did perhaps involves Knight’s notion of truth-seeking. One reason Knight introduces truth as a concept is to discuss how the modern notion of truth is not fixed, but evolving. This is part of his emphasis on the open-endedness of social change, an open future. But he takes this pursuit seriously enough that he worries about knowledge requirements, the nature of discussion, and of agreement, all to a substantial degree. He also faces the democratic real-world requirement for delegation, of some agent making decisions for a large number of principals. This ties back to his example of the doctor (used as representative of the principal/agent problem), and underlies his discussion of where this all tends to lead—the agent as expert, and how that expert is to be viewed, and controlled. The evolving nature of truth, and his focus on the open-ended future lead him away from rules that are hard-and-fast, and towards the discretion of suitable experts. An example still of macroeconomic interest is whether the money supply should be governed through rules or discretion. Knight unsurprisingly leans towards discretion (Knight, 1960, 105).16 Thus constitutional innovation is rejected on the same grounds:

Moreover, constitutional details are of secondary importance. The legal framework of any existing formally democratic, responsible, government, is fairly adequate, if intelligently used—without any revolution or major change not provided for in the constitution itself. (Ibid., 152)

25This is all before Buchanan planted his constitutional flag, as it were. We can only imagine the discussion that might or might not have taken place between them as Buchanan’s program developed.

26Knight’s formulations differ from Buchanan’s in an additional fundamental emphasis. Buchanan more fully abstracts the exchange moment itself; he makes that isolated moment a type of model. It represents a highly applicable example of non-coercion. Knight shares the sentiment linking markets and freedom. Yet when discussing actual economic, and especially political, practice, Knight frequently chooses to discuss power imbalances, and the human urge for that power as motivational. Thus, he immediately jumps to more real-world problems, such as agreement and delegation. Buchanan, however, focuses on the moment of exchange as a kernel of non-coercion, and extrapolates from it. Surely groups, under certain circumstances, work out what could be called an exchange? Why, then, can’t this be an abstracted version of government, a model? It is interesting to remember that this element of abstraction, of model building, is exactly what many reviewers of Calculus (and of other economics-based studies of politics) objected to at the time. Mathews, in reviewing Riker’s The Theory of Political Coalitions, cautioned “The realism and utility of models are a function, in part, of their inventors’ prior understanding of how the real world operates. Do we know enough about politics to construct useful models now? Or do we need more and better empirical studies first?” In reviewing Calculus, Vines argued that its authors evinced little "political awareness”, and that it "derives general propositions about politics according to economic theory but largely outside the political context” (quotations from Medema, 2000). Even positive reviews (here Sydney Ulmer’s) thought that Calculus’s authorsassumed too hastily that the explicit and implicit assumptions of economic behavior can be carried over to political behavior. The extent to which this can be done with each and every such assumption is a matter to be determined by testable, empirical consequences” (Ulmer, 1963). These criticisms hint at the nature of Buchanan’s and Tullock’s innovation, at once both a simplification, and advance, away from Knight.

27A final application of the notion of rules vs. play-of-the-game lies in considerations of fairness for future generations. In short, this means for Buchanan that we should strive for an equal start to the race. This issue in its many dimensions deeply concerned both Knight and Buchanan. Buchanan is unusual in his adamant objection to inheritance. Knight feels this issue strongly as well: “Particularly offensive to individualistic ideals is the unequal start in life that results from inheritance” (Knight, 1960, 160). There is for Knight an “ideal of no inherited inequality”:

Recalling that individualism really means familism, this tendency does not cease to operate with the lives of any generation of acting individuals. Inequalities achieved—or resulting from good or bad “luck,” which is a major factor and very hard to deal with or discuss—are passed on to the next generation. Inheritance of property is a major factor and hardly separable from the private family as an institution, but is by no means the only such factor, and at bottom doubtfully the most important. (Ibid., 119)

28Knight goes on to discuss a concern for the future generally, and how this should constrain government. He considers generations unborn: “we legislate and act for our children, and their children, for the unborn, not merely to adjust conflicts of interest existent at the given time” (Ibid., 40). Students of Buchanan should immediately see how closely this connects with, not only Buchanan’s objection to inheritance, but his objection to debt passed on to future generations as well. Buchanan’s work with Wagner ([1978] 2000) contains an extended treatment on this theme. Again, a focus on the future is key when considering specific economic and moral guidelines.

29Many of Knight’s and Buchanan’s more closely held beliefs resonate around this idea. The notions of unanimity (at least as an ideal), and agreement generally, are violated when the current generation makes decisions adversely affecting future generations. For Knight this sort of action is wrong on its face. But Buchanan sees an opportunity with this issue to drive home the constitutional perspective. Day-to-day legislative activity is not apt to be sufficiently forward-looking. Knight portrays political activity as hobbled by power-seeking, just as economic activity is, but to an even greater extent. Buchanan bypasses this dead-end pessimism through the constitutional option. Buchanan avoids the discussion of power directly, but introduces the negative force of incrementalism. “Political realism suggests the implausibility of achieving reforms at the level of incremental decision-making” (Buchanan, 1975, 153). Constitutional reform circumvents this incremental impasse. As un-Knightian as constitutional emphasis appears to us now, it is firmly anchored in the dual emphases on achieving agreement (ideally unanimity) and on consideration of rules vs. play, two ideas on which Knight and Buchanan deeply concurred.

3. Knight and Public Choice

  • 17 See Coker (2021).

30One seldom hears Knight mentioned among the precursors of public choice. Only one edition of Dennis Mueller’s definitive overview of the field provides a listing in the index for Knight. Knight’s influence was limited, perhaps, for two reasons: 1) he didn’t write in the modern form (that is, present a problem or basic idea, then solve (problem) or explore (idea) in a direct fashion with a result in mind), and 2) he didn’t offer a research agenda. But what he did do was take the problems inherent in government seriously, and suggest the need to confront them. Buchanan was not the only important theorist to take his cue from Knight’s positions; John Rawls was decisively influenced as well.17 Knight, exploring economics with a philosophical bent, influenced both economists with a similar analytical angle (Buchanan), as well as social theorists looking to economics for analytical structure (Rawls). But within economics proper, it might be useful to focus on lines emerging from the University of Chicago.

  • 18 And this talk of ideality does not represent a difference from Friedman, “And the real market is by (...)

31A comparison with one of Knight’s students, who was also one of Buchanan’s teachers, might be helpful here. Milton Friedman can be seen as paralleling Knight and Buchanan in arguing that markets represent a kind of freedom. For Friedman, the market offers “co-operation” that “is strictly individual and voluntarily provided” (Friedman, 1962, 14). For Knight, similarly, “the theoretically ideal market is ideally free; nobody has any arbitrary power over anybody else” (Knight, 1960, 112).18 But their analyses from this point diverge. Friedman argues for increasing the range of market activity, and simply reducing the range permitted government. But Knight sees negative dimensions in markets (as well as in governments).

In a competitive market the participants are free in the true sense, free from arbitrary interference by the power of others. But freedom alone does not solve the social problems. There are other values that must be considered. (Ibid., 112)

  • 19 “Freedom, particularly economic freedom, has to be restricted by rules, made and enforced as law by (...)

32Knight’s analysis is more encompassing than Friedman’s. Power issues for Knight exist in both arenas (market and government), so simply increasing the role of one at the expense of the other is not a complete answer.19

33Moreover, Knight perceives the reach of government; we cannot simply roll it back and be free. Government is a problem that needs addressing on its own terms. “At most government is a matter of the dictation of a majority over minorities in whatever political unit we are considering” (Ibid., 115). This inevitably coercive dimension of government figures in The Calculus of Consent as well, notably in the tradeoff diagram between decision costs (the costs of creating winning coalitions) and what they call “external costs”, which are Knight’s costs endured by any losing coalition. These external costs—coercion costs—are inevitable in anything short of unanimity (at which point decision costs would be prohibitive). Though such costs might be reduced by reducing government’s scale, they cannot be eliminated; they therefore represent for Knight an issue that must be faced. We have now transitioned to a more direct grappling with government as possessing its own problem set; we have transitioned to public choice. Knight’s analysis also now sets the characterization of market and government as sharing certain problems, or as containing certain cross-contaminations (“entanglement”, in Richard Wagner’s phrase). Escape requires the introduction of another dimension of analysis. This would be constitutions, or meta-rules. And although Knight didn’t specify such a shift, his unblinking analysis of markets (as well as government) is more in line with the attitudes of public choice (where the ills of government activity are considered unavoidable, and are parsed), and completely distinct from the later Chicago viewpoint represented by Friedman (where it is sufficient to deal with government through its minimization, and the weaknesses of market activity are largely ignored).

34This difference from Friedman, and somewhat closer relation to some dimensions of public choice, seems to link Knight and public choice to an extent. Yet the lack of much actual reference to Knight by public choice scholars indicates some unresolved tension. Another place to look to find the direct rift between Knight and modern public choice is their respective use of, or engagement with, rational actor theory. Amadae defines rational actor theory as the principle behind neoliberalism, and opposes it to classical liberalism.

Liberalism secured a basis for voluntary market exchanges within the context of a night watchman state by arguing that upholding justice is the best means to generate general prosperity, which emerges from individuals’ security of their persons and property, and the freedom to exchange without interference in accordance with their own interests. Neoliberalism remains unable to identify a purchase for justice and common norms of conduct outside of the individual’s maximization of expected utility. (Amadae, 2015, 220)

35Amadae then closes the loop, identifying public choice with this latter view of rational actor theory/neoliberalism: “Both public choice and law and economics have drifted far from classical liberalism, which endorses types of action not reducible to momentary cost-benefit analysis of outcomes” (Ibid., 222). While public choice theorists might debate the harsh divide between these two viewpoints, they would most likely be comfortable with the utility-maximizing tenet she ascribes to the rational actor school. In that theoretical structure, to facilitate analysis, preferences are fixed. This clearly clashes with the open-ended, “becoming” view of preferences outlined above in the work of both Buchanan and Knight.

  • 20 “After all, freedom was the “primary value” of liberalism, and Knight believed in liberalism.” (Mar (...)

36In Amadae’s scheme, Knight separates himself from public choice to the degree he is associated with classical liberalism.20 Much of the power of public choice comes from an unwavering assumption of utility-maximization. Positing actors in this simplified form generates numerous insights; there is no lamenting that individuals aren’t different. But Knight does lament this exact point. Where Buchanan scolds the profession for getting off track (Buchanan, 1964), Knight is discouraged by the foolishness of ordinary citizens, “The serious fact is that the bulk of the really important things economics has to teach are things that people would see for themselves if they were willing to see” (Knight, 1951, 4). Knight is continually stunned that individuals aren’t more thoughtful than they are. There is therefore a frustrated idealism in Knight that is absent in public choice; Knight cannot rest with idea that individuals simply maximize. Buchanan, by driving a significant wedge between the legislative-political and the constitutional-political, could be said to maintain a foot in each camp. He maintains a hard-edged economic actor view for everyday political activity, but reserves a more idealistic stance for the pure exchange model of politics, and for the constitutional dimension that allows him to work around real-world self-interest obstacles. Knight’s idealism, which fails to utilize these strategies, descends into a general pessimism.

  • 21 “Frank Knight’s writings have never neatly aligned with his imputed role as a dedicated advocate of (...)
  • 22 Buchanan and Tullock are authors in the first instance, Buchanan alone in the second.

37Knight’s pessimism is double-edged: on the one hand, it envisions government (in both the “at-the-mercy-of-the-doctor-you-have-selected” metaphor, as well as the power considerations) as compromised by the human nature of its participants, yet on the other, his pessimism gives no real glimpse of possible solutions. The second lessened his influence, but the first was a critical step towards taking governmental issues seriously as an area for intellectual attention. So, the question of optimism is not irrelevant. Buchanan’s optimism, primarily in his early work, served him well in this regard. Knight’s indigestibility might result from as little as his refusal not to see both sides of every question. Economists make a splash through overstating the importance of their argument, but Knight manages to overstate on both sides of an issue, diluting his impact.21 But there are pointed and powerful elements to Knight’s thought—Buchanan recognized them. And by refashioning them, and innovating with them, he removed much of their double-sidedness, and gave them direction and added force. Buchanan used slices of hard-edged analysis (the cost graph mentioned above, his theory of clubs, etc.)22, but positioned those slices within a broader, more philosophical context. This latter dimension owes much to his affinity with Knight. In that sense, public choice got much of its Knight second-hand. And it is perhaps this range, this mixture of attack and idealizing strategy, that made Buchanan such a seminal figure. The combination gave his ideas appeal not just to economists, but to theorists across the social sciences. Public choice would be immeasurably poorer without Buchanan’s contributions. But it was Knight’s idiosyncratic viewpoint, his new ideas, which launched Buchanan into the open future.

We wish to thank David Levy, Alain Marciano and two anonymous referees for helpful comments and suggestions. We also want to thank participants at the AEA Meetings in San Diego (2020), where this paper was presented, for a number of probing questions and thoughts.

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1 For instance, in the index for Knight’s The Ethics of Competition and other essays we find Henry Adams, Henri Bergson, Berkeley, John Calvin, Dewey, Galileo, Hume, William James, Kant, Locke, Ruskin, Schopenhauer, Smith, Herbert Spencer, Veblen, and Weber. Buchanan in his “Appendix” to The Calculus of Consent, discusses Plato, Hobbes, Spinoza, Hume, Althusius, Christian Wolff, Fouillée, Burke, Leon Duguit and von Humboldt. And as with Adam Smith, the occasional literary reference figures in arguments as well.

2 Buchanan was certainly not content to stay with received wisdom. The absence of Knight in Buchanan’s Nobel address may come from the significant criticism Buchanan levels on Knight in an essay written one year earlier, for the conference the University of Chicago convened to honor the centenary of Knight’s birth (Buchanan, 1987). Wagner argues that Knight’s influence was “typically more in terms of attitude toward material than in substantive text” (Wagner, 2017, 38). Also, in Marciano (2013), Knight is seen frequently as a useful point of disagreement for Buchanan, while Wicksell is more wholeheartedly accepted.

3 We will use the publication dates hereafter.

4 Buchanan also endorses the use of “progress” in his “Natural and Artifactual Man”, “We find statements everywhere to the effect that modern man has lost the faith in progress that was pervasive in the post-Enlightenment period, the eighteenth and ninetieth centuries, and most of this century. … The hopes for man, individually and collectively, held out by the post-Enlightenment social philosophers may have been naive, especially when viewed from the perspective of our age. But the lesson to be drawn is surely and emphatically not one of resignation to man’s fate as a natural animal.” (Buchanan, [1978] 1999, 254)

5 “The primary consideration for democracy, is free agreement; the conclusion actually reached is secondary—up to the point where there is a threat of outright destruction or an insurrection putting an end to freedom” (Knight, 1960, 152).

6 The divergence between “old” and “new” Chicago is underlined here; the Stigler-Becker “De Gustibus Non Est Disputandum” essay argues an assertion 180 degrees opposite to Knight’s assertion. See Emmett ([2006] 2009). Buchanan again displays an “old school” Chicago slant: “The purpose of political discussion is precisely that of changing ‘tastes’ among social alternatives.” (Buchanan, [1959] 1999, 136) And by 1978, he is engaging with it directly. “As a second example, let us consider the Stigler-Becker proposition to the effect that economists should proceed on the assumption that utility functions are stable through time and invariant as among persons. Introspectively and observationally, we may want to reject this notion out of hand.” He then proceeds to object to it on specific grounds, relevant to his discussion: “It seems impossible, in the Stigler-Becker world, to invest in becoming more appreciative of music or of anything else.” (Ibid., 97-98)

7 Knight argues explicitly in terms of the utility function as well, “Ultimately, the real ends of action are not mainly of the concrete quantitative sort represented by utility functions, but consist rather in such abstract motives as interesting activity, satisfying achievement, self-approval, fellowship, and social position and power. There is no end completely ‘given’ in terms of sense data. Every end is more or less redefined in the process of achieving it, and this redefinition is one reason for desiring the activity.” (1935, 281)

8 For an examination of Buchanan’s view of public goods and the social welfare function, see Desmarais-Tremblay (2014).

9 Knight mentions how our pre-modern routines can become animal-like also: “In primitive society people know what they need to know, almost as animals know what to do in the situation they meet with.” (Knight, 1960, 140)

10 “… neither man nor his world can be understood in terms of categories derived from the exigencies of adapting means to given ends.” (Knight, [1924] 1935, 109—page reference is to the Knight collection, The Ethics of Competition and other essays)

11 Buchanan rhetorically wonders, “Does the manner in which men model their own behavior affect, and perhaps profoundly, the way that they model the social institutions under which they live?” The implied answer is of course, yes. (Buchanan, [1978] 1999, 256)

12 “Beyond this fact of majority dominance, further limitation [sic] on freedom are set by the inherent imperfection of the agency relation, which is ubiquitous in modern society and is of the essence of government. It is primarily a consequence of specialized knowledge and skill, and of the dynamic character of knowledge in particular. Decisions are constantly made by experts, on behalf of principals for whom they act by agreement.” (Knight, 1960, 30)

13 “Enforcement of rules and prevention of cheating is, however, but the minimum function of the political system. In any state of affairs yet seen in the world, men of good will must aspire to have it do much more; the game of social living has never approached satisfactory ideals in the fairness of its rules, to say nothing of the inherent quality and dignity of its objectives and the type of play employed in reaching them.” (Knight, 1935, 303)

14 Knight’s influence on Buchanan applies even to terminology. The word “romantic” is used by Knight extensively across his work. Two examples from Intelligence and Democratic Action: “Man is an opinionated animal, and contentious, as well as romantic (uncritical) in forming opinions”, and “The first step is to make people in general more critical, less romantic, in their judgments of debating arguments used in political campaigns, and of advertising and sales-talk.” (Knight, 1960, 9 and 13)

15 We are over-simplifying here a bit; Buchanan recognized that voters may have “social” effects in mind which would change their inclinations from what they might be in a pure market environment. But he insists this should not be taken to extremes—as in the introduction of benevolent government actors. (Buchanan, [1962a] 1999, 23-24)

16 Not surprisingly, Buchanan has more faith in Knight’s idea of rules than does Knight himself. On this specific topic, Buchanan makes the argument for rules. He asserts that the predictability of a rule creates a different decision-environment, and so even if on an instance-by-instance basis rules could be out-performed by discretionary action, still the rule structure might be more beneficial across all instances taken together. Their differing “frameworks governing private decisions” make an instance-by-instance comparison inconclusive. (Buchanan, [1962b] 1999, 348)

17 See Coker (2021).

18 And this talk of ideality does not represent a difference from Friedman, “And the real market is by no means as different in this respect from the theoretically ideal market as the critics allege.” (Knight, 1960, 112)

19 “Freedom, particularly economic freedom, has to be restricted by rules, made and enforced as law by social agencies acting on behalf of the general interest.” (Knight, 1960, 113)

20 “After all, freedom was the “primary value” of liberalism, and Knight believed in liberalism.” (Marciano, 2020, 5) Marciano’s treatment throughout this article is of interest.

21 “Frank Knight’s writings have never neatly aligned with his imputed role as a dedicated advocate of free enterprise. Throughout his career, he refused either to extol the virtues of markets without drawing attention to their manifest limitations and sins, or to observe those limitations and sins without enumerating the formidable difficulties inherent in any attempt to overcome them.” (Burgin, 2009, 515)

22 Buchanan and Tullock are authors in the first instance, Buchanan alone in the second.

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David C. Coker

Center for study of Public Choice, George Mason University.

Ross B. Emmett

Center for the Study of Economic Liberty, School of Civic and Economic Thought and Leadership, Arizona State University.

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