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Externalities in Economic Thought

Buchanan and Pro-Social Behaviors: Why Ethics is Necessary

Buchanan et les comportements pro-sociaux: pourquoi l’éthique est nécessaire
Alain Marciano
p. 295-311


L’objet de cet article est d’analyser le rôle de l’éthique et de l’intérêt personnel chez Buchanan et dans les explications qu’il donne des comportements pro-sociaux. Notre argument est que, pour Buchanan, non seulement l’éthique est importante mais elle est aussi nécessaire. Dit autrement, si les individus ne sont pas contraints par des principes éthiques, c’est-à-dire s’ils poursuivent leur intérêt personnel de manière étroite, alors ils ne se comportent pas de manière pro-sociale. Nous montrons, dans une analyse historique, comment Buchanan a construit cet argument et comment il est progressivement devenu convaincu de la nécessité de l’éthique. Cela implique, en particulier, de revoir son argument sur la taille des groupes qui est une condition nécessaire mais pas suffisante pour l’adoption de comportements pro-sociaux. En effet, même dans les petits groupes, les individus qui ne suivent pas des principes éthiques et qui se préoccupent uniquement de leur intérêt personnel ne se comportent pas de manière pro-sociale.

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  • 1 The first attempts to model pro-social behaviors were not made with the objective to question self- (...)
  • 2 To be more precise, there exists a distinction between 2 types of alternative explanations: those f (...)

1That individuals spontaneously and voluntarily behave pro-socially—that is, among other things, pay for the public goods they consume or internalize the externalities their actions produce—is illustrated by an increasing number of empirical and experimental studies (see, among others, Ledyard, 1995; Loewenstein, 1996, 2000). At least, this point has gained overwhelming support among economists who, then, wonder1 if, after such studies, is it possible to stick to the claim that individuals are self-interested and to envisage that pro-social behaviors are compatible with narrow self-interest (List 2007)? Or if is it necessary to revise the behavioral assumptions made in economics and to assume that individuals follow other kinds—in particular ethical—motives of action2. To put it in different words, can narrow self-interest be pro-social or are ethical rules necessary to explain that individuals behave pro-socially? This is exactly the same question that is asked nowadays as the one that was asked in the late 1960s-early 1970s when economists started to analyze altruism and philanthropy (see Fontaine, 2007). The question remains of importance to understand, first, more precisely how individuals behave and, second, which tools can be used—if it is necessary—to promote pro-social behaviors. Our hopes in this paper is to contribute to this understanding. Not directly, though, but indirectly with a paper in history of economic thought. In effect, we focus on, and analyze, the views adopted by the 1986 Nobel prize laureate in economics, James Buchanan, on ethics, self-interest and pro-social behaviors. But our primary object and purpose is more specifically to be a piece in Buchanan’s scholarship.

  • 3 Buchanan, to our knowledge, never used the word “pro-social behaviors” but he spoke of “anti-social (...)
  • 4 One must add that Buchanan considered public goods as a form of externalities—externalities in prod (...)

2 That Buchanan’s views on ethics and pro-social behaviors are of interest today comes from two complementary claims he made. First, he believed that individuals—at least under certain conditions—spontaneously and voluntarily behave pro-socially3. To him, this meant, in particular, that individuals pay for the public goods they consume or internalize the externalities their actions produce4. Second, in contrast to what maybe be assumed about someone who studied at Chicago, collaborated with Gordon Tullock and contributed to the “invention” of Public Choice, Buchanan was an “ethics-minded economist” (Fontaine, 2007, 14). He believed in the importance of ethics to explain pro-social behaviors. More precisely, to him, individuals behave pro-socially when and because they follow a moral rule (see, for instance, Buchanan, 1965b). This has already been discussed (in particular, Fontaine, 2007; Marciano, 2013; 2016). What has not, to our knowledge, been discussed is wether or not, for Buchanan, all pro-social behaviors are necessarily grounded in ethics? Or did he also believe and argue that pro-social behaviors can be based on self-interest? This is precisely what we discuss in this article.

  • 5 We voluntarily do not contextualize the analysis proposed here. Our objective is not to explain why(...)

3 To a certain extent, it could be said that the answer to this question is known—to be negative—because of the link Buchanan established between self-interest and ethics. To him, indeed, individuals always pursue their self-interest and ethics is a form of—enlightened—self-interest. From this perspective, pro-social behaviors could be viewed as self-interested and ethical at the same time and it could be said that Buchanan defended the idea that pro-social behaviors are self-interested. But this answer would be inexact and incomplete if it were not raised in terms of narrow, rather than enlightened, self-interest. From this perspective, what one needs to ask is: did Buchanan envisage that pro-social behaviors could result from narrow self-interest or did he depart from the assumption of narrow self-interest to explain pro-social behaviors? Did he mean that narrow self-interest can never be pro-social or are there circumstances in which it does lead individuals to behave pro-socially? Our answer is that, to Buchanan, self-interest, narrowly pursued, cannot be pro-social. To him, not only ethics matters but also, and above all, ethics is necessary. This how we propose to interpret what he wrote at the end of the 1970s, when he was so concerned with how the American society evolved5, and emphasized the need “to recognize the existence of a general motive force that inhibits the play of narrowly defined self-interest” (Buchanan, 1978, 366). In other words, to Buchanan, this is the argument we put forward in this paper, pro-social behaviors are necessarily grounded in ethics.

4 Since this is a paper in history of economic thought, we propose a demonstration based on the analysis of the evolution of Buchanan’s views on ethics, narrow self-interest pro-social behaviors. We show how, in the early 1950s, he was rather confident in self-interest and believed that pro-social behaviors were systematic. Then, progressively, he became less and less confident in self-interest—and ethics progressively appeared to him as important—and he came to discuss conditions under which pro-social behaviors are possible. Finally, he came to view ethics as necessary and claimed that pro-social behaviors were possible only if individuals were following an ethical rule. Recounting this history, with a special emphasis on the necessity of ethics, allows us to gain new insights on the evolution of Buchanan ideas. In our analysis, we use articles that are almost never used and archival material that have never been used before. We draw connections that have, to our knowledge, never been drawn before. This is a first—historical—outcome of the paper. Then, the paper has a second, new and important outcome. Our analysis allows us to show that, to Buchanan, all other conditions—including institutional ones—are secondary compared to ethics that comes necessarily first. More precisely, in this paper, we also clarify what Buchanan thought about the importance of the size of groups. In effect, it is known that, to Buchanan, the size of groups matters—in small groups only, individuals adopt pro-social behaviors (Fontaine, 2007; see also Desmarais-Tremblay, 2014). However, that is not enough. By showing that ethics is always necessary to lead individuals to behave pro-socially, we also show that the size of groups is a necessary and not a sufficient condition. Even in small groups, narrow self-interest leads individuals to behave anti-socially.

1. Economics, Politics and Pro-Social Behaviors

5To understand why, if and when, narrowly self-interested individuals could behave pro-socially, we need to start with Buchanan’s first works on Knut Wicksell’s voluntary exchange theory and, in particular, the articles he wrote in the early 1950s (1951, 1952). These were his first published works in which he explained why he adhered to such a theory; in which he, to put it differently, he explained why individuals voluntarily adopt pro-social behaviors.

  • 6 It is beyond the scope of this paper to explain the nature of their disagreement but it is importan (...)
  • 7 Actually, in the early 1950s, externalities and market failures were not on economists’ research ag (...)

6 Let us remind that voluntary exchange meant, for Buchanan6, that buying public goods or services is not different from buying a private good. Taxes are the price individuals pay in exchange for the public goods and services produced and sold by the State. This is precisely why transactions between individuals and the State are voluntary: as with any other private transaction, individuals receive a benefit in exchange of the prices—taxes for public goods and services—they pay. From this perspective, it is clear that, to Buchanan, what could be viewed as pro-social behaviors—individuals do pay for public goods or internalize the effects their actions have on others—were explained by the private gains individual receive from paying their taxes. Thus, those behaviors were entirely rooted in a strict and narrow self-interest. In effect, individuals only take into account their private gains and compare them to the prices they pay as taxes. Individuals were not supposed to take into account the welfare of others, but nonetheless behave pro-socially. With a consequence which is that, in those years (1950-1952), Buchanan did not envisage that markets could fail7.

  • 8 It was not the first time that Buchanan envisaged the inefficiency of markets. In 1950, he explaine (...)
  • 9 The article began with the same example that Pigou (1920) and Knight (1924) used in their controver (...)

7 Buchanan started to pay attention to externalities in 1954, when he was at the RAND Corporation and exchanged memos with Roland McKean about this problem. He also started to write on “the problem of social cost” and the inefficiencies of markets in presence of externalities and public goods (1954a). In contrast, not to say in contradiction, with what he had written just a few years before, he no longer seemed to find relevance in the assumption of a willingness to pay for public goods and to internalize externalities. Narrow self-interest seemed to give birth certain problems8. Indeed, in certain circumstances, the private costs individuals pay to consume a good does not cover the social costs implied by the consumption of the good (Buchanan, 1954a)9. It was the first time that Buchanan really acknowledged that individuals, acting out of (a narrow) self-interest, could not behave pro-socially. And, although this appeared in a published article in 1956 only—it was in “Private Ownership and Common Usage: The Road Case ReExamined”—, Buchanan made it for the first time in 1954.

8 It is therefore not a coincidence that also in 1954 Buchanan wrote an article—“Individual Choice in Voting and the Market” (1954b)—in which he tried to reconcile those two claims—the individual willingness to pay for the public goods (or to internalize external effects) and the failures of market mechanisms. Actually, the objective of the paper was not to discuss externalities. The core of the analysis developed in this article was rather to compare 2 different institutional environment in which individuals make decisions—“the political voting process and in the market process” (1954b, 334), on the one hand, and “the price system and in a single form of centralized decision-making” (1954b, 334), on the other. But, the article proves to be important because it bears on an important aspect for market failures, interdependencies.

9 From this perspective, there exists, according to Buchanan a major difference between market and voting, between economics and politics. He claimed that, in economic and in political decisions, individuals do not rank similarly the different alternatives they face because they are not guided by the same “preference scale” (1954b, 336). They do not have the same “sense or degree of participation in social decision-making” (1954b, 335). In their economic decisions, individuals have no sense of participating in any collective action. They are “unconscious of the secondary repercussions of [their] act of choice” (Buchanan, 1954b, 336). They behave as if they were independent from each other, ignoring the interdependences that exist between them. By comparison and contrast, individuals do know that their political decisions and actions—their vote—“are influential in determining the final collective choice” (Buchanan, 1954b, 336). This implies means that individuals who make political decisions acknowledge the interdependences that link them to others.

  • 10 On a different but connected level, one must also resist the temptation to conclude that externalit (...)
  • 11 Interestingly, a first and identical version of the paper—slightly differently entitled “Simple Maj (...)

10 As mentioned above, Buchanan’s article was not about externalities or public goods at all. In addition, it did not include any reference to ethics, to enlightened or to narrow self-interest. One must resist the temptation to establish a connection that Buchanan did not make at that time between markets and narrow self-interest, on the one hand, and ethics or enlightened self-interest and politics, on the other10. It would be a rational ex-post and erroneous reconstruction. Not only Buchanan did not make such a connection at the time but, when he started to enter into the details of how individuals vote, he clearly said that voting could well be neither pro-social and nor ethical. Indeed, when they vote, individuals could be as narrowly self-interested as they are when they buy a good on a market. He made the point in an article published in 1961 and entitled “Simple Majority Voting, Game Theory and Resource Use” (1961b)11. It is the next step in our analysis.

2. Ethics, Politics and Pro-Social Behaviors

  • 12 The example was borrowed from Gordon Tullock, “Problems of Majority Voting” (1959). Tullock’s artic (...)

11In this 1961 article (1961b), Buchanan analyzed majority voting applied to the share of resources among individuals. The example he discussed was the repair of a system of private roads in a community of farmers12. Roads are private but the costs of maintenance can be shared among farmers. Each farmer vote to decide either to repair their own road or also to repair the roads of others (that they will not use). In other words, they vote on whether or not to share the costs of repairing and maintaining roads. Then, towards the end of the article, he switched to how individuals would vote if they had to finance the purchase of a pure collective good. However, he did discuss ethics and public goods. It is only in the case of the repair of private roads without indivisible gains that he spoke of the role of ethics. To be more precise, Buchanan more specifically discussed how individuals would vote to divide an exogenous amount of money among them. But what he said about ethics in this context is relevant for our analysis.

12Buchanan thus contrasted behaviors based on “moral or ethical principles” (1961b, 340) and that consist in “being interested in the welfare of his fellow citizen” (1961b, 340) to those that are not constrained by ethics and result from the maximization of private and individual utility. The opposition is clearly marked when Buchanan added that ethical principles “inhibit individual utility-maximizing behavior” (1961b, 340). And then he explained that it is only when farmers are bound by those ethical principles that they will choose an equitable imputation of benefits and that they will vote to share equally all the benefits or repair equally the roads of each of them. By contrast, when they do not follow these ethical principles and follow their private interest, farmers form coalitions that allow them to obtain a larger share of the benefits compared to the equitable imputation. But this increase in the private gains farmers is doubly costly: first, for the collectivity, because it means a waste of resources; second, for the individuals who are not in the coalition—the minority—who either get nothing or pay for repairing the roads of others. And he insisted: this is unavoidable in the democratic process in which individuals “act so as to further their own interest in some objectively measureable way” (1961b, 347). Thus, and this is what matters for our purpose, first, individuals may well vote to favor their self-interest and ignore the impact of their action on others and, second, pro-social behaviors require ethical principles; un-inhibited self-interest does not generate pro-social behaviors. That is, to refer to Buchanan’s previous claims on politics, voting and the interdependencies with others, when they vote, individuals may well acknowledge the interdependencies that link them with others individuals but they take them into account—and effectively behave pro-socially—only if they are bound, constrained by ethical principles.

13At about the same period, in 1960, Buchanan spent 4 months at the London School of Economics and wrote “Politics, Policy and the Pigovian Margins” (1962). In the latter work, Buchanan gave additional details about the question we are discussing here. Deepening the argument made in 1954 (1954b), Buchanan compared two polar—“extreme and contrasting”—models of human behavior. First, the standard economic representation of man: a rational and self-interested individual who makes decisions by comparing marginal costs and benefits and for whom “[n]o considerations of the ‘public’ or the ‘social’ interest are assumed to enter this … calculus” (1962, 20). In other words, these individuals are narrowly self-interested. Then, at the other end of the behavioral spectrum, one finds the model assuming that “each individual … tries to identify himself with the community of which he is a member and … tries to act in the genuine interest of the whole group” (1962, 22). Those individuals, Buchanan wrote, follow a “Kantian-like rule of action” (1962, 22). The results, wrote Buchanan, are “almost intuitively clear” (ibid.). In a world populated with self-interested individuals, external diseconomies are unavoidable. One cannot expect that narrowly self-interested adopt pro-social behaviors. But, externalities disappear in a world in which individuals behave ethically and pro-socially. He thus made no difference between ethical and pro-social behaviors.

14 It took Buchanan a few more years to explicitly state his views about the respective role of ethics, self-interest and pro-social behaviors. It was in 1965, in an article entitled “Ethical Rules, Expected Values and Large Numbers” (1965b; hereafter “Ethical Rules”) in which he, again, argued that individuals could behave after “the moral law” or by following “the private maxim” (1965c, 2). Then, following the moral law means that the “individual behavior embodies social content” (1965c, 2)—that echoed the interest in the welfare of others of his 1961 article. This meant also that the individual who follows the moral rule acknowledges and takes into account the influence of his action on others. By contrast, the individual who follows “the private maxim” (or “the expediency criterion” (1965b, 2)) is narrowly self-interested: he maximizes his own utility and ignores the interdependencies with others.

15 In terms of pro-social behavior, Buchanan derived interesting consequences. To him, the individual who follows the moral law “commits himself to act in subsequent situations on the basis of something like the generalization principle. That is, he will not act in ways other than those which allow his particular action to be universalized, regardless of the specific consequences” (1965b, 2). In other words, he always behave pro-socially. But the individuals who follows the private maxim “commits himself in advance to no particular principle of behavior. He retains full freedom to act on the basis of expedient considerations in each particular instance that arises” (1965b, 2). As a consequence, he may or may not ignore the consequences of his actions on others. Thus, Buchanan seemed to suggest that following the private maxim may also lead individuals to behave pro-socially.

16 Therefore, in the various works and he discussed self-interest, ethics and pro-social behaviors, Buchanan did not derive precise conclusions against narrow self-interest. If it can be said that following the moral law or adhering to moral (ethical) principles would necessarily lead individuals to adopt pro-social behaviors, the reverse does not seem to be true: narrowly self-interested individuals can also behave pro-socially. However, when he started to detail the conditions in which individuals do behave pro-socially, narrow self-interest no longer seemed to allow pro-social behaviors.

3. Numbers, Ethics and Pro-Social Behaviors

17One of the consequences of the absence of any clearcut conclusion about ethics, self-interest and pro-social behavior is that it seems impossible to say whether or not ethics is necessary to generate pro-social behaviors without discussing the conditions in which individuals follow the moral rule or the expediency criterion/private maxim. This was precisely one of the main claims he made in “Ethical Rules” (1965b), in which Buchanan insisted on “the relevance of numbers” (1965b, 5), that is on the influence of the size of groups on how individuals behave and, more specifically, on whether or not their pro-social behaviors are ethical or (narrowly) self-interested.

18However, it was not the first time Buchanan had insisted on the relevance of numbers. In his 1961 article, on “Simple Majority Voting, Game Theory and Resource Use” (1961b), Buchanan had already stressed that

as the size of the group increases, any tacit adherence to moral or ethical principles that might inhibit individual utility-maximizing behaviour becomes more difficult to secure. The deliberate exploitation of the third member by any two members of a three-person group may be difficult to conceive. But the individual’s interest in the welfare of his fellow citizen falls off sharply as the group is enlarged. (1961b, 340)

  • 13 And he already suggested a twofold—not to say two—explanation. In a small group, interactions are p (...)
  • 14 The same month he started to write “Ethical Rules, Expected Values and Large Numbers”. Buchanan als (...)
  • 15 It is important to note here that, although he wrote in 1961 that individuals “tacitly adhere” to m (...)
  • 16 Theorists, in particular after Loewestein 1996 (see also 2000), have recently discussed how self-co (...)
  • 17 A corollary is that no individual will follow a moral rule if it implies expected benefits lower th (...)
  • 18 From this perspective, it is significant that the first version of the paper was entitled “A Probab (...)

19In other words, in 1961, Buchanan was already convinced that numbers are “relevant” to understand pro-social behaviors13. He made a similar claim in “A Note on Public Goods Supply” co-authored with Milton Kafoglis and published in 1963. In this article, Buchanan and his co-author compared the public and private provision of health services and came to the question of the number of individuals involved. To them, even if private arrangements could be said to be efficient, there were circumstances in which they would be too costly to organize, in particular, did they write, “when the interactions extend over a large number of persons” (Buchanan and Kafoglis, 1963, 412). Finally, in 196514, Buchanan explained again that the “critical determinant” that “influences and individual’s choice among ethical rules [is …] the size of the group” (1965b, 1). More precisely, he explained why, according to him, in small-number environments individuals would choose the moral law while in large-number environments they will choose the private maxim or the expediency criterion15. And, if individuals follow one law rather than the other as a result of a choice, then it means that they make a calculus16 that allows them to compare the expected values associated with following one rule or the other17. Therefore an individual’s choice “depends upon his own predictions about the behaviour of others” (1965b, 3), which means that choosing one rule or the other is a matter of probabilities18: “[t]he expected values depend, of course, on the probabilities that the individual assigns to the various patterns of behavior for ‘others’ than himself” (1965b, 5) or the “probabilities assigned [by the individual] to each of the possible behavior patterns of others.” (1968a, 85) But the assignment of these probabilities, or the expectations about others’ behaviors, depends on the influence each individual thinks he will have on others.

20From this perspective, the difference between small and large groups is easy to understand. In a small group—an “isolated setting” (Buchanan 1965b, 6) of 3 persons, “a desert island” (1965b, 6) for instance—“any one of the three will tend to recognize that his own choice of a rule, and subsequent adherence to it, will to some considerable extent influence the similar choices to be made and followed by the other two members” (1965b, 6). This leads individuals to behave strategically (Buchanan, 1968a, 91)—strategically means that individuals adapt their behavior to the behavior of others. This is why they will follow the moral law, if the individual “contributes nothing, he may assess the probability of noncooperation on the part of others higher than if he contributes some share. This change alone may be sufficient, on rational grounds, to cause him to contribute.” (Buchanan, 1968a, 86) Or, “the most likely outcome will surely be one where each and every person adopts, and follows, something that is akin to the Kantian categorial imperative.” (Buchanan, 1965b, 7)

21 By contrast, in large number environments, the situation is completely different. Each individual behaves non-strategically, in the sense that “he simply reacts or adjusts to the behavior of ’’others’’ in a manner similar to his reaction to natural environment.” (1967, 113) The word “natural” refers to the fact that each individual treats others as part of “nature”. He takes the behavior of others as given, independent of his own behavior. He knows that his behavior will influence no one: “only when the size of the group is critically large … will the individual consider his own action to exert substantially no effect on the actions of others.” (1965b, 9) This is why he will follow the expediency criterion. He will follow this rule whatever others do, even if they all behave like “saints”: “[i]n a group of critically large size, the individual will tend to adopt the rule of following the expediency criterion even if he thinks that all of his fellow citizens are saints” (1965b, 7).

  • 19 Although he distinguished between small- and large-number environments, Buchanan but did not distin (...)
  • 20 We can draw a parallel with the conception of cooperation and co-production that was central to Eli (...)

22In terms of pro-social behaviors, the situation is the following. First, the individuals who follow the moral rule will behave pro-socially if he is in a small group and contribute to the provisions of public goods or internalize the externalities his actions create. Second, the same individual—or the same type of individual—will not follow the moral rule if he is in a large environment. Thirdly, the narrowly self-interested individuals, who follow the private maxim, will not behave pro-socially if they is in a large group. Buchanan explained that, in a critically large group, individuals will “refuse” (1965b, 9) to contribute to the costs of provision of the public goods they consume. The narrowly self-interested individual, who chooses the expediency criterion, the private maxim, behaves as a free-rider—a behavior that is typically not pro-social. Finally, the fourth and much more interesting situation, is the case of the narrowly self-interested individual who interact with other individuals in a small-number environment. The latter, wrote Buchanan, is “motivated to behave strategically” (1968b, 81). He “may deliberately resort to strategic ‘antisocial’ behavior” (1968b, 81) because he “will find it to his advantage to conceal his true preferences and to give false signals about those preferences to his opponents-partners.” (1968b, 81) Thus, the conclusion is similar to the conclusion reached in the article published in 1961 and discussed above: narrow self-interest does not lead individuals to behave pro-socially if it is not bound by ethical principles19. Put another way, the size of the group is a sufficient condition only. The individuals who follow their narrow self-interest may behave strategically even in small groups20.

  • 21 From this perspective, another thesis—minor but new and original—of this paper is that, for Buchana (...)

23Actually, Buchanan went one step further, arguing that these individuals will even behave anti-socially. One must note here the vocabulary and conceptual evolution here21. In 1965, Buchanan did not say equate free-riding with anti-social behaviors. Free-riding was just a form of non pro-social behavior. Indeed, Buchanan insisted that the individuals who refuse to behave pro-socially in a large number environment makes no “deliberate effort [… to secure benefits at the expense of his fellows.” (1965b, 9; emphasis added) He “is simply reacting to an environment in which he finds himself, to ‘nature,’ so to speak, not in any way against his fellow citizens.” (1965b, 9; emphasis added) However, this will change not long after this article was published. In 1968, he was already considering that the individuals who who refuse to share the costs of public goods, free-riders in 1965, “behave ‘anti-socially’” (1968a, 354; see also 1968b). There was no doubt now that ethics was necessary to lead individuals to behave pro-socially. And it also confirms the importance of ethics for Buchanan.

4. Conclusion

24In this paper we analyzed Buchanan’s views on self-interest and pro-social behaviors—that is, how self-interest may or may not lead individuals to pay for the public goods they consume and internalize the externalities they produce—and how they evolved. We show that, in the early 1950s, he was rather confident that self-interest could lead individuals to behave pro-socially. Actually, in those years, he did not distinguish between narrow or enlightened self-interest. Certainly, he was not naive—for instance, he has always acknowledged market failures (see, for instance, 1954a, 1956). But he was optimistic, about human behavior and about the individuals’ capacity to devise private arrangements that would solve those failures. However, he progressively changed his mind and became convinced that narrow self-interest was really problematic for the economy but also for the society at large. The most obvious and clear statement he made of these claims was in “Markets, States, and the Extent of Morals” (1978). And, in the 1970s, he was definitively convinced that it is only because ethical principles constrain and limit narrow self-interest that individuals can behave pro-socially. Interestingly, he also believed that individuals choose, rationally and self-interestedly, to behave ethically. Self-interest bounds self-interest.

25Our analysis is new and original for different reasons. First, from an historical perspective, we show that the claims made at the end of the 1960s in various books and articles have their roots in previous works in which they were sketched (in particular in 1961b and in “The Calculus of Consent”, 1962). “Ethical Rules” (1965b), for instance, was at the end of an intellectual process rather than at the beginning. Second, regarding the size of groups, we show that it matters but it is not a sufficient condition. It is only a necessary condition to be fulfilled to explain pro-social behaviors and cooperation. Indeed, even in small groups, narrowly self-interested individuals do not behave pro-socially. Therefore, to reduce the number of interacting individuals, of individuals involved in exchange, would be useless if those individuals were not ethically oriented. The efficiency of market mechanisms, of exchange, primarily depends on ethics. With ethics, institutions do not matter. This is a very important result. It means that, to Buchanan, ethics is a “framework institution” as it was for Carl Menger or Friedrich Hayek (see Boettke, 2012). And, from this perspective, Buchanan was not only one of the rare economists—in the Chicago/Virginia tradition—who paid attention to ethics. He was one of the rare economists who believed in the necessity of ethics.

I would like to thank the editors of the Journal, the editors of the special issue as well as 2 anonymous referees for particularly useful comments.

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1 The first attempts to model pro-social behaviors were not made with the objective to question self-interest. On the contrary, economists tried to explain those behaviors by using the standard behavioral assumptions used in economics. This is the case, for instance, of Gary Becker (see Fontaine, 2007) or Bruno Frey (see Romaniuc, 2014).

2 To be more precise, there exists a distinction between 2 types of alternative explanations: those for which individuals behave pro-socially because they follow, first, “external” or, second, “internal” norms. Ethics is rather viewed as a form of internal norm. Interestingly, as we will see below, to Buchanan, the following an ethical rule is a consequence of a social pressure.

3 Buchanan, to our knowledge, never used the word “pro-social behaviors” but he spoke of “anti-social” behaviors (see section 2 below). This is why we suggest to apply this expression to Buchanan.

4 One must add that Buchanan considered public goods as a form of externalities—externalities in production—that he distinguished from the externalities in consumption. In the former case, there is an interdependence in individual production functions and in the latter case, utility functions are independent.

5 We voluntarily do not contextualize the analysis proposed here. Our objective is not to explain why but rather how Buchanan’s views evolved. But, of course, the context played a crucial role. The evolution of Buchanan’s ideas was, first, the consequence of changes that occurred in his personal and intellectual environment—for instance meeting new colleagues who modified his views—and, second, of the political, social, cultural changes that affected the American society in the 1950s and in the 1960s (see Fontaine, 2007; Fleury and Marciano, 2014). Indeed, the evolution in his views as reflected in this paper is linked to an evolution in his larger view of the world and to his disenchantment with the society.

6 It is beyond the scope of this paper to explain the nature of their disagreement but it is important to note that Buchanan’s interpretation of Wicksell’s work quite radically differs from Richard Musgrave’s (for more details see Johnson, 2005, 2015, for instance).

7 Actually, in the early 1950s, externalities and market failures were not on economists’ research agenda yet. The concept of externalities was far from stabilized. Very few economists paid attention to this problem and, actually, did not even consider that it was a problem. For instance, Scitovsky wrote that the case of external economies is “unimportant because examples of it seem to be few and exceptional” (1954, 145; for an history of the concept of externality in the 20th-century literature, see Medema, 2015). The expression of “market failures” has not been coined yet. It was invented by Francis Bator in 1958 (see also Marciano and Medema, 2015).

8 It was not the first time that Buchanan envisaged the inefficiency of markets. In 1950, he explained that, in a federal regime, individuals, led by their self-interest, were incited to move to the wealthiest states to benefit from more public goods and services. According to him, this could not but lead to a waste of resources (see Boettke and Marciano, 2014 for an analysis of this claim in relationship to Tiebout and spatial competition). This was thus a form of market failures before market failures were invented, but of a totally different types compared to the ones analyzed in this article.

9 The article began with the same example that Pigou (1920) and Knight (1924) used in their controversy, namely the pricing of roads. In effect, roads are an instance of a good the common usage of which gives birth to “external diseconomies” and, as economists well know and agree upon notes Buchanan, when such diseconomies are present “the market does not produce the efficient allocation of resources” (1956, 308). He even criticized Frank Knight for having missed this point

10 On a different but connected level, one must also resist the temptation to conclude that externalities should be moved to the political system. Not only Buchanan did not write that in 1954 but, later, he put forward the idea that it is not only markets that fail but governments fail too and this must be taken into account. In 1954, thought, no one had really insisted on government failures. Medema (2014b) speaks of “the almost complete absence of this viewpoint [about the limits of the intervention of the state] from the literature of the day”. Ronald Coase (1960) and Roland McKean (1964) were among the firsts to stress this important point. Now, in the late 1950s and early 1960s, as Charles Hitch and Roland McKean argue, economist’s knowledge of the behavior of government is even smaller than the little they know on firms behavior (1961, 152). It is therefore inopportune to conclude that a transfer of activities to the public sector is going to solve the problem of efficiency markets face (on the same issue, see also Buchanan, 1962).

11 Interestingly, a first and identical version of the paper—slightly differently entitled “Simple Majority Voting and The Theory of Games”—was published in “The Calculus of Consent” (Buchanan and Tullock, 1962, ch. 11, 143-164) and republished as a separate article under Buchanan’s name only name in 1961. Since “The Calculus of Consent” was completed in 1960. It can be said that the paper had actually be written in 1960.

12 The example was borrowed from Gordon Tullock, “Problems of Majority Voting” (1959). Tullock’s article was also reprinted as a chapter in “The Calculus of Consent” (Buchanan and Tullock, 1962, ch. 10, 127-141).

13 And he already suggested a twofold—not to say two—explanation. In a small group, interactions are personal and it will be easily recognized that individuals are not interested in the welfare of others. Individuals do not behave ethically because they are genuinely interested in others but because a lack of concern would be too conspicuous. But, when the size of the group increases, the concern for others decreases. This implies that each individual’s interest in the welfare of others decreases because a lack of concern is less visible than in small groups.

14 The same month he started to write “Ethical Rules, Expected Values and Large Numbers”. Buchanan also started another article article on externalities and numbers that also served as a link between with previous works on groups and numbers. The article was entitled “Externality, Jointness, and Numbers” (1965c). As the title clearly showed, numbers were an issue for him and played an important role in the analysis developed in this text. Thus, Buchanan put forward that the objective of the paper was to “show that when Pareto-relevant externalities are exerted jointly on large numbers of individuals, market-like arrangements cannot be predicted to generate efficient results … When externalities are accompanied by jointness, market-like arrangements will emerge with some high degree of probability only if the group affected is small” (1965c, 1). However, when the paper was eventually published in 1966 under a different title—“Joint Supply, Externality and Optimality”—numbers were no longer at the center of the analysis. Certainly, Buchanan noted that, if the number of people involved is small, compensations can be offered and then externalities could be internalized through private arrangements and, by contrast, “[i]f the externality affects some critically large number of persons, the ‘free rider’ problem arises to prevent voluntarily-organized shifts toward the optimality frontier.” (1966, 409) But he did not go farther than that. Buchanan was more interested in joint-supply than in numbers. This can easily be explained by the fact that, by then “Ethical Rules” had been published and Buchanan had made his point about numbers and ethics.

15 It is important to note here that, although he wrote in 1961 that individuals “tacitly adhere” to moral or ethical principles, in 1965, he explained that following one rule or the other is a matter of “choice”. From this perspective, it does not seem that individuals follow the moral rule (or the private maxim) because of social norms.

16 Theorists, in particular after Loewestein 1996 (see also 2000), have recently discussed how self-control relates to ethical behavior and to self-interest. It is clear that, to Buchanan, the decision to follow an ethical rule is perfectly rational and not affected by cognitive limitations.

17 A corollary is that no individual will follow a moral rule if it implies expected benefits lower than the expected benefits associated with the private maxim. In that case, following the rule that has the lowest expected value would “play” against the individual. This reasoning parallels what a friend of him had written not long before: “the more personal gain one sacrifices to be altruistic, the less altruism he will pursue” (McKean, 1964, 243-244). To Roland McKean, this implied a consequence that Buchanan never drawn: “the greater the divergence between individual and total costs and gains, the less likely one is to be guided by total costs and gains” (1964, 244).

18 From this perspective, it is significant that the first version of the paper was entitled “A Probabilistic Approach to the Free Rider Problem” (Buchanan Archives, GMU). Buchanan will use the same title, and part of the article, in “The Demand and Supply of Public Goods” (1967a, 85-88).

19 Although he distinguished between small- and large-number environments, Buchanan but did not distinguish between externalities that occur in small-number environments (which was Coase’s concern) and those that occur in large-number environments (which was Calabresi’s concern). Medema (2014a) explains how Coase and Calabresi differ in this regards and why it matters.

20 We can draw a parallel with the conception of cooperation and co-production that was central to Elinor and Vincent Ostrom’s political economy. Indeed, the Ostroms claimed that co-production is a form of “cooperative activity” that is “easiest among groups with strong ties” (Boettke, Lemke and Pagashvili, 2015, 326). We thus show that this is also the case with Buchanan: it is only if there exist “strong”—namely ethical—ties between individuals that they will adopt pro-social behaviors. If there are no “strong” ties, even in small groups, cooperation will be unlikely.

21 From this perspective, another thesis—minor but new and original—of this paper is that, for Buchanan, “anti-social” behaviors should be distinguished from “free-riding” (on Buchanan and free-riding, see also, Fontaine, 2014).

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Alain Marciano

Université de Montpellier, Faculté d’Economie et LAMETA-CNRS,

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