Quote of the Day

Today’s Quote of the Day comes from page 37 of the Liberty Fund edition of The Collected Works of James Buchanan: Volume 12: Economic Inquiry and its Logic (original emphasis):

The point to be emphasized is that many, indeed the overwhelming majority, of the technologically feasible positions cannot be behaviorally realized, under any regime.  Most of these positions or social states that are romantically imagined to be possible are inconsistent with the motivational postulate of economics, with human nature as it exhibits its uniformities.  Economics need not be the dismal science, but it can scarcely avoid being labelled as the nonromatic science.  The setting in which producers-sellers offer high-quality goods for nothing while showing interests in the desires of consumers is nonfeasible in a generalized sense.  There is no regime, no set of rules, no assignments of rights to choose and to act that will generate such a social state and remain consistent with the central proposition of economic science.

Buchanan makes an important, but oft-overlooked, point: just because something is technologically possible doesn’t mean human nature will go along with it.  Humans are rational, but they are not machines.  What is rational behavior for one person may not be rational behavior for another.  And, most importantly, people react to incentives.  So, it may be technologically possible, say, for government to set a socially-efficient Pigouvian carbon tax, but it is “nonfeasible in a general sense” to expect such an outcome will necessarily come about given the incentive structure of humans and the economic principle of incentive-driven behavior.  As Buchanan says in the paragraph immediately prior to this one: “Care must be taken to avoid the comparison of false alternatives.”