James M. Buchanan: The constitutive years 1946 – 1968

The development of the Virginia school of political economy is in large part the story of how James M. Buchanan and several graduates of the University of Chicago developed a new paradigm in economics.  The roots of the Virginia school may be traced to the Italian public finance theorists, the intellectual environment of the University of Chicago and the influence of scholars such as Frank H. Knight, Jacob Viner, and Henry Simons.  Under Buchanan’s the development of the Virginia school took place at three universities in Virginia:  the University of Virginia (Charlottesville), Virginia Polytechnic Institute and State University (Blacksburg), and George Mason University (Fairfax). 

The essentials of the Virginia school may be summarized in four points.  First, the focus is on institutional arrangements as the reason for economic success or failure.  Second, it recognizes that the only way to turn economic failure into success is by changing the institutional arrangements.  Third, institutional arrangements are compared by reference to the outcomes they yield and with reference to their feasibility.  Finally, the analyst is constrained to provide positive rather than normative recommendations.

In his Nobel Prize Lecture entitled “The Constitution of Economic Policy“ on December 8, 1986, Buchanan discussed the foundational insights of his work which led to the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1986.   He expressed a debt to Knut Wicksell, the Swedish economist, but it can be argued that part of Wicksell’s contribution was to expose Buchanan to the Italian public finance theorists of the late 18^th and early 19^thcentury.  This paper examines Buchanan’s intellectual and professional experiences leading to the development of the Virginia school during the period 1946 through 1968.   The paper covers Buchanan’s graduate training at Chicago,  his NATO fellowship (1956-57), the formation of the Thomas Jefferson Center for Political Economy, and the Ford Foundation’s rejection of the TJC’s grant proposal, and Buchanan’s departure to UCLA in 1968. 

The authors are Emeritus Professor Sapienza, University of Rome and former Senior Economist, Joint Economic Committee, U.S. Senate.  Contact information:  gbrady6430@aol.com.