Where Chicago Meets London: James Buchanan, Virginia Political Economy, and Cost Theory
28 Pages Posted: 17 Oct 2019 Last revised: 18 Oct 2019
Date Written: October 7, 2019
James Buchanan has argued that not only the study of public choice, but also property-rights economics as well as law and economics can be directly traced to the work of scholars associated with the Thomas Jefferson Center for Studies in Political Economy and Social Philosophy (TJC) at the University of Virginia (UVA). We draw attention to this point to raise the following question: what was the common knowledge at UVA that made it uniquely suited for the development of each these related, yet distinct subdisciplines of political economy? Fundamentally, this can be explained by the unique combination of Chicago price theory and LSE cost theory developed at UVA, where opportunity costs were regarded not as constraints to which individuals passively respond. Rather, they are the reciprocal of the act of choice itself. This subtle distinction has significant implications not only for public policy, but more importantly the scope and scale of government with respect to addressing market failures. This unique combination between the Chicago School and London School was central to the development of a neglected branch of price theory at the University of Virginia.
Keywords: James Buchanan; Ronald Coase; Cost Theory; Political Economy; Public Policy
JEL Classification: B31; D46; H11
Suggested Citation: Suggested Citation