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Where Chicago meets London: James M. Buchanan, Virginia Political Economy, and cost theory

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  • Peter J. Boettke

    (George Mason University)

  • Rosolino A. Candela

    (George Mason University)

Abstract

James M. Buchanan argued that not only the study of public choice, but also property-rights economics as well as law and economics, can be traced directly to the work of scholars associated with the Thomas Jefferson Center for Studies in Political Economy and Social Philosophy at the University of Virginia (UVA). We draw attention to that point by raising the following question: what was the common knowledge at UVA that made it uniquely suited for the development of each of those related, yet distinct subdisciplines of political economy? Fundamentally, the answer is the unique combination of Chicago price theory and London School of Economics 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. That subtle distinction has significant implications not only for public policy, but, what is more important, the proper scale and of governmental responses to market failures. The unique combination of the Chicago and London schools was central to the development of a neglected branch of price theory at the University of Virginia.

Suggested Citation

  • Peter J. Boettke & Rosolino A. Candela, 2020. "Where Chicago meets London: James M. Buchanan, Virginia Political Economy, and cost theory," Public Choice, Springer, vol. 183(3), pages 287-302, June.
    • Handle: RePEc:kap:pubcho:v:183:y:2020:i:3:d:10.1007_s11127-020-00796-4
    DOI: 10.1007/s11127-020-00796-4
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    More about this item

    Keywords

    James Buchanan; Ronald Coase; Cost theory; Political economy; Public policy;
    All these keywords.

    JEL classification:

    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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