Author essays

I really enjoy late-in-life reflective essays written by authors whose work is too large and too challenging to tackle head on. For example Bertrand Russell wrote Portraits from Memory and other essays, which places him in his time and space as an observer of his contemporaries. And recently I’ve been enjoying Essays on Political Economy by James M. Buchanan.

Taken in small bites, it’s easier to chew on some of the ideas they left for the world.

Consider the fourth essay in the book: The Relatively Absolute Absolutes. Buchanan tells the story of how he was invited to give a talk on the same old hum drum economic stuff when he negotiated their accord to a presentation with this somewhat Suessian title. Keep in mind this is after he won the noble prize in 1986. With celebrity prizes earned, he was free to expend some creative thought.

He explains the commitment to the talk was meant to keep him on track with the good intentions of writing a small book, to bear the same title. Yet it doesn’t appear to have been enough of a push. So we must turn to this essay to learn what this great mind was trying to impart about relativity and absolutes.

I’m sure I am going to fall short of his intentions, but here is goes. The term implies that for purposes of analysis one can pull out a segmented situation and look at interactions at that level for the absolutes that are applicable, even if those absolutes are only relative once the segment is shoved back into the extended deck of playing cards for life.

If all settings of economic activity could be held on plates swirling on sticks, like the jugglers are able to manage, then to do the analysis of just one plate of activity, you are able to temporarily ignore the other relevant factors of being part of a larger group of plates (one being that they will come crashing to the ground once the stick stop jiggling).

In his first example he considers the work of Alfred Marshall who “imposed a temporal order environment within which firms act.” As we all know there are short term decisions which can garner immediate profits, but short change long term goals. Using the relatively absolute absolutes argues that it is OK to consider the short term ignoring the overarching ‘absolutes’ or givens of long term decisions. It’s OK to analyze long tern decisions under similar circumstance. Then pull the analysis together.

The short-period and the long-period planning process may occur simultaneously. The differentiation lies, instead, in the number of variables that are allowed within the relevant choice-set relative to the number of variables that are regulated to the set of constraints.

The next example releases the individual from commitments to institutions. “The individual must reckon on the the temporal ability of the potential choice variables, and norms for rational choice required that some variables be treated analogously to fixed inputs in the Marshallian model, that is, as relatively absolute absolutes for the purpose of making short-period choices.”

He says that this is all pretty straight forward on the surface but it gets more complicated when you consider how many plates everyone is trying to spin without any falling to the ground. Things get a little more interesting when one interest has constraints placed upon it by a higher level interest. For instance the “higher” level interest of loosing weight is biased constraint against the initial impulse to select a second chocolate Easter egg.

The practical part of what he is offering with the relatively absolute absolutes is that analysis and measures can be done on just one plate. “We may, on occasion, walk on ice as if it were solid ground, even if we recognize that to do so requires that certain conditions of temperature, time and place be met.”

I think this is a very useful point of view.

Catallactics

I came across a new word today in James M Buchanan’s Essays on the Political Economy. In his second essay, The Public Choice Perspective, he says:

I shall refer in the following discussion to two separate and distinct aspects of elements in the public-choice perspective. The first aspect is the generalized “catallactics” approach to economics. The second is the more familiar homo economicus postulate concerning individual behavior. These two elements, as I shall try to demonstrate, enter with differing weights in the several strands of public-choice theory, inclusively defined.

He goes on to explain what the catallactic part of the economy means as used in his POV.

The approach to economics that I have long urged and am urging here was called by some nineteenth-century proponents “catallactics,” the science of exchanges. More recently, Professor Hayek has suggested the term “catallaxy,” which he claims is more in keeping with the proper Greek origins of the word. This approach to economics, as the subject matter for inquiry, draws our attention directly to the process of exchange, trade, or agreement to contract.

Then he elaborates to distinguish traditional economics as the exchange between two individuals, versus the catallactic form as an exchange between groups of people.

If we take the catallactics approach seriously, we then quite naturally bring into the analysis complex as well as simple exchange, with complex exchange being defined as that contractual agreement process that goes beyond the economist’s magic number “2,” beyond the simple two-person, two-commodity barter setting. The emphasis shifts, directly and immediately, to all processes of voluntary agreement among persons.

This seems like more than a point of view. This is the foundational understanding of the comprehensive economic apparatus.