Discussion questions on "the Market as a Creative Process" by James Buchanan and Viktor Vanberg"

First three notes to help with the reading:

1. I'd recommend skipping the introduction, which seems to me an instance in which work in one science or in mathematics is taken, by analogy, to support views in another. Although not nearly so vulgar, the discussion is reminiscent of those who cite Einstein's theory of relativity to argue for relativism in ethics.

2. A teleological account is one that describes or explains features of some system in terms of its goals. So, for example, a teleological theory of choice describes choices in terms of the goals of agents. Buchanan and Vanberg use the term "teleology" in an extended sense (see footnote 15 on page 393). In their view, a theory is teleological if it makes reference to some end state or equilibrium state toward which the system it is describing is tending. So someone who maintains that shaking a sack of potatoes will result in an arrangement that minimizes the volume the potatoes occupy counts as making a teleological claim. Note also that at the same time that V&B insist that economic systems are non-teleological, they would hold that individual choice is teleological. They also suggest that to suppose that there are criteria by which the performance of an economic system can be judged commits one to a teleological view of economics.

3. There's a political aspect to radical subjectivism, which is almost always allied with an extreme libertarianism, both in an emphasis on freedom and in the view that government interferences in individual choices will improve outcomes only by chance. Beyond police and national defense, government should do nothing.


1. What is "radical subjectivism"?

2. What is the relationship between creativity and the unknowability of the economic future?

3. To what extent is the future unknowable? People in fact have expectations concerning, for example, the price of oil in three months, the price of wheat next September, and so forth. Does the unknowability of the future imply that these expectations are pure guesses that cannot be more or less rational?

4. According to Buchanan and Vanberg, what mistake does Kirzner make?

5. In simple microeconomic analysis, economists draw supply and demand curves and locate market price at their intersection. Economists then consider what happens if there is a shift in one of the curves caused by, for example, a crop failure (that would shift the supply curve so that less is offered at the going price). The analysis predicts that the price will change to the new equilibrium price at the intersection between the unchanged demand curve and the new supply curve. This appears to be "teleological theorizing". Would Buchanan and Vanberg criticize it?

6. Among the central arguments mainstream economists make in defense of competitive markets is that, under suitably idealized conditions, they result in a "Pareto optimal" or a "Pareto efficient" allocation of goods -- that is, there is no way to satisfy anybody's preferences better without satisfying somebody else's preferences less well. What do Buchanan and Vanberg think of this defense of competitive markets? How would they defend markets?