Cost and Choice: An Inquiry in Economic Theory

by James M. Buchanan

"As he usually does, Professor Buchanan has produced an interesting and provocative piece of work. [ Cost and Choice ] starts off as an essay in the history of cost theory; the central ideas of the book are traced to Davenport and Knight in the United States, and to a series of distinguished writers associated at various times with the London School of Economics. The author emerges from this discussion with what can be described as the ultimate in subjectivist cost doctrines. . . . Economists should learn the lessons offered to us in this little book—and learn them well. It can save them from serious errors."—William J. Baumol, Journal of Economic Literature

Genres: Economics, Politics

120 pages, Paperback

First published March 15, 1979

About the author

American economist known for his work on public choice theory, for which in 1986 he received the Nobel Memorial Prize. Buchanan's work initiated research on how politicians' self-interest and non-economic forces affect government economic policy. He was a Member of the Board of Advisors of The Independent Institute, a Distinguished Senior Fellow of the Cato Institute, and professor at George Mason University.
Buchanan was the founder of a new Virginia school of political economy. He taught at the University of Virginia—where he founded the Thomas Jefferson Center for the Protection of Free Expression—UCLA, Florida State University, the University of Tennessee, and the Virginia Polytechnic Institute, where he founded the Center for the Study of Public Choice (CSPC). In 1983 a conflict with Economics Department head Daniel M. Orr came to a head and Buchanan took the CSPC to its new home at George Mason University. In 1988 Buchanan returned to Hawaii for the first time since the War and gave a series of lectures later published by the University Press. In 2001 Buchanan received an honorary doctoral degree from Universidad Francisco Marroquín, in Guatemala City, Guatemala, for his contribution to economics.

Reviews

[Otto Lehto · Rating 4 out of 5]

An admirably clear and deep analysis of the notion of opportunity cost from the perspective of what Buchanan calls the "London-Austrian" school of economics, which emphasizes the subjectivity of choice and value. This book is one of Buchanan's most important theoretical works, but somewhat neglected. (A word of warning: this is a relatively short and clear read, but also quite jargon-heavy and analytically dense. As such, it is definitely not suitable for a non-technical reader.)

This concise and impressive tome is somewhat a child of its time. Some of the criticisms that it levels against Pigovian theory and social choice theory might have been answered, at least with partial success, in later literature. (I'm thinking about the contemporary responses from welfare economics, behavioural economics, environmental economics, etc.) Nonetheless, most of the book is relevant even to this day. It stands alongside the very best of Buchanan's expansive works.

The book is a major contribution to the philosophical underpinnings of economic theory. It contributes to a deeper understanding of the debates around social cost, Pigovian taxation, social choice theory, the possibility of socialist calculation, the problem of the interpersonal comparison of utility, environmental economics, public choice, etc. It highlights questions that are undervalued and unexplored in mainstream economic literature; and it even provides some answers that have been neglected for too long. Any student of economics will surely gain insights from it.

[Dio Mavroyannis · Rating 4 out of 5]

Great little book, Buchanan tries to clarify the concept of opportunity cost and draw out the differences between Adam Smith and the subjective interpretation. Armed with this new clarity he then goes on to apply this idea to a variety of areas, for instance he says that the analysis of lump sum taxation, public goods, and welfare measures are often meaningless with the more rigorous conception.

[Kevin Gomez · Rating 5 out of 5]

A fantastic treatment on the economic theory behind the concept of cost. An important read for any economist.

[Parasuram Venkatesh · Rating 5 out of 5]

Short, sweet, BRILLIANT!

[Susannah Petitt · Rating 3 out of 5]

i just need everyone to know i'm still reading im just back in school and now its stuff like this :( also buchanan is a terrible writer :( but the ideas in this are killer

[Molly · Rating 5 out of 5]

Incredibly important point. The most mentally exhausting to actually read. RIP my weekend.

[David · Rating 4 out of 5]

Very insightful. Addresses such a foundational issue it is difficult to know where to begin in implementing his insights into economic theory.