Freedom and unanimity

##Freedom and Unanimity

In post-war America, the role of government in the economy continued to strengthen, which caused dissatisfaction among proponents of minimal state intervention in the market. Among the critics of Keynesianism was a group of prominent scholars working at the University of Virginia led by James M. Buchanan and Gordon Tullock.

They dedicated their research to how much officials are actually guided not by personal, but by public interests at various levels — economic and political. Read about the key ideas of the Virginia school and how relevant they are now in the new article by ForkLog.

###From Idea to Movement

During the years of the Great Depression (1929–1939), the role of the government in the US economy strengthened. Many saw the government as a tool for solving crises, and the ideas of John Maynard Keynes and his followers came to the forefront. The Virginia School emerged in the post-war years as a response to this trend.

In the 1950s, at the University of Virginia, a group of economists led by James M. Buchanan and Gordon Tullock established a program for the study of public administration. Their goal was to demonstrate how politicians and officials act in their own interests, ignoring the public.

Scientists drew inspiration from the ideas of the Austrian School, which emphasized the role of the free market and limited government. The Virginians went further, focusing on the analysis of political processes through economic methodology. The school was also influenced by classical liberalism, including the concepts of limiting power and protecting individual freedoms, which was manifested in Buchanan's work on constitutional economics.

The key principles of the Virgin School can be formulated as follows:

• individualism. People act based on their own interests, whether in economics or politics. The state is not an abstract arbitrator, but a collection of individual decisions;
• government intervention. Government interference is often ineffective and leads to undesirable consequences, such as corruption or bureaucratic arbitrariness;
• constitutional framework. Economic and political freedom depends on clear rules that limit the power of the state and protect individuals.

The Virginia school relies on empirical research and mathematical models, emphasizing the philosophy of freedom. Its ideas are applied in the analysis of not only markets but also government institutions.

###Politics as a Market

The heart of the Virginian school is the theory of public choice, which describes how people use government institutions to achieve their goals. It is based on three assumptions:

• rational individual. Through their actions, people strive to gain personal benefits, whether in economics or politics;
• politics as exchange. Voters pay taxes for public goods, but often do not receive what was promised;
• political market. The state is a arena of competition for influence, resources, and power. Voters choose representatives, deputies pass laws, and officials oversee their enforcement.

The leaders of the Virginians viewed the state as a market where participants exchange votes and promises. However, they emphasized that elections do not always reflect the true preferences of society. The paradox of voting, described by Buchanan and Tullock in the book "Calculus of Consent: Logical Foundations of Constitutional Democracy" (1962), is that the results depend on the regulations and can be easily manipulated. Thus, the order of questions on the ballot can influence the outcomes of the expression of will.

The problem is exacerbated by practices such as lobbying and logrolling. Lobbying is the influence on power to make beneficial decisions, often in the interests of narrow groups. Logrolling, or "vote trading," involves mutual support among legislators to push their projects forward. One popular option is the "pork barrel," where politicians allocate funds from the general budget to numerous local initiatives in order to gain the support of the majority.

For example, in the 2000s, approximately $1.3 million was allocated in the USA for a study in which shrimp were made to run on a miniature treadmill to assess how they cope with physical exertion under stress. This sparked a heated debate as an unjustified, in the opinion of critics, expenditure of taxpayers' money for narrow scientific interests.

Such actions, in Buchanan's view, pose a threat to democracy. Politicians, striving for re-election, increase spending, which inflates bureaucracy and stimulates inflation. As a result, state control intensifies, while the economy weakens.

###Public Goods and Their Paradoxes

The theory of public choice pays great attention to the concept of "public goods". These are understood as goods and services that are characterized by:

• non-exclusivity ( consumption by one person does not reduce availability for others );
• non-exclusivity (it is impossible to effectively restrict access to the good).

Examples include street lighting, clean air, and national defense. The production of such goods is usually not profitable for the private sector, so they are provided by the state. However, the question arises: what of this and in what volume do people need?

Economist Mancur Olson noted in his book "The Logic of Collective Action" (1965) that the demand for public goods is often understated due to the free-rider problem — citizens benefit from goods without paying for them.

Suppose the city decides to install an air purification system. This is a public good, as all residents breathe the same air, and no one can be excluded. However:

• citizens may evade paying taxes on this system, hoping that others will pay;
• politicians may redirect the budget not towards air purification, but in favor of projects that will bring them more votes;
• Bureaucrats can inflate the cost of a project to increase their budget.

Buchanan emphasized that such problems require not only economic but also political analysis to ensure fair and effective provision of public goods. He proposed the following solutions:

• constitutional constraints. Establishing strict rules ( such as budgetary restrictions ) to prevent inefficient resource allocation;
• decentralization. The transfer of some decision-making to the local level, where citizens' preferences are better known;
• principles of unanimity. Ideally, decisions on public goods should be made with the consent of the maximum number of people to avoid imposing decisions on the minority.

The classics of the Virginia school believed that the effective provision of public goods requires consideration of individual interests and the creation of institutions that minimize political distortions. In their view, decisions based on constitutional constraints and decentralization help balance the interests of society and ensure a fair distribution of resources.

###Institutes, Pirates, Blockchain

In the 1970s and 1980s, the Virginia school expanded its influence through the work of scholars such as William Niskanen. His theory of bureaucracy demonstrated how government institutions maximize their own budgets—often at the expense of the public interest.

This period was marked by a deepening analysis of constitutional rules and their role in limiting political power, as reflected in the works of Buchanan, particularly in the book "The Limits of Liberty: Between Anarchy and Leviathan" (1975). At the same time, philosopher and economist Geoffrey Brennan in his studies demonstrated how tax systems influence individual behavior and limit governmental power.

For example, high fees can discourage people from working or investing as much, thereby reducing economic activity. Conversely, well-thought-out tax rules can curb excessive expansion of government spending. These ideas emphasized how the institutional design of tax systems can guide individual decisions and restrain government intervention in the economy.

Modern followers of the Virginia school, such as Peter Leeson, Matthew D. Mitchell, and Donald Boudreaux, actively apply the principles of the school to the digital economy. They study blockchain as a tool that provides transparency, data immutability, and reduced transaction costs, making it ideal for analysis from the perspective of methodological individualism.

Peter Leeson, known for his research on informal institutions, applies the principles of the Virginia School in the analysis of decentralized systems. He illustrates how informal institutions, such as pirate codes, create mechanisms of self-governance. In this context, blockchain can serve as a modern example of informal institutions that provide coordination and trust in the absence of centralized control.

Senior research fellows at the Mercatus Center, Matthew D. Mitchell and Donald Budreau, analyze the impact of regulation on innovation, emphasizing that excessive government intervention stifles technological development. Their research, based on public choice theory, demonstrates how blockchain fosters economic freedom and market mechanisms by circumventing traditional intermediary structures.

Thus, the ideas of Olson, Buchanan, and Tullock continue to be reflected in the works of contemporary economists who adapt them to new realities.

###What Virginians Are Criticized For

Certain provisions of the Virginia school are often criticized by renowned economists. For instance, Nobel laureate Joseph Stiglitz considers the excessive emphasis on rational choice and the assumption that all agents act solely out of selfish motives to be excessive.

Drawing on his research in the field of information asymmetry and behavioral economics, Stiglitz argues that this simplified representation ignores the influence of irrational factors, altruism, social norms, or bounded rationality. For example, people may vote based on ideological beliefs or a sense of duty, which the school often does not take into account.

In turn, Korean economist Ha-Joon Chang criticizes the school's pessimistic view of government institutions, considering it overly cynical. Chang emphasizes that the state is capable of effectively addressing coordination problems and providing public goods, especially in developing countries, and historical examples of successful government regulation contradict the thesis of the inevitable failures of the state.

Moreover, critics, including Stiglitz and Chang, note the limited empirical foundation of the Virginia School. Although its theoretical models are logically coherent, they are not always supported by real data, as predictions about agent behavior may not take into account cultural or historical contexts. The Virginians are also accused of ideological bias: their emphasis on government inefficiency and defense of market mechanisms are interpreted as support for libertarian ideas, which raises skepticism among proponents of collective action and social justice.

Despite the criticism, the Virginia School remains influential due to its ability to uncover hidden motives in political processes and to emphasize the importance of institutional frameworks for minimizing inefficiencies, fostering discussions about the balance between market, state, and society.

Text: Anastasia O.