 My name is Jamie Lunke. I'm a senior fellow in the FA Hayek Program for Advanced Study and Philosophy, Politics and Economics. I'm here with my colleague, Dick Wagner, the author of a book we're going to be discussing today, James M. Buchanan and Liberal Political Economy, A Rational Reconstruction. Thank you for joining me here today. Well, thank you for inviting me and looking forward to our conversation. One of the subjects that you wrote about a lot together early on was deficit and debt financing. So I want to ask you a little bit about that project because I know it's a research agenda that you've continued to work on also. So what role is there for democratic peoples who are engaging in this kind of self-governing system where they are able to engage in this kind of cooperative, collective action with each other in that democratic framework? What scope is there for those peoples to take on debt and then maybe a little bit about what some of the pathologies are that come along with that because of course we rarely get one side of that coin without the other in all areas of life, but especially these public projects? Public debt provides some really fascinating and difficult questions and issues because you start from ordinary private debt. Debt contracts are promises. You're borrowing an asset from someone else for which you have an obligation to repay. So all credit contracts have this kind of structure where someone has an asset to which they lend you and they can expect to get that asset back with monetary loans with interest. Or even in such cases as you might go out and borrow a bed because you're having some company come for a week and you're expected to return that bed in the right condition and so forth, that's all credit contracts have this kind of problem with them and the law of credit contracts in private business is well developed to deal with the problems that arise. But what happens when you get to democratic systems where who owes what to whom when a democratic government goes in debt? See we speak about government being indebted, but governments can't be indebted. Monarchs of old could be indebted. Monarchs of old had their, they had lands, had various estates, their own wealth. Now people who might lend to the Monarchs of old sometimes could be fearful of being repaid back. Sure, but still when a monarch was indebted it was clear who owed what to whom. May not get repaid, but you owe what to whom. But when a democracy, a democratic government goes into debt, who owes what to whom? If you ask that question it's not apparent what the answer is because the government will float an issue of bonds that promises to pay bond holders at some future period. But who exactly is obligated to pay those bond holders? Obviously they say the answer as a class would be taxpayers. But did taxpayers choose to issue the debt in the first place to borrow? Many taxpayers, perhaps some taxpayers did and other taxpayers didn't. You can feel pretty confident that there are many taxpayers who would probably rather have had the spending project not done and not had to pay taxes in the future so you can have people within democratic systems who are forced debtors through the collective decision process. And so I think this is one of many instances in which a language and conventions of thinking that develop in terms of private interaction can get corrupted when they are brought to bear to public interaction. And so I think it's a huge confusion of thought to think of democratic governments themselves as being indebted when there's no agent in that democracy who bears the liability, the responsibility for making good when things don't work out. If you have a government that sponsors a big tunnel project under a river it's going to spend $100 million at borrows. And then the costs go up $200 million, $300 million. Does the organizer of the project bear the loss? No, it becomes part of the general government indebtedness and it's spread over whoever can be hit up for the money. And that says that government debt is a handling of contracts as it were. Our obligations that extend over long durations of time are particular problems because there's no one who is responsible with that obligation when they leave office. And it's a problem that goes far beyond debt. It's a problem that comes up in any kind of governmental-based promising where promises extend over longer periods of time. We talk about the official American debt is up around $20 trillion or so. But there's also a massive debt buildup into what is things like Medicare and so forth that by some estimates are in the order of $100 trillion or so, which in all these things, if you apply the principal contract and you talk about what they call as a unfunded liability, what that means is that the promises politicians have made to people in their capacities as recipients of benefits from programs exceed the promises or commitments that have been made to people in their capacities as taxpayers. There's a $100 trillion gap between the promises that politicians make to one set of people in their capacities as taxpayers and the promises they make to another set of people in their capacities as beneficiaries. And so it's an arrangement that is null and only at the surface, a form of systemic line, you might say, that built into this democratic system is a form of built-in line that people knowingly know that this can't be maintained, but yet that's an outcome of the system. And I think those are the kinds of things that are of great significance in terms of trying to understand and wrestle with the problems of what does it require for there to be self-governing republics? And it means that there's part of that has to do with the responsibilities that you bear as a member of a self-governing republic. Do you ever think that for instance when politicians, oh, they talk about what they're going to do, they talk about what their benefits you're going to get from what they do. Now the basic theory of economic organization or economic equilibrium, if you will, says that every transaction has two sides. It has what it recognizes as a demand side and a supply side. The politicians always emphasize what you might call the demand side, what we get. They don't emphasize the supply side of who has to do what to make that happen, but yet you can't do one without the other. Yeah, about that relationship between liberty and responsibility and actually through every aspect of your answer to that question you can see the analysis calling back to this fundamental question about self-governance that you raised at the beginning, which is that sometimes we just get on each other's nerves and we get in each other's ways and we want different things and we want things that are sometimes mutually incompatible and how do we resolve those kind of very fundamental tensions. And one of the things that you called out just now but also in the book is that many of those processes of negotiation and voluntary consent to government systems, you want people to be free and to have liberty to engage in those processes, but if you don't have the responsibilities side of that equation also you can get people engaging in behaviors that are quite destructive. When we think about this relationship between liberty and responsibility that's putting demands on people for how they are supposed to behave. So we get this intermingling in Buchanan's research between the positive economics and this more social or moral philosophy. So what is the relationship between those two? Are they similarly inseparable in the way that liberty and responsibility are? If we're going to think about the world and get the kind of explanation and understanding that Buchanan seems to want us to? Yeah, I think we're totally wrapped up in a world of inseparabilities in various of these ways and I think it goes back that yes, as you said, we do have the ability to get on each other's nerves in each other's ways and so forth. And I think behind that there are some significant questions of how do you really conceive the problem of people living together in close geographical proximity? And see Buchanan always wanted to think of that problem ultimately as having a resolution and I think that's partly why you referred earlier to the austerity or abstractness of some of his thinking compared, say, to Benson Ostrom. But I think Buchanan had a tendency to think, well, there must be something, some core at which we can all agree. And that becomes in his scheme of thinking a constitutional moment. We can all agree and here's how we're going to, rules by which we're going to live together and then all of our subsequent disagreements are nonetheless resolvable within that original framework of rules. That's not the only way to think about it. I don't think that's necessarily the way that Benson Ostrom think about it. That's not the way that, for instance, Buchanan's one-time co-author Gordon Tulloch thought about it. It's also not the way a lot of various significant Italian social philosophers thought about it. Probably the main point of divergence between Buchanan and myself in thinking about these matters is I think Buchanan shied away from a number of Italians, going back to Machiavelli actually, that he, I think he could usefully have brought into his field of vision. There's a question there of, you know, it's a question of whether at base societies are can be totally, I think, peaceable places or whether the peace that you can experience is held together inside of a latency of conflict among people getting back to these questions of, you know, on the one hand we recognize gains from trade. That's fundamentally what economics is about, is the exploitation of gains from trade. But if you also bring in that, yeah, we do annoy each other, we also have quarrels about precedence. You take a set of people, 50 people want to be in an orchestra that they want to be first violin. Only one's going to be. And so there's going to be perhaps conflict, intrigue, disputation and all that. That's all part of the social deal. And so this kind of, you know, leads to the question of whether you think about a social economy in terms of some kind of closed model where you have an answer, finally. There's a final answer. You know, I one time wrote a paper actually comparing Buchanan and Tullich. And I called it something about east of Eden or west of Babel. Buchanan theorized from east of Eden in the sense that in the Eden story there is a point of primal niceness and sweetness. And then there's the ejection from the garden. And so you could say there's a harkening back in the constitutional story to regain Eden. I think that's Buchanan. Then you get to the Babel. That's Tullich. Babel is just cacophony. People disbursed from Babel with multiple languages. And that's Buchanan, excuse me, that's Tullich's notion of the social dilemma is how to get by there in that kind of arrangement. And you know, I think the social problem of living together is something that has many dimensions, many kinds of complex lines of thought. And again, I would just affirm that the problem is too big for any one person to think about and digest and give some final answer. But it's part of the non-going intellectual and scholarly process. And I think Buchanan's work in particular tried to say that governance is our problem. See, in the usual kind of public announcement he encountered is that the implicit political regime was a feudal regime. So if you go to feudalism, and of course, this country is founded on the rejection of all things feudal and the European heritage, which is one of the things why I dislike so much modern emphasis and saying, well, we should be more like Europe and this country was founded on not Europe. And so in that kind of orientation, the feudal orientation, you had Lords of the Manor. Governance was the business of the Lords of the Manor. Now, you could find feudal regimes where governance went well. Peasants were very happy with things. You could also find feudal governance where ordinary people were treated miserably and harshly. And so the world of feudal governance provides many examples arranged from the whole gamut of experiences. But they were all feudal governance. They were all cases where governance was a right or a station in life that some people inherited. Most people didn't. And so if you were there, you were just a farmer working your crops or a merchant in your shops, governance was not your business. And where the democratic scheme of thought is that governance is all of our business. Now Buchanan's own normative values is that's how it should be. And that's a desirable social arrangement is for all of us to participate in our governance. But it's not an easy arrangement. In fact, pretty much going back to the ancient Greeks all thought that democracy was at best a kind of a temporary form of government that would exist until people came increasingly to recognize that they can vote largesse for themselves by imposing costs on other people. And that was a kind of a widespread claim based upon a lot of historical evidence. And I think we right now are living into that very same kind of question, same kind of issue that is going to be for the future to determine the outcome. It's always a pleasure talking to you, Dick. And today was no exception. So thank you so much. Well, thank you so very much. I always love talking to you too.