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James Buchanan endorses a radical version of subjectivism at several points in his body of work. I distinguish two distinct criteria for subjectivism in Buchanan. First, Buchanan rejects the realism of preferences, arguing that they serve only as an analytical tool for understanding choice. Second, Buchanan adopts an Austrian perspective inspired by Kirzner and Shackle on the importance of creativity. In addition to reconstructing Buchanan’s subjectivism, I examine how it relates to more recent work in political philosophy, behavioral economics, and psychology in order to ascertain the value Buchanan’s radical approach might still hold.

Theory suggests that capital is more likelyto be efficiently allocated via marketmechanisms, such as bank lending and stockissuance, than via non-market allocation. Consequently, we conjecture that increasedmarket allocation of capital will enhanceeconomic growth. We also posit that goodcollateral and corporate law will increasethe allocation of capital via debt andequity markets, respectively. Usingmeasures of statutory law as instrumentsfor market-mobilized capital, to controlfor its endogeneity in a cross-countrygrowth regression, we demonstrate a clearcausal link between financial marketdevelopment and economic performance.

We build a model of two-candidate elections in which voters judge candidates on the basis of how well their announced campaign positions correspond with their records. Given different records, the candidates will adopt different campaign positions. Two types of reputational advantage are analyzed: proximity of the candidate's record to the median voter's ideal point, and the range of campaign positions that a candidate may adopt and still retain some credibility with the voters.

Economic rents may be obtained through the process of market competition or be obtained by resorting to governmental protection. Rational firms choose the least costly alternative. Collusion to obtain governmental protection will be less costly, the higher the concentration, ceteris paribus. However, high concentration in itself is neither necessary nor sufficient to induce governmental protection. The result that rent-seeking activity is triggered when firms are affected by government regulation has a clear implication: to reduce rent-seeking waste, governmental interference in the market place needs to be attenuated. Pittman's suggested approach, however, is ‘to maintain a vigorous antitrust policy’ (p. 181). In fact, a more strict antitrust policy may exacerbate rent-seeking. For example, the firms which will be affected by a vigorous application of antitrust laws would have incentive to seek moderation (or rents) from Congress or from the enforcement officials.

It is very difficult to demonstrate that representatives employ sophisticated cost-benefit calculations in evaluating constituent benefits when making many legislative decisions. This is because most modern American legislation is ambiguous about which constituencies will receive particularized benefits. This paper examines a series of locational rollcall votes in which the benefits going to constituents were obvious. In such cases representatives balance increases in voter support within their congressional districts and potential increases in their political power within Congress to be gained by vote trading. If constituency benefits are great, representatives overwhelmingly support legislation to provide such benefits. As the benefits decline, vote trading increases.

We explore a setting where the central bank is offered an incentive scheme by an interest group, in addition to the contract designed by the government. We prove that the inflation bias can be eliminated when principals do not cooperate and have different output or inflation objectives. These conclusions contrast with those of Chortareas and Miller (Public Choice 121:131–155, 2004). The reason is that our analysis takes into account the participation constraints of the central bank. We also show that, if principals cooperate, the inflation bias is eliminated when their output target is different but not when they disagree over the inflation objective.

Major economic crises may promote structural reforms, by increasing the cost of the status quo, or hinder them, by inducing more demand for protection. The ideology and political partisanship of the ruling government may be crucial in determining the prevailing course of action. In good times, conservative parties are typically pro-reform. However, do these parties try to exploit periods of crisis to carry out their reforms? Do social-democratic parties support even greater social protection? To answer these questions, this paper uses indicators of structural reforms in the labor, product, and financial markets for 25 OECD countries over the 1975–2008 period. The empirical analysis confirms the ambiguous effect of crises: product markets are liberalized, but financial markets become more regulated. Partisan politics also matters, as right parties are associated with more pro-market reforms. Yet, crises modify partisan politics: right-wing parties refrain from promoting privatizations, and oppose the introduction of greater financial market regulations. By contrast, center parties liberalize and trim unemployment benefits generosity, while left parties privatize. Furthermore, weak, fractionalized governments, which are associated with more regulated product markets, are also more likely to liberalize during a crisis.

Observation shows that while democracy is fragile in poor countries, it is impregnable in developed ones. To explain this pattern, I develop a model in which political parties propose redistributions of incomes, observe the result of an election, and decide whether to comply with the outcome or to launch a struggle for dictatorship. Democracy prevails in developed societies because too much is at stake in turning against it. More income can be redistributed in developed than in poor countries without threatening democracy. Limits on redistribution arise endogenously, so that constitutions are not necessary for democracy to endure. A democratic culture characterizes the equilibrium.

Politics, like any social system, involves selection mechanisms. This paper presents a model of politics as an evolutionary process. Our model yields three main results. First, the political process selects for efficient policies in the long run. We call that attribute asymptotic efficiency. Second, bargaining amongst interest groups bounds the inefficiencies that can exist in the short run. Potential inefficiency declines when organizing interest groups becomes less costly. Finally, policies that appear to be inefficient in a static analysis can be efficient once economists consider the dynamic nature of political decisions. We argue that viewing the political process as a selection mechanism allows political economists to use efficiency as a criterion for positive economic analysis. In our approach, applied political economy involves looking for relevant costs that make the policy efficient. However, our approach does not rob political economists of the ability to make meaningful normative statements; it only constrains the type of statements made.

This note is an empirical investigation of the benefits that accrue to local building departments for a regulatory policy that conforms to the relative strength of local interest groups. The study uses an interest group model and applies it to data for building departments in 1100 municipalities. It finds that material benefits in terms of budgets and salaries go to building agencies which set a strictness of regulation that reflects the balance of interest group strengths in the locality.