James M. Buchanan: Smithian Economist as Business Ethicist

Abstract

We explore some of the key themes in the Nobel Prize-winning economist James M. Buchanan’s classic works, showing how his ethical thinking, particularly in his Ethics and Economic Progress, apply to the problems facing firms and workers. We also explore how Buchanan’s ethical arguments pertain to the “public capital” of a flourishing society. Buchanan’s argument that we should work more, save more, and “pay the preacher” of “the institutions of moralethical communication” suggest several ways that people with other-regarding preferences can contribute to overall social flourishing and highlights some of the mechanisms by which those who have “affected to trade for the public good” might want to redirect their efforts. Our analysis shows how Buchanan’s work has considerable implications for business ethics. Just as his economic analysis of politics changed how we understand government, we think his economic analysis of ethics can (and should) change how we understand business.