The market, yes; demos, no.

• Author: Buchanan, James M.

A Puzzle in Bauer's Vision of Social Reality

Peter Bauer expressed great confidence in the ability of ordinary persons, the peasants and small holders, to look after their own affairs, and, in so doing, to exhibit the necessary entrepreneurial talents to ensure a viable and productive market economy. Bauer might well be labeled as a laissez-faire optimist. He seemed to be convinced that ordinary people, if they are simply left alone and to their own devices, and without overt interference from others, including governments, would use resources wisely and productively.

At the same time, Bauer was what we may call a democratic pessimist. He did not think that persons are capable of organizing themselves politically so as to ensure the establishment of the constitutional-institutional framework required to allow the market to function properly. On each and every occasion when we personally met for discussion, Peter accused me of being unduly optimistic about the human prospect. He held out little hope that persons could organize themselves democratically and, at the same time, allow markets to work well.

This two-pronged stance, that toward markets on the one hand and toward political democracy on the other, is puzzling, at least to me. Perhaps the reason for my reaction stems from my inability, relative to Bauer, to separate fully my normative hopes from my positive evaluations. Perhaps my attitude has been, and remains, naively American, whereas Peter's attitude here was peculiarly Hungarian. I, personally, would find it difficult to live with the observation that the world is headed into perdition of its own making while, at the same time, holding little or no hope that we can make things better. I say that this attitude seems peculiarly Hungarian since it is shared by both Peter Bauer and Tony de Jasay.

Prospects for Change

I admired Peter Bauer for his courage in sticking to the simple verities, and I shared with him the notion that we do not need fancier science, whether analytical or empirical, to know the institutional parameters that are required to ensure economic growth and development. Our differences were strictly on the prospects for change. Peter seemed to think that the relative successes of some societies, owing to the institutional framework having been put right, was perhaps due to historical accident rather than any conscious intent. In this respect, Bauer should have been a fellow traveler with Hayek, especially the Hayek...