There Is Very Little Economic Content in Much of Modern Economics; What They Are Doing Is Engineering and Applied Mathematics

Buchanan has also long been considered a proponent of the Austrian view of the market process. In this regard he is more than just a “fellow traveler”; his work has played an important role in helping to distinguish between the theory of the market as a process and the alternative, neoclassical theory of competitive equilibrium. Thus, in addition to his seminal work on subjective cost theory, Buchanan has helped clarify the Austrian view of the market as a process.

In his 1963 presidential address to the Southern Economic Association, Buchanan explained how the economics profession was apparently being led astray by its focus on the “theory of resource allocation.” He forcefully argued that the standard neoclassical definition of economics as the study of the allocation of scarce mean among competing ends “has served to retard, rather than advance scientific progress.” The reason for this, according to Buchanan, is that there is very little economic content in much of modern economics. What neoclassical economics, all too often involves is a computation problem, the computation of equilibrium prices, for example which “to the subjectivist, [seems] an absurd exercise.”

A good example is the work of Nobel Laureate Tjalling Koopmans, who began his career by working out the optimal allocation of a set of tankers carrying oil across the Atlantic during World War II. Buchanan properly labels such work as engineering, not economics, and claims that he must have been “a confirmed subjectivist long before I realized what I was because I recall thinking in 1946, when Koopmans was lecturing… at the University of Chicago, that there seemed to be absolutely no economic content in what he was doing….”

Buchanan has attempted to persuade the economics profession to abandon its fixation on allocation problems per se, for “if there is really nothing more to economics than this, we had as well turned it all over to the applied mathematicians.” This does appear to be the direction the profession has been heading; for “developments of note... during the past two decades consist largely of improvements in ... computing techniques, in the mathematics of social engineering.”

Instead of becoming weakly-trained mathematicians (at least by the standards of professional mathematicians), Buchanan suggested replacing the theory of resource allocation with the theory of markets.

—Thomas J. DiLorenzo and Walter E. Block, introduction to An Austro-Libertarian Critique of Public Choice, Economy and Society (New York: Addleton Academic Publishers, 2016), Kindle e-book.