A Critique of Buchanan on the Theory of Choice

"Neither the consumer in the supermarket nor the construction engineer [building a dam] faces an economic problem; both face essentially technological problems. [Thus], the theory of choice (resource allocation) must be removed from its position of eminence in the economist's thought processes, [since it] assumes no special role for the economist, as opposed to any other scientist who examines human behavior." - J. M. Buchanan, "What Should Economists Do?"

Perhaps it is true that, provided that his preference scale is intertemporally fixed, the consumer in the supermarket faces what might be described as a more complex variety of the technological problem. However, from the point of view of advancing economic theory this is beside the point. What matters in this context is that the situation faced by the consumer in the supermarket, unlike the one faced by the construction enginner building a dam, can be described within the economic framework, and thus used to derive or illustrate many fundamental laws of economics.

Having a multiplicity of goals and a supply of homogeneous means at one's disposal results in a situation whose analysis allows for deducing the law of diminishing marginal utility. Having a multiplicity of goals while facing scarcity of time implies the existence of an intertemporal ranking of preferences, and thus the existence of positive time preference, which in turn sheds light on the phenomeneon of interest rate. In the absence of a uniform scale of exchange value expressible in terms of cardinal numbers and reflective of socially meaningful utility appraisals, i.e, the free market price system, the consumer is unable to evaluate the opportunity costs of his decisions, even if he is otherwise omniscient. And so on for many other economic theorems and phenomena.

In other words, pure theory of choice, understood as abstracted from uncertainty and genuine market exchange, can still provide us with a rich source of specifically economic insights, and it most certainly does not commit us to a mechanistic vision of human action. Thus, it has to be concluded that Buchanan, as well as Kirzner, were mistaken in their assessment of Robbins as a neoclassical maximizer rather than as a Misesian praxeologist, since while it seems reasonable to assume that it is catallactics that contains the most significant and eye-opening truths concerning the nature of human action (and interaction), it is mistaken to conclude, as Mises understood all too well, that the theory of market exchange exhausts the domain of economics.