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James Buchanan has taken up an interesting but difficult subject: the role of culture and norms in making the market system, or other system, work. When reading this paper, I thought about previous attempts by economists to model differences in countries or social systems. Two in particular come to mind. In Capitalism, Socialism and Democracy, Joseph Schumpeter discussed the institutional and cultural structure of capitalism. He decided that the cultural foundation was breaking down, and concluded that much of the structure of capitalism could be used, without the profit motive, to achieve progress and increase utility in the new culture to be achieved under socialism. Like Lange, but unlike von Mises and Hayek, Schumpeter claimed that the behavior that produced capitalist development could be made to work tolerably under a different system of social organization. Schumpeter was wrong. Buchanan is clearly on the side of von Mises and Hayek, but his argument differs from theirs


Isaac Ehrlich conference, May 1991