James Buchanan versus Warren Samuels, last round: Buchanan’s devastating critique of Samuels’s analysis of Miller et al. v. Schoene

Thus far, we have outlined Miller et al. v. Schoene (the red cedar tree rust case), explained why economists like James Buchanan and Warren Samuels took an interest in this old case (see here), and then compared and contrasted Samuels’s 1971 paper with Buchanan’s 1972 reply paper (see here and here). Today, I will conclude my series on the Buchanan-Samuels exchange by pinpointing the main source of their disagreement over how the cedar tree case was decided.

As I see it, it’s not so much what Samuels says that bothers Buchanan; it’s what he doesn’t say, for there is a big blind spot in Samuels’s economic analysis — and in Coase’s theorem as well, for that matter. Simply put, both Samuels and Coase are ignoring a critical distinction: the distinction between (a) lower-level, day-to-day law and politics on the one hand and (b) higher-level constitutional rules on the other. Although Buchanan does not express his objection to Samuels or to Coase in this way, this objection is implicit in the logic of Buchanan’s overall worldview as expressed in many of his other writings. (See, for example, this 2003 paper describing Buchanan’s “public choice” approach to politics; James Buchanan, Politics without romance, Policy, Vol. 19, No. 3 (2003), pp. 13-18.)

To the point, while Samuels’s focus is on how law can impact economics (e.g. how the allocation of property rights affects costs), Buchanan’s focus, by contrast, is on how economics can impact law. For Buchanan, government officials (including legislators and judges) are not benevolent do-gooders; they are self-interested actors who respond to incentives the same way everyone else does. This is why the distinction between lower-level, day-to-day law and politics and higher-level constitutional rules is so crucial for Buchanan. On the one hand, constitutional-level rules are designed to limit government power, such as the rules under which the government itself may confiscate property — e.g. the Takings Clause of the Constitution. On the other hand, the ordinary rules of law and politics refer to the rough-and-tumble world of law courts and legislatures — e.g. a specific law or government order taking someone’s property, such as the Cedar Rust Act of Virginia or Fred Schoene’s order in in Miller et al. v. Schoene.

For Buchanan, our ordinary political-level rules are always up for grabs; that is why higher-level constitutional-level rules need to be established ahead of time in order to bind the players of the day-to-day law and politics game. More to the point, this distinction between constitutional rules and ordinary law and politics is especially relevant to a case like Miller et al. v. Schoene. In that case, the State of Virginia enacted a takings law (the Cedar Rust Act) that required the owners of red cedars to cut down their infected trees, but at the same time, a strong argument can be made that this law violated the Takings Clause in the Constitution because the law did not require the payment of compensation to the cedar tree owners for the fair market value of their fallen trees. And that is why the main lesson to be learned from the cedar tree case is not how law can shape economic activity (Samuels’s main point in his 1971 paper). The main lesson to be learned for someone like Buchanan is how economics can shape — and distort — law!

In other words, Buchanan is not so much objecting to the substantive choice that was made in the cedar tree case. That is, his objection is not that the legislature and the courts favored the interests of the apple growers at the expense of the cedar tree owners; after all, their dispute is a reciprocal one, so one of the parties is going to be harmed no matter how the case is decided. Instead, what Buchanan is really objecting to is the legislature’s and the courts’ ex post disregard of an important ex ante constitutional-level rule: the Takings Clause, which is supposed to protect existing property owners by providing them compensation whenever their property is taken by the government.

For my part, Buchanan’s critique of Samuels (and Coase) is a devastating one. Why? Because Buchanan’s critique is not that one side or another should have won the cedar tree case; rather, his critique is that neither the legislature nor the courts in this case abided by the constitutional-level rules that apply to takings. Instead, they flouted those constitutional-level rules and literally changed the rules of the law-and-politics game in the middle of the game!