Freedom and Unanimity

The core ideas of the Virginia School of political economy

In post-war America the state’s role in the economy kept expanding, irking advocates of minimal government. Among the critics of Keynesianism was a group of spirited scholars at the University of Virginia led by James M. Buchanan and Gordon Tullock.

Their research asked to what extent officials truly serve the public interest rather than their own, across both economic and political arenas. The new ForkLog feature explores the core ideas of the Virginia School and their relevance today.

From Idea to Movement

During the Great Depression (1929–1939) the government’s role in America’s economy grew. Many saw the state as a crisis-fixer, and the ideas of John Maynard Keynes and his followers took centre stage. The Virginia School emerged in the post-war years as a response to this trend.

In the 1950s a group of economists at the University of Virginia, led by James M. Buchanan and Gordon Tullock, launched a programme to study public administration. Their aim was to show how politicians and bureaucrats act in their own interests, often at odds with the public’s.

The scholars drew inspiration from the Austrian School, which stresses free markets and limited government. The Virginians went further, analysing political processes with economic methods. Classical liberalism also influenced the school, notably the ideas of constraining power and protecting individual liberty, reflected in Buchanan’s work on constitutional economics.

The Virginia School’s core principles can be summarised as follows:

• individualism. People act in their own interest, in both markets and politics. The state is not an abstract arbiter but a collection of individual decisions;
• limited government. State intervention is often inefficient and yields unintended consequences, such as corruption or bureaucratic arbitrariness;
• constitutional rules. Economic and political freedom depend on clear constraints that limit state power and protect individuals.

The Virginia School relies on empirical research and formal modelling while emphasising a philosophy of freedom. Its ideas apply not only to markets but to government institutions themselves.

Politics as a Market

At the heart of the Virginia School lies public choice theory, which describes how people use state institutions to pursue their goals. It rests on three premises:

• rational individuals. People seek personal gain through their actions, in both economics and politics;
• politics as exchange. Voters pay taxes for public goods but often do not receive what they were promised;
• the political market. The state is an arena of competition for influence, resources and power. Voters choose representatives, legislators pass laws, bureaucrats enforce them.

The school’s leaders viewed the state as a marketplace where participants trade votes and promises. Yet elections do not always reveal society’s true preferences. The voting paradox, described by Buchanan and Tullock in “The Calculus of Consent: Logical Foundations of Constitutional Democracy” (1962), is that outcomes depend on the rules and are easy to manipulate. Even the order of questions on a ballot can sway the result.

Lobbying and logrolling make things worse. Lobbying is influence exerted on authorities to secure favourable decisions, often for narrow interests. Logrolling—“trading votes”—entails mutual support among legislators to push through their projects. One familiar form is the pork barrel, when politicians carve up the general budget for a slew of local initiatives to assemble a majority.

In the 2000s, for instance, about $1.3m in the United States went to a study that put shrimp on a miniature treadmill to assess how they cope with physical stress—sparking controversy as, critics said, a questionable use of taxpayers’ money for narrow academic interests.

Such practices, Buchanan warned, threaten democracy. Politicians, keen on re-election, raise spending, swelling bureaucracy and stoking inflation. State control tightens as the economy weakens.

Public Goods and Their Paradoxes

Public choice theory pays close attention to public goods—goods and services characterised by:

• non-rivalry (one person’s consumption does not reduce availability to others);
• non-excludability (access cannot be effectively restricted).

Street lighting, clean air and national defence are common examples. Provision of such goods is typically unprofitable for the private sector, so the state supplies them. But what exactly do people want, and in what quantity?

In “The Logic of Collective Action” (1965), economist Mancur Olson noted that demand for public goods is often understated because of the free-rider problem: citizens benefit without paying.

Suppose a city opts to install an air-cleaning system. This is a public good: everyone breathes the same air and no one can be excluded. Yet:

• citizens may avoid paying taxes for the system, hoping others will cover the cost;
• politicians may divert funds from air cleaning to projects that yield more votes;
• bureaucrats may inflate the project’s cost to expand their budgets.

Buchanan argued that such problems require not only economic but also political analysis to ensure fair and efficient public-good provision. He proposed:

• constitutional constraints. Strict rules (for example, budget limits) to prevent inefficient resource allocation;
• decentralisation. Shifting decisions to local levels, where citizens’ preferences are better known;
• unanimity principles. Ideally, decisions on public goods should have the widest possible consent to avoid imposing outcomes on minorities.

For the Virginia School, effective public-good provision requires recognising individual interests and building institutions that minimise political distortions. In their view, constitutional limits and decentralisation help balance social interests and deliver fairer allocation.

Institutions, Pirates, Blockchain

In the 1970s and 1980s the Virginia School broadened its reach through scholars such as William Niskanen. His theory of bureaucracy showed how state agencies maximise their budgets—often at the public’s expense.

The period also deepened analysis of constitutional rules and their role in constraining political power, reflected in Buchanan’s “The Limits of Liberty: Between Anarchy and Leviathan” (1975). Around the same time, philosopher-economist Geoffrey Brennan examined how tax systems shape behaviour and restrain the state.

High levies, for example, can discourage work and investment, sapping activity. Conversely, well-designed tax rules can check excessive government expansion. These ideas underscore how the institutional design of tax systems can steer individual decisions and curb state intervention.

Contemporary heirs to the school—among them Peter Leeson, Matthew D. Mitchell and Donald Boudreaux—apply its principles to the digital economy. They study blockchain as a tool that ensures transparency, data immutability and lower transaction costs, making it apt for analysis through the lens of methodological individualism.

Peter Leeson, known for his work on informal institutions, applies Virginia School principles to decentralised systems. He illustrates how informal institutions—such as pirate codes—create mechanisms of self-governance. In this light, blockchain can serve as a modern example of informal rules that enable coordination and trust without central control.

Senior fellows at the Mercatus Center, Matthew D. Mitchell and Donald Boudreaux, analyse how regulation affects innovation, stressing that excessive intervention stifles technological progress. Grounded in public choice, their work also shows how blockchain bolsters economic freedom and market mechanisms by routing around traditional intermediaries.

Thus the ideas of Olson, Buchanan and Tullock continue to echo in the work of modern economists adapting them to new realities.

The Case Against the Virginians

Some of the school’s tenets draw fire from prominent economists. Nobel laureate Joseph Stiglitz considers its emphasis on rational choice and narrowly self-interested agents overdone.

Drawing on research into information asymmetries and behavioural economics, Stiglitz argues that this simplified view neglects irrational factors, altruism, social norms and bounded rationality. People may vote out of ideology or civic duty—motivations the school often overlooks.

For his part, the Korean economist Ha-Joon Chang criticises the school’s pessimistic, overly cynical view of state institutions. Chang maintains that governments can solve coordination problems and provide public goods effectively—especially in developing countries—and that historical cases of successful regulation contradict claims of inevitable state failure.

Critics, including Stiglitz and Chang, also point to a limited empirical base. While the models are elegant, real-world evidence does not always validate predictions, which may ignore cultural and historical contexts. The school is further accused of ideological bias: its focus on state inefficiency and defence of market mechanisms is seen as an endorsement of libertarian ideas, drawing scepticism from advocates of collective action and social justice.

Despite the criticism, the Virginia School remains influential for exposing hidden motives in politics and stressing institutional constraints to curb inefficiency—fueling debates over how to balance market, state and society.

Text: Anastasia O.