In response to a question from the audience at the recent MPS meeting, I invoked a thought experiment that James Buchanan has asked students of public economics to consider. "It is said," Buchanan starts, "that a fly that grew 9 times its size could no longer fly." "What does that imply for the fiscal dimensionality of the state?," he would ask. Buchanan never directly answered the question himself. If he knew the answer already, they wouldn't call it research. Buchanan's entire approach to teaching was (is) an invitation to inquiry guided by the core principles of economics, not an exposition of received wisdom offered from on high.
Despite Buchanan's constitutional stance and in fact an embracing of normative issues in social philosophy, if one looks closely at his methodological position as laid out in "Positive Economics, Welfare Economics and Political Economy", Buchanan is a positive political economist and not just a normative political philosopher trapped in an economists mind. Despite the radical stance that I take in political economy, I also operate under the delusion that I too am doing positive political economy rather than normative political philosophy and that critics that think otherwise are in fact failing to state my position correctly.
Anyway, back to the fly. Buchanan's question is one of scale I pointed out to the audience. While I consider questions of scale important, they are not as important in my mind as those of scope. Perhaps the fly cannot fly if it grew 9 times its size, but the fly also cannot teach economics. If we keep asking it to do that, then we will be frustrated. The fly can do many tasks very well, but it cannot do other tasks all that well and other tasks it simply cannot do at all. To insist that the fly do those tasks it doesn't do well, or those tasks that it is constitutionally unable to accomplish, is a recipe for disaster.
There are questions of scale and scope. We should restrict state action to those tasks, and only those tasks, that government can do well. Buchanan's work does not ignore these issues of scale and scope. He is basically an advocate of a strong minimal state. The appropriate role of government is to accomplish the task of providing for the protective state (law and order, and defense) and the productive state (essential public goods) while not succumbing to the redistributive state (rent-seeking). I find this puzzle intellectual fascinating, but I am not sure it has a viable solution that is empirically robust. Perhaps the scope of government is much more restricted than even this nightwatchman vision of the state. Perhaps a fly can only really fly, and not do much else; perhaps a state can really only institutionalize predation and not much else. If that was in fact true, then what would be the positive political economy of the state?
As I pointed out to the audience at MPS, the history of classical liberal thought is filled with examples of leading thinkers becoming frustrated with their earlier attempts to constrain the state in terms of scale and scope. More and more elaborate methods of "tying the rulers' hands" have been proposed only to be abandoned in frustration. As I said, Hayek didn't write The Denationalization of Money when he was 31, he wrote it rather late in life after a lifetime of thought on how to get monetary policy rules adopted and followed. If, as Hayek also wrote, the state has corrupted not only money, but also law, markets, and morality, then where are we to go? Is the positive political economy conclusion of the analysis of such an empirical reality one that would say that perhaps destatization is the only way to resolve the dilemma? As I said, what if our best efforts to tame the beast all fail, our only conclusion is that perhaps we need to stop trying to retrain the beast but instead stab it (or in the fly metaphor swat it). In the case of monetary policy, we might reluctantly have to conclude that efforts to bind a government monopoly supplier of the currency have failed and that the only way to resolve the problem is to eliminate the government from the business of monetary policy.
The fly cannot teach economics (or raise your kids; care for your parents; care for you), don't ask the fly whether small or big to even try. Perhaps the only way to win the game with the state is to not play that game at all. The problems of the state relate to scale no doubt, but more importantly in my mind to questions of scope. Flies should only fly, and if they try to do anything else, we need the flyswatters to get to work. To my mind, the most effective flyswatters in affairs of state has always been from Smith to Say; from Mises to Hayek; from Bastiat to Friedman, the economic way of thinking.