James Buchanan is the cofounder, along with Gordon Tullock, of public choice theory. Buchanan entered the University of Chicago’s graduate economics program as a “libertarian socialist.” After six weeks of taking Frank Knight’s course in price theory, recalls Buchanan, he had been converted into a zealous free marketer.
Buchanan’s next big conversion came while reading an article in German by Swedish economist Knut Wicksell. The obscure 1896 article’s message was that only taxes and government spending that are unanimously approved can be justified. That way, argued Wicksell, taxes used to pay for programs would have to be taken from those who benefited from those programs. Wicksell’s idea contradicted the mainstream 1940s view that there need be no connection between what a taxpayer pays and what he receives in benefits. That is still the mainstream view. But Buchanan found it persuasive. He translated the essay into English and started thinking more along Wicksell’s lines.
Buchanan was awarded the 1986 Nobel Prize in economics for “his development of the contractual and constitutional bases for the theory of economic and political decision making.”
Via Don Boudreaux.
UPDATE: Corrected, thanks to Eric Crampton in the comments.