This paper examines James Buchanan’s earliest writings within the
context of post-WWII public finance theory and his education at Chicago. Public
choice scholars have long recognized their ties to Chicago, but few have
examined Chicago’s role in serving as the primordial soup for
Buchanan’s later work in public choice. Thus, we know very little
about the subdiscipline of public finance at Chicago and its institutional and
intellectual traditions in the immediate post-war period. As the influence of
Frank Knight, price theory, and catallactics on Buchanan have been well
explored, the focus here is on Buchanan’s graduate training in public
finance, the departmental emphasis on product differentiation of ideas, and the
general acceptance in ‘Old Chicago School’ economics of
the importance of institutions and institutional design. I find that while he
maintained a high degree of intellectual affinity with Chicago economics
generally, Buchanan broke decisively with orthodox public finance (including
that taught at Chicago) on several substantive issues early in his career,
including the importance of expenditure theory and the relevance of the benefit
principle and voluntary exchange.