The Virginia School of political economy refers to a school of economic thought originating at the University of Virginia in the 1950s and 1960s, mainly focusing on public choice theory, constitutional economics, and law and economics.
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Development
It emerged first at the Thomas Jefferson Center at the University of Virginia established by James M. Buchanan and G. Warren Nutter in 1957. It was there that Ronald Coase formulated his famous theorem on the problem of social cost (1960) and that Buchanan and Gordon Tullock wrote The Calculus of Consent: Logical Foundations of Constitutional Democracy (1962). During this period, the early ideas of the school were influenced by the works of Dr. David Dunn.
In 1969, Buchanan, Tullock, and Charles J. Goetz established the Center for the Study of Public Choice at Virginia Tech, which moved with them to George Mason University in 1983. Other prominent scholars associated with the school include Dennis C. Mueller, Robert D. Tollison, Andrew B. Whinston, and Leland B. Yeager.
Economic approach
The Virginia approach to political economy focuses on comparing private and public sector institutions as imperfect alternatives. The Virginia approach is also favored by some economists of the Chicago and Austrian schools. Virginia School economists are often seen as 'fellow travelers' with Austrian economists, as members of both schools of economic thought generally favor free-market outcomes.
There are several main lines of research in the Virginia School. James Buchanan and Gordon Tullock were among the earliest economists to apply economic analysis to national constitutions. Tullock also founded the modern rent seeking literature. Mancur Olson founded modern research on collective action and special interest groups. Olson was not at GMU, Virginia, or Virginia Tech, but Virginia scholars tend to emphasize special interest group bias in government.
However the Virginia School is opposed to the Chicago school of political economy on two fundamental points. Chicago believes that politics tends towards efficiency due to the fact that human predators provoke stiffening resistance in their human prey due to the exponentially increasing deadweight loss imposed by takings. Chicago also believes that because political markets tend towards efficiency, policy advice by scholars is irrelevant. Charles Rowley is a prominent opponent of these notions and has set out his views in the Encyclopedia of Public Choice where he writes that Chicago’s "… interpretation of the political process emanates from a fundamentally flawed application of … microeconomics to the political marketplace … while the Journal of Political Economy publishes papers that defend the U.S. federal farm program as an efficient mechanism for transferring income to poor farmers, there is justifiable cause to worry whether CPE [Chicago political economy] scholars and their journal editors ever look out from their ivory towers and survey the real world."
The Public Choice Society is an outgrowth of the Virginia School.