Any theory of collective choice must attempt to explain or to describe the means through which conflicting interests are reconciled. In a genuine sense, economic theory is also a theory of collective choice, and, as such, provides us with an explanation of how separate individual interests are reconciled through the mechanism of trade or exchange. Indeed, when individual interests are assumed to be identical, the main body of economic theory vanishes. If all men were equal in interest and in endowment, natural or artificial, there would be no organized economic activity to explain. Each man would be a Crusoe. Economic theory thus explains why men co-operate through trade: They do so because they are different.
The above is a quote from the book The Calculus of Consent: Logical Foundations of Constitutional Democracy, by James M. Buchanan and Gordon Tullock, published in 1962 (available for free at the Online Library of Liberty.) Continue reading “Economic Theory is a Theory of Collective Choice”