Buchanan is the cofounder, along with Gordon Tullock, of public choice theory. Buchanan once described public choice theory as:
Public choice, as an inclusive research programme, incorporates the presumption that persons do not readily become economic eunuchs as they shift from market to political participation. Those who respond predictably to ordinary incentives in the marketplace do not fail to respond at all when they act as citizens.Buchanan also believed that because costs are subjective, much of welfare economics—cost-benefit analysis, and so on—is wrongheaded. He spelled out these views in detail in the book, Cost and Choice.
He was awarded the 1986 Nobel Prize in economics specifically for “his development of the contractual and constitutional bases for the theory of economic and political decision making.”