The Limits of Liberty: Between Anarchy and Leviathan

James M. Buchanan.
Buchanan, James M.
(1919- )
CEE
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Editor/Trans.
First Pub. Date
1975
Publisher/Edition
Indianapolis, IN: Liberty Fund, Inc.
Pub. Date
1999
Comments
Foreword by Hartmut Kliemt.

1. James M. Buchanan, The Limits of Liberty: Between Anarchy and Leviathan (Chicago: University of Chicago Press, 1975), volume 7 in the series.

2. Gordon Tullock, ed., Explorations in the Theory of Anarchy (Blacksburg, Va.: Center for Study of Public Choice, 1972).

3. John Rawls, A Theory of Justice (Cambridge: Harvard University Press, 1971).

4. Robert Nozick, Anarchy, State, and Utopia (New York: Basic Books, 1974).

5. This somewhat down-to-earth Kantianism of Buchanan is also clearly brought out in some of the essays on constitutional political economy, volume 16 in the series, Choice, Contract, and Constitutions; and the philosophical essays, volume 17 in the series, Moral Science and Moral Order.

6. James M. Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy (Ann Arbor: University of Michigan Press, 1962), volume 3 in the series. Hereafter referred to as the Calculus.

Chapter 1

7. For additional examples along with a more comprehensive discussion, see Roland N. McKean, "The Economics of Trust, Altruism, and Corporate Responsibility," in Altruism, Morality, and Economic Theory, ed. E. S. Phelps (New York: Russell Sage Foundation, forthcoming). Also see Diane Windy Charnovitz, "The Economics of Etiquette and Customs: The Theory of Property Rights as Applied to Rules of Behavior" (M.S. thesis, University of Virginia, Charlottesville, Virginia, 1972).

8. There are exceptions. Murray Rothbard argues that conflicts could be resolved by the protective associations or clubs that would be formed voluntarily in genuine anarchy. See his For a New Liberty (New York: Macmillan, 1973). His approach fails to come to grips with the problem of defining rights initially, the issue that is central to my discussion.

9. James M. Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy (Ann Arbor: University of Michigan Press, 1962; paperback ed., 1965).

10. Although our approach was somewhat more narrowly economic, the analytical setting is closely related to that employed by Rawls in deriving principles of justice from contractual process. See John Rawls, A Theory of Justice (Cambridge: Harvard University Press, 1971).

11. In terms of the historical controversy, my approach is more closely related to the Germanic-feudal concept of property than to the Roman. On this distinction, as well as on many other aspects relating to the theory of property, see Richard Schlatter, Private Property: The History of an Idea (New Brunswick: Rutgers University Press, 1951), p. 9.

12. For a similar discussion, see Richard Taylor, Freedom, Anarchy, and the Law (Englewood Cliffs: Prentice-Hall, 1973), p. 9.

13. Cf. J. J. Rousseau, The Social Contract, vol. 38, Great Books of the Western World (Chicago: Encyclopaedia Britannica, 1952), p. 394. See also Henry Maine, Ancient Law (Boston: Beacon Press, 1963), p. 89.

14. The French Declaration of the Rights of Man, issued in 1789, is more confusing than Jefferson's statement in the Declaration of Independence. The relevant statement in the former reads: "Men are born, and remain, free and equal in rights." (Italics supplied.)

The fallacious implication that men must be, or must be made to be, equals in fact before they can qualify for the equality of treatment in democratic polity is one source of the modern confusion surrounding research in genetics.

15. See Gordon Tullock, "The Paradox of Revolution," Public Choice II (Fall 1971): 89-100.

Chapter 2

16. For a relatively recent book that falls within the romantic tradition, and which summarizes other works, see Daniel Guerin, Anarchism, intro. Noam Chomsky, trans. Mary Klopper (New York: Monthly Review Press, 1970).

There exists a variant of anarchism which is, instead, based squarely on the recognition of the free market's role in facilitating individual relationships in the absence of government. This has been called "private property anarchism" by Laurence Moss, who traces out the contributions of Americans to this variant. See Laurence S. Moss, "Private Property Anarchism: An American Variant" (Paper presented at the Southern Economic Association meeting in Washington, D.C., November 1972). Murray Rothbard is a modern expositor of this variant. See his For a New Liberty.

17. This is my own definition of economics. It is elaborated in some detail in my 1963 presidential address to the Southern Economic Association. See "What Should Economists Do?" Southern Economic Journal 30 (January 1964): 213-22. This view is at variance with those who define economics in terms of the central maximizing principle. Differences in definition here need not, however, affect the main argument of the text.

18. This is emphasized clearly by David Hume; see A Treatise of Human Nature, ed. L.= A. Selby-Bigge (Oxford: Clarendon Press, 1960), pp. 502-3. Hume's whole discussion concerning the origins of property rights and the advantages of such rights for social stability is similar in many respects to that which is developed in this book.

Hegel's basic conception of property is also similar to that developed here. See Shlomo Avineri, Hegel's Theory of the Modern State (Cambridge: Cambridge University Press, 1972), pp. 88f.

19. The "theory of property" that is implicit in my discussion here and elsewhere in the book can perhaps best be classified as some mixture of the "personality" and "utilitarian," especially as the latter is represented by the discussion of David Hume. These and other useful classifications of theories of property, along with a good general discussion, are found in Frank I. Michelman, "Property, Utility, and Fairness: Comments on the Ethical Foundations of 'Just Compensation' Law," Harvard Law Review 80 (April 1967), especially pp. 1202-13.

20. The citation is from Blackstone's Commentaries on the Laws of England, 12th ed. (London: T. Cadell, 1794), 2:2-3.

21. A partial listing of the contributions is as follows: A. A. Alchian and R. Kessel, "Competition, Monopoly, and the Pursuit of Money," in Aspects of Labor Economics (New York: National Bureau of Economic Research, 1962), pp. 157-75; S. Cheung, "Private Property Rights and Sharecropping," Journal of Political Economy 76 (December 1968): 1107-22; Harold Demsetz, "The Exchange and Enforcement of Property Rights," Journal of Law and Economics 7 (October 1964): 11-26; R. McKean, "Divergences between Individual and Total Cost within Government," American Economic Review 54 (May 1964): 243-49; Douglass C. North and Robert Paul Thomas, The Rise of the Western World: A New Economic History (Cambridge: Cambridge University Press, 1973). These and other contributions are discussed by Furubotn and Pejovich in a lengthy review article, which also includes a full set of references. See Eirik Furubotn and Svetozar Pejovich, "Property Rights and Economic Theory: A Survey of Recent Literature," Journal of Economic Literature 10 (December 1972): 1137-62.

22. Among the modern "property rights economists," S. Pejovich is the only one who has attempted a generalized discussion of origins. He states explicitly that his aim is to show that "the creation ... of property rights is endogenously determined" (p. 310). A careful reading of Pejovich's paper suggests, however, that the endogeneity does not refer to the exchange process. Instead, individuals are motivated by private utility-maximizing norms to invest resources in defense and predation of resource stocks, behavior which is, of course, descriptive of Hobbesian anarchy. I prefer that we limit "economic explanations" of institutional change to the contractual process. In this context, as my analysis suggests, property rights may emerge from an economic calculus that prompts the negotiation of a "constitutional contract." But this is quite different from the results emergent from the independent, utility-maximizing behavior of the parties. See S. Pejovich, "Towards an Economic Theory of the Creation and Specification of Property Rights," Review of Social Economy 30 (September 1972): 309-25.

23. Harold Demsetz, "Toward a Theory of Property Rights," American Economic Review 57 (May 1964): 347-59.

24. The formal characteristics of this "natural distribution" have been worked out by Winston Bush. See his "Individual Welfare in Anarchy," in Explorations in the Theory of Anarchy, ed. Gordon Tullock (Blacksburg, Virginia: Center for Study of Public Choice, 1972), pp. 5-18.

The notion of such a distribution is, of course, to be found in the work of several of the philosophers who have thought about the origin of property, notably in Aegidius, Hugo Grotius, and Thomas Hobbes.

25. This conceptual explanation is variously presented by many of the social philosophers, notably those in the general contractarian tradition. Particular versions are to be found in the works of Aegidius, Bodin, Grotius, Hobbes, and Hume. For a good summary treatment, see Richard Schlatter, Private Property.

26. The more general theme that all investment that takes the form of protecting rights must be, in the net, socially wasteful is developed at some length by Gordon Tullock in his forthcoming book, The Social Dilemma.

27. For a paper that specifically introduces the Demsetz example, but which interprets the emergence of property rights in a manner fully consistent with that which is developed here, see Charles R. Plott and Robert A. Meyer, "The Technology of Public Goods, Externalities, and the Exclusion Principle," Social Science Working Paper No. 15 (revised) (California Institute of Technology, February 1973).

28. The position taken here is that both constitutional and postconstitutional rights conceptually emerge from contract, but that it is essential that the two stages be kept distinct. This may be compared with the position advanced by F. A. Hayek in his work Law, Legislation, and Liberty, vol. 1, Rules and Order (Chicago: University of Chicago Press, 1973). If I interpret his argument correctly, Hayek suggests that "law," which is equivalent to what I have called constitutional contract, is not contractual in origin but emerges from an unpredictable evolutionary process. He advances this argument in opposition to the "constructivists," who are alleged to think of law as willed by someone. In histori-cal fact, evolutionary elements may explain much of the emergence and development of "law." Acceptance of this does not, however, negate the application of contractual-constructivist criteria in an evaluation of that "law" which exists, and which might be willfully modified.

29. Note that the distinction made here need not require that any historical relevance be attributed to constitutional contract. No matter how a structure of property rights may emerge, it is useful to separate the definition of structure from the exchange of rights within this structure.

30. For an elaboration of this point, see my Demand and Supply of Public Goods (Chicago: Rand McNally, 1968), especially chap. 9.

31. In the elementary discussion here, I am assuming that B is able to exclude A from the use of Z without excessive cost. If nonexclusion is inherent in Z, then no property right will be initially assigned in this good in the no-production setting. If Z must be produced, however, the discussion becomes applicable, even if, once produced, Z is nonexcludable. Exclusion will, in this case, take the form of not producing.

32. Complexities arise in the large-number setting which make any assignment of rights less stable than in the small-number setting. There are two reasons for this difference. In the first place, almost any imputation or assignment that is agreed on will dominate that which the individual would anticipate were he to opt out and to try to exist on his own in pure anarchy. With large-number communities, however, the set of rights assignments that will dominate, for each person, the position that he might expect to secure if any coalition opts out, is much more restricted, and, indeed, this set might be empty in many interactions. These aspects of interactions have been discussed in detail, formally, in modern game theory. To use the appropriate terminology, for large-number groups there may be no imputation or assignment that is in the core, and, if a core does exist, the number of imputations contained may be small. For an introductory discussion of these concepts, see Duncan Luce and Howard Raiffa, Games and Decisions (New York: John Wiley and Sons, 1957).

Second, even if the assignment finally arrived at should qualify for inclusion in the core in the game-theoretic sense, individuals would still find it advantageous to violate the terms if they predict an absence of response on the part of remaining members of the group. This tendency toward instability is present in both the small- and large-number groupings, but the sheer impersonality or anonymity of individuals in large groups makes strategic behavioral calculations much less likely to occur.

33. This is the same assumption that was made by Samuelson in his classic formulation of the welfare norms for public-goods provision. See Paul A. Samuelson, "The Pure Theory of Public Expenditure," Review of Economics and Statistics 36 (November 1954): 387-89.

34. For a more extended treatment, see my "An Economic Theory of Clubs," Economica 32 (February 1965): 1-14.

Chapter 3

35. For a paper which discusses some of the problems which this neglect creates, see Dennis Mueller, "Achieving a Just Polity," American Economic Review 44 (May 1974): 147-52. Although Mueller develops his argument in the context of a critique of the work of John Rawls, much of his analysis is directly relevant to my argument in this book.

36. For two recent books which examine many of these issues in detail, see Wallace E. Oates, Fiscal Federalism (New York: Harcourt Brace Jovanovich, 1972), and Richard E. Wagner, The Fiscal Organization of American Federalism (Chicago: Markham Publishing Co., 1971).

37. For a discussion of the spontaneous order that emerges from market processes, see the excellent essay by Michael Polanyi, The Logic of Liberty (Chicago: University of Chicago Press, 1951).

38. David Hume, A Treatise of Human Nature, p. 538. The behavioral principle involved here has been recognized for centuries, or at least since Aristotle. See Aristotle, Politics, trans. H. Rackham (Cambridge: Harvard University Press, 1967), p. 77.

39. For a more detailed discussion of the basic analysis here, see my Demand and Supply of Public Goods, chap. 5.

40. For a summary discussion, see Ludwig von Mises, Human Action: A Treatise on Economics (New Haven: Yale University Press, 1949), p. 271.

41. See Knut Wicksell, Finanztheoretische Untersuchungen (Jena: Gustav Fischer, 1896). Major portions of this work are available in translation under the title "A New Principle of Just Taxation," in Classics in the Theory of Public Finance, ed. R. A. Musgrave and A. T. Peacock (London: Macmillan, 1958).

42. For a discussion of the importance of others' behavior in influencing the willingness of individuals to participate in group decisions, see William J. Baumol, Welfare Economics and the Theory of the State, rev. ed. (Cambridge: Harvard University Press, 1965).

43. Note that I am defining a pure public good here in terms of the jointness rather than the nonexclusion property. That is to say, purity implies that additional consumers or users of any quantity may be added at zero marginal cost to those already in the group. It need not, in this context, be prohibitively expensive to exclude individuals from enjoying the benefits.

44. Exclusion from public-goods benefits is analytically equivalent to punishment for law violation, which will be discussed in detail in Chapter 8. The possible unwillingness of members of a cost-sharing group to exclude free riders because of the costs of the exclusion is conceptually equivalent to the possible unwillingness of law-abiding members of a polity to punish offenders because of the disutility involved in the act of punishment itself. In this, and other examples, an understanding of the central theory of public goods is helpful in understanding some of the issues involved in maintaining order under law.

45. Mancur Olson has stressed the importance of by-product private goods as a means of enforcing exclusion in public-goods provision. See his The Logic of Collective Action (Cambridge: Harvard University Press, 1965).

46. In the approach taken, there and here, unanimity offers the benchmark from which departures are dictated by reasons of efficiency in decision-making. Consent or agreement remains the conceptual ideal. For an argument which opposes this approach, see Douglas W. Rae, "The Limits of Consensual Decision" (Paper presented at the Public Choice Society Conference, College Park, Maryland, March 1973).

47. The whole discussion here is directly related to the issues involved in "just compensation." These are examined in the context of modern legal doctrine in an excellent long essay by Frank I. Michelman. See his "Property, Utility, and Fairness," pp. 1165-1258.

48. Wicksell was the first to recognize the basic substitutability between tax institutions and collective-choice rules. By the introduction of more flexibility in tax institutions, more inclusive collective-decision rules can be accepted, with more guarantees against fiscal exploitation. Wicksell did not, however, reverse the logical chain here. With effectively designed tax institutions, the potential exploitation that can be implemented through less-than-unanimity decision rules can be reduced, and, in the limit, wholly eliminated. For an elaboration of this relationship, see my Demand and Supply of Public Goods, and my Public Finance in Democratic Process (Chapel Hill: University of North Carolina Press, 1967).

49. Formal proofs that the Lindahl "solution" to the public-goods game is in the core do nothing toward showing that there do not exist many other "solutions" that equally qualify for inclusion. In this sense, the Lindahl equilibrium in the public-goods game is not at all comparable to competitive equilibrium in the private-goods counterpart.

To make the geometrical illustration in figure 3.1 more relevant to the large-number setting, we could reinterpret position E as that which is attained from the completion of all interpersonal trades in private goods and in all trades in joint-consumption goods that involve coalitions of less than the full membership of the inclusive group. With this modification, the diagram and the discussion can depict the constraints imposed on political decision rules with respect to any one person vis-à-vis all others in the polity.

50. For a related discussion in the context of theoretical welfare economics, see A. Mitchell Polinsky, "Probabilistic Compensation Criteria," Quarterly Journal of Economics 86 (August 1972): 407-25.

51. Warren J. Samuels is an articulate modern spokesman for this positivist position. In an exchange devoted to a specific legal issue, the basic methodological differences between this position and my own are clarified. See Warren J. Samuels, "Interrelations between Legal and Economic Processes," Journal of Law and Economics 14 (October 1971): 435-50; James M. Buchanan, "Politics, Property and the Law: An Alternative Interpretation of Miller et al. v. Schoene," Journal of Law and Economics 15 (October 1972): 439-52; Warren J. Samuels, "In Defense of a Positive Approach to Government as an Economic Variable," Journal of Law and Economics 15 (October 1972): 453-60.

A more comprehensive statement of Samuels's position is contained in his "Welfare Economics, Power, and Property," in Perspectives of Property, ed. G. Wunderlich and W. L. Gibson, Jr. (State College: Institute for Land and Water Resources, Pennsylvania State University, 1972), pp. 61-146.

52. R. A. Musgrave, The Theory of Public Finance (New York: McGraw-Hill, 1959).

53. R. A. Musgrave, "Comment," American Economic Review 60 (December 1970): 991-93. The paper that prompted Musgrave's comments, along with those of several others, was Harold M. Hochman and James D. Rodgers, "Pareto Optimal Redistribution," American Economic Review 59 (September 1969): 542-57.

Chapter 4

54. A development of significance in the 1960s and 1970s has been the emergence of the "economics of property" as a field of intense scholarly interest, along with the parallel introduction of more economic theory and more economists into the curricula of law schools. The primary emphasis of this movement has been, however, the influence on individual behavior exerted by the institutional or legal setting within which such behavior takes place. This emphasis is, in itself, praiseworthy, and it has yielded and will continue to yield useful scientific results. By contrast with this, however, relatively little emphasis has been placed on the possible explanations for the emergence of the observed institutions in the first place. See relevant footnotes to Chapter 2.

55. See S. I. Benn and R. S. Peters, The Principles of Political Thought (New York: The Free Press, 1959), p. 377.

Maine advanced the suggestion that the language and terminology appropriate to discuss the relationship between ruler and ruled in postfeudal society was found only in treatments of Roman law. Hence, "contract" theories of the state emerged, in part, because of linguistic history. In this connection, Maine's discussion of "quasi-contracts" is helpful, and this would perhaps be a more suitable term to apply to all discussion of "social contract." In "quasi-contract," there is no implication of explicit agreement, but the relationship is such as to make the contractarian framework for discourse helpful. See Henry Maine, Ancient Law, pp. 333-35.

56. It is in the expectational sense that the approach taken here differs sharply from that taken in The Calculus of Consent. In that book, individuals were assumed to be sufficiently uncertain about their positions under the operations of decision rules as to make them enter the negotiation stage as equals in at least this one respect.

57. For an analysis of the different implications of inequality in these separate attributes, see my paper, "Equality as Fact and Norm," Ethics 81 (April 1971): 228-40.

58. Note that we are removing the restrictions imposed by the no-production model analyzed briefly in Chapter 1.

59. See Winston Bush, "Income Distribution in Anarchy." See also Winston Bush and Lawrence Mayer, "Some Implications of Anarchy for the Distribution of Property," mimeographed (Center for Study of Public Choice, Virginia Polytechnic Institute and State University, Blacksburg, Virginia, 1973).

60. This derivation of the conceptual origins of property has been advanced by several social philosophers. It was developed by Aegidius Romanus in the thirteenth century, and was elaborated with surprising sophistication by Hugo Grotius in 1625. On these contributions, see Schlatter, Private Property, pp. 57f., 128-32.

The derivation is also closely similar to that presented by David Hume. See his A Treatise of Human Nature, vol. 3.

The contractual emergence of property rights from some anarchistic state of nature is opposed to the view taken by many scholars that "natural law" precepts are necessary.

61. In terms of the model of figure 4.1, the natural equilibrium for one of the two persons would clearly be less desirable than the position at the origin, where, by assumption, he is allowed to retain what he produces.

62. For a different and more general discussion of the emergence of slavery, see Mancur Olson, "Some Historic Variations in Property Institutions," typescript (University of Maryland, 1967).

63. If there is something inherent in the nature of man that inhibits theft, the natural equilibrium and the origin on figure 4.1 would coincide.

64. See Thomas C. Schelling, The Strategy of Conflict (Cambridge: Harvard University Press, 1960).

65. For a generalized discussion which extends the dilemma to many social interactions, see Gordon Tullock, The Social Dilemma.

66. The divergence between individual utility-maximization and group interest is characteristic of many other situations in addition to that which involves adherence to law in the narrow sense of the term.

67. For a general discussion, see my "Ethical Rules, Expected Values, and Large Numbers," Ethics 76 (October 1965): 1-13.

68. The necessity for including enforcement provisions in the initial agreement distinguishes the social contract from other contracts which are made within the framework of a legal order. John C. Hall emphasizes that the recognition of this feature of social contract is central to the ideas of both Hobbes and Rousseau. See John C. Hall, Rousseau: An Introduction to His Political Philosophy (London: Macmillan, 1973), pp. 86-92.

69. This point will become clear in the more general discussion of Chapters 7 and 8.

70. Historically, the state's more general role in criminal law emerged from its early role as enforcer of the process within which private quarrels were settled, by physical combat or otherwise. See Henry Maine, Ancient Law.

71. In this respect, as noted earlier, our approach had considerable affinity with that of John Rawls, who has attempted to derive general principles of justice in a similar manner. Rawls's earlier papers appeared in the 1950s, but his work is presented in detail in his book A Theory of Justice.

72. For a more detailed examination, see my paper "The Political Economy of the Welfare State," Research Paper No. 808231-1-8 (Center for Study of Public Choice, Virginia Polytechnic Institute and State University, June 1972).

See also Earl Thompson, "The Taxation of Wealth and the Wealthy" (UCLA Department of Economics Working Paper, February 1972).

Chapter 5

73. This conclusion would need to be modified for a social structure in which the continuing or permanent family rather than the individual is the dominant unit.

74. For a more extended discussion of this example and the general problem, see my paper "Before Public Choice," in Explorations in the Theory of Anarchy, ed. Gordon Tullock (Blacksburg, Virginia: Center for Study of Public Choice, 1972), pp. 27-38. For the development of a similar model which emphasizes the shift in the underlying structure of "fall-back" imputations consequent on changes in technology introduced because of association, see Donald McIntosh, The Foundations of Human Society (Chicago: University of Chicago Press, 1969), pp. 242-44.

75. In his analysis of nonaltruistic motivations for transfers of income and wealth, Brennan mentions the self-protection motive and discusses the relevant literature. See Geoffrey Brennan, "Pareto Desirable Redistribution: The Non-Altruistic Dimension," Public Choice 14 (Spring 1973): 43-68.

76. For an extended treatment, see Gordon Tullock, "The Charity of the Uncharitable," Western Economic Journal 9 (December 1971): 379-92.

77. Cf. John Locke, Second Treatise of Civil Government (Chicago: Henry Regnery, Gateway Edition, 1955), pp. 116ff.

78. I have in several other works elaborated the basic methodological position suggested. My own ideas, here as elsewhere, owe much to Knut Wicksell. For an early statement of my position, see the essay "Positive Economics, Welfare Economics, and Political Economy," Journal of Law and Economics 2 (1959): 124-38. This is reprinted without change in my Fiscal Theory and Political Economy (Chapel Hill: University of North Carolina Press, 1960).

W. H. Hutt should be mentioned as an important exception to mainstream political economists here. In a book written during World War II that has been too little known, Hutt proposed basic structural changes along strictly contractual lines. See W. H. Hutt, A Plan for Reconstruction (London: Kegan Paul, 1943).

Chapter 6

79. In earlier and forthcoming works, F. A. Hayek has elaborated this point in detail. See his Studies in Philosophy, Politics, and Economics (London: Routledge and Kegan Paul, 1967); also see his Law, Legislation, and Liberty, vol. 1, Rules and Order.

80. After writing this chapter, I discovered that the alarm-clock example was used by John C. Hall to illustrate roughly the same point. More generally, Hall's careful and persuasive interpretation of Rousseau's work suggests that many of the elements of the contractual analysis developed here can be found in Rousseau. Those points where Rousseau departs from Hobbes, in Hall's interpretation, mark comparable limits of Hobbes for my own analysis. See Hall, Rousseau; the alarm-clock example is found on page 95.

81. Complex psychological issues are raised even in this simple model of self-government. As McIntosh says: "The idea of self-control is paradoxical unless it is assumed that the psyche contains more than one energy system, and that these energy systems have some degree of independence from each other" (The Foundations of Human Society, pp. 122f.). See also Gordon Rattray Taylor, "A New View of the Brain," Encounter (February 1971): pp. 25-37.

82. Cf. Rousseau, The Social Contract, p. 393.

83. Locke, Second Treatise of Civil Government, pp. 11ff.

84. This principle was fully recognized at certain stages of English constitutional history.

85. The relationship between the set of goods and services which might have these characteristics and the particular assignment of rights in basic constitutional contract should be emphasized. The dividing line between private and public goods depends, in part, on how the property rights of persons are defined.

86. Although it does not recognize the distinction made here, a recent paper applies a helpful economic approach to the institution of the jury. See Donald L. Martin, "The Economics of Jury Conscription," Journal of Political Economy 80 (July/August 1972): 680-702.

87. For elaboration of this analysis, see Buchanan and Tullock, The Calculus of Consent.

88. For a detailed discussion of the uniformity requirement for taxation under the United States Constitution, as interpreted historically by the courts, and with especial emphasis on the asymmetry between the taxing and spending sides of the budget in this respect, see David Tuerck, "Constitutional Asymmetry," Papers on Non-Market Decision Making 2 (1967). (This journal is now Public Choice.) Or, more comprehensively, see Tuerck, "Uniformity in Taxation, Discrimination in Benefits: An Essay in Law and Economics" (Ph.D. diss., University of Virginia, 1966).

Chapter 7

89. For a general paper which covers material similar in many respects to that treated here, see W. H. Riker, "Public Safety as a Public Good," in Is Law Dead? ed. E. V. Rostow (New York: Simon and Schuster, 1971), pp. 379-85.

90. The analysis applies only to "law" which does, in fact, lend itself to the "publicness" description. In technical terms, "law" which involves the elimination of general external diseconomies or the creation of general external economies is the subject of analysis, not "law" which attempts to regulate individual behavior that may be unrelated to the extent of external effects. For example, a law that requires me to vaccinate my dog against rabies clearly qualifies because, in so doing, I am exerting external economies on all others in the community. By contrast, a law that might prevent me from purchasing the services of a prostitute could hardly be brought within the "publicness" description.

My use of "law" in this respect is similar to that employed by Rousseau. See Rousseau, The Social Contract, p. 399.

91. For a general discussion, see Paul Craig Roberts, Alienation and the Soviet Economy (Albuquerque: University of New Mexico Press, 1973), Chapter 3; idem, "An Organizational Model of the Market," Public Choice 10 (Spring 1971): 81-92.

92. See Thomas R. Ireland, "Public Order as a Public Good," typescript (Chicago: Loyola University, 1968). Ireland's discussion is one of the few that seems to be based on a recognition of the central points made here.

93. This argument may appear to be related to the analysis of direct regulation and effluent charges as policy alternatives in dealing with pollution, but on closer examination the two arguments are quite distinct. The pollution analogue concerns collective decisions on the quantity of clean-up (the public good) and the means of sharing the costs. Direct regulation does embody a determinate cost-sharing scheme, imposing differentially higher costs on those whose liberty of action is more highly valued. This is the equivalent of the adoption of any quantity of behavioral restrictiveness or law, as discussed in the text. The levy of effluent charges provides an alternative means of attaining chosen targets, along with alternative means of sharing costs. But effluent charges are not analogous to modifications or adjustments in the distribution of tax-prices so as to produce more widespread agreement on preferred quantities in the orthodox public-goods model.

94. For extended discussion, see Buchanan and Tullock, The Calculus of Consent, especially Chapter 10.

95. For a development of this approach, see H. Aaron and M. McGuire, "Public Goods and Income Distribution," Econometrica 38 (November 1970): 907-20; M. McGuire and H. Aaron, "Efficiency and Equity in the Optimal Supply of a Public Good," Review of Economics and Statistics 51 (February 1969): 31-39. See also William H. Breit, "Income Redistribution and Efficiency Norms" (Paper presented at Urban Institute Conference on Income Redistribution, 1972, forthcoming in conference proceedings volume).

96. For an application with disturbing racial overtones, see Andrew Hacker, "Getting Used to Mugging," New York Review of Books, 19 April 1973.

97. An alternative, but related, explanation of observed order is based on the hypothesis that individuals follow rules not because these are formally enacted as law or because of the acceptance of ethical precepts but simply because they are rules which exist. The origin of rules, in this view, is essentially evolutionary in an unpredictable sense. This hypothesis is supported by F. A. Hayek. See his Law, Legislation, and Liberty, vol. 1, Rules and Order. Hayek cites, in elaboration of the specific hypothesis of "man as rule follower," a book by R. S. Peters, The Concept of Motivation (London, 1959).

98. An excellent example of this interrelationship is provided in the testimony of Jeb Magruder before the Senate Watergate Committee in June 1973. Magruder justified the departures from formal legal requirements by the Nixon supporters on the grounds that the antiwar militants of the late 1960s and early 1970s had been repeatedly observed to violate formal laws without being subjected to the penalties which were presumably attached to such violations.

99. For a specific discussion of this effect in an externality setting, see my "Externality in Tax Response," Southern Economic Journal 32 (July 1966): 35-42.

100. For related discussion, see my "A Behavioral Theory of Pollution," Western Economic Journal 6 (December 1968): 347-58; and my "Public Goods and Public Bads," in Financing the Metropolis, ed. John P. Crecine, vol. 4, Urban Affairs Annual Review (Beverly Hills: Sage Publications, 1970), pp. 51-72. Also see James M. Buchanan and Marilyn Flowers, "An Analytical Setting for a Taxpayers' Revolution," Western Economic Journal 7 (December 1969): 349-59.

101. For a general discussion that introduces several helpful examples, see Thomas C. Schelling, "The Ecology of Micromotives," Public Interest 25 (Fall 1971): 59-98. Also see his "Hockey Helmets, Concealed Weapons, and Daylight Saving," Discussion Paper No. 9, Public Policy Program (John F. Kennedy School of Government, Harvard University, July 1972). For a discussion applied to ethical standards, see my "Ethical Rules, Expected Values, and Large Numbers."

Chapter 8

102. As witness the infamous gun-trap judgment in Iowa. For a general discussion of state laws, see Richard A. Posner, "Killing or Wounding to Protect a Property Interest," Journal of Law and Economics 14 (April 1971): 201-32.

103. For a discussion of the punishment dilemma in a different setting, see my "The Samaritan's Dilemma," in Altruism, Morality, and Economic Theory.

104. For a generalized discussion of the different conceptions of "cost" that has relevance here, see my Cost and Choice: An Inquiry in Economic Theory (Chicago: Markham Publishing Co., 1969).

105. My discussion suggests that the observed punishment of offenders, ceteris paribus, imposes a utility loss on representative members of society. This may not be true, especially with respect to major crimes. In observing retribution or "justice done," individuals may actually secure benefits or utility gains. This will not modify the analysis, as such, although it will make the problem under discussion less serious than otherwise. In the extreme, if the average or representative person in the community should actually enjoy seeing others punished, the direction of the bias introduced by taking this into account would be the opposite from that which I have suggested. My own view is that modern social attitudes are much more accurately described by the model which my discussion implies than by its opposite.

106. Cf. Montesquieu, The Spirit of Laws, vol. 38, Great Books of the Western World (Chicago: Encyclopaedia Britannica, 1952), p. 35.

107. The argument developed here is, of course, essentially a contractarian theory of punishment, as distinct from a utilitarian theory, although there are related aspects. In a genuine contractarian theory, there is no problem raised concerning the "right" of some persons to punish others, since, in effect, individuals who find themselves in the implicit social contract that any legal order represents have presumably chosen to be punished as the law directs when they violate law. My argument seems in these respects to be close to that presented by Kant and, especially, by Hegel. On the Hegelian theory, and as related to the use made of this by Marx, see Jeffrie G. Murphy, "Marxism and Retribution," Philosophy and Public Affairs 2 (Spring 1973): 217-43.

108. On this trade-off, along with a discussion of some of the policy implications, see Thomas Ireland, "Public Order as a Public Good."

109. See Gary Becker, "Crime and Punishment: An Economic Approach," Journal of Political Economy 76 (March/April 1968): 169-217; Gordon Tullock, The Logic of Law (New York: Basic Books, 1971); George Stigler, "The Optimum Enforcement of Laws," Journal of Political Economy 78 (May/June 1970): 526-36; Gary Becker and George Stigler, "Law Enforcement, Corruption, and the Compensation of Enforcers," mimeographed (Paper presented at Conference on Capitalism and Freedom, Charlottesville, Virginia, October 1972).

110. In part, this neglect of the discussion of preferred rules for making ordinary collective decisions, and of the efficiency properties of alternative rules, stems from the earlier treatment of these questions. See James M. Buchanan and Gordon Tullock, The Calculus of Consent.

111. The modern seminal works on the voting paradox are Kenneth Arrow, Social Choice and Individual Values (New York: Wiley, 1951); and Duncan Black, Theory of Committees and Elections (Cambridge: Cambridge University Press, 1958).

112. For a more extended discussion of these points, see my "Individual Choice in Voting and the Market," Journal of Political Economy 62 (August 1954): 334-43, reprinted in Fiscal Theory and Political Economy (Chapel Hill: University of North Carolina Press, 1960); and Gordon Tullock, "Public Decisions as Public Goods," Journal of Political Economy 79 (July/August 1971): 913-18.

Chapter 9

113. See John Passmore, The Perfectibility of Man (London: Duckworth, 1970), pp. 90ff.

114. For an excellent history, see R. R. Palmer, The Age of Democratic Revolution, vols. 1, 2 (Princeton: Princeton University Press, 1959, 1969).

115. For a very general and early treatment, see James M. Buchanan and Alberto di Pierro, "Pragmatic Reform and Constitutional Revolution," Ethics 79 (January 1969): 95-104.

116. Cf. C. E. Lindblom, "Policy Analysis," American Economic Review 48 (June 1958): 298-312.

117. It is not clear that the indirect costs should, in fact, be tied to specific choices. These costs emerge from the overall size of the budget, and are generated by all projects jointly. The problem of imputation here is identical to that involved in all joint-cost problems.

118. The discussion in this section has been limited to those interdependencies among budgetary components that tend to generate overexpansion in total spending rates unless constraints are imposed constitutionally. The facts of modern government spending should be sufficient to convince even the most skeptical observer that these are the interdependencies of importance. The analysis may, of course, be applied to interdependencies that tend to reduce total spending below efficiency limits, considered in the large. This might emerge, for example, if separated budgetary components should be complementary in individual utility functions. It would surely be stretching the limits of plausibility, however, to argue that these budget-reducing interdependencies overweigh those that are budget-increasing.

119. For a detailed discussion of the United States constitutional requirements for tax uniformity and the asymmetry between the tax and spending sides of the fiscal account in this respect, see Tuerck, "Constitutional Asymmetry"; and idem, "Uniformity in Taxation."

120. As the analysis suggests there will tend to be overexpansion in the size of the public sector under the conditions postulated. Furthermore, these conditions are abstract representations of the real world. I should again emphasize, however, that the analysis, as such, is fully symmetrical. If we should postulate rules that allow nonuniformity and nongenerality in taxation while requiring that all spending projects generate benefits uniformly or generally to all citizens, majority voting would tend to produce a public sector that is relatively too small when measured against standard efficiency criteria. The asymmetry emerges from the historical record, not from the analysis. Constitutions, as they have been interpreted, do embody requirements that taxes be imposed generally. They do not embody comparable requirements on the benefits side of the ledger. This general statement is only slightly mitigated by the recognition that special loopholes in the tax structure shift the pattern in the direction of symmetry.

121. For an extended discussion of logrolling, along with other analysis relevant to the earlier discussion, see James M. Buchanan and Gordon Tullock, The Calculus of Consent.

122. This "political income" may be, but need not be, convertible directly into a monetary equivalent. Both incorruptible and corruptible politicians' behavior can be incorporated in the general model. The attractiveness of "political income" will be dependent, in part, on the compensation of politicians. At sufficiently high official salaries, persons may be attracted to politics who place relatively low values on the "political income" components.

For a general analysis of "political income" and its influence on budgets, see Robert J. Barro, "The Control of Politicians: An Economic Model," Public Choice 14 (Spring 1973): 19-42. See also Thomas R. Ireland, "The Politician's Dilemma: What to Represent," Public Choice 12 (Spring 1972): 35-42.

123. To the extent that tax loopholes can be opened up for the benefit of specialized subgroups, tax-side opportunities are available to potentially corrupt officials. As noted earlier, however, these departures from generality on the tax side seem relatively small by comparison with those prevalent on the expenditure side of the account.

124. Much of the discussion in this section is based on a set of papers on governmental growth prepared at Virginia Polytechnic Institute and State University in 1972 and 1973. These papers are included in Thomas Borcherding, ed., Bureaucrats and Budgets (Duke University Press, forthcoming).

125. For a discussion which contrasts the older view with the more modern one, see Vincent Ostrom, The Intellectual Crisis in American Public Administration (University: University of Alabama Press, 1973).

126. For an early recognition of this, see Gordon Tullock, The Politics of Bureaucracy (Washington, D.C.: Public Affairs Press, 1965).

127. For an analysis that develops that aspect of bureaucratic behavior in detail, see William A. Niskanen, Bureaucracy and Representative Government (Chicago: Aldine-Atherton, 1971).

128. Major wars have exerted an influence on this rate of public-sector growth, and the displacement effects of such emergencies have, no doubt, contributed to the acceleration. See A. T. Peacock and Jack Wiseman, Growth of Public Expenditures in the United Kingdom (New York: National Bureau of Economic Research, 1961).

The veritable explosion of the late 1960s and early 1970s cannot, however, readily be explained under the Peacock-Wiseman thesis. The Viet Nam war was not the major causal influence in this explosion.

Chapter 10

129. My basic criticism of F. A. Hayek's profound interpretation of modern history and his diagnoses for improvement is directed at his apparent belief or faith that social evolution will, in fact, insure the survival of efficient institutional forms. Hayek is so distrustful of man's explicit attempts at reforming institutions that he accepts uncritically the evolutionary alternative. We may share much of Hayek's skepticism about social and institutional reform, however, without elevating the evolutionary process to an ideal role. Reform may, indeed, be difficult, but this is no argument that its alternative is ideal. See F. A. Hayek, Law, Legislation, and Liberty, vol. 1, Rules and Order, and his Studies in Philosophy, Politics, and Economics.

For a general discussion of individual interaction where social dilemma characterizes the results, see Gordon Tullock, The Social Dilemma (forthcoming).

130. Costs must always be tied to the specific choice that is made. The costs of one set of rules from among alternative sets are measured differently from the costs of rules, generally, when the alternative is an absence of rules. On problems in defining opportunity costs, see my Cost and Choice.

131. In this book I have deliberately avoided discussion of the ethical-moral arguments for adherence to rules, for law-abiding. These arguments have been the subject of renewed interest since the widespread civil disobedience of the 1960s. For an analysis which relates these arguments to type of government, see Peter Singer, Democracy and Disobedience (Oxford: Clarendon Press, 1973).

132. The disciplinary split of the older "political economy" into the separate modern disciplines of "economics" and "political science" was partially responsible for the intellectual confusion that developed. Economists, in the large, tended to remain positive analysts, at least in their examination of market or exchange processes. Political scientists, by contrast, tended to remain normative in their treatment of governmental processes. As a result, the social choice between organizational alternatives was often informed by a comparison between an actual institution on the one hand and an ideal one on the other. On this point, see David B. Johnson, "Meade, Bees, and Externalities," Journal of Law and Economics 16 (April 1973): 35-52.

133. Although the ideas here, as elsewhere, have roots in earlier discourse, the modern revolution in thinking about political choice in democracy stems from the works of Kenneth Arrow and Duncan Black. Arrow, Social Choice and Individual Values, and Black, Theory of Committees and Elections. Both works had been foreshadowed in papers published earlier. My own interest in collective choice theory was indicated in papers published in 1950 and 1954, all of which are reprinted in my book Fiscal Theory and Political Economy. In another work, published in 1957, Anthony Downs analyzed political parties in a manner analogous to the analysis of profit-maximizing firms. See his An Economic Theory of Democracy (New York: Harper and Row, 1957).

134. As with the theories of collective choice, modern theories of bureaucracy have antecedents in the traditional literature. But the modern shift in bureaucratic paradigm can be attributed to a few basic works. See Tullock, The Politics of Bureaucracy; Anthony Downs, Inside Bureaucracy (Boston: Little, Brown, 1967); Niskanen, Bureaucracy and Representative Government. For a contrast between the newer conception and the traditional one, see Ostrom, The Intellectual Crisis in American Public Administration.

135. Dahl and Lindblom suggested that the era of the grand alternatives (the term is theirs) is over, and their argument supports the efficacy of pragmatist alternatives. See R. A. Dahl and C. E. Lindblom, Politics, Economics, and Welfare (New York: Harper and Row, 1953).

136. In The Calculus of Consent, Gordon Tullock and I examined the structure of collective decision-making rules in a setting that is more closely related to that used by Rawls. We asked the question: What sort of political decision structure might be predicted to emerge from a constitutional setting within which individual participants are uncertain about their own positions in postconstitutional sequences?

137. Some implications of treating voting franchises as property rights valued by individuals were examined in my paper "The Political Economy of the Welfare State," Research Paper No. 808231-1-8 (Center for Study of Public Choice, Virginia Polytechnic Institute and State University, June 1972). This paper was prepared for the Conference on Capitalism and Freedom in honor of Professor Milton Friedman, held in Charlottesville, Virginia, in October 1972. The paper will be published in the volume of proceedings of the conference, edited by Richard Selden.

138. Under any legal-constitutional order that defines individual rights, there must be a relationship to the expected structure of individual claims in the "natural equilibrium" of genuine anarchy. As the latter distribution shifts, the relative strengths of claims under existing legal order may shift, giving rise to potential ranges of agreement for constitutional redefinition. For extended discussion, see Explorations in the Theory of Anarchy, ed. Tullock.

End of Notes

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