The Limits of Liberty: Between Anarchy and Leviathan
By James M. Buchanan
- Ch. 1, Commencement
- Ch. 2, The Bases for Freedom in Society
- Ch. 3, Postconstitutional Contract
- Ch. 4, Constitutional Contract
- Ch. 5, Continuing Contract and the Status Quo
- Ch. 6, The Paradox of Being Governed
- Ch. 7, Law as Public Capital
- Ch. 8, The Punishment Dilemma
- Ch. 9, The Threat of Leviathan
- Ch. 10, Beyond Pragmatism
- Selected Bibliography
Prospects for Constitutional Revolution
The ethical problem of social change seems to me to have been seriously if not fatally misconceived in the age of liberalism. It must be viewed in terms of
social-ethical self-legislation, which involves a creative process at a still “higher” (and intellectually more elusive) level than that of individual self-legislation. It is a matter of social choice, and must rest on the conception of society as a real unit, a moral community in the literal sense. It is intellectually impossible to believe that the individual can have any influence to speak of, or especially any predictable influence, on the course of history. But it seems to me that to regard this as an ethical difficulty involves a complete misconception of the social-moral problem or that of the individual as a member of a society striving for moral progress as a society. I find it impossible to give meaning to an ethical obligation on the part of the individual to improve society.
The disposition of an individual, under liberalism, to take upon himself such a responsibility seems to be an exhibition of intellectual and
moral conceit. It is sheer love of power and self-aggrandizement; it is
un-ethical. Ethical-social change must come about through a genuine moral consensus among individuals meeting on a level of genuine equality and mutuality and not with any one in the role of cause and the rest in that of effect, of one as the “potter” and others as “clay.”—Frank H. Knight,
“Intellectual Confusion on Morals and Economics”
The analysis of this book is intended to be relevant for America’s third century, for the emerging issues that challenge the viability of traditional institutions of social order. Despite disclaimers to the contrary, the American constitutional structure is in disarray. It is time for the social scientist or social philosopher to go beyond the manipulation of elegant but ultimately irrelevant models. He must ask the question: What sort of social order can man create for himself at this stage in his history?
There are two distinct approaches that may be taken in answering this question. The first involves basic structural diagnosis, which is perhaps the best descriptive appellation for my own efforts in this book. The existing as well as the possible institutions for human choice must be analyzed in terms of criteria for promoting “improvement,” defined largely by potential agreement and independent of advance description. The second approach involves description of the “good society” independent of either that which exists or the means through which attainment might be secured.
Despite the urging of several critics, I have not gone beyond the restrictions imposed by the first approach. I have not tried to present in detail my own private proposals for constitutional reform; I do not offer a description of the “good society,” even on my own terms. In part my reluctance is based on comparative advantage. As I noted earlier, many social philosophers seem willing to essay the second of the two tasks suggested, with neither recognition of nor interest in the first. This concentration, in its turn, often promotes intellectual and moral arrogance. An attempt to describe the social good in detail seems to carry with it an implied willingness to impose this good, independent of observed or prospective agreement among persons. By contrast, my natural proclivity as an economist is to place ultimate value on process or procedure, and by implication to define as “good” that which emerges from agreement among free men, independent of intrinsic evaluation of the outcome itself.
The social philosopher who takes either of these two roles must reject the pragmatism that has characterized the American mind-set on social policy reforms. The time has come to move beyond this, to think about and to make an attempt at reconstruction of the basic constitutional order itself. My analysis suggests that there are structural flaws in the sociopolitical system which can scarcely be remedied by superficial tampering. Acceptance of this, as diagnosis, becomes a necessary starting point in the search for alternatives. I am convinced that the social interrelationships that emerge from continued pragmatic and incremental situational response, informed by no philosophical precepts, is neither sustainable nor worthy of man’s best efforts. History need not be a random walk in sociopolitical space, and I have no faith in the efficacy of social evolutionary process. The institutions that survive and prosper need not be those that maximize man’s potential. Evolution may produce social dilemma as readily as social paradise.
“Dilemma” is explicitly used here in order to draw attention to an interaction that has been exhaustively analyzed in modern game theory. In its most familiar setting, the “prisoners’ dilemma,” the independent utility-maximizing behavior on the part of each party generates results that are desired by neither party, results that can, with behavioral coordination, be changed to the benefit of all parties within the interaction. In the terminology of economic theory, the results of independent behavior are nonoptimal or inefficient in the Pareto sense; changes can be made which will improve the lot of some without harming anyone.
The generality and ubiquitousness of the social dilemma force concentration on a dual decision process. As we have noted, even an isolated Crusoe may find it helpful to adopt and abide by rules that constrain his choice behavior. In a social setting, the duality is essential. Men must choose mutually agreeable rules for behavior, while retaining for themselves alternatives for choice within these rules. Recognition of the distinction between what I have called constitutional and postconstitutional contract is an elementary but necessary first step toward escape from the social dilemma that confronts man in the Hobbesian jungle, whether this be in its pristine form or in its more sophisticated modern variants.
The costs of rules, when the alternative is their absence, are measured in the losses that are anticipated to occur because of the defined inability to respond to situations in a strictly short-term utility-maximizing manner.
*130 These costs may be dominated by the promised benefits of stability which will allow for planning at the moment when rules are chosen. Once adopted, however, adherence to the rules involves a different choice and a different cost. Because utility is maximized through unilateral violation of existing rules, adherence or obedience to the terms of contract cannot be secured costlessly. This applies to all members of the social group, not just to those who are observed to be the most likely violators. This suggests the necessity of some enforcement structure.
Almost inadvertently, the discussion points toward the derivation of a logical basis for constitutional contract, a basis which involves the demonstration that all members of a community secure gains when rights are defined, when rules imposing behavioral limits are settled, and when enforcement institutions are established. On this, however, no quarrel should arise; even the ardent romantic revolutionary would prefer almost any order when the alternative is pristine Hobbesian jungle. The problem worthy of attention is quite different. Given an existing constitutional-legal order, as it is actually enforced and respected, how can changes be made so as to improve the positions of all or substantially all members of the social group? History produces an evolving status quo, and predictions can be made about alternative futures. If we do not like the particular set of alternatives that seem promised by nonrevolutionary situational response, we are obliged to examine basic structural improvements.
This is the definitional basis for the term “constitutional revolution,” which may appear to be internally contradictory. I refer to basic, nonincremental changes in the structural order of the community, changes in the complex set of rules that enable men to live with one another, changes that are sufficiently dramatic to warrant the label “revolutionary.” At the same time, however, it is useful to restrict discussion to “constitutional” limits, by which I mean that structural changes should be those upon which all members in the community might conceptually agree. Little, if any, improvement in the lot of modern man is promised by imposition of new rules by some men on other men. Nonconstitutional revolution invites counterrevolution in a continuing zero- or negative-sum power sequence.
If there exist potential structural changes in legal order which might command acceptance by all members of the society, the status quo represents a social dilemma in the strict game-theoretic terminology. Even if we consider ourselves far removed from the genuine Hobbesian jungle, where life is brutish and short, the status quo contains within it elements or features that are in principle equivalent. Life in the here and now may be more brutish than need be, and certainly more nasty. If after examination and analysis, no such potential for change exists, the legal-constitutional order that we observe must be judged to be Pareto optimal, despite the possible presence of discontent among specific members in the body politic.
A central hypothesis of this book is that basic constitutional reform, even revolution, may be needed. The existing legal order may have lost its claim to efficiency, or, in a somewhat different sense, to legitimacy. At the very least, it seems to be time that genuine constitutional change be considered seriously.
Institutional-Constitutional Change and Pragmatic Policy Response
The distinction between institutional-constitutional reform and the enactment or adoption of specific policy correctives for blatantly unsatisfactory situations as they emerge must be understood first by working scholars, then by politicians and by the citizenry. Pragmatism has been hailed with approbation as the American behavioral characteristic. When something has gone wrong, our response is to fix it up with baling wire and to go on about our business. This baling-wire syndrome presumes, however, that the underlying structure or mechanism is sound and itself not in need of repair or replacement. But, eventually, baling-wire repairs fail, and more fundamental change becomes necessary. When such a stage is reached, continuation of the established response pattern may create more problems than it resolves.
“Politics,” by which I mean governmental action, notably federal governmental action, has been the social analogue to baling wire. The identification of a “social need,” whether this be real or manufactured, has come to suggest, almost simultaneously, a federal program. Social progress has been measured by the quantity of legislation, and our assemblies are deemed to be political failures when new programs are lacking. Properly interpreted, the succession of New Deal, Fair Deal, New Frontier, Great Society, and New Federalism formats represents the pragmatic and essentially nonideological working of American democratic process. Little or no attention has been paid to the possible interlinkage of program with program, to the ability of the underlying structural system to sustain the growing pressures put upon it, to the questions of aggregate size and scope for political activity.
There have been ideological supports for the pragmatist policy directions, but these have not really informed the attitudes of practicing politicians or their constituents. Even without John Dewey, and perhaps even without either Marxian or non-Marxian socialism, the American policy history might have been much the same. The faith in politics exhibited by twentieth-century man, at least until the 1960s, stems ultimately from his loss of faith in God, accompanied by an ignorance about the effective working of organizational alternatives. Eighteenth- and early nineteenth-century men seem to have possessed greater wisdom, but skepticism is suggested even here. Perhaps their judgments were based on a closer observation of governments, and their negative attitudes may have reflected not so much a faith in the nongovernmental alternative as their rejection of statist attempts at “solution.”
There is, nonetheless, a fundamental difference between the approach taken by the philosophers of the eighteenth century and that which I have referred to as the pragmatic or incremental political response to issues that emerge. The difference is methodological, in that the earlier emphasis was on structural or institutional change, not on the particulars of programs. Adam Smith sought to free the economy from the fetters of mercantilist controls; he did not propose that the specific goals of policy be laid down in advance. He did not attack the failures of governmental instruments in piecemeal, pragmatic fashion; he attacked in a far more comprehensive and constitutional sense. He tried to demonstrate that, by removing effective governmental restrictions on trade, results would emerge that would be judged better by all concerned. Precisely because of this comprehensiveness, this concentration on structural-institutional change, Adam Smith deservedly won acclaim as the father of political economy. He and his compatriots proposed genuine “constitutional revolution,” and their proposals were, in large part, adopted over the course of a half-century.
The triumph of laissez-faire was achieved because intellectual and political leaders came to accept a new
principle for social order, a principle that enabled them to rise above the narrow and short-sighted pragmatic vision that must accompany analytical ignorance. The principle was that of ordered anarchy: a regime described by well-defined individual rights and by freedom of and enforcement of voluntary contracts. An understanding of this principle enabled man to conceptualize a social process that was orderly and efficient
without the detailed direction of a centralized decision-maker,
without a necessary major role for governmental action beyond that of the strictly protective state. The importance of conversion to a new organizing principle cannot be overemphasized. It was this conversion that facilitated what can only be judged as a genuine constitutional revolution in Britain. Adam Smith and his colleagues could not have been successful had they chosen to attack the previously existing order on a pragmatic, policy-by-policy basis. The shift in vision was essential, the shift that established new benchmarks against which departures might be measured.
Socialist critics were successful in identifying particular flaws in the conceptually ideal order of laissez-faire, as well as in its practicable counterparts. These critics did not, however, offer an alternative organizing principle that was even remotely comparable in intellectual appeal. Marxian doctrine is characterized by an absence of analytical description of society “after the revolution.” Later attempts to model the working of socialist order amounted to a translation of laissez-faire precepts, almost in a literal sense. In practice, regimes organized under socialist rubrics are acknowledged to be bureaucratic monstrosities.
Because of the negative impact on the laissez-faire principle exercised by socialist ideas, however, the pragmatically generated erosion of the minimal government principle achieved intellectual-ideological respectability. The central organizing principle that dominated early nineteenth-century thinking, one that embodied a vision of viable society with minimal government direction, was gradually undermined in particularistic stages. Failures were first identified and acknowledged by intellectually honest men. Following this, corrections were proposed, corrections that almost always took the institutional form of governmental action. Intellectual controversy and political debate shifted away from concentration on alternative principles for social organization and toward specific policy choices in a situational context. Social scientists and/or social philosophers abandoned attempts to examine large-scale institutional differences, and they came to look upon their own functional roles as particularistic critics of the existing structure. Welfare economics, in its twentieth-century gloss, became a theory of
It should not have been at all surprising that this setting proved to be highly conducive to very rapid growth in the size and scope of the public or governmental sector. Governmental correctives to presumed particular flaws in the operation of markets were considered piecemeal and independent one from the other. More important, these correctives were presumed to work ideally once they were introduced. Because there existed no principle or vision of the process of governmental operation, the naive presumption was made that intention was equivalent to result. Program was piled on top of program, with little or no attention being paid to the effects of such aggregation on the supporting structure, on the principle of constitutional-legal order itself.
By the middle of the twentieth century, American pragmatism seemed to reign supreme, and there was almost no talk about fundamental revolutionary change, either in the academy or in the streets.
Confusion and Challenge
This pattern changed dramatically and unpredictably in the 1960s. There were several causal factors. Scholars in the academic groves commenced, as early as the late 1940s and early 1950s, to advance simplified theories or models of democratic process, models that must have given pause to those who thought seriously of implementing socialist ideals. Governmental action which emerged from majoritarian institutions, held to be the essence of democracy, need not produce “public good.” And perhaps even more damaging was the intellectually formidable proof that such action need not itself be internally consistent.
*133 Furthermore, it came to be recognized that governmental programs, once enacted, were necessarily administered by bureaucratic personnel, and theories of behavior were developed on the elementary presumption that bureaucrats are ordinary men.
*134 Conceptually, the base was laid for the emergence of theories of
government failure that are on all fours with the more familiar theories of market failure.
These essentially intellectual developments were accompanied and overshadowed in public consciousness by accumulating evidence that governmental nostrums do not effect miracles. By a sequence of events, collective decision-makers were led to enact programs which found their origins, not in the demands of citizens, but in the brains of academicians and the slogans of politicians. Unfortunately, many citizens, and some politicians, expected more results than the institutional structure could possibly deliver. “New Frontier” slogans were too hurriedly translated into “Great Society” realities, precisely at a time when the public began to lose its tolerance for governmental wastage. Citizen reaction was acerbated by an activist judiciary, whose behavior indicated widespread departures from any protective-state limits, departures that were seen as such by the public at large. These legislative and judicial excesses were more than matched by the independence exerted by the executive branch of the United States government in foreign affairs, notably in the Viet Nam involvement. The observed failures, at all levels of the federal government, combined to foster an antigovernmental attitude that was perhaps unique in American history.
The implications for policy were, however, clouded by the accompanying behavioral revolution of the 1960s, itself motivated in part by the same forces. As governmental failures came to be more widely acknowledged, personal respect for “law” deteriorated. Politics and politicians became more blatantly profit-seeking, and pressures for governmental handouts accelerated. As the federal courts were seen to “make” law in their own idealized image, by natural extension individuals came to think of their own private criteria for discriminating between “good” and “bad” law. Initially motivated by wholly admirable precepts for achieving racial justice, unlawful demonstrations were mounted against the operation of “bad laws” generally, demonstrations that were condoned ex post by judicial failure to enforce existing legal norms. The limited manpower needs for a limited war guaranteed that conscription could be and would be judged to be unjust and highly discriminatory. Protest came to be the order of the day in the late years of the decade. Venerable institutions that had long survived by adherence to unwritten behavioral rules, workable ordered anarchies such as universities, proved to be exceedingly vulnerable to disruption once voluntary respect for the rules broke down. An inability and an unwillingness to defend established “rights” could mean only that there was a genuine shift in the basic structure of control.
These confusions of the 1960s were compounded as the nonprotesting citizenry called for “law and order,” overlooking the governmental origins of the turmoil. The law-abiding citizen failed to understand his own plight. He observed apparent erosion in public capital; he read about and sometimes suffered from rising crime rates; he saw behavioral changes that he considered to represent losses of personal respect and tolerance. He demanded “law and order,” which meant increased rather than decreased collectivization of society. He was, in this stance, trying to evoke response on the part of the protective state, the external enforcer, and he was asking that this state reestablish the apparent claims embodied in constitutional contract.
The state cannot, however, wave some magic wand and produce instant improvements. If individual rights are in some disarray, better and more effective enforcement requires more investigation and more severe punishment for offenders. But here the punishment dilemma emerges. The selfsame citizen who demands enforcement may be quite unwilling to allow for the increased severity or certainty of punishment that efficient enforcement may require. The state responds by moving along those dimensions of adjustment which generate minimal feedbacks. It hires more policemen, and keeps punishment levels stationary or declining. It responds to prison riots by rewarding the inmates with better facilities. The costs are borne by the general taxpayer and the size of government grows.
The citizen responds to George Wallace’s attacks on the bureaucratic superstructure. He rejects claims of legitimacy on the part of agents of the state, and he senses increasing insecurity against governmental domination. At the same time, however, he is quite unwilling to yield up his own share in the special benefits that he thinks only government can provide. The American suburbanite who is most vehement in his opposition to cross-city bussing of his children to publicly financed schools is unwilling even to question the right of the collectivity to levy taxes, coercively, on all families in order to finance the schooling of children for some families (and, in the process, to subsidize the production of more children in an overcrowded world).
In sociopolitical matters, the 1970s can be described as an era of intellectual bankruptcy. Theoretical welfare economists continue to develop sophisticated demonstrations of market failures; public choice theorists, who have been charged with dabbling in “welfare politics,” match the welfare economists with their own demonstrations of governmental failures. The theorems of the economists are put to alleged practical usage in the discussion of pollution-environmental issues that occupies policy debates. The “solutions” that are proposed, however, involve widening the sphere of bureaucratic control rather than shrinking it. The libertarians are scarcely preferred over their liberal counterparts. They score effectively when they point to the analytically demonstrable and empirically verified flaws in the collectivist alternatives. Positively, however, they can suggest little other than a shift of organizational structure toward the marketplace. Both liberals and libertarians alike presume implicitly that their task is to offer advice to some nonexistent but benevolent wisdom that will accept rational argument.
The facts are different. Both markets and governments fail, and there is no such benevolent wisdom. The man of the 1970s is trapped in his own dilemma. He recognizes that the “grand alternatives,” laissez-faire and socialism, are moribund, and that revival is not to be predicted.
*135 What modern man does not recognize, in either an intellectual or an intuitive sense, is that the pragmatic alternative is equally suspect, and that viable social order may be seriously threatened by long-continued failure to consider his situation systematically and nonincrementally. In this as in other aspects of his life, modern man seems to be in need of sociopolitical “conversion” to a new conception of society. Without such a conversion, the constitutional revolution that may be necessary for survival cannot take place.
In this respect at least, the modern radical revolutionaries may be correct; improvement may well require changes in the system, not in the personnel that man it and not through peripheral adjustments. But if both markets and governments fail, what is the organizational alternative? Throughout the ages men have dreamed of character ideals descriptive of the person who acts out of love for others or duty toward his fellow men. There is a role for ethics in social order. It is, however, extremely dangerous to generalize ideally personal behavior into the basis for social organization, taking the route of William Godwin and other romantic anarchists. Regardless of the organizing principle, the larger the proportion of “good” men in the community, the “better” should be the community, provided the terms are defined in accordance with individualistic precepts. But it is folly to expect
all men to be behaviorally transformed. Yet this becomes the minimal requirement for an acceptably orderly society without organization.
Social order may be imposed by a despotic regime, through either an individual ruler or through an elite ruling group. Despotism may be the only organizational alternative to the political structure that we observe. In which case, those who claim no special rights to rule had best judge existing institutions in a different light. This would amount to a counsel of despair, however, and there may be alternatives worthy of consideration.
The Contractarian Revival
It is in this respect that the modern contractarian revival, stimulated largely by the publication of John Rawls’s book,
A Theory of Justice (1971), is highly encouraging. In this work, Rawls made no attempt to lay down precepts or principles of justice on the basis of any externally derived ethical norms, utilitarian or otherwise. Instead, he advanced the individualistic conception of “justice as fairness.” Those principles are just which emerge from the unanimous agreement of men participating in a setting where each places himself behind a veil of ignorance concerning his own position in postcontractual sequence. No man counts for more than any other, and no precepts for justice are defined independently of this conceptualized contractual setting. Unfortunately, in my view, Rawls went further than this and attempted to identify those precepts that might be predicted to emerge. In this extension, Rawls was, perhaps, responding to the pressures of critics who demand specific reform proposals. And, predictably, it is this aspect of his work that is drawing attention away from his more basic contribution, which is the relationship of justice to the outcome of the contractual
My efforts in this book are simultaneously more and less ambitious than those of Rawls, or some of my own earlier works.
*136 Rawls is content to discuss the emergence of potential agreement on principles of justice from an idealized contractual setting within which men are led to behave as moral equals. He does not discuss the critically important bridge between such an idealized setting and that within which any discussion of basic structural rearrangement might, in fact, take place. In this respect, my approach is more ambitious. I have tried to examine the prospects for genuine contractual renegotiation among persons who are not equals at the stage of deliberation and who are not artificially made to behave as if they are, either through general adherence to internal ethical norms or through the introduction of uncertainty about postcontract positions. It is for this reason that the return to the conceptual emergence of contract from Hobbesian anarchy has been necessary to develop my argument.
In another respect that has been noted, however, my efforts are much less ambitious than those of Rawls. He identifies the principles of justice that he predicts to emerge from his idealized contractual setting. Although perhaps this was not Rawls’s specific intent, these principles may become the basis of proposals for specific institutional changes, which may then be debated in the pragmatically oriented arena of day-to-day politics. I take no such step. I do not try to identify either the “limits of liberty” or the set of principles that might be used to define such limits.
The “principles” that might be said to be implied in this book are that the multidimensional trade-off between liberty and law should be recognized, that the interdependence among different laws as they constrain individual liberties should be reckoned with, that continued misunderstanding and confusion above the separate constitutional and postconstitutional stages of collective action leads to disaster. The reform that I seek lies first of all in attitudes, in ways of thinking about social interaction, about political institutions, about law and liberty. If men will only commence to think in contractarian terms, if they will think of the state in the roles as defined, and if they will recognize individual rights as existent in the status quo, I should not at all be insistent on particulars. It is as if a less ambitious John Rawls might have limited his concern to ways that men think about justice.
Political and Public Philosophy
The contractarian revival suggests that there may be widespread agreement among scholars that a renewed discussion of basic problems of social order is desirable. To the extent that this revival continues, the groundwork may be laid for a rebirth of political and legal philosophy in our institutions of higher learning. To the extent that contractarian precepts emerge victorious in this discourse, the ways of thinking that I have called for here may come into being. The trade-offs between law and liberty may be recognized, and the dual role played by the state more fully understood, along with some appreciation for the problem of keeping collective action within limits. General acceptance by working scholars is perhaps a necessary prelude to acceptance of such ideas by a frustrated public.
The emergence of a modified public philosophy in this respect should not be beyond the bounds of hope. Both the ideas and the events of the preceding decades have created a potentially receptive attitude in the ordinary man. He has lost his faith in government as it operates, but he remains unwilling to jettison the governmental crutch. He searches silently for a philosophy that might offer him some reconciliation and that might partially restore his social faith.
If this were all there is to it, reform of basic constitutional structure might be, relatively speaking, an easy task. Judges would cease legislating and stick to adjudicating conflicts, enforcing laws, and imposing punishments. Legislators would cease using the political mechanism to make uncompensated transfers of rights among individuals and groups. Citizens would not seek private profits, individually or in groups, from resort to the governmental sector, and they would refrain from supporting political entrepreneurs who promise to deliver such profits. Those who observe and discuss governmental processes, be they journalists or professors, would cease measuring social progress by the amount of legislation enacted, by the sheer size of the budget account. Individual liberty, as an independent value, is inversely correlated with these familiar scalars, and this would be given its proper place among other social values in the attitudinal revolution which I am suggesting here. Individuals would recognize that government, the state, is ultimately subject to their own control. They would no longer accept, implicitly, the positivist view that the state, and only the state, can define and redefine individual rights, and, by inference, its own. Democracy remains conceptually possible only if individuals view government in the consent paradigm.
Individual Rights in Democracy
On cursory examination, the attitudinal shift that I have outlined seems to be in accord with straightforward laissez-faire precepts. The orthodox libertarian would find no apparent difficulty in associating himself with the position suggested. When the level of discussion is brought back one stage, however, a new set of issues emerge which have been glossed over in the traditional conceptions. Too often, the libertarian, like his socialist counterpart, discusses reforms under the “as if” assumption that he is simply advising some benevolent despot who will lay down the proposed changes, with little or no reference to the consent of participating parties. With this political presupposition, it becomes relatively easy for the market-oriented libertarian to neglect any analysis of the existing distribution of rights and claims among persons. But unless these rights and claims are first identified and agreed on, what do the terms used above mean? What is an uncompensated transfer? What qualifies as profit-seeking through the use of the political mechanism?
Once such questions as these are raised, elements of the social dilemma come to light that are too readily ignored when we remain at the level of philosophy. Practical operational significance can be placed on the precepts only when a major condition is fulfilled: the agreement of all members of the social group on the assignment of individual rights that exists in the status quo. So long as there is continuing disagreement on just who has the right to do what with what and to do what to whom, the attitudinal shift suggested above may remain operationally empty.
A necessary step in the process of genuine constitutional revolution is a
consensual redefinition of individual rights and claims. Many of the interventions of government have emerged precisely because of ambiguities in the definition of individual rights. The central issue here concerns the reconciliation of nominally expressed claims by individuals to private property, to human as well as nonhuman capital, and the equalitarian distribution of the “public property rights” through the voting franchise. Whether treated as value or as fact, modern democracy incorporates universal adult suffrage. From this elementary base, several questions arise. How can the poor man (with “poor” defined in terms of private-property claims) exert his putative claims to the wealth nominally held by the rich man except through exercise of his voting franchise? Acknowledging this, how can the rich man (or the libertarian philosopher) expect the poor man to accept any new constitutional order that severely restricts the scope for fiscal transfers among groups? Consensual support for such restriction could scarcely be predicted to be forthcoming. This need not, however, suggest that all attempts at renegotiation of the basic constitutional structure should be abandoned before they commence. There may well exist potential gains-from-trade for all participants, but the existing as well as the prospective distribution of rights and claims must inform the bargaining process. The rich man, who may sense the vulnerability of his nominal claims in the existing state of affairs and who may, at the same time, desire that the range of collective or state action be restricted, can potentially agree on a once-and-for-all or quasi-permanent transfer of wealth to the poor man, a transfer made in exchange for the latter’s agreement to a genuinely new constitution that will overtly limit governmentally directed fiscal transfers.
Consider a highly simplified two-person example. A rich man, A, nominally owns an asset that yields $100,000 in annual income, which is taxed at 50 percent, leaving a post-tax income of $50,000. A poor man, B, owns no assets, and earns $5,000 annually from his labor services. The “government” (here treated as exogenous) collects taxes exclusively from the rich man, for a total revenue of $50,000, which it uses for a variety of projects, with varying degrees of efficiency. The benefits accrue in such a manner as to provide the rich man with a benefit value of $10,000, and the poor man with a benefit value of $20,000. Can the “social contract” be renegotiated with gains to both parties? Suppose that the rich man offers to transfer to the poor man one-third of his asset, with a gross income of $33,333, in exchange for the latter’s agreement to reduce the size of the governmental budget to zero. The rich man, under this arrangement, retains a new real income of $66,667, higher than he retained under the previous arrangement ($60,000). The poor man, B, secures a real income of $38,333 (own earnings plus governmental benefits), higher than he secured under the other arrangement ($25,000). Both parties are made better off under the postulated terms of the new contract.
Potential agreement might be secured even if the present value of claims is not increased in a strictly measurable sense. If the rich man, A, anticipates onerous tax burdens in the future, even if these do not currently exist, he may agree to the sort of rearrangement suggested. Or, more dramatically, if either or both parties fear nonconstitutional revolution, during which all claims are abrogated, agreement may well be forthcoming on terms that do not seem mutually beneficial under direct measurements. There seems little doubt that, at least conceptually, distributional aspects of the renegotiation can be settled.
The Creation of Rights
Assume that the problems of income and wealth distribution among persons could be satisfactorily settled in a renegotiated constitutional contract, one that would redefine individual rights and reduce the scope for collectively determined coercive activity. Would this basic step be sufficient to allow for the implementation of laissez-faire principles? If property rights should be redefined so that distributional results are acceptable to all participants, would the operations of private markets, with minimal collective enforcement of contracts, be sufficient to insure efficient outcomes, to remove the social dilemma? A negative answer is immediately suggested with reference to the many problems summarized under the rubrics: congestion, pollution, environmental quality. Here the issues are specifically not distributional, or at least not exclusively or predominantly so. The alleged failures of existing social arrangements in many of these situations cannot legitimately be attributed to markets or to government, if we think of these as alternative processes of postconstitutional contracting. The social dilemma reflected in apparent results here stems from incomplete constitutional agreement, from first-stage failure to define and to limit individual rights. Resolution of this dilemma lies not in any explicit redistribution of rights among persons, not in some reshuffling of claims, but in the
creation of newly defined rights in areas where none now exist, at least none that can offer a basis for predictability and exchange. In essence, congestion and pollution describe settings analogous to that generalized in Hobbes’s model of anarchy. Individuals find themselves in conflict over the use of scarce resources, with results that are desired by no one because there is no agreed-on and enforced set of rights. The constitutional revolution suggested involves mutual agreement on those restrictions on behavior that are required to achieve tolerably efficient outcomes.
To the extent that there is mutuality of gain in prospect, agreement should be conceptually attainable. The status quo provides a reasonable base from which limitations can be measured. “Congestion on the common” can be eliminated by guaranteeing to each participant a level of well-being at least as high as that which he secures in the dilemma of commonality. Improvement is precisely analogous to that which is achieved through the mutual disarmament contract which first enables man to leap from the brutish dilemma of Hobbes.
Idealized constitutional revolution here would require that limits be placed on behavior with respect to
all scarce resources, whether this be in the form of assigning individual ownership titles or of imposing restrictive behavioral limits under common titles. Much of the dilemma summarized under the pollution rubric finds its origins in the presumption made by the founders of our constitutional-legal order that certain resources were in permanent abundance. Growth and technological advance have converted once-free resources into scarce resources, but existing property assignments have failed to keep pace. The resulting dilemma was predictable. This alone suggests that genuine constitutional change must take place as population grows, as technology develops, and as demand shifts through time.
The alternative that falls between anarchy on the one hand and Leviathan on the other must be articulated, analyzed, and, finally, made into models amenable to public comprehension. As an organizing principle, laissez-faire is too closely associated with the rights of property in the historically determined status quo, defined in nominal independence of the contingency claims represented in modern democracy. Socialism is the throughway to Leviathan. The failure of these two grand alternatives need not, however, dispel all of the Enlightenment dreams. The vision of the eighteenth-century philosophers which enabled them to describe a social order that did not require the centralized direction of man over man may yet stir excitement.
Free relations among free men—this precept of ordered anarchy can emerge as principle when successfully renegotiated social contract puts “mine and thine” in a newly defined structural arrangement and when the Leviathan that threatens is placed within new limits.
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).
Cost and Choice.
Democracy and Disobedience (Oxford: Clarendon Press, 1973).
Journal of Law and Economics 16 (April 1973): 35-52.
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).
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.
Politics, Economics, and Welfare (New York: Harper and Row, 1953).
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?
Explorations in the Theory of Anarchy, ed. Tullock.