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
The Paradox of “Being Governed”
Americans are dissatisfied with the status quo. This is more than mere assertion and more than reference to the discontented of all ages. There is a difference between the attitude of citizens toward the institutions of their society in the 1970s and the attitude that existed before 1960. Faith in the “American dream” has largely disappeared, and restoration does not seem in the offing. Who could have predicted that major American cities would prove so reluctant to host a celebration of the bicentennial of nationhood?
Some of the slogans of the 1960s can be meaningfully interpreted. The “participatory democracy” of the New Left took form in 1972, both in George Wallace’s “send them a message” and in George McGovern’s reforms of Democratic party structure. But paradox appears when we look at the results. The Wallace message is interesting primarily because it did not get through. Citizens’ clamor for tax relief was translated into tax reform which, again translated, turned into proposals for increasing tax revenues. The budding “taxpayer revolution” of the late 1960s and early 1970s all but disappeared. The McGovern “democratization” of party structure amounted to near-destruction and was shelved quickly after 1972.
Dissatisfaction with the institutional structure, and most notably with the observed performance of government at all levels, remains widespread, but there is no effective means through which this shared attitude can be translated into positive results. Reactions against the excesses of bureaucracy provide the source for bureaucratic expansion. Frustrations with the status quo are noted by politicians and by actual and would-be self-serving “public servants.” Proposals come forward for resolving “social problems,” almost on an assembly-line schedule, proposals that necessarily require expansion rather than contraction in elements of structure that generate the evils. The infinite regress involved in what has been called the “public utility attitude” goes on. If something is wrong, have government regulate it. If the regulators fail, regulate them, and so on down the line. In part this is the inevitable result of public failure to understand the simple principle of laissez-faire, the principle that results which emerge from the interactions of persons left alone may be, and often are, superior to those results that emerge from overt political interference.
*79 There has been a loss of wisdom in this respect, a loss from eighteenth-century levels, and the message of Adam Smith requires reiteration with each generation. (Modern economics must stand condemned in its failure to accomplish this simple task, the performance of which is, at base, the discipline’s primary reason for claiming public support.)
There is more to it than this, however, and some miraculous rediscovery of eighteenth-century political wisdom would scarcely get us out of the woods. The surface paradox between observed frustrations with governmental processes and the resulting expansion in these same processes is itself based on a deeper and more complex phenomenon, one that itself involves a more permanent paradox. Hence, this chapter’s title.
As noted earlier, the ideal society is anarchy, in which no one man or group of men coerces another. This ideal has been expressed variously through the ages, and by philosophers of widely divergent ideological persuasions. “That government is best which governs least” says the same thing as the “withering away of the State.” Man’s universal thirst for freedom is a fact of history, and his ubiquitous reluctance to “be governed” insures that his putative masters, who are also men, face never-ending threats of rebellion against and disobedience to any rules that attempt to direct and to order individual behavior. In a strictly personalized sense, any person’s ideal situation is one that allows him full freedom of action and inhibits the behavior of others so as to force adherence to his own desires. That is to say, each person seeks mastery over a world of slaves. In a generalized social setting, however, and one that man can recognize as being within the realm of plausibility, the anarchistic regime of free men, each of whom respects the rights of others, becomes the utopian dream. Observed social orders depart from this dream, however, and men (and scholars) who think of themselves as potentially ideal citizens stand doomed to frustration with the practical. Perhaps some recognition of the equivalence between the hopeless and the ideal, repeatedly stressed by Frank Knight, would be helpful here. But there remains what should be legitimate faith in “improvement,” in “progress,” faith that should not be wholly deadened. Improvement within limits, faith in progress tempered by reason, not romance—these are the qualities of attitude that prompt men to live with the institutions that they have while seeking change in orderly and systematic fashion. The reasoning and philosophical anarchist, which involves no contradiction in terms, becomes the only person who might construct the constitutional basis for a free society, who might elaborate changes from an institutionalized status quo, changes away from rather than toward the threatening Leviathan.
Why should the potentially ideal citizen adopt the conservative stance suggested? If all men are viewed as moral equals, why not institute the anarchist utopia in the here and now? Must the utopia remain unattained because some men cannot qualify as brothers? Is the problem centrally one of broadening the anarchist elite until all men become capable of the challenge? This line of thought may characterize the anarchist-cum-elitist, but it offers neither the direct nor the detour route to the construction of a free social order.
Man as Rule-Maker
Man looks at himself before he looks at others. The individual recognizes, and acknowledges, that he is neither saint nor sinner, either in existing or in extrapolated society. Man adopts rules. The rule-maker explicitly and deliberately imposes constraints upon himself in order to channel his own expedient behavior toward rationally selected norms. No one could claim that Robinson Crusoe is not “free”; yet a rational Crusoe might build and set an alarm clock, a device designed deliberately to intervene in his behavioral adjustment to changing environment.
*80 It is rational to adopt rules that will effectively “govern” individual behavior, and in this sense we say that Crusoe, even before Friday’s arrival, is “governed.” The concept of rationally chosen “self-government” is a necessary starting point for any analysis of “governing” in a many-person setting.
Crusoe imposes rules on his own behavior because he recognizes his own imperfection in the face of possible temptation. This is not an acknowledgment of original sin but a simple recognition that behavioral responses are to some extent predictable by the person who chooses, and that some behavior patterns are better than others when a long-term planning horizon is taken. The rational Crusoe accepts the necessity of planning; his necessarily anarchistic existence may be carefully and systematically “planned” to make for a fuller and better life.
*82 Before shifting from Crusoe to the individual in society, however, we should note that the alarm-clock example was not randomly chosen. Crusoe constructs his alarm clock, an impersonal and external device designed to impose constraints on his own choice behavior. He may, of course, also select internal rules or precepts which, once adopted, will be rigorously followed. But there remains an important difference between the two cases, one that has significance for the broader problems to be examined later in this chapter. With the alarm clock, Crusoe disturbs his dozing in advance. He closes off one behavioral option that would continue to remain open under voluntaristic rule. In a literal sense, Crusoe is “governed” by his clock with respect to his time of starting to work, even in his isolated one-man world.
A somewhat different way of putting this is to say that Crusoe “makes contracts with himself” when he works out his planning program. He recognizes that the pleasant life requires work while the sun is young in the tropical morn and agrees with himself during his contemplative moments that such work is a part of an optimal behavior pattern. But, knowing himself and his predispositions, he fears that he will not expediently and voluntarily live up to his own terms. The alarm clock becomes, for Crusoe, the enforcing agent, the “governor” whose sole task is that of insuring that the contracts once made are honored. For effective enforcement, the “governor” must be external to the person who recognizes his own weaknesses.
As the alarm bell arouses him from his nap, Crusoe faces one paradox of “being governed.” He finds himself frustrated by an external constraint on his choice set, and he feels “less free” at that moment than he might have felt in the wholly voluntary act of rising from his bed. This sense of frustration may be repeated each and every morning, but Crusoe may continue to set the governing clock each evening. The rational rule-maker makes the trade-off between liberty and planned efficiency and includes an enforcement instrument in the contract.
I have discussed this choice calculus in some detail because the analysis is helpful in introducing problems raised by the enforcement of social contracts. Just as our Crusoe may choose to govern himself by the alarm clock, two or more persons may rationally choose to be governed by prior selection and implementation of enforcement institutions. Consider an elementary, two-person example. Once two men recognize each other’s existence, potential conflict becomes possible, and some mutually acceptable disarmament agreement may be worked out, either before or after conflict takes place. This contract will embody agreed-on limitations on behavior which will, in turn, imply agreement on something that may be called a structure of rights. Each party will realize, however, that the agreement will have little effective value until and unless there is some security against violation by the other. Some enforcement mechanism, some device or institution, may accompany the initial contractual agreement, and each party will place a positive value on having such an instrument included.
At this point the two-person example distorts analysis by making enforcement seem less essential to contract than it is in the more general multiperson interaction. But the two-person example carries offsetting benefits in that it focuses attention on one feature of enforcement that may be overlooked. As noted, both men in the example will place value on the enforcement institution. The design and location of this institution becomes all important, however; neither party will entrust enforcement to the other, and, indeed, the delegation of such authority to one party in contract violates the meaning of enforcement. Both persons will seek something analogous to Crusoe’s alarm clock, some instrument that is
external to the participants (potential violators all) and which may be programmed in advance, which may be counted on to detect and to punish violations of the agreement, and to do so impersonally and impartially. Both parties will place a higher value on external institutions of enforcement than on adversely chosen internal ones.
*83 (It is bad baseball when the catcher is required to umpire.) Both parties will prefer that the rules which they mutually choose be enforced by a third party, a stranger, by forces outside and beyond the participating group. Ideally, some wholly impersonal mechanism, a robot that could do nothing but follow automatized instructions, might be selected. Failing this, resort to third-party adjudication produces “government” of the ideal type in practicality.
The Protective State as Outside Referee
When the relative desirability of an external “governor” for enforcing contracts is understood, much of the continuing confusion and ambiguity in democratic theory may be clarified. The “government” or state that is conceptually derivative from this individualistic calculus is categorically different from that other “government” or state that emerges as an instrument of contract itself, as the means of facilitating and implementing the complex exchanges required for the provision of jointly consumed goods and services. This dual role for the state was discussed in earlier chapters. But it is sufficiently important to warrant elaboration and reemphasis here in a somewhat different setting. Failure to recognize this basic distinction provides a major source of the paradox of being governed.
For purposes of emphasizing the distinction, I have called that part of government which acts as the enforcing institution of society, the “protective state,” and that part of government which facilitates public-goods exchanges, the “productive state.” The task or role of the protective state is to insure that the terms of the conceptual contractual agreement are honored, that rights are “protected.” As noted, in this role the state ideally must be external to and divorced from the individuals or groups whose rights are involved.
*84 Conceptually, the participants in social contract “purchase” the services of the external or outside enforcing agency, much as Crusoe builds and sets his alarm clock. Once selected and informed as to the agreed-on terms or rules, the participants have no voice, and could have none, in the “decisions” of the enforcing agent. Ideally, there are no “decisions” to be made, in the sense of a value-weighing of alternatives. The enforcing agent’s task, conceptually, is purely scientific. The determinations to be made concern possible violations of agreed-on terms. These are almost archetype “truth judgments.” While margins for discretion will almost always be present, the answer must be in the form of either/or. The terms or rules, “the law,” were or were not violated, and there is no subjective moral evaluation in the agent’s or referee’s “choice.” The terms will include specification of punishment or penalty to accompany violation. And, again it is inappropriate for the external agent to introduce its own evaluation into “decisions.” (The basketball referee does not arbitrarily assign free throws to the shorter players.)
Precisely because “the government” (or the institutions of “the law,” the protective state as enforcing agent) is and must be external to the parties in contract, unhappiness and frustration appear when sanctions for violations occur. Crusoe experiences displeasure when his clock arouses him; the person who violates social contract, who “breaks the law,” and suffers punishment for it experiences comparable displeasure. This remains true despite the fact that, in both instances, the enforcing agent may have been rationally selected by the very person who is displeased. This suggests that, at the time of acknowledged or proven contract violation, with reference both to the policing and the imposition of punishment, “participatory democracy” that includes participation by those who violate the rules becomes an absurdity.
Even in the most idealized conditions of genuine social contract, the enforcement of terms that reflect agreement made in some prior stage will invoke displeasure of potential violators. To the latter, the protective state, as the enforcer of contract, becomes the enemy to be countered and outwitted if at all possible. This alienation from the enforcer state becomes much more severe, however, in the descriptive setting of the real world. The existing and ongoing implicit social contract, embodied and described in the institutions of the status quo, is exogenous to the participants, who have no sense of previous sharing in the making of the rules. To the extent that they divorce themselves from existing contractual order, their respect for “law” and for the agent assigned the enforcement task is diminished. Individuals come to feel that they are “governed” by institutions, by a system, that is external in any current participatory sense, which, as suggested, is a necessary condition, while, at the same time, they consider these institutions to be wholly exogenous in any contractual sense. That is to say, persons may feel themselves being forced to abide by terms of a “social contract” never made and subjected to potential punishment by an enforcing agent over whom they exert no control, either directly or indirectly.
This alienation of modern man from the protective state is exacerbated when he observes those persons who hold assigned roles in the functioning of this agency themselves to be departing from the rules defined in the status quo, either to aggrandize personal power or to promote subjectively chosen moral and ethical objectives. In this context it may become literally impossible for the individual to look on the state as anything other than arbitrarily repressive. Once this stage is reached, the individual abides by existing law only because he is personally deterred by the probability of detection and subsequent punishment. Indirectly, he may seek relief from arbitrary and capricious interference with his own freedom of behavior. All semblance of “self-government” may have disappeared, at least as this might exist at the margins or limits of actual governmental functioning.
The Productive State as Embodied in Postconstitutional Contract
As noted in earlier chapters, government, as observed, operates in a dual capacity. There is a part of government whose action is different, in principle, from that of rule-keeping or enforcement. In its postconstitutional role, what we may call the “productive state” is the constitutional process through which citizens accomplish jointly desired objectives, a means of facilitating complex exchanges
among separate citizens, each of whom enters the contractual or exchange process with rights assigned in the more fundamental legal structure. In this role, government is
internal to the community, and meaningful political decisions can only be derived from individual values as expressed at the time of decision or choice. Lincoln’s “by the people” becomes appropriately descriptive of current choice-making procedures. In such a context, current participation in collective choice becomes a desirable attribute. And, as noted, Wicksellian unanimity offers the idealized rule for the reaching of decisions. Departures from this benchmark are justifiable only because of the excessive costs of attaining genuine consensus. Even when the practicably acceptable departures from unanimity are acknowledged, however, the decision-making process is properly conceived as a surrogate for a full consensus model.
In this role or capacity, the state is not “protecting” defined individual rights. Government is a
productive process, one that ideally enables the community of persons to increase their overall levels of economic well-being, to shift toward the efficiency frontier. Only through governmental-collective processes can individuals secure the net benefits of goods and services that are characterized by extreme jointness efficiencies and by extreme nonexcludability, goods and services that would tend to be provided suboptimally or not at all in the absence of collective-governmental action.
*85 In this capacity, government decision-making involves agreements on quantities and cost-sharing. Outcomes are reached by compromising among conflicting desires, by making full use of various devices for compensation, by facilitating and promoting indirect trade-offs among persons and groups. The “truth-judgment” characterization of outcomes or decisions applicable in the enforcer or protective state is wholly foreign in this second governmental role. In providing and financing national defense, for example, the governmental process represents an adjustment among conflicting demands and generates some median level of budgeted outlay. This is not an either/or choice, and the level of outlay finally selected is not properly to be described as “true” or “false.” The outcomes of the institutional processes of the productive state are not “scientific.” These outcomes are derived from individual behavior, not from some objectifiable empirical reality. The results reflect the distribution of the value weights among persons that are inherent in the constitutionally determined rules for choice-making, and participation by affected parties is a necessary component of such rules because only through such participation can evaluations be revealed.
The outcomes that define the amount of publicly provided goods and services and the means of sharing their costs are themselves contracts, and, as such, these, too, require enforcement. This creates a necessary interface between the productive and the protective state. What we descriptively observe in government is an amalgamation of both of these, along with other components yet to be examined.
Experts and Democracy
The preceding summary of the dual capacity of government may be followed by a brief discussion of some of the implications. Consider, first, a setting in which no need for a productive state exists. There are no goods and services that may be consumed or used more efficiently through collective than through market auspices. In this setting, individuals have been assigned rights to resource endowments in a basic if implicit constitutional contract, enforceable by an external agent, the protective state. From this base, individuals are free to negotiate any and all mutually beneficial exchanges among themselves, and agreed-on terms will be effectively enforced by the agency. In such a world as this, there should be little or no concern expressed about the “form” of government. So long as the enforcing agency does not overstep its own constitutionally delegated bounds, the citizenry should not bother itself with the detailed means through which the agency operates. There is, in conception, no more need for concern here than Crusoe might feel as between alarm clocks made of hickory or of coconut wood. So long as the device works well, the details of construction and operation are not relevant.
There may, of course, be a relationship between the efficiency of the enforcing institution and its organizational form. And, more important, the probability of departure from its delegated role may be affected by organization. But concern for either of these matters is different in principle from that which is appropriately expressed for governmental “form” in the productive state. The jury may offer a familiar example. Operating as an inherent part of the enforcing agency, the jury’s verdict is a “truth judgment,” and the efficiency in attaining correct or accurate decisions may vary somewhat as the organization is modified. A jury of twelve men may be more efficient than one of ten men or one of six men, or vice versa, but there is no inherent reason for selecting one form rather than another. Much of the same applies for the inclusiveness of rules for verdict; whether unanimity is or is not required may affect the accuracy of decision as well as the direction of bias, but there is no single best rule for all circumstances. Or, consider a different example, that of the judge in an isolated community. The selection of a person to fill this role by voting processes may be preferable to random assignment or to any of several other methods. But there is no logical reason why democratic process should be preferable here since the function to be performed is not one that derives ideally from individual valuations at all, but is, instead, ideally one of determining objective fact and initiating well-defined action. Some notion of the extent of modern ambiguity is suggested by familiar proposals for “representation” of interests on multijudge appellate courts, and even more dramatically by the observed action of modern appellate courts in requiring appropriate interest “representation” on juries.
*86 This attitude appears to reflect simple blindness to the distinction between the protective and the productive state, between the external enforcement of contract and contract itself.
It may be argued that, in carrying out its enforcement role, the state should employ “experts,” “scientists,” “truth seekers,” “fact finders”—persons who are particularly trained in the law. If confined to its appropriate limits there seems to exist a logical and rational basis for delegation of enforcing power to a judicial elite. The problem is, of course, that of keeping any such elite confined within any limits that might be specified, and it is in recognition of this problem that much of the modern ambiguity arises. Democratic procedures, including representation of interests, may be explicitly incorporated into the structure of the enforcer state because these seem to offer the only means of exercising ultimate control over the experts to whom enforcing tasks are delegated. If they cannot voluntarily withdraw from the game, players on all sides may insist on retaining some power of removing the referee, even when they recognize that this intrusion of player control will, ceteris paribus, introduce inefficiencies.
By a converse chain of reasoning, expert or scientific judgments become wholly inappropriate in generating outcomes in the productive state, and democratic procedures become necessary. The question of “form” becomes all important here, and, of course, the productive state is that aspect of government that spends billions, allegedly in promoting the “general welfare.” The ambiguity in attempts to incorporate democracy directly into government’s enforcer role is matched by that which holds that government should provide goods and services for citizens in accordance with “social goals” or “national priorities” rather than in accordance with citizens’ own expressed desires. This latter view is, in part, fostered by the practical necessity of bureaucratic discretion and by the intellectual failure to distinguish procedural and substantive norms.
The costs of decision-making guarantee that wide discretionary powers rest with bureaucratic personnel. Representative assemblies, themselves already one stage removed from constituency demands, can scarcely vote separately on detailed items in a multipurpose budget. Allocative decisions are necessarily shifted to the executive branch, to the bureaucracy, and without criteria for determining citizenry evaluation, the temptation to introduce “experts” is strong. For those allocative decisions within his power, how is the bureaucrat to choose? On his private, personal preferences? Or, on the introduction of some presumed judgment of “general welfare” or “public interest”? Some choices are surely “better” than others, or so it would seem. To accept this implies, however, that substantive criteria have been subtly introduced over and beyond the procedural criteria that are embodied in the decision-making itself. To the external observer,
any result reached by the procedure of voluntary contract among persons is equally desirable, provided only that the procedural norms are followed, that the process itself is efficient, and that the interests of the parties in contract are the only ones to be counted. This is clear enough when we discuss ordinary market exchanges among persons. But the issue necessarily becomes cloudy when we shift discussion to the actions of the government in supplying goods and services. As noted, governmental process here must be interpreted as a surrogate for a complex exchange among all citizens in the community. To the extent that this interpretation mirrors reality, all outcomes that are reached through agreed-on and efficient procedures for decision-making become equally acceptable. When it is recognized, however, that governmental process must include departures from any rules that would be fully analogous to voluntary exchanges, it is difficult to maintain a stance of full neutrality as among possible alternatives. Some of these do seem better than others.
Personal Loss Functions and Procedural Norms
Governmental decision-making in its operative form departs from voluntaristic contracting, despite the contractarian basis for the state’s productive role. Indeed the relative efficacy of governmental institutions in providing genuinely public goods and services is presumed to stem from the cost-reducing impact of allowable departures from strictly voluntaristic negotiations. But, in their turn, these departures guarantee that some participants in almost every decision will be coerced into abiding with undesirable terms. Budgetary and taxing decisions are not reached through Wicksellian unanimity, and to the extent that they are not, some participants suffer losses in an opportunity-cost sense. The existence of these opportunity losses becomes an additional source for the basic governmental paradox.
Consider a politically organized municipality that has long operated under a constitution that specifies simple majority voting as the rule for making budgetary choices. Spending and taxing decisions are made in town meetings. (This simplest of models is used here to avoid unnecessary complexities that are introduced by representation.) Assume that a proposal is made to finance a new auditorium through an increase in the general property-tax rate. The proposal secures a majority in the assembly, and it is adopted. Each person who opposed the measure will, however, experience an opportunity loss consequent on the political action taken, a loss by comparison with his own individually preferred outcome. To these disappointed members of the losing minority coalition, the budget is too large, but observed voting behavior suggests that a proposal for reversal cannot carry the day. Members of this losing coalition, singly and in groups, will be motivated to search out and to propose other spending schemes which are personally preferred and which promise to yield benefits in excess of the allocable tax costs. Such persons, or a political entrepreneur who senses their interest, will try to locate new budgetary propositions that may succeed in generating majority support. But as a second such proposal, say, a new swimming pool, is added to the municipal budget, a new and different disappointed minority emerges. Even to some of those who approved the initial proposal for spending on the auditorium, the budget may now have become too large; they, too, will experience opportunity losses. To persons outside either of these two majorities, the opportunity loss increases as the budget grows, and they are now more strongly motivated to secure “budgetary justice” by getting the enactment of at least some projects that they value differentially.
In a continuing process of this sort, and so long as the tax institution remains more general in incidence than the particular benefit projects, each member of the community may experience opportunity loss from governmental action. The total outlay may seem too large to each and every citizen; the budget will contain items of spending that are valued less than the corresponding tax obligation. This conclusion holds even if each budgetary project, considered independently, is “efficient” in the strictly allocative sense. There is, of course, no assurance that all majority-approved projects will be allocatively efficient, especially in the absence of smoothly working monetary side payments. The introduction of logrolling possibilities allows for the enactment of projects that benefit specific minorities, but this does not modify the general conclusion about budgetary frustration.
*87 The budget is, of course, symmetrical; outlays must be financed. And essentially the same process as that sketched above would apply to majority-approved departures from strict generality in tax distribution. Suppose that an initial proposal is made to reduce the tax shares of a majority of citizens, while increasing the shares of the minority. Anyone in the latter group senses the loss, and he seeks relief by organizing a somewhat different majority, insuring his own membership, that will support additional departures from tax generality. As the process continues, each person may be placed in the position where he feels that the whole tax structure is “unfair” and “inequitable,” which translates into the notion that the “loopholes” available to others than himself are unwarranted.
The direction of overall budgetary bias which majority-voting decision processes may generate is wholly irrelevant to my argument at this point. It does not matter whether the results are budgets which are “too large” or “too small” by normal efficiency criteria, or that offsetting biases produce overall budget sizes that are “just right.” If the productive state operates strictly within the procedural norms laid down for it in the constitutional stages of decision, and even if its provision and financing of genuinely public goods and services represents the most efficient institutional arrangements possible, the individuals who are the final recipients of benefits and the final bearers of costs may feel that they are being coerced. And coerced here in a somewhat different sense than that which must be felt by any person who is required to live up to contractual terms that he has himself agreed to at one time. Even if the contractarian basis for governmental action is acknowledged in the abstract, so long as departures from unanimity are descriptive of the collective decision rules, the individual’s sense of being compelled to abide by unacceptable terms must be treated as fact. This sense of coercion is enhanced precisely because of the internal nature of the productive state, precisely because the basis is seen to be contractarian. The individual may accept “rules” enforced by the protective state as being exogenous to his own influence. He abides by law because it is there, and he may see no way that his own behavior can modify this. He may not be so willing to abide by democratically evolved budgets, on either the spending or taxing side, because he is encouraged to consider his own influence on budgetary outcomes, his own participation in democracy at work.
This fiscal frustration with government that is experienced by the citizen necessarily increases as the size of the governmental sector grows, relative to that of the private or market sector of the economy. As government, and notably the central government, commands a larger share of the economy’s total resources, as more specific functions are taken over collectively, the citizen’s personal benefit-cost criteria are increasingly violated. Consider an example. If government limits itself to an enforcer role, all exchange is private and voluntary. The individual’s ability to opt out of any particular agreement guarantees that enforced acceptance of unfavorable terms is minimal. (This principle holds true even if all markets are not fully competitive; the degree of monopolization will, of course, affect the comparability as well as the number of alternatives that each market participant faces.) If the government takes on a productive role, and if it assumes responsibility for the complex exchange process embodied in the provision of public goods, the average or representative citizen must anticipate that he will rarely, if ever, optimally prefer the particular budgetary package that he will be required to enjoy and to pay for. Given almost any budgetary package, the citizen must expect that he would prefer expansion in some items, contractions in others, even within the same revenue constraint. And, overall, he may prefer that the total outlay be larger or smaller than that to which he is subjected. On the taxing side, the citizen will, quite straightforwardly, prefer that his own cost-shares be reduced relative to those of others in the community. As the total size and complexity of the budget increases, the individual may become increasingly disappointed with governmental performance, even if all functions are carried out efficiently in the small.
Individual opportunity losses increase with increasing centralization in the public sector in much the same way as with increasing budget size and complexity. It has long been recognized that the individual’s sense of participation in collective choice is relatively greater in localized jurisdictions, rationally so because the influence of a single person on group outcomes is inversely related to group size. A less familiar but still elementary fact is that governmental process is necessarily closer to genuine voluntary exchange at the local level because of the relatively greater freedom of migration. The limits to tax-budgetary exploitation of the individual are reached more quickly in local governmental units than in central governments. Migration thresholds need not be high in a multicommunity national economy that is characterized by high resource mobility, a description that has fitted the United States in the twentieth century.
Enforcement of Putative Contract
In the productive state that provides and finances public goods and services, costs of agreement dictate that decisions binding on all members of the community be made by some subset of the putative parties in contract. Once made, however, these decisions must be enforced just as those reached by negotiations among persons in genuinely voluntary interactions. To enforce its decisions, the productive state must call on its complement, the protective state.
To the individual citizen who may oppose a particular outcome, enforcement here is not one whit different from exogenous destruction in his rights. He is forced to abide by choices made for him by others, which may involve a net reduction in his own command over material goods. Taxes are levied on him, without his consent, to finance goods and services that he may value less highly than the foregone private-goods alternatives. The activity of the enforcing agent becomes quite different here than it is with reference to ordinary contractual agreements among separate parties. In the latter, rights are presumably well defined in advance, and the contractual terms are explicitly known and acknowledged. The task of enforcer is “scientific”; it must determine whether an explicit contractual agreement has been violated. This setting may now be compared with that involved in the enforcement of the putative fiscal contract that is reflected in a decision on providing and financing a public good. Suppose that a spending-taxing decision has been made by an appropriately required majority in a legislative assembly. The outcome is opposed strongly by a significant minority of citizens. Here the enforcing agent must assume a wholly different role. Problems arise in determining just what rights individuals possess prior to contract, and in determining the limits to which these rights, if they existed, may be coercively destroyed without consent in the putative fiscal contract that the decision reflects.
The enforcement agency’s task may remain “scientific” at the purely conceptual level, but the discretionary limits are significantly wider here. The range over which the agent may make his determination is not narrowly confined, and, within this range, his own judgments may enter, judgments of “value,” not of “truth.” Consider a simple comparison with ordinary two-person contract. If A tells B that he will repay a loan of $10, the enforcer must decide only whether A has carried out the terms. But what if A and B join forces in a three-person collective group and, by majority vote, impose a tax of $10 on C to finance a joint-consumption project? Suppose that C objects and refuses to pay the $10. He has violated no agreement, no explicit contractual arrangement made with his peers. The enforcing agent or adjudicator here must do more than determine whether C fails to comply. The agent must also decide whether the putative contract is, in itself, “constitutional.” As noted, this, too, is a factual or scientific question at the conceptual level of inquiry. But constitutions are unlikely to be at all specific with respect to the rights of collectively controlling coalitions to impose binding decisions on all members of the community. Historically, the United States courts have held only that overtly discriminatory treatment is prohibited. If taxes are plausibly “general,” there is normally no “constitutional” basis for minority objection, regardless of the distribution of benefits or of the nonvoluntariness of the decision.
The point of emphasis here is that the necessary intrusion of the external enforcing arm of the state into the putative social contract reflected in collective decisions concerning the financing and provision of collective-consumption goods places this arm or agency in a conceptually superior position. By necessity, the protective state must ride herd on the possible excesses of the productive state that is its complement. Majorities might, if left unchecked, impose discriminatory costs on minorities. Gross departures from anything that could plausibly be legitimate social contracting might be observed under majority rule without constitutional constraints. Nonetheless, the granting of review authority to the enforcing arm of the state carries with it a fundamental contradiction. Under the majoritarian governmental process that finances and provides public goods, the individual citizen who holds the franchise retains some indirect controls through the possible formation of rotating majority coalitions. Even if he remains dissatisfied and disappointed with particular results, there is a participatory element that is present which has some value save in those cases where the constituency is permanently divided. With respect to the enforcing agent, however, the individual does not have even this recourse open to him. The transfer of final authority to this part of the state must, therefore, reduce rather than enhance the individual’s influence.
Enforcer’s Encroachment on the Contractual Domain
The alienation of the individual citizen from government in the large is further increased when the enforcing agent expands its authority and encroaches on the domain that is or should be appropriately reserved for the putatively contractual state operating postconstitutionally. The temptation for such encroachment that is placed on the men who fill assigned enforcement roles is directly related to the authority granted and to the respect for this authority held by both private citizens and by those who hold positions in the contractual branch of government. If it comes to be widely acknowledged, and accepted, that only the enforcer (the judiciary) can determine whether or not a particular putative contractual proposal (for example, a budgetary scheme) is “constitutional,” and, further, that there is no appeal from the enforcer’s final pronouncement, there should be little surprise at the enforcer’s failure to distinguish carefully between “constitutionality” and “public good,” with the latter defined personally and privately. (If others treat him as God, man will come to think that he is God.) This is especially the case when legal and political philosophers themselves fail to sense the critical differences between these two categorically different sets of criteria.
In practice, some institutional ambiguity must always be present, and the conceptual boundaries between enforcement and contract itself can rarely be maintained inviolate. It remains nonetheless extremely important that these ambiguities be minimized, and that encroachments in either direction be called into account and corrected if possible. One of the primary reasons for the discontent with government that we observe in the 1970s is traceable to the failure of the separate agencies to respect the distinction between their separate roles. The federal courts in the United States, which must be a vital part of the enforcing agency but whose task extends neither to a rewriting of the basic constitutional contract nor to the providing of public goods and services, have sought, and gained, widely respected authority to define “public good,” and their criteria for decision have come increasingly to be those of “social interest” rather than those of embodied contract, whether this be explicit or putative. Whether the values reflected by the thrust of particular judicial decisions are deemed desirable or undesirable to the observer, the role that has been assumed by the federal judiciary must be recognized to be grossly violative of the conceptual separation between constitutional contract and its enforcement on the one hand and between the enforcing agent and the productive state on the other. It is little wonder that the individual citizen stands bewildered. By this reference to the American setting in the 1970s, I am not suggesting that the political structure was conceived initially and has been operated along precisely the model developed in my analysis and that departures have taken place only in recent decades. The analysis will, I hope, provide a way of looking at the operating political structure at any point in time, a structure that is always, to an extent, “imperfect.” I am suggesting that by applying critically the model for democratic political order to the modern American setting, the anomalies seem gross indeed. Furthermore, and in part because of the quantum increase in governmental size, these anomalies do much to explain the intensity of the basic paradox sensed by the ordinary citizen.
Studies in Philosophy, Politics, and Economics (London: Routledge and Kegan Paul, 1967); also see his
Law, Legislation, and Liberty, vol. 1,
Rules and Order.
Rousseau; the alarm-clock example is found on page 95.
The Foundations of Human Society, pp. 122f.). See also Gordon Rattray Taylor, “A New View of the Brain,”
Encounter (February 1971): pp. 25-37.
The Social Contract, p. 393.
Second Treatise of Civil Government, pp. 11ff.
Journal of Political Economy 80 (July/August 1972): 680-702.
The Calculus of Consent.
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).