Front Page Titles (by Subject) Part IV.: The Economics and the Ethics of Democracy - The Calculus of Consent: Logical Foundations of Constitutional Democracy
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Part IV.: The Economics and the Ethics of Democracy - James M. Buchanan, The Calculus of Consent: Logical Foundations of Constitutional Democracy 
The Collected Works of James M. Buchanan, Vol. 3. The Calculus of Consent: Logical Foundations of Constitutional Democracy, with a Foreword by Robert D. Tollison (Indianapolis: Liberty Fund, 1999).
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Foreword, coauthor note, and indexes © 1999 Liberty Fund, Inc. The Calculus of Consent, by James Buchanan and Gordon Tullock © 1962, 1990 by the University of Michigan.
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The Economics and the Ethics of Democracy
Democratic Ethics and Economic Efficiency
Are politics an attempt to realize ideals, or an endeavor to get advantages within the limits of ethics? Are ethics a purpose or a limit?
The failure to separate positive analysis and normative ethical statements has been one of the major barriers to scientific progress in political theory. Rarely does one encounter so much confusion between “what is” and “what ought to be” as in this field of scholarship. Our analysis is not, of course, free of value judgments. In the introductory chapters we have explicitly stated the fundamental postulates on which our construction is based. We have tried to outline, in an admittedly preliminary and exploratory fashion, the calculus of the rational utility-maximizing individual as he confronts what we have found useful to call constitutional choices. This whole calculus has meaning only if methodological individualism is accepted, and this approach must embody philosophical commitments. Unless the individual human being (or family unit) is accepted as the central philosophical entity, and this acceptance requires an ethical judgment, our analysis is of little value. Many scholars refuse to accept this premise, and propose instead to adopt some organic conception of the social group. This alternative conception embodies the individual as a part of a larger whole and attributes to him varying degrees of ethical independence. Under this conception several theories of political constitutions may be developed, and these theories may be useful in explaining and predicting the evolution of certain political institutions in certain circumstances. We do not propose to argue in favor of our own individualistic conception or against the organic one. We repeat merely that, having stated our premises explicitly in this respect, no objection should be raised against our construction on the grounds that it neglects the “ethos of group life.”
The Behavioral Assumptions
We must also emphasize that our behavioral assumptions do not properly introduce an ethical question. We have tried to apply the economist’s assumptions about human behavior in an analysis of political choice. There is nothing moral or ethical about an analytical assumption. Disagreement may appropriately arise concerning the empirical validity of the utility-maximizing assumption, but this is a matter that may conceptually be subjected to empirical testing through the comparison of the real-world implications of hypotheses developed on the basis of this assumption and real-world observations. No issue of “right” or “wrong” in an ethical sense need be introduced at all.
Compared with the more standard works in political science, our analysis may seem to involve a “pessimistic” view of human nature. For scientific progress, however, it is essential that all conceivable assumptions about human behavior be tested. If our models provide some explanations of real-world events, and we believe that they do, our assumptions must have some empirical validity, quite apart from the “attractiveness” of the human characters that inhabit our hypothetical model world.59
In one sense our approach taken as a whole is more “optimistic” than that taken by standard writers in political theory. Our assumptions about human nature may be judged “pessimistic,” but our conception of the political process, as such, is surely more congenial to those seeking “sweetness and light,” “peace,” and all such good things than the conception usually implicit in political discourse. We view collective decision-making (collective action) as a form of human activity through which mutual gains are made possible. Thus, in our conception, collective activity, like market activity, is a genuinely co-operative endeavor in which all parties, conceptually, stand to gain. By contrast, much of orthodox political thought seems to be based on the view that the collective-choice process reflects a partisan struggle in which the beneficiaries secure gains solely at the expense of the losers. If the political “game” should be, in fact, similar to that conception which seems to be implicit in much discussion, especially that concerned with the doctrine of majority rule, the maintenance of political order must depend, in fact, on the strength of moral restraints placed on human actors. If, by contrast, a broader and, we think, a more “correct” conception of political choice is adopted, there need be less reliance on moral restraints of individuals.
The Ethics of Trade
In our analysis we have assumed that individuals are motivated by utility-maximizing considerations and that, when an opportunity for mutual gains exists, “trade” will take place. This assumption is one of the foundations on which economic theory is constructed. Let us examine some of the ethical issues that may arise in the operation of ordinary market exchange before considering the much more complex problems inherent in this approach to the political-choice process.
Initially it seems useful to distinguish two separate stages in the organization of economic exchange, although in practice these two stages are simultaneous and the two decisions made by the individual participant are interdependent. First, the individual must decide to enter into an exchange relationship, and, secondly, he must agree to the specific terms at which exchange shall take place. The point to be made here is that, in normal discussion, ethical issues are considered to arise in the second decision, but not in the first. In Chapter 8 we discussed the simple two-person bargaining model in some detail. Where a bargaining range exists, the terms of trade will determine the division of the total benefits among the participating parties. Moreover, since this division is essentially a distributional question, the whole problem of “fair shares” arises, a problem that can only be discussed in terms of ethical norms.
As we suggested in our earlier discussion, this admittedly ethical problem is reduced to a minimum in the operation of competitive markets because the proper functioning of a market organization will insure that the single buyer or the single seller has little control over the terms of trade. If the terms of trade (the conditions of exchange) are set independently of the individual participant’s own behavior, no ethical question can arise concerning his “fairness” in dealing with other parties to exchange, ruling out fraudulent behavior. Thus we find that ethical issues about market behavior present themselves only when individuals or groups are in noncompetitive positions, when they possess some power to influence the terms of trade in their favor.
In ordinary exchange no ethical question is presumed to arise concerning the decision of the individual to engage in trade, regardless of whether or not he possesses independent power to influence the terms of trade. Moreover, a moment’s reflection suggests that there could hardly be an ethical issue posed regarding this sort of behavior. Not only is the individual presumed to secure some benefit by entering into trade, but he must also be providing benefit to the other parties in the contract. On almost any set of ethical norms, trade would seem to be an activity that would be accepted as fully consistent with the moral standards of the community.
It is difficult for the modern student of social progress to keep in mind the fact that this apparently obvious interpretation of trading activity has only been dominant since the eighteenth-century Enlightenment. Before that time, “trade,” as an activity, was suspect; and, implicitly, individuals engaged in trade were somehow supposed to be following less moral pursuits than other members of society. This suspicion of trade, as an activity, still dominates the non-Western world and has not yet entirely disappeared from Western thought. Some of the elements of such suspicion can perhaps explain the neglect of the study of the political process in terms of an “exchange” relationship.
Under what conditions is “trade” or “exchange,” even in the modern world, considered to be immoral in and of itself and quite apart from the terms of trade? To begin with, we must recognize that each person has certain moral standards, and these normally will include certain criteria for human behavior. An individual may consider it perfectly moral behavior to sell his own labor services to a business firm, but he may think that it is grossly immoral for a woman to sell the services of her body to a man. An economist may consider it morally acceptable to sell his educational services to a university, but morally unacceptable to sell his professional services to a political party. Each person will have a set of such moral values, and these may include attitudes toward certain commodities or services that other people “ought” not to sell for “money.” There is nothing inconsistent between the existence of such moral standards and an individualistic ethic until and unless the individual desires to constrain others to conform to his own moral standard of behavior. It is quite consistent for the individual to hold a set of values which dictates that a woman ought not to sell her body on the market, and at the same time to include within this set of values the attitude that he should not attempt to constrain the prostitute and her client from exercising their own free choices. In evaluating behavior in others which he thinks morally wrong, the individual, in effect, says: “I think that they are doing themselves harm by such actions; but, since I value freedom of individual choice and since there is no harm imposed on me by their actions, I do not wish to interfere by placing constraints on their behavior.”
Note that this attitude is to be distinguished from a second one in which the individual thinks that other individuals, through behaving in a way that he considers immoral or unethical, are actually reducing his own utility. If an individual interprets the prostitute plying her trade in this way, her activity is, in a real sense, imposing external costs on him. However, even when external costs are imposed on third parties, we must distinguish two separate reactions. The individual may recognize that the activity is imposing external costs on him, but he may also recognize that constraints on this activity may open up the way for other collectively imposed constraints, some of which may affect him directly and adversely. Looking at the problem in this way, the individual may rationally choose to accept the external costs (the reductions in his own utility) which the free play of individual choice in the activity under consideration introduces.
We must distinguish this attitude from that of another individual who holds somewhat stronger views on the immorality of the activity in question, say, prostitution. This individual may rationally seek collective action aimed at preventing the activity from taking place. In reaching a decision of this kind, the individual evaluates the external costs that the activity imposes on him and estimates that these are sufficiently great to offset all possible adverse collective decisions that might be taken against some of his own accepted practices were the State allowed to legislate on moral issues. In this case the individual must consider the external costs to be high enough that he is willing to pay some positive sum in order to secure elimination of the activity. In this sense he must be willing to “trade” something in return for the elimination of the activity under consideration. In many cases, of course, moral standards would become significantly weaker than they initially appear if those who hold them were asked to contribute positive sums toward the elimination of that behavior in others which they condemn as immoral.
Normally, of course, there is sufficient standardization of moral values over the population of a community to prevent serious issues of the sort posed from arising. Most trade falls within the accepted moral schemata of the great majority of the population. Nevertheless, it should be acknowledged that there is never a sharp dividing line between the many trading or exchange activities that are generally accepted and the relatively few genuine trading activities that may be suspect.
Exchange of Political Votes
This discussion of the morality of exchange is helpful because it points directly toward one interpretation of prevailing attitudes on the exchange of votes in Western societies. Individual votes on political issues seem to be among the scarce commodities or services that many members of the community consider inappropriate for open buying and selling. The free marketing of votes, either by an individual or by a member of a legislative assembly, is considered to be an activity in which individuals “ought not” to engage. This attitude toward the marketability of political votes, interpreted in the sense of outright vote-buying and vote-selling, seems to be an empirical fact. The attitude toward vote-trading through indirect methods is considerably different.60 Our task, therefore, is to examine the logical basis for this combination of attitudes, if indeed one exists.
Why should the rational individual consider the sale and purchase of votes among his fellow citizens to impose external costs on him, that is, to reduce his own utility? Suppose that A observes B selling his political vote on an issue to C. Why should A’s utility be affected by this transaction? B and C mutually gain from the exchange, or else it would not take place. One approach would suggest that A’s utility is reduced (that he bears external costs) because the transaction gives to C political power that C would not otherwise possess. If open buying and selling were to be permitted, A could have an equal opportunity with C to purchase the vote of B. However, what is meant by “equal opportunity” in this case? If the distribution of economic power among the citizens is unequal, open buying and selling of political votes might be said to give “unfair” advantages to the richer members of the group. To be sure, both the poor (exemplified by B), who would find their over-all economic position improved by selling their political decision-making power, and the rich (exemplified by C) would gain from the vote exchange. However, if majority voting prevails, A can be more readily exploited by the votes of B and C in a coalition “owned” and organized by C.
This argument, which is probably characteristic of much orthodox thinking, would seem to contradict some of the conclusions reached earlier to the effect that full side payments (that is, open vote-buying and vote-selling) would tend to reduce, not to increase, expected external costs from the operation of decision-making rules. We are obliged, therefore, to examine the argument quite carefully. Again we may use a simple illustrative example. Figure 25 shows the location of three families, A, B, and C, in a community. The sizes of the squares indicate the economic position of the three families; for simplicity, assume these to be houses. Suppose now that the community is granted sufficient outside funds to construct one road to be run horizontally from the western to the eastern boundary of the territory. If open vote-buying is allowed, C may purchase B’s vote and, by majority rule, choose the road shown as II in Figure 25. On the other hand, if all vote-buying and vote-selling should be prohibited, A and B might form the majority and construct the road shown at JJ. This road, being closer to both A and B, would seem to be a more “desirable” choice on the grounds that “political equality” is more nearly satisfied by this decision than by the alternative one.
This line of reasoning is quite convincing, up to a point, and it does tend to contradict some of our earlier conclusions. It does so, however, only because the market is assumed to be imperfect. If, instead, the vote market is assumed to be perfect in all respects, A and B might well form the majority coalition, as in the no-trade case, but they would still construct the road at II. They could, by acting as a coalition, force C to purchase both of their votes (or to pay as much for one as if two were purchased) and to pay an amount sufficient to reduce his own net gain to zero (a negative sum if the road is to be tax financed). A, acting as a “political entrepreneur,” could offer B just as much for his vote as does C under these circumstances, because he would be aware that he will have the opportunity to sell both votes (as one) to C. One additional transaction or “bargain” would be required in this solution, but with perfect markets this will be no barrier.
It seems evident, however, that some imperfection in the vote market might arise, and, in this case, bargains or trades between C and B would seem much more likely to emerge. Expecting this, the rational individual may consider the open buying and selling of votes to impose an external cost on him.
If we consider the question of vote-marketing at the time of constitutional choice, differences in economic position are not predictable. Therefore, to generalize our discussion we need to allow, not for predictable differences in economic position, but for differences in interest on particular issues, which may or may not be based on differences in economic status. The individual, considering organizational rules, may well think that vote-marketing, if it could operate perfectly, would reduce expected external costs. However, he may also predict imperfections in this market which may more than offset this advantage. With expected market imperfections of a certain type, the individual may choose rationally to try to prohibit the open buying and selling of political votes.61
If the market imperfections are expected to take the form of the exclusive exchange of votes between the most interested and the least interested groups, with the absence of “political entrepreneurs” or “vote brokers” in the mildly interested groups, the individual may expect interest coalitions to solidify and to become permanent. The basis on which his constitutional decisions rest may be changed if he does, in fact, expect permanent coalitions to form.
Closely analogous to this is the operation of competitive markets. If, in fact, markets could be expected to work perfectly, there would never be any need for the State to intervene with antimonopoly legislation. The firm securing a monopoly position temporarily would tend to be restrained in its efforts by the emergence of other firms producing closely related goods and services. Any restriction on the freedom of firms to merge, to enter into pricing agreements, etc., would, under these conditions, amount to a denial of “gains from trade.” However, when it is recognized that certain types of agreement may lead to the establishment of market-power positions that are not readily displaced due to the imperfect operation of the mechanism of adjustment, it becomes reasonable to seek prohibitions on such agreements.
There are two separate reasons why such agreements should be prohibited under these circumstances. First, once attained, the firms may be able to exploit their bargaining advantage; they may be able to secure an “unfair” share of the total gains from trade by manipulating the terms of trade in their favor. This is not, however, the relevant part of the antimonopoly analogy for our purposes. Here the aim of intervention is not that of prohibiting trade, but rather that of insuring more acceptable terms of trade. The second reason for trying to prevent the attainment of positions of dominant market power lies in the expected ability of firms, once having attained this power, to prevent the emergence of other rival groups (competitors). This reason, which is the central theme in the legal if not in the economic history of the antimonopoly laws, seems closely analogous to the argument that we have developed above regarding the open buying and selling of votes in the market. The individual may not have sufficient confidence in the perfection of the vote-market’s operation; he may fear that open buying and selling will quickly lead to the emergence of specific interest-group coalitions, which will tend to become permanent and which will possess the power to prevent the emergence of alternative patterns of coalition formation.
The whole institution of vote-buying and -selling is exceedingly difficult to analyze because of the unique nature of the items traded. A vote in the collective-choice process, operating under less-than-unanimity rules, represents potential power to impose external costs on other individuals. There are few fully acceptable analogies in the operation of ordinary markets. The potential power exists, of course, whether or not the individual holder places it on the market. Thus it is relatively easy to see why moral and ethical questions of major import tend to arise when any consideration of vote-trading is introduced.
The Imperfect Ideal
We recognize, however, that some forms of vote-trading are accepted as being consistent with the prevailing moral standards in Western democracies. The individual calculus in this respect—if prevailing attitudes can be taken to reflect rationally reached conclusions—suggests that, in reference to the whole issue of vote-trading, the “ideal” is neither “none” nor “all” but somewhere in between. As the analysis above indicates, if market imperfection is expected to be present and if the results of this imperfection can be predicted in advance, the placing of prohibitions on open buying and selling of political votes may be quite rational. If a full and open vote-trading market, where transactions take place in money, could be predicted to result in the most interested individuals and groups purchasing votes from the least interested on all or a substantial number of issues, then the rational utility-maximizing individual might expect such an institution to result in unbearable external costs or even in the overthrow of the constitutional system, the “social contract.” On the other hand, the individual might also recognize the advantages to be secured from vote-trading under certain circumstances. Indeed, if all vote-trading were prohibited, he would probably be unwilling or at least quite reluctant to agree to any less-than-unanimous decision-making rules for collective choice.62 He may consider, therefore, that the “optimal” amount of vote-trading is provided by that system which prohibits open markets in political votes as such but which sanctions indirect methods of accomplishing roughly the same purposes. The opportunity to trade votes on separate issues through logrolling, explicit and implicit, provides an essential protection to interested minorities against discriminatory legislation. The value of this protection may be widely acknowledged, and at the same time the “open” sale of votes may be condemned as immoral. We have shown that this attitudinal pattern need not be internally inconsistent, even within the limited framework of the individualistic ethic.
The conflict between democratic ethics and economic efficiency need not, therefore, exist in so distinct a form as it might have appeared at earlier stages of our construction. Economists recognize that unrestricted trade can be guaranteed to lead to greater “efficiency” in resource usage only if markets are expected to operate perfectly. If imperfections are predicted and the characteristics of these imperfections can be identified, specific restrictions on trade may, under certain conditions, actually increase “efficiency.” These restrictions will rarely, however, extend to the prohibition of all trade.
This is not to imply that the existing set of legal prohibitions and restrictions (along with the existing moral attitudes toward the exchange of votes) is necessarily that set which the rational utility-maximizing individual “should” support. Our purpose has been that of indicating that this set is not necessarily inconsistent in itself, and that the possible conflict between ethical standards and economic efficiency is not demonstrated.
We are aware, of course, that other arguments can be developed to justify the moral attitudes on vote-trading that seem to exist. We neither wish to deny the value of these arguments nor to compare them with those we have presented. For our purposes, which are those of developing the implications of rational individual behavior in political choice-making, the other arguments are irrelevant. Much of the orthodox discussion has been based, as we have suggested, on different assumptions about the behavior of the human actor in the political process. If individuals are assumed not to try to further their own interests but instead to seek some “public interest” or “common good” when they participate in collective choice, the sale of a vote becomes clearly immoral since the receipt of a money payment provides definite proof that the individual is receiving “private” gains from his power to participate in political action. Much of the standard attitude toward vote-trading probably stems from this approach to the governmental process. We note only that the immorality of vote-trading in this context is wholly different from that which we have considered in some detail above, and much behavior which seems to be accepted as standard practice in modern democratic institutions must also be held to be immoral on this alternative approach. It would be interesting to examine the full implications of the behavioral assumption which holds that the individual always seeks the “public interest,” but, as Frank Knight has often observed, no one has yet provided us with an analysis of the organization of a society of angels.
Vote-Trading and the Rule of Unanimity
The analysis of vote-trading above applies only when collective decisions are made under less-than-unanimity voting rules. If the unanimity rule is required for collective action, the political vote of an individual no longer represents the potential power to impose external costs on other individuals. Here the vote represents only the “right” or the “permit” to participate in the division of the mutual gains that collective organization and action can secure. This major change in the very meaning and significance of the political vote of the individual modifies the analysis of vote-trading.
If, for all collective decisions, all members of the group are required to agree, there would seem to be no rational basis for imposing any prohibition on the purchase and the sale of political votes of individuals. The dangers discussed above, those of permanent power blocs being formed, no longer can exist since the effective coalition on all issues must always consist of all members of the group. Prohibitions on vote-trading under the unanimity rule serve only to create inefficiencies in the use of collective resources. An illustrative example may be helpful. Suppose that all vote-trading were to be strictly prohibited and that the rule of unanimity is operative for all collective action. Any proposal that stands a chance of adoption must include within a single “package” elements that provide net benefits to each individual and group in the community. In order to organize such a “package” proposal, many rather wasteful and inefficient projects may have to be included. If open vote-trading were to be allowed, there would be no need for any genuinely inefficient projects to be undertaken. True “pork-barrel” legislation would never be observed under this institutional scheme. With vote-trading prohibited, this sort of “pork-barrel” legislation would be quite prevalent under the operation of the unanimity rule, although it would be present under other voting rules also. However, under these other voting rules this “pork-barrel” inefficiency must be compared with the greater danger of permanent coalition formation that open vote-buying and vote-selling might encourage. This second danger, or cost, is wholly absent when the rule of unanimity is operative.
The Rent-Control Analogy
We may construct, without difficulty, an economic analogue to the prohibition of vote-trading. This analogue serves perhaps to bring out clearly the nature of the questions raised by our whole approach to the political process.
Assume that, in a ten-man (family) community, a new apartment unit is to be made available by the municipal government. There are six units in this apartment building, and the rentals are strictly controlled, being established at a predetermined level. Suppose further that this rental price is below the demand price of each of the ten families in the group. In other words, every one of the families will desire to move into the new subsidized housing if possible. We should also expect, however, that demand prices for this opportunity will vary over the ten individuals in the group. Some families will be relatively satisfied with their current accommodations and thus would secure relatively little net advantage from the new opportunity. Other families will find that the net advantages from residence in the community housing project would be substantial.
Now assume that no plan for rationing the six available units is adopted. The municipal authority simply announces that the first six families to sign up on a particular morning will be assigned the units. It is clear that a queue will form on the designated day, and also that no predictable configuration can be placed on this queue. Let us suppose that a queue forms which is like that shown in Figure 26. Individuals 5 through 10 will be successful in securing the desired housing, and Individuals 1 through 4 will be left to live in their current residences. This result seems to be almost precisely equivalent to the operation of simple majority voting when no vote-trading of any kind is allowed to take place. Individual 8, for example, who receives only a slight net advantage, secures, nevertheless, one of the municipal units. Similarly, in the analogous political process the individual who cares relatively little about the outcome on a particular issue counts for as much as any other individual.
Let us now modify our example. Suppose that housing permits are to be issued. Since only six units are present, permits totaling to six are to be made available. However, assume also that the municipal authority does not choose to discriminate among the various citizens. Following the principle of “housing equality,” the authority therefore issues a permit of 6/10 to each family, but it encourages the buying and selling of these permits among families. No one can secure an apartment unit unless he presents to the authority one full permit; no family can secure an apartment under these circumstances unless it purchases additional permits from others. We assume that fractional permits are marketed in units of 1/10. The result is readily predictable; queuing will no longer determine the outcome. Individuals 2, 3, 5, 6, 7, and 9 will secure the apartments. Individuals 1, 4, 8, and 10 will sell all of their permits. All members of the group are better off as a result, and a Pareto-optimal solution is attained Pareto optimally (if we neglect the costs of organizing the exchanges). This example seems precisely analogous to that political voting rule which requires unanimity but which allows for full side payments (full vote-buying and vote-selling). Note especially that “political equality” is maintained in the sense that each man is given an equal “vote” at the outset.
Let us now introduce a third version of our rent-control illustration which will be analogous to simple majority voting with full side payments (open vote-trading). As before, assume that housing permits are issued equally to all families. However, assume that, instead of 6/10 being issued to each family, each family is now given one full permit. Thus, the authority issues more permits than there are apartments available for disposition. Full purchase and sale of permits is encouraged during a period prior to the announcement of a date for distributing units among permit holders. As in the first case, units will be allocated to the first six individuals presenting permits on one designated day. However, prior to this time, those persons desiring the community housing most strongly will be able to “purchase” additional permits to prevent their losing out in an allocation solely by queue. It is easy to see that this “market” will not work nearly so smoothly as in the previous example. While the market in permits will tend to insure that the six families desiring the municipal housing most strongly will end up with the available units, there is nothing in the operation of this market that will insure that each of the ten families gains in the over-all operation. Only six of the families will be certain to secure net gains (although more could do so), and these six need not be the same ones who finally secure the housing units. They may be fully “squeezed” by other families who are better “vote brokers.” The reason for this difference in result is that, finally, four of the permits originally issued will prove to be of zero value at the time of assignment. Those families caught holding the worthless permits will gain nothing at all.
These rent-control analogies seem helpful in pointing up the issues of democratic ethics. In the second example, full vote-trading would seem to be desirable, and little ethical argument could be advanced against it. This is because the institution of trading here not only insures greater efficiency in the allocation of housing space but it also insures that every family in the group secures some positive benefits. This last result is due to the equivalence with the unanimity rule of choice. If we move to the third example, the analogue with simple majority voting, the case for allowing open vote-trading is considerably less strong. While the open marketing of votes may insure increased measured “efficiency” by guaranteeing that those families securing the apartments will be those desiring them most strongly, this advantage may be more than offset by the secondary inefficiencies stemming from the free operation of the vote market.
The interesting conclusion is reached that, under our behavioral assumptions, vote-trading per se cannot be condemned on the basis of a rational individualistic ethic but that vote-trading under rules for collective choice requiring less than full agreement among all members of the group may be condemned. The fact that the political vote of the individual is wholly different in these two cases makes for an extremely important difference in the attitude of the rational individual toward vote-trading. In the one case, the vote represents the potential power to impose external costs on other individuals in the group, and it is because of the fear that market imperfections may cause this power to become solidified into permanent or quasi-permanent coalitions that the individual may choose to restrict in some way the institution of vote-trading. In the other case, when unanimity is required for action, the vote does not represent the potential power to impose costs on others. No offsetting reason arises to oppose the efficiency reason for allowing full and free marketing of political votes.
This distinction is very similar to that made in discussing ordinary economic transactions. For the most part, these transactions directly affect the parties participating in exchange to the exclusion of third parties. Such transactions are, therefore, fully accepted as falling within the standard behavior patterns of democratic society. Trade is not suspect under these conditions. This is equivalent to saying that the group unanimously approves trade of this sort. Ordinary market exchange is, in a real sense, equivalent to the political rule of unanimity. On the other hand, trade does become subject to question when the services exchanged (produced) come to represent the power to affect third parties adversely, that is, to impose spillover or external costs on individuals outside the contractual relationship. Somewhat interestingly, however, the form of the suspicion is rather different in the two cases of political and economic decision-making. When economic or market activity is observed to result in the imposition of costs on parties outside the exchange relationship, economists have tended to call attention to the “inefficiency” in over-all resource usage that this organizational arrangement generates. They seem rarely to have brought into question the morality or ethics of the individuals participating in such activity. Individuals are assumed to seek to maximize their own utility within the limits of the effective constraints imposed on their action. Not bringing the underlying motivational assumptions into question, the economist tends, therefore, more or less automatically to think in terms of modifying the set of constraints on individual action (the redefining of property rights, the changes in the legal structure, etc.) with a view toward eliminating the inefficiencies, if possible.
By contrast, the student of political processes, observing what is essentially the same phenomenon in another form (that is, the imposition of external costs on third parties), has not considered the inefficiency aspects seriously. Instead he has—through his emphasis on moral restraints on self-interest, his concept of the “public interest,” etc.—sought to accomplish reform through a regeneration of individual motives. Ethical and not structural reforms tend to be emphasized. Breakdowns and failures in the operation of the system are attributed to “bad” men, not to the rules that constrain them.
Pressure Groups, Special Interests, and the Constitution
Perhaps the clearest answer offered was ... by Mr. Bane ... there is no public interest in the sense of being an interest of the whole public. There are only particular interests.... The panel did not accept this solution, and Mr. Bane did not defend it.
... Mr. Larsen asked whether it was not true that the means of obtaining the objectives, rather than the objectives themselves, was the issue.... Perhaps the process, the means of compromise and agreement, are themselves a large part of the public interest.
—Major Economic Groups and National Policy, The American Round Table, Digest Report
In large political units the institutional manifestation of the active promotion of economic interest is the pressure group. The reason for the very existence of such groups lies in their ability to promote and to further, through the political-choice process, the particular functional interests represented. The emergence of such groups to positions of dominant importance during the last half century has been one of the most significant developments in the American political scene. This fact, which can no longer be hidden from view or considered as an aberration to orderly political process, has understandably weakened the predominance of the traditional model of democratic choice-making institutions. In the face of observable pressure-group activity with its demonstrable results on the outcome of specific issues presented and debated in legislative assemblies, the behavioral premise that calls for the legislator to follow a selfless pursuit of the “public interest” or the “general welfare” as something independent of and apart from private economic interest is severely threatened. Empirical reality must have its ultimate effect on analytical models, even if this reality contains implications about human behavior that scholars with strongly held ethical ideals find difficult to accept.
In recent years the role of the pressure or special-interest group in democratic political process has come to be more widely accepted as inevitable, if not “desirable.” In 1951 David B. Truman, building on the earlier work of Arthur Bentley and to some extent on that of E. Pendleton Herring, made a bold attempt to construct a positive theory of American politics on the basis of an acknowledged interplay of group interests.63 In 1958 an interesting, if abortive, effort to examine the role of the pressure group was undertaken in a round-table discussion at the University of Chicago.64
Special Interest and the “Public Interest”
Most attempts to examine the role of pressure groups have bogged down in their efforts to define the “public interest.” If this cannot, in fact, be defined, it becomes impossible to determine, even conceptually, the extent to which the activity of special-interest groups either advances or retards progress toward the “general welfare.” Analysis becomes impossible without a well-defined criterion. Our essentially economic approach to the political process is useful in that it allows us to escape from the ambiguities surrounding the concept of the public interest. The literature of modern welfare economics is especially helpful in this respect. The discussion in this field has clarified some of the more troublesome issues that seem to arise. One approach recognizes that definitive meaning can be attached to “social welfare” or the “public interest” only if a social-welfare function is fully described. This function conceptually orders all possible states of society, and quite unambiguously allows for the selection of the “best” or from a restricted set of available alternatives, the relatively “best.” However, in order to describe this function, some individual must make quite explicit his own value judgments. There is no escape from the responsibility of individual ethical decision. In this construction the “public interest” is what the individual says it is. Moreover, each individual will have a meaningful conception of what he conceives to be the public interest; there will be as many social-welfare functions as there are individuals in the group. “Social welfare” or the “public interest” does exist, for the individual, as something apart from and independent of special group interests, but the usefulness of this approach disappears when we come to those issues on which individual evaluations of alternatives differ.
We have rejected this approach. Instead of initially developing a social-welfare function which unambiguously orders all social situations, we start from the presumption that we are quite ignorant as to what is “better” or “worse” for the group. Falling back on the Pareto criterion for assessing changes, we admit as “better” only those changes that are observed to be approved unanimously by all members of the group. Any change that secures unanimous support is clearly “desirable,” and we can say that such a change is “in the public interest.” Few would, we suspect, dispute this half of our criterion for evaluating social changes. However, we go further and state that, for any change in the public interest, unanimous support can be achieved. This half is perhaps less acceptable until the economic meaning of “improvement” is fully understood. If the political process is conceived as one means through which individuals co-operate to attain mutual advantage, it is clear that, conceptually, all persons can be made “better off” by any change that does, in fact, produce sufficient “improvement” for mutual advantage to be possible.
Our unanimity criterion does not, however, seem to get us very far toward a definition of the public interest in any practical applications of this term. Actually we observe day-to-day decisions being made on other-than-unanimity rules for choice. Is there no criterion by which we may judge whether or not specific changes are or are not “desirable”?
At this point our construction becomes equivalent to that conception of the public interest raised by Mr. Roy Larsen in the Chicago round-table discussion and cited at the beginning of this chapter. There is clearly no way of determining the degree to which the public interest is advanced by the operation of ordinary rules for legislative decision-making on any single issue. Here we should expect only particular or group interests. We expect that some of these will be advanced and that others will be thwarted. The “public interest” becomes meaningful only in terms of the operation of the rules for decision-making, and these rules can be evaluated only over a long and continuing series of separate issues. Our conceptual and analytical separation of the constitutional and the operational level of collective decision allows us to discuss the unanimous choice of rules and at the same time to recognize the arbitrary results that will be produced by the operation of any given rule on specific issues.
At the ultimate constitutional level of decision, the implied requirement of consensus prevents the partisan struggle among group interests that characterizes operational decisions. If identifiable and permanent coalitions are expected, genuine constitutional process, as we have defined this term, is not possible. We do not, of course, deny that conditions may be present in which separate class or group interests are so solidified that no democratic constitution can be chosen for the community. However, we should emphasize that at the ordinary operational level of decision, within defined constitutional rules, pressure-group conflicts are fully consistent with the democratic process. Indeed it is precisely because the individual anticipates that economic interest will manifest itself in the operation of ordinary collective choice-making rules that he is willing to choose processes that involve considerable investment of resources in strategic endeavor. Our analysis is not, therefore, inconsistent with a structure of political institutions closely approximating those found in Western democracies. If, in fact, the individual could be “trusted” not to follow economic interest, and if all pressure groups could be assumed away, there might be, on some grounds, considerably less strength in the argument for many of the checks and balances that characterize modern democratic process.
Pressure Groups and Big Government
The activities and the importance of special-interest groups in the political process are not independent of either the over-all size or the composition of the governmental budget. A hypothesis explaining the increasing importance of the pressure group over the last half century need not rest on the presumption of a decline in the public morality. A far simpler and much more acceptable hypothesis is that interest-group activity, measured in terms of organizational costs, is a direct function of the “profits” expected from the political process by functional groups. In an era when the whole of governmental activity was sharply limited and when the activities that were collectivized exerted a general impact over substantially all individuals and groups, the relative absence of organized special interests is readily explainable. However, as the importance of the public sector has increased relative to the private sector, and as this expansion has taken the form of an increasingly differential or discriminatory impact on the separate and identifiable groups of the population, the increased investment in organization aimed at securing differential gains by political means is a predictable result.65
This relationship is not, however, one-sided. While the profitability of investment in organization is a direct function of the size of the total public sector and an inverse function of the “generality” of the government budget, both the size and the composition of the budget depend, in turn, on the amount of investment in political organization. The organized pressure group thus arises because differential advantages are expected to be secured through the political process, and, in turn, differential advantages for particular groups are produced because of the existence of organized activity. A spiral effect comes into play here, the results of which may be observed in the federal income-tax structure, federal tariff legislation, federal resource-development projects, and many other important areas of economic legislation in particular. This spiral effect has an important bearing on the individual constitutional calculus, and it is therefore worth discussing in some detail.
Conjecturally, and certainly not without considerable historical validity, we may imagine a government that undertakes only those activities which provide general benefits to all individuals and groups and which are financed from general tax revenues. Under these conditions there would be relatively little incentive for particular groups of individuals to organize themselves into associations designed specifically to secure special advantages through governmental action. Suppose now that this institutional “equilibrium” is disturbed through the efforts of one particular interest group, which organizes in an attempt to secure the adoption of favorable legislation. Assume that, through some means of side payments, this group is successful in its activity. It secures the passage of legislation which provides the group represented with special benefits that are not applied generally to the whole population. The measure adopted protects a specific industry, exempts a particular form of association from the antimonopoly laws, grants differential tax privileges, or any of the many other commonly accepted current practices.
The results will be that total collective action is increased and, secondly, that the door is opened for differential class-, group-, or sectional-interest legislation. Other functional or interest groups, observing the success of the first, will now find it profitable to invest resources (funds) in political organization. The pressure group, as such, will rapidly become a part of the political decision-making process. Moreover, because of the activities of such groups, the range and the extent of collective action will tend to be increased. As more and more groups come to recognize the advantages to be secured by special political dispensation, this organizational process will continue. The ultimate “equilibrium” will be reached only when all groups have become fully organized.66
Many modern students of pressure-group phenomena seem to rely on this “equilibrium” and expect it to produce, if not “optimal,” at least “satisfactory” results. It is often noted that the individual will simultaneously be a member of several organized interest groups: his trade union, his church, his local political unit, etc. Moreover, because of this multiple membership he will restrain the self-seeking activities of any particular group to which he belongs. Some such restraint cannot be overlooked, but it must also be acknowledged that few, if any, single individuals will be members of all groups simultaneously, and, even disregarding this, membership in separate groups will generate different degrees of individual interest. The fact that the member of the trade association or the trade union is also a consumer will not effectively restrain his activities in seeking differential advantage for his particular producer group because of the predominant importance of his producer role with respect to any single decision that the government might confront relating to the specific industry.
The difficulty is not removed if we postulate that each functional group has “equal power.” In this case mutual “exploitation” will proceed to take place under ordinary democratic processes. Discriminatory legislation will continue to be adopted. The only difference between this situation and that in which “power” is distributed unequally among organized groups, and between organized groups and the unorganized members of the community, is that the costs will tend, over time, to be distributed over the whole population somewhat more “equitably.” In this “equal-group-power” model, all groups will, over a whole sequence of issues, bear roughly the same share of the total costs of pluralistic organization. This conclusion is readily demonstrated by referring to the simple logrolling model developed in Chapter 10. In that model we may substitute a single group interest for each individual farmer, thus guaranteeing “equal power” to each group, and then examine the results. Given any collective decision-making rule other than that of unanimity, external costs will tend to be imposed by collective action. Differential or group legislation is precisely equivalent to the special road-repair projects financed out of general-tax revenues which were introduced in the model of Chapter 10.
External Costs and “Optimal” Organization
As we have repeatedly emphasized, the existence of external costs imposed by the operation of the rules for making collective decisions is neither a necessary nor a sufficient condition for “nonoptimality” in an organizational sense. The advantage of our construction lies in the fact that we are not required to explain away the effects of the special-interest groups in describing the “optimal” organization of collective decisions. Pressure- or interest-group activity is one institutional manifestation of external costs, and external costs are expected to be present even in the “ideal” organization. The question remains, however, as to whether or not the existing organization reduces the over-all interdependence costs (external costs plus decision-making costs) to the lowest possible level. Saying that external costs will be present in the “ideal” organization is not equivalent to saying that any organization embodying pressure-group activity is, in any sense, “ideal.”
No direct measurement of the total interdependence costs under existing or alternative decision-making rules is readily available. Certain conclusions can be drawn, however, on the basis of the facts of history. We may observe a notable expansion in the range and extent of collective activity over the last half century—especially in that category of activity appropriately classified as differential or discriminatory legislation. During the same period we have witnessed also a great increase in investment in organized interest-group efforts designed specifically to secure political advantage. These facts allow us to reach the conclusion that the constitutional rules that were “optimal” in 1900 are probably not “optimal” in 1960. If we may assume that the fundamental rules for organizing collective decisions were more closely in accordance with the “ideal” in 1900 than in 1960, these same rules will tend to produce a higher level of interdependence costs than necessary. This suggests that some shifting in the direction of more inclusive decision-making rules for collective choice and some more restrictive limits on the range of collective activity might now be “rational” to the individual considering constitutional changes. The contrary possibility, of course, also exists. If the operation of existing constitutional rules produces roughly “optimal” results today, clearly these same rules were overly restrictive in earlier stages of development marked by relatively less organized pressure for differential legislation.
We express an explicit value judgment here, but we consider the first alternative interpretation to be more applicable to American society. Moreover, because of this judgment we consider the external costs imposed by the operation of existing rules to be excessive. Nevertheless, we can also be somewhat optimistic, over the long run, regarding the prospects for securing some genuine improvements in political organization. If, in fact, the organization of special interests has advanced to the point at which no one interest can expect, in the long run, to secure differential advantage, the way may be open for some changes in the organizational rules themselves. Each interest group will, of course, turn every effort toward improving its own position, within the limits of the prevailing rules; but if, in fact, all interests come to recognize that the external costs involved in this continuous struggle of interests are excessive, all might agree on some changes in the rules that allow such behavior to take place. It seems doubtful whether American democracy has as yet reached this point of mutual recognition of the advantages to be secured from the requisite constitutional changes. However, as more and more groups organize to secure political support, and as more and more discriminatory action does come to characterize separate political decisions, reaction will surely set in at some point. We begin to see, perhaps, the beginnings of such reaction today with respect to income-tax legislation. More and more criticism is being raised against the maze of special exemptions and deductions that has come to characterize income-tax laws. Although the brief experience of late 1959 showed that, when actual changes of a more general sort are proposed, the special beneficiary groups are still sufficiently strong to retain the currently existing structure, the criticism is still likely to mount. While the excessive external costs involved in discriminatory tax legislation are perhaps more likely to be recognized than those involved in other legislation, the current discussion of tax policy does seem to bear out the prediction that could be made on the basis of our construction.
Ultimately the hope for some “improvement” must lie in the mutual consent of the special interests themselves for constitutional changes which will act so as to reduce the excessive costs that discriminatory legislation imposes on all groups over time. It is in seeking such changes in the organizational rules themselves that genuinely enlightened self-interests of these groups may be expressed. It seems sheer folly to expect that the interest groups will, unilaterally and independently, exercise sufficient self-restraint, given existing rules. To expect them to do so amounts to expecting them to act contrary to their raison d’être.
General and Special Legislation
If all collective action should be of such a nature that the benefits and costs could be spread equally over the whole population of the community, no problem of the interest group, and indeed few of the problems of government, would arise. If each individual, in his capacity as choice-maker for the whole group, could, in his calculus, balance off a pro-rata share of the total benefits against a pro-rata share of the total costs, we could expect almost any collective decision-making rule to produce reasonably acceptable results. Under these relatively “ideal” circumstances, individuals and groups would have relatively little incentive (because there would not exist much genuine possibility) to utilize the political process to secure advantage over their fellows. However, few collective decisions, if any, can be reduced to such general dimensions. Almost any conceivable collective action will provide more benefits to some citizens than to others, and almost any conceivable distribution of a given cost sum will bear more heavily on some individuals and groups than on others. As the analyses of Chapters 10 through 15 have shown, it is the opportunity to secure differential benefits from collective activity that attracts the political “profit-seeking” group. Moreover, these differential benefits may be secured in either of two ways. First, activities may be approved which cause benefits to accrue to selected individuals and groups but which impose costs generally on all members of the community. This was illustrated by our initial road-repair examples. Secondly, activities may be approved which provide general benefits to all members of the community but which impose costs on certain selected individuals and groups. The necessary condition for the presence of external costs, as we have used this term, is some difference in the distribution of the benefits and costs of collective action among members of the community.
One means of modifying the organizational rules so as to produce results akin to those that would be produced under truly “general” legislation would be to require that those individuals and groups securing differential benefits also bear the differential costs. This legislative generalization of the benefit principle of taxation would, in effect, produce results similar to those that would take place under “general” legislation. Note that this change in the rules need not be equivalent to requiring a larger majority or unanimity, although the results need not be significantly different from those produced by such changes. While the requirement of unanimity would tend to insure that all collective action is based on a “benefit principle” of sorts, the requirement that the benefit principle be followed need not insure that all proposals receive unanimous support. The reason for this difference is that presumably in the second case “benefits” would be measured or estimated in some manner that would be independent of the individual’s own evaluations. Therefore, a practical equivalent to the unanimity rule might be, say, majority voting under reasonably strict constitutional requirements about the matching of special benefits and special costs, as measured in some reasonably objective manner. This inversion of the Wicksell scheme, in which he proposed the rule of relative unanimity in order to insure the matching of benefits and costs, would, in any case, reduce the external costs imposed by the operation of any given rule for collective decisions other than the unanimity rule. Moreover, for all issues of collective choice other than those in which redistributive objectives are of primary importance, some improvement could, conceptually, be achieved along these lines.
A practical example may be helpful here. Suppose that a constitutional requirement is adopted to the effect that all irrigation projects, all river-valley-development and flood-control projects, all harbor and inland waterway developments, and the like must be financed, at least in part, by the levy of a special income tax on residents of those areas directly benefited by the projects in question. The number of such projects approved, even under unchanged voting procedures, could either be reduced or increased. It would be clear that those projects failing to win support would be “inefficient” and should therefore be eliminated, provided only that the differential benefits and differential costs are measured with some degree of accuracy. If all areas of the country should become sufficiently “organized” in support of such localized federal resource-development projects, and if all units were in some proximate equality as to power, it would be in the genuine interest of all groups to implement constitutional changes of the sort illustrated. The fact that the interest or pressure group as such tends to develop an interest in continuing to exist will, of course, be a real barrier to such reform.
Analogous but different constitutional changes could be instituted which would reduce the excessive external costs imposed by the operation of special-interest groups in those cases where over-all redistribution objectives cannot be put aside. Many collective projects are undertaken in whole or in part primarily because they do provide benefits to one group of the people at the expense of other groups. These objectives may be quite legitimate ones, and they may be accepted as such by all, or nearly all, members of the community. However, the difference in the distribution of benefits and costs may result in excessive external costs quite independently of the accomplishment of the distributional objectives. For example, suppose that the issue confronted should be that of providing some federal funds to aid the depressed coal-mining area of West Virginia. For such a measure the levy of special taxes on citizens of West Virginia would be largely self-defeating. Nevertheless, it is relatively easy to see that, if such aid is to be financed out of general-tax revenues, a veritable Pandora’s box may be opened. Depressed fishing villages along the Gulf coast, depressed textile towns in New England, depressed automobile production centers in Michigan, depressed zinc-mining areas in Colorado, etc., may all demand and receive federal assistance. As a result, excessive costs will be imposed on the whole population.
One means of eliminating this sort of distortion, which may appear somewhat farfetched because it is novel, would be to require that all such projects be financed out of taxes levied on specific groups in the total population, although not on the same group securing the benefits. For example, if the funds designed for aid to West Virginia were to be collected from special taxes levied on citizens of Oklahoma only, then we could be assured that roughly balancing political forces would determine the final outcome. Excessive external costs world be substantially reduced in this manner, and something roughly similar to the pattern of “general” legislation would emerge. Genuinely depressed areas, considered as such by the whole population, would tend to be provided with assistance without at the same time opening up the whole set of grants to areas not considered to be deserving of assistance. Congressmen from, say, North Dakota or Minnesota, in our example, would be confronted with two opposing partisan interests. Those representing West Virginia would try to secure favorable votes; those from Oklahoma would try to influence the Congressmen in the offsetting manner. Through the logrolling process some solution would be reached, and this solution would more nearly reflect “the public interest” than the alternative one which requires general-tax financing. There could, of course, be no assurance that “optimal” individual decisions would be reached, but it seems relatively certain that a somewhat closer approach to a set of “optimal” collective decisions over time could be produced in this way than under existing rules.
These suggestions are highly tentative and preliminary, as indeed are many which have been advanced elsewhere in this book. The consideration of mutually beneficial constitutional changes aimed at reducing the external costs imposed by the operation of special-interest groups in modern democratic process would seem to represent an extremely important and worthwhile activity for scholars in political science.
The Ethics of Pressure-Group Activity
An analysis requires, first of all, a somewhat more widespread acceptance of special-interest or pressure-group activity as an inherent and predictable part of modern democratic process. In our analysis this activity is a predictable outcome of our fundamental behavioral assumptions. At least in this one respect, the facts of the real world lend support to the confirmation of our assumptions. Scientific progress in the analysis of politics cannot be made until this widespread activity is fully incorporated in the analytical models. Such an incorporation need not commit the analyst to either an acceptance or a rejection of the activity as morally “good” conduct on the part of the practitioners. The economist does not need to say that the individual “should” or “ought to” maximize his own utility; he starts from the assumption that the individual does do so, and that is all there is to it. The student of the political-choice process should do as much; if he does so, the pressure or interest group becomes an essential building block in any political “science.”
The Politics of the Good Society
Political society is complex and many-sided; perhaps the first thing that should be said about any “theory” concerning the organization and the operation of this society should be to stress the limitations that any single explanation must embody. The theory that we have developed in this book has been based on the assumption that individuals are the only meaningful decision-making units, that these individuals are motivated by utility-maximizing considerations, and that they are well informed and fully rational in their choices. Yet we know that “groups” do exist as something apart from the individual members, that individuals are motivated by many considerations, and that individuals are far from being either well informed or rational in their political behavior. The apparently extreme assumptions of our analytical models would seem to restrict severely the descriptive, explanatory, and predictive value of our theory.
We are encouraged, however, when we observe the scientific progress that has been made in the study of natural phenomena and also in the study of economic organization. The real world of nature is also highly complex, and the assumptions introduced into the model of the physical scientist appear to be as remote from observable factual reality as those that we have introduced. Despite the apparent unrealism of his models, the physical scientist has been able to make significant progress toward uncovering laws that govern the natural world, and upon these laws he has been able to provide explanations and to make predictions that are verified by real-world events. The physical scientist is not, however, dealing with man, and the study of human beings in association with each other introduces a whole set of complexities that remain outside his realm. Social science can never be “scientific” in the same sense as the physical sciences. Nevertheless, the study of economic organization does have some legitimate claim to the status of a “science.” Economic theory starts from basic assumptions about human behavior; each individual is assumed to attempt to maximize his own utility. Individuals are also assumed to be fully informed and to be rational in their behavior. On the basis of these assumptions a body of theory has been developed which does provide some satisfactory explanations of real-world phenomena. We know, of course, that in the economic as well as the political relationship, individuals are not entirely rational, they are not well informed, and they do not follow self-interest in all circumstances. Yet we can observe that people purchase more goods at lower prices, that wage rates for similar occupations tend to equality, that the return on investment will tend to be equalized in different employments, and many other propositions of “positive” economics that can be subjected to empirical testing.
In this book we have tried to extend the assumptions of the economist to the behavior of the individual as he participates in the political process. As we have suggested at several points, the explanatory value of our preliminary theory is considerably more limited than that of economic theory. We think, however, that the “theory,” as developed here, does provide some “explanation” of certain aspects of political organization.
The Logical Model
Relevant theory is made up of two parts, and our construction embodies both of these. First, on the basis of certain initial postulates and assumptions, the logical consequences can be developed. This sort of theorizing is purely logical in nature and has no empirical relevance in the direct sense. Herein, theory resembles mathematics. Our approach to individual constitutional choice can be interpreted in this way. On the basis of the assumption that individuals do follow utility-maximizing rules of behavior and that they are fully informed and rational, we can work out the consequences of the various rules for making collective choices. To some extent this is what we have done in our simple models in earlier chapters. In this respect we should emphasize that the conclusions depend strictly on the assumptions introduced, and, barring logical errors in the reasoning, there can be no question as to the “truth” or “falsity” of the theory.
This pure logic of constitutional choice is unique only in that we have introduced assumptions that are different from those of other scholars. The important thing to note in this respect is that an infinite number of theories of this purely logical sort can be developed. The usefulness of the logical model depends solely on the relevance of the model to real-world issues.
The Operational Model
The only means of testing or verifying the logical structure lies in comparing some of the predictions that can be made on the basis of the theory with observations of the real world. At several points in the analysis we have referred to certain institutional facts that seemed to lend support to the theoretical model under construction. By and large, the operation of the political process in Western democracies suggests to us that our theoretical model does have explanatory value, but what is meant by explanatory value in this respect? If our theory is capable of explaining all conceivable configurations that might be observed in the real-world political process, then it is no theory at all. Adopting the conception of the logical positivists for the moment, we could then say that the construction is meaningless. In order to maintain that our construction has some operational validity, we must show that there are conceivable observations that would refute the fundamental hypotheses.
What observable real-world events could refute the hypotheses of the model? Obviously, we cannot directly observe whether or not individuals maximize their own utility. The statement that they do so is, in one sense, meaningless, or, to use a more acceptable term, nonoperational. Nor can we readily observe whether or not individuals act rationally. To test the empirical relevance of our construction we must, therefore, turn to the implications of these behavioral assumptions for the operation of political-choice processes and the evolution of political institutions. We should stress that we do not intend to develop in any exhaustive way the operational implications of our analysis at this point. We may, however, suggest a few tests.
If, for example, we should observe a social group operating under less inclusive rules for constitutional change than for day-to-day operational decisions, this would seem clearly to refute the central hypothesis of our theory. If we should observe single groups deciding unilaterally to give up special-privilege legislation, our hypotheses are refuted. If we could observe the oil industry pressure group petitioning Congress for an elimination of the depletion allowance, if we could observe the American watchmakers unilaterally petitioning the President to lower the tariff rates on Swiss and Japanese watch imports, if we could observe the California farmers actively opposing federal irrigation projects, then we should have clear evidence that some conception of the political process alternative to our own should be sought. These few examples are sufficient to suggest that our theory is an operational one; the hypotheses are conceptually refutable, and we can easily imagine observable events that would refute particular elements of the theory. The fact that the required events seem only remotely possible in our examples provides some indication that empirical support for our construction is relatively strong.
There exist, of course, certain other observable phenomena that clearly refute the testable version of our hypotheses. Insofar as these can be found and observed, our hypotheses are weakened. We have nowhere proposed or suggested that the “economic” approach can explain all aspects of the complex political process. We suggest only the much more limited hypothesis that the approach does explain certain elements of modern political activity that have previously been unexplainable with standard models.
The Imperfect Ideal
One of the more significant doctrinal implications of our construction lies in its implicit rationalization of a political structure that has never seemed to possess rigorous theoretical foundation. The analysis shows quite clearly that the “ideal” organization of activity may embody many and varying rules for making collective decisions, may involve considerable investment in decision-making costs, may include many of the so-called checks and balances, may allow considerable administrative authority on certain matters, may be quite restrictive as regards amendments to a written constitution, and may provide quite rigid protections to the so-called inalienable rights. The apparent inefficiency that this over-all system may seem to introduce when other criteria of organization are employed disappears in the construction that has been developed in this book.
This is not, of course, to suggest that the American experiment in constitutional democracy is the best of all possible political worlds. The purpose of this construction has not been to provide this sort of rationalization. It remains true, however, that in the course of this work the authors have come to appreciate more fully the genius of the Founding Fathers in the construction of the American system. We do not think that this genius can be wholly separated from its environment, which was also that in which the ideas of economic theory were initially developed. The rather bewildering complex of institutions that makes up the American decision-making system does not seem openly to contradict the fundamental hypotheses of our model. This is the extent to which our construction serves as a rationalization for what is, or perhaps more aptly stated, what is supposed to be.
We think, nevertheless, that this point in itself is a useful one. Our analysis, broadly interpreted, is quite similar in many respects to that of those scholars who have continued to express an implicit faith in the pragmatic, groping process that has characterized American democratic institutions. In an unsystematic way many of these writers have perhaps sensed the essential approach that we have been able to make somewhat more rigorous in this work. At the outset we suggested that our purpose was to provide some “theoretical determinacy” to the working of “individualist democracy.” If we have done so, the supporters of this conception of democratic process will perhaps have a somewhat stronger theoretical base from which to defend their position against the continuing onslaughts of the proponents of “idealist democracy.”
We hope especially that our theoretical construction will cause the student of political process, as well as the man in the street, to consider more carefully and more cautiously the proper place of majority rule in the constitutional system. The discussion surrounding this conception has been perhaps the most confused part of political theory. The failure to distinguish between the power of a majority to take positive action and the power to block action has caused qualified majority rule to be equated with minority rule. All of such arguments would have been more fruitful if it had been recognized that any decision-making rule, other than that of unanimity, is itself a choice that the group must make at the constitutional level. Moreover, it must be recognized that any rule imposes some costs. Once these simple elements of our theory are understood, majority rule becomes simply one rule among a continuous set of possible rules for organizing collective decisions.
The Politics of the Good Society
We have argued that our theoretical structure does have some operational relevance in the understanding of modern political institutions and that it does provide some conceptual rationalization for the type of political complex represented by American constitutional democracy. We have not specifically answered the question as to whether or not the politics of the sort embodied in our theory is a part of the operation of a “good” society, and we should stand properly accused of intellectual cowardice if we should end this book without further comment on this matter. Accept the fact that some men, some of the time, do act so as to promote partisan private or group interests through political means; accept that our models do help to explain many of the results. However, are we prepared to say that these results are “desirable” attributes of the social order?
We do not intend to evade this question, but, before answering it, we should insist on some clarification of the issues. It is essential that it be understood that those characteristics which are “desirable” in the behavior of a person or persons are wholly independent of those characteristics that are “desirable” in an institutional structure. The moralist must be distinguished from the social philosopher. Our whole approach has concentrated on the institutional organization of social activity.
If we start from a rigidly conceived institutional organization, the only relevant variable becomes the behavior of individual human beings. Given any organization of social life, there are certain moral or ethical standards of conduct, and these may be discussed objectively and dispassionately. Under certain circumstances, widespread agreement may be reached regarding the content of a set of moral precepts or principles. For centuries the Judeo-Christian world has accepted certain ethical ideals, at least to some degree. Among these ideals has been the responsibility of the individual to make choices on the basis of an interest broader than that which is defined by his own selfish short-run gains. The familiar golden rule and the admonition to “Love thy neighbor” both express this principle.
Insofar as these ideals do motivate individuals, the differences among the results produced by separate organizational systems are reduced. Moreover, given any social organization that does allow for some “exploitation” of man by man (and none exists that does not), more acceptable results will follow from a greater devotion to these moral ideals. Indeed, a widespread adoption of Judeo-Christian morality may be a necessary condition to the operation of any genuinely free society of individuals.
Several qualifying points need to be introduced before proceeding further. Behavior in accordance with the precepts of the golden rule, literally interpreted, can lead to a conflict of individual interests that is equally as intense as that which would arise under the operation of pure self-interest. Christian idealism, to be effective in leading to a more harmonious social order, must be tempered by an acceptance of the moral imperative of individualism, the rule of equal freedom. The acceptance of the right of the individual to do as he desires so long as his action does not infringe on the freedom of other individuals to do likewise must be a characteristic trait in any “good” society. The precept “Love thy neighbor, but also let him alone when he desires to be let alone” may, in one sense, be said to be the overriding ethical principle for Western liberal society.
If we are to allow the individual to be free, however, we cannot be assured that he will always follow the moral rules agreed on by the philosophers as being necessary for harmonious social life. The individual may behave “badly,” and, if he does so, he may gain “unfair” advantages over his fellows. This brings us squarely to the central issue. Should the social order be organized to allow moral deviants to gain at the expense of their fellows? Or instead, should the institutional arrangements be constructed in such a way that the “immoral” actor can gain little, if at all, by his departure from everyday standards of behavior? These questions are based on the acceptance of the “idea of progress” as applied to social organization, that is, on the assumption that social organization is subject to criticism and to change and that it can be “improved”—and presumably such change can modify the degree to which the individual actor who departs from morally acceptable behavior patterns can exploit his fellow men.
It should be emphasized that no social organization in which men (some men or all men) are allowed freedom of choice can prevent the exploitation of man by man and group by group. Our construction is helpful in that it enables us to illustrate this point quite clearly. The relevant choice among alternative institutions reduces to that of selecting that set which effectively minimizes the costs (maximizes the benefits) of living in association. The shift from market organization to political organization does not, in any way, eliminate the opportunity for specific individuals and groups to impose external costs on others. This extremely simple conclusion, which we have repeated many times, has not been adequately recognized. Market organization, however, is based on the idea that individuals will tend, by and large, to seek their own interest. This does not suggest that each and every participant in the marketplace is assumed to try to exert the maximum effort to secure short-run gains. It does suggest that the social philosophy of market organization recognizes this behavior as a possibility and that the organizational norms are based on the view that this sort of behavior can be channeled in such a direction that it becomes beneficial rather than detrimental to the interests of all members of the community. These organizational norms are misunderstood and grossly misrepresented in much of the critical discussion of the market order. This order is not, in any sense, organized on the principle that self-seeking activity is morally “good.” There is no conflict between the philosophy of the market, which is a philosophy of social organization, and that of Christianity, which is a philosophy of individual behavior. The market order is founded on the empirical reality that not all men renounce self-interest, and that, because of this, the pursuit of private gain should be put to social use where this is possible.
The question that we have posed in this work concerns the possibility of extending a similar approach to political organization. Can the pursuit of individual self-interest be turned to good account in politics as well as in economics? We have tried to outline the sort of calculus that the individual must undergo when he considers this question. We have discussed the formation of organizational rules that might result from such a rational calculus. In our more rigorous analytical models we have adopted the extreme assumption that each participant in the political process tries, single-mindedly, to further his own interest, at the expense of others if this is necessary. We were able to show that, even under such an extreme behavioral assumption, something closely akin to constitutional democracy as we know it would tend to emerge from rational individual calculus. We believe that this in itself is an important proof that should assist in the construction of a genuine theory of constitutional democracy.
In developing this analysis we are not, in any way, glorifying the pursuit of self- or group interest by political means. Empirical evidence does seem to point toward this pursuit as an important element in modern democratic process. Our approach is based on the idea that, insofar as this pursuit of self-interest does take place, it should be taken into account in the organization of the political constitution. Only in this way can the institutional setting for collective choice-making be constructed so as to confine the exploitation of man by man within acceptable limits. We are convinced that man can organize his political society better by putting checkreins on his behavior in advance, checkreins which effectively restrain the behavior of the deviant from the “moral way”—behavior that may be observed only occasionally and temporarily but which may also be quite characteristic of real-world human beings.
To the extent that the individual, in his capacity as decision-maker for the group, is able to divorce himself from his own interests (his own set of values) and to take a broadly based attitude of Kantian scope, the external costs that any decision-making rule is expected to impose are reduced. We do not deny this possibility or even the common appearance of such an attitude on the part of individual electors or on that of legislators and administrators. Moreover, insofar as this attitude exists, somewhat fewer constitutional constraints on the operation of ordinary rules for collective choice may be dictated than would otherwise be indicated as rational. It should be stressed that moral restraint is a substitute for institutional-constitutional restraint, and in a society with more of the former there will be less need for the latter, and vice versa. Our quarrel with those who would rely primarily on the moral restraint of individuals to prevent undue exploitation of individuals and groups through the political process is, therefore, at base, an empirical one. The assessment of the nature of man himself will, or should, determine the respective importance that is placed on institutional-constitutional restraint and on moral limitations on the behavior of individuals in political society.
The assessment of human nature that is required here cannot, however, be limited to an observation of man’s activity in the political process to the exclusion of his activity elsewhere. The modern critic of constitutional democracy who calls for more direct operation of majority rule cannot, at the same time, rationally condemn modern man for his attention to selfish and short-run interests in the nation’s market place. If modern man is unduly interested in the emoluments of the affluent society (in creature comforts), he is not likely to shed this cloak merely because he is placed in a slightly different institutional complex. A shift of activity from the market sector cannot in itself change the nature of man, the actor in both processes. The individual who seeks short-run pleasures through his consumption of modern “luxury” items sold in the market is precisely the same individual who will seek partisan advantage through political action. The man who spends his time at the television set or in his automobile in private life is not the man who is likely to vote for more taxes to finance libraries, concerts, and schools. This simple point seems to have been almost entirely overlooked in the so-called “great debate” of the 1960’s.
It is not surprising that our conception of the “good” political society should resemble that held by the philosophers of the Enlightenment. Our analysis marks a return to an integration of the political and the economic problems of social organization, and constitutional democracy in its modern sense was born as a twin of the market economy. With the philosophers of the Enlightenment we share the faith that man can rationally organize his own society, that existing organization can always be perfected, and that nothing in the social order should remain exempt from rational, critical, and intelligent discussion. Man’s reason is the slave to his passions, and recognizing this about himself, man can organize his own association with his fellows in such a manner that the mutual benefits from social interdependence can be effectively maximized.
[59. ]The persons in our analytical models may seem to be ethically unattractive, but it should be noted that intellectually they are considerably more “attractive” than the human beings included in more orthodox models of political behavior.
[60. ]The prevailing attitude seems to be quite closely related to the “grossness” of the form that vote-trading activity takes. Truman notes that legislatures and constitutional assemblies have, on occasion, defined vote-trading as a crime, and the Mississippi constitution of 1890 required all legislators to take an oath that they would not engage in vote-trading activity. (David B. Truman, The Governmental Process [New York: Alfred A. Knopf, 1951], p. 368.)
[61. ]Note that the central point made here is precisely equivalent to that raised in connection with the symmetry in gains among the members of a dominant majority coalition in Chapter 12. Symmetry may only be predicted with reasonable certainty if side payments operate perfectly. With partial, but incomplete, side payments, symmetry no longer seems essential for “solution.”
[62. ]Alexander Hamilton is said to have remarked that the British Constitution would fall when corruption came to an end. See Sir Henry Maine, Popular Government (New York: Henry Holt, 1886), p. 102.
[63. ]David B. Truman, The Governmental Process (New York: Alfred A. Knopf, 1951). See also Arthur Bentley, The Process of Government (Bloomington: The Principia Press, 1935 [first published 1908]), and Pendleton Herring, The Politics of Democracy (New York: W. W. Norton and Co., 1940).
[64. ]Major Economic Groups and National Policy, The American Round Table, Digest Report (Chicago, 1958).
[65. ]Cf. Röpke, “ ’I gruppi di pressione’ e l’ultima istanza,” 484.
[66. ]For an instructive analysis of the modern pressure-group problem in terms of its historical development out of economic liberalism, see Professor Goetz Briefs’ paper, “Some Economic Aspects of Pluralistic Society,” delivered at the meeting of the Mt. Pelerin Society in Oxford in September 1959.