The Online Library of Liberty

A project of Liberty Fund, Inc.

• Foreword
• Preface
• The Reason of Rules
• 1.: The Constitutional Imperative
• I.: Introduction
• II.: Reasons For Rules
• III.: Rules of Games
• IV.: Rules of the Road
• V.: Rules of the Market Order
• VI.: Rules of Political Order
• VII.: The Importance of Rules
• 2.: The Contractarian Vision
• I.: Introduction
• II.: Noncontractarian Constitutionalism
• III.: Individuals As Sources of Value
• IV.: Contract and Exchange
• V.: Politics In the Exchange Perspective
• VI.: Unanimity As the Contractual Ideal
• VII.: Agreement On Rules and the Veils of Ignorance and Uncertainty
• VIII.: Conclusions
• 3.: The Myth of Benevolence *
• I.: Introduction
• II.: Private Good and Public Good
• III.: Science, Truth, and Politics
• IV.: The Authoritarian Imperative
• V.: Majoritarian Democracy In the Noncontractarian Paradigm
• VI.: The Aim of Politics
• 4.: Modeling the Individual For Constitutional Analysis
• I.: Introduction
• II.: Homo Economicus In Politics: the Argument For Symmetry
• III.: Science and the Empiricist Defense
• IV.: A Methodological Defense of the Differential Interest Model of Behavior
• V.: Social Evaluation and Quasi-risk Aversion
• VI.: Gresham’s Law In Politics
• VII.: Summary
• 5.: Time, Temptation, and the Constrained Future *
• Preface
• Part 1.: Individual Private Choice
• I.: Introduction
• II.: The Ultimate Z ’s
• III.: Preferences For Preferences
• IV.: Past, Present, and Future
• Part 2.: Individual Public Choice
• I.: Introduction
• II.: Society With a History
• III.: Temporal Interdependence
• IV.: An Illustration
• V.: Moral Rules And/or Constitutional Commitment
• 6.: Politics Without Rules, I: Time and Nonconstrained Collective Action
• I.: Introduction
• II.: The Social Discount Rate
• III.: The High-tax Trap
• IV.: The Inflation Trap
• V.: The Public-debt Trap
• VI.: Other Examples
• VII.: Conclusions
• 7.: Rules and Justice
• I.: Introduction
• II.: Just Conduct and the Notion of Desert
• III.: Justice and Promise Keeping
• IV.: Justice Among Rules
• V.: Just Rules, Agreed-on Rules, and Just Conduct
• VI.: Conclusions
• 8.: Politics Without Rules, II: Distributive Justice and Distributive Politics
• I.: Introduction
• II.: Distributive Justice: the Conventional View
• III.: The Constitutional Perspective and Institutional Incidence
• IV.: The Incidence of Unrestricted Majoritarianism
• V.: Tax Rules and Distribution Under Majority Rule
• VI.: Direct Constitutionalism and Distributive Justice
• VII.: Summary
• 9.: Is Constitutional Revolution Possible In Democracy?
• I.: Introduction
• II.: Pareto-superior Change and Wicksellian Unanimity
• III.: Distributional Limits and Prospective Rules
• IV.: Status Quo Entitlements and Distributional Envy
• V.: Constitutional Change and Free Riders
• VI.: The Role of Norms
• VII.: Toward a Civic Religion

VI.

Rules of Political Order

Many social analysts might agree that market processes operate within reasonably clearly defined rules and that such rules are important objects of inquiry. They may be less willing to apply the same insight to political processes. But political “choices” also emerge from an interaction of individual agents within a set of institutional rules, with each actor being constrained by the actions of others. Political actors operate under a set of more or less clearly defined rules, and they make choices among the options available to them so as to maximize their returns (which may, here as in other settings, include ethical as well as economic objectives). The crucial issue is whether the set of rules that orders the relationships among the separate actors is that set which best leads individuals to further the interests of others, or at least refrain from imposing harm on others.

There are several ways of viewing political processes in the same terms as we view markets. The first, and most important at this point, is the view of political process as a system of interacting individuals from which outcomes emerge as equilibria. This view is consistent with any of a number of motives we might ascribe to those individuals and with any of a number of criteria by which we might evaluate the operative rules. The motives and criteria in question can be chosen from the economist’s tool kit. We shall explore such political applications of economic method in subsequent chapters. What is crucial here, however, is neither actor motive nor evaluative criteria but, rather, a preparedness to examine the political process in the same general terms as we examine markets. Individuals with their own objectives interact, under a set of rules (political institutions), to further those objectives, and the interaction finally serves to establish a particular outcome as an equilibrium. If the individuals’ capacities and objectives are given, the only way the pattern of outcomes can be changed is by alteration of the rules. And changes in the rules, obversely, will alter the outcomes that emerge from any society of individuals.

Much of what we shall discuss in subsequent chapters concerns the implications of particular aspects of the political rule structure. At this point, we should alert the reader to the necessary subtlety of the rules-outcomes distinction in the political context. At one level, the rules of the political game are obvious enough: majority rule; periodic elections; various restrictions on the government’s power to take; the requirement of systematic accounting for expenditure of public funds; the geographic structure of electoral arrangements, including possible partitioning of the political jurisdiction itself as under a federal structure; and so on. Yet many of these features themselves emerge from political process. Understandings, for example, of the appropriate domain of public activity, which have an important constitutional aura, are determined largely by ongoing political decisions. In this sense, the rules-outcomes distinction tends to become blurred in the political setting. Moreover, since both rules and decisions within rules themselves emerge from rather similar political processes, the significance of the distinction may seem somewhat overdrawn. It is precisely where the distinction is not obvious, however, that basic rules of the game may be at risk—and it is for this reason that we shall attempt to maintain the rules-outcomes distinction in the political setting.