The Online Library of Liberty

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• 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

VII.

Agreement on Rules and the Veils of Ignorance and Uncertainty

The seemingly convincing argument against the feasibility of applying the unanimity criterion in imputing legitimacy to political rules is substantially mitigated if we recall once again the categorical difference between the choice among rules and the choice among alternatives within rules. For the latter, which we may call ordinary politics, elements of conflict seem to overwhelm elements of potential cooperation because the interests of individuals and groups are well defined and readily identified. The set of starting points, or possible positions of status quo, from which no change could ever be made under a unanimity rule would seem almost all-inclusive. In the economists’ terminology, the Pareto-optimal set would be exceedingly large. This prospect is dramatically modified, however, when the choice alternatives are not those of ordinary politics but are, instead, rules or institutions within which patterns of outcomes are generated by various nonunanimous decision-making procedures. The scope for potential agreement on rules is necessarily wider than that for agreement on outcomes within specified rules.

This result follows directly from the fact that the interest of any person or group is much less easily identified in the choice among rules. It is much more difficult for a person to determine which of the several choice options confronted will, indeed, maximize whatever set of values that person desired to maximize. There are two reasons for this loss of interest identity as we shift to the level of choice among rules or institutions. In the first place, rules are, almost by definition, applicable to a number of instances or cases. That is to say, rules embody characteristics of “publicness” that need not be present in specific political outcomes. As an example, consider the position of a dairy farmer confronting choices at the two levels. He might strongly oppose a specific reduction in milk price supports, since such action will almost surely reduce his net wealth. At the same time, however, he might support a generalized rule that would eliminate political interference with any and all prices for services or goods. The effect of such a rule change or institutional reform on his own net wealth is less determinate in the latter case than in the former.

A related but somewhat different characteristic of rules is that they embody an extended time dimension. The very notion of a rule implies existence through a sequence of time periods. We could hardly describe a game by its rules if they were made up at the beginning of each round of play. Rules tend to be quasi-permanent; they “live” longer than outcomes of decisions made under them. A balanced-budget rule, for example, would be meaningless if it were adopted for only a single budgetary period. Such a restriction would be a “rule” in our sense only if it were known to remain in force for a succession of budgetary periods.

As both the generality and the permanence of rules are increased, the individual who faces choice alternatives becomes more uncertain about the effects of the alternatives on his own position. This relationship is perhaps most clearly illustrated when we postulate that individuals will try, generally, to maximize their expected net wealth. But this standard behavioral postulate of the economist’s is not a necessary part of the analysis here. Regardless of what the participant seeks to maximize, the uncertainty about how particular rules will affect the value of his maximand increases as rules are made more general and more permanent.

The uncertainty introduced in any choice among rules or institutions serves the salutary function of making potential agreement more rather than less likely. Faced with genuine uncertainty about how his position will be affected by the operation of a particular rule, the individual is led by his self-interest calculus to concentrate on choice options that eliminate or minimize prospects for potentially disastrous results. Consider, for example, a political decision rule that would call for the random selection of one member of the community who would be authorized to make all decisions as to who would be put in prison and for how long. Even though each citizen, at the level of constitutional choice, would know that he had the same chance as any other citizen of being elected as the “dictator,” this arrangement would almost surely be rejected. The potential losses from the exercise of arbitrary powers by the one person selected would far outweigh the expected gains. (Chapter 4 develops this point in more detail.)

To the extent that a person faced with constitutional choice remains uncertain as to what his position will be under separate choice options, he will tend to agree on arrangements that might be called “fair” in the sense that patterns of outcomes generated under such arrangements will be broadly acceptable, regardless of where the participant might be located in such outcomes. It was on the basis of this chain of reasoning that John Rawls introduced “justice as fairness.” The affinity of the discussion here with Rawls’s whole construction is apparent.6 We have stressed uncertainty rather than ignorance, however, because the design of the choice alternatives themselves may influence the former.

The “veil of uncertainty” may be approached, if never fully realized, if persons are modeled as though they were faced with choices among rules of social order that are generally applicable and guaranteed to be quasi-permanent. By comparison, the Rawlsian “veil of ignorance” is an idealized normative construction, the appropriate starting point for persons when they consider making choices among basic principles of justice. Two objections have been raised to this construction. Can real persons choose as if behind such a veil of ignorance when, at another level of consciousness, they realize who they are? And does the construction have empirical bases in the commonly held feelings of justice? The partial veil of uncertainty, which we use and which was initially introduced in The Calculus of Consent (1962), is not subject to comparable criticism. It does not require persons who enter into the constitutional dialogues to shift moral gears. Persons are modeled as they are. The design of the choice alternatives must, however, affect their behavior, and in the limiting case, the veil is equivalent to that described much more fully by Rawls.

Another, and ultimately mistaken, objection that has been raised to the Rawlsian construction is not applicable to our own. In Rawls’s formulation, the person in the original position behind the veil of ignorance knows nothing about his own prospective position under the chosen rules of social order—under the selected and potentially operative principles of justice. At the same time, however, the person allegedly knows everything about the general characteristics of the outcomes under such rules. This formalized construction has led several critics to charge that there is no contractarian element in the whole Rawlsian construction, contrary to what Rawls himself suggests, and that all such disembodied persons would automatically agree on the preferred option. This argument is mistaken on its own grounds because it neglects the subjective elements that must be present in predictions concerning the working properties of alternative institutions.7 These subjective elements remain, of course, in the uncertainty representation of the calculus; these elements alone make contractual agreement necessary for validation. But, as noted, in the uncertainty representation, the two constructions attain full equivalence only in the limiting case.

[6. ]John Rawls, A Theory of Justice (Cambridge, Mass.: Harvard University Press, 1971).

[7. ]For an elaboration of this point, see James M. Buchanan and Roger Faith, “Subjective Elements in Rawlsian Agreement on Distributional Rules,” Economic Inquiry 18 (January 1980): 23-38.