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

II.

The Ultimate Z’s

We shall relate the analysis here to modern developments in the theory of individual choice behavior, notably to the work of Gary Becker and his colleagues.1 In that work, the arguments in an individual’s utility function have been redefined so that they represent composite “commodities,” the Z’s, which are themselves produced by the household through combinations of inputs, the X’s, which are purchased as ordinary goods in the marketplace. Household production functions describe the relevant trade-offs among the separate inputs, the X’s, that are variously combined to generate the Z’s. The individual is modeled as maximizing utility, defined over the Z’s, given the market or shadow prices for the X’s, within some overall income constraint.

From this basic construction, it is relatively straightforward to shift one stage back in the individual’s decision process and to drop the income constraints by including leisure, or desired usage of time, as a Z commodity with its own shadow price. We can then model the individual as choosing a whole profile of behavior, constrained by time, talent, and initial endowments. This one step back in the decision sequence would seem to be as far as most modern economists could go. They would not seek to go farther back in the imagined choice chain, to get behind the set of composite commodities, the Beckerian Z’s. Economists become uncomfortable when they are unable to specify arguments in utility functions.

Our interest here, however, is not in further elaboration of the analysis of utility maximization in the orthodox economists’ framework. Our interest lies, instead, in moving beyond the Beckerian Z’s to what we might call the “ultimate Z’s.” Our concern is with an individual’s selection of a life-style, or behavior pattern, in a more comprehensive setting than any that might be conceptualized as the maximization of a function defined over a set of known arguments. The individual may choose a life plan, a sequence of actions, that he hopes will ensure that his experiences are “interesting,” “good,” “rewarding,” and/or “happy.”

There must, of course, be minimal attainment of the Beckerian Z’s for the achievement of such experiences. The basic human needs—food, clothing, shelter, sex, security, liberty—will place bounds on feasible life-styles. But, essentially, individuals in modern Western society have long since attained levels of affluence that enable them to transcend these elementary biological determinants of behavior.

[1. ]See Gary Becker, The Economic Approach to Human Behavior (University of Chicago Press, 1976).