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

IV.

An Illustration

We shall illustrate the difference between private and public choice with a simple example. A person is in a collective-choice setting that presents two options in t₀, one of which will be chosen by the decision rule that combines individual expressions of preference between the two options. Each one of the options is expected to generate results that will be realized in t₁, at which time a second pairwise selection between two later options will be faced. The “choice” emergent from the decision rule in t₁ will, in turn, generate results that will be realized in t₂. We shall truncate the sequence arbitrarily at t₂ for the sake of simplicity.

The individual evaluates the expected payoffs from the perspective at t₀. Figure 5.1 depicts the example in a tree diagram, with specific numerical values for expected payoffs, all of which are evaluated from t₀. The initial options are A and B; which of these will command the expression of preference by our reference person, whose payoffs are as depicted? The “choice” will depend on what the individual predicts the subsequent collective “choice” at t₁ will be. If the setting were purely private, with identical payoffs, the person would know that control over the options at t₁ would remain internal. Hence, a reasonably high probability would be placed on the choice of a₁ at t₁, so as to allow the ultimate achievement of the highest present-valued payoff of 1,000. Despite the recognition that the person at t₁ will be different from the chooser at t₀, the latter’s subjective sense of continuity will make such a probability assessment rational. If the setting were one of private choice, therefore, A would be selected over B in t₀.

The postulated setting is one in which the individual is one among many, however, and the decision is to be made for the collectivity as a unit, with the results applicable to all persons in the community. We are concerned with how the individual will express a preference between A and B in the voting booth at t₀.

Our reference person may well vote for B rather than A in t₀, reversing the revealed preference that might be exhibited in the private-choice setting. He may take this action because of his inability to place a high probability on the prospect that the collectivity, as a unit and via the operation of the existing decision rule, will, when faced with the options a₁ and a₂ at t₁, select the a₁ option, the result indicated to be the most desirable to the person in question. There is here no continuity of consciousness, no sense of quasi-permanent psychological unity. Even if the voter-chooser at t₀ reckons that there will be no change in individual preference orderings, either in his own or in those of others, between the two time periods, a lower probability must be placed on the prospect that the decision rule will generate the most desirable result in t₁. This lower probability stems from the fact that the individual has no way of knowing why others, who may be partners in the coalition that might express preferences for A in t₀, order the options predicted to be faced at t₁. Persons in such a prospective coalition may well order the alternatives in Figure 5.1 in precisely opposed fashion to the person whose payoffs are depicted.

To make our example even more specific, consider a risk-neutral voter in the large-number setting who has no knowledge of the preferences of others. Under simple majority voting rules, this voter will assign a .5 prospect to each alternative at each stage in the pairwise choice sequence. In the numerical example of Figure 5.1, the individual will then vote for B over A, despite the fact that the present value of the sequence Aa₁ is higher than that of any other. If B is chosen, the individual enjoys the payoff of 600 units at t₁. By contrast, if A is selected by the decision rule, there is only a .5 prospect that t₁ having been reached, the rule will generate a₁ at the critical second node.

A more general way of stating the central proposition of the analysis is to say that the individual participant in collective choice will find it difficult to make instrumental use of the collectivity in the furtherance of genuinely long-term objectives. “Investmentlike” collective alternatives will tend to be placed lower than “consumptionlike” alternatives in individual orderings. This basic reason for the limited time perspective exhibited in collective or public choice is quite different from other, more familiar reasons having to do with electoral term limits and the nonmarketability of individualized shares in “public good.”