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

I.

Introduction

In the preceding chapter, we attempted to demonstrate that individual behavior in collective choice is likely to reflect shorter time horizons than comparable behavior in private or individualized choice, and for individually rational reasons. The person who may be willing to wait privately, to behave with prudence in order that he or his heirs may secure the fruits of long-term investment in human or nonhuman capital, may, at the same time, be unwilling to wait collectively, as reflected in expressions through political decision-making institutions. Because of the necessary attenuation of individually identifiable rights or shares in the fruits of collective or governmental “investment,” individual time horizons in politics are shortened. If this underlying hypothesis is valid, it would follow that as modern societies have become increasingly collectivized or politicized, there has been a shift toward a higher discount rate implicit in the allocation of the economy’s resources.

In this chapter we shift our attention to the less abstract and more practical level of real-world politics. But we should stress that we do not go all the way; we dare not enter the realm of historical or descriptive institutional detail. In a sense, our discussion remains abstract in that we examine the predicted workings of idealized models of politics in democracies as these models might be expected to work in confrontation with the problems of modern experience. Analytic models of politics assist us in understanding why these familiar problems persist in modern political life. Such an understanding, however, is a by-product of the primary function of the analysis here, which is to offer support for constitutional rules or constraints on practical political grounds.

Our purpose is to develop the intertemporal theme with the aid of distinct and familiar examples drawn from economic problems of the 1970s and 1980s in the United States and other Western nations. We shall discuss the “high-tax trap,” the “inflation trap,” and the “public-debt trap,” all of which demonstrate the general problem of imprudence in modern democratic polities, different countries having experienced these separate problems in differing degrees of relative importance. The inferences to be drawn for our larger and more comprehensive theme become clear as the analysis is developed; governments can be induced to take the long view only if they are appropriately constrained by constitutional rules that do not now exist. These reasons for rules emerge from an understanding of the workings of modern political economies.