Front Page Titles (by Subject) VI.: Direct Constitutionalism and Distributive Justice - The Collected Works of James M. Buchanan, Vol. 10 (The Reason of Rules: Constitutional Political Economy)
Return to Title Page for The Collected Works of James M. Buchanan, Vol. 10 (The Reason of Rules: Constitutional Political Economy)
The Online Library of Liberty
A project of Liberty Fund, Inc.
Search this Title:
VI.: Direct Constitutionalism and Distributive Justice - Geoffrey Brennan, The Collected Works of James M. Buchanan, Vol. 10 (The Reason of Rules: Constitutional Political Economy) 
The Collected Works of James M. Buchanan, Vol. 10 (The Reason of Rules: Constitutional Political Economy) Foreword by Robert D. Tollison (Indianapolis: Liberty Fund, 1999).
About Liberty Fund:
Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.
Foreword and coauthor note © 2000 Liberty Fund, Inc. © 1985 by Cambridge University Press.
Fair use statement:
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
Direct Constitutionalism and Distributive Justice
The central message of the institutional incidence analysis undertaken in the previous two sections is that ordinary majoritarian politics is a highly imperfect mechanism for securing distributive justice—at least as distributive justice is normally conceived. Two types of problems seem to be associated with majority rule. The first is one of distributional indeterminacy. The implementation of political transfers will always be such that the direction of transfer is away from the minority and toward the decisive majority, and the poorest cannot be expected to be in the decisive majority any more often than anyone else. Therefore, although the poorest can expect to be net beneficiaries of the political roulette wheel in the long run, the fact that political transfers will regularly flow in a perverse direction is one to be reckoned with. Exactly how one should evaluate a sequence of systematically variable distributional outcomes is not a question to which social philosophers or normative policy analysts have given much attention. Nonetheless, it should be clear that without some answer to this question majoritarian institutions cannot generally be evaluated in terms of criteria for distributive justice. Is an income stream that varies randomly over time as “just” as a stream that yields income equally in each period? If not—and specifically, if the constant stream is to be preferred—there seems a good prima facie case for restricting majority rule in some way to produce, if possible, more stable distributional outcomes.
One way of restricting majority rule to achieve a determinate distribution is to require uniform proportional taxes and disbursement of revenues on an equal per capita basis. If such restrictions are imposed, however, a second problem with majority rule emerges: The transfer pattern generated will be insensitive to ethically relevant considerations. Specifically, the level of transfers will be perversely responsive to changes in the level of income of the poorest. Indeed, there is no guarantee that transfers will occur. Any transfers that do occur, of course, will be such as to benefit the poorest most of all. This is a direct concomitant of the restrictions imposed—that taxes be levied in proportion to income and that revenues be paid on an equal per capita basis. Nevertheless, majority rule does not seem capable of determining a level of transfers that is ethically appropriate or sensitive to the relevant parameters of the distribution.
It may, of course, be argued that the highly austere model of political process used in the foregoing sections is so remote from “real-world democracy” that nothing of any relevance can be concluded. Though fully conceding the starkness of the simple majoritarian model used, we reject the criticism. The object is to investigate the nature of the pressures on distributional outcomes that arise from electoral processes. Those pressures necessarily reflect the nature of the institutional setting, of which electoral competition under simple majority rule is a major (and many would argue predominant) feature. The danger of less formal treatment of democratic institutions is that one can become captivated by the prevailing political religion. There is, of course, much talk of distributive justice in the political rhetoric. The substantive issue is whether there is any reason to believe that distributive justice will be secured.
Given the simple model of majority rule we have developed, the answer is at best equivocal. Majority rule may be able to secure a more equitable outcome in the income distribution and may do so at tolerable cost. Majority rule, however, seems likely to work much better in this respect if constrained by the requirement of uniform proportional taxation. Such a requirement promotes more equitable outcomes in that it restricts the advantages to a decisive coalition of richer individuals in organizing large-scale transfers toward themselves, while restricting to a lesser extent the analogous advantages for the poorer. In all such cases, however, because transfers flow often enough in the “wrong” direction, the cost of securing any net redistribution in an expected sense is rather high—and seemingly unnecessarily so. For example, in cases 1 and 2 of Section V, it seems likely that all parties would receive larger returns if there were an agreement to secure the average distributional outcome at every point in the electoral sequence. This could also be construed to have purely distributional advantages. In a Rawlsian maximin setting, where no individual knows to which group he will belong, an arrangement that generates the expected distribution at every point has the advantage of entirely precluding the outcome in which the poorest are the exploited minority. Given the maximin criterion, this characteristic would seem to be decisive.
Might, then, some directly constitutional transfer arrangement be distributionally superior? If, in some quasi-Rawlsian setting behind the veil of ignorance at the constitutional level, individuals can be presumed to have well-defined preferences in relation to future income distributions and to transfer policies that might be implemented to constrain those distributions, why not seek to institute those policies at the constitutional level? Suppose, for example, that a uniform proportional tax rate is to be levied and that the resultant revenues are to be expended in equal per capita grants. Also suppose, however, that the tax rate (and hence grant level) were not determined by the median voter under majority rule but, instead, the tax rate (or the grant level) were selected constitutionally. Transfer policy would cease to be a matter for in-period political determination; the pattern of government grants would, instead, be part of the rules of the game.
There are four points to be made about such an arrangement. First, and somewhat surprisingly, the demogrant system is not necessarily as efficient a means of achieving a given expected distributional outcome as the uniform tax alternative examined in Section V.2. That is, reductions in the variance of the poorest’s income stream over the electoral cycle are achieved at some loss in aggregate income. The reason for this seems to be that requiring transfers to be paid to all individuals increases the total revenue requirement of the transfer level that the poorest insists on when in the decisive coalition, and does so sufficiently to offset the disadvantages to the poor when in the minority. Recall that in the model discussed in Section V.2, tax rates are lower when there is a coalition of the richest than when there is a coalition of the poorest, so the disadvantages to the poor from being in the minority are already somewhat moderated. In any event, to achieve the same expected income for the poorest via a demogrant system does require a higher tax rate and hence larger excess burdens than in the case where transfers are restricted to majority members, even though the poorest will be in the exploited minority some of the time.
Second, and on the other side of the ledger, the constitutional demogrant system obliterates incentives to expend resources in an attempt to ensure that one is part of the decisive coalition, incentives that exist whenever majoritarian cycles prevail. If political rent seeking of this type is at all large (which, as we have already argued, it could very well be), then the lower excess burdens on the tax side in a majoritarian system restricted only by the requirement of uniform proportional taxes may well be more than offset. In this event, efficiency considerations favor the explicit constitutional transfer package.
Third, although it seems natural to refer to such an arrangement as “constitutionally determined transfer,” there is something rather misleading about such terminology. There is, after all, no sense in which these policies would “redistribute” resources or income among persons. Rather, the constitutional order would involve a set of property rights in which each individual genuinely “owned” only a portion of the product that the labor embodied in his person generated. On the other hand, each would own an equal share of some portion of the product that the labor embodied in other persons generated. The government could not be taken to be transferring income from the rich to the poor—by virtue of gratuitous altruism, hatred of the rich, or any other aspect of “Robin Hoodism.” The arrangement would simply be part of the institutional structure under which individuals’ basic property rights were defined and enforced. In fact, this is perhaps not so different from current institutional arrangements in Western democracies. Citizens do, by virtue of the prevailing powers of the state, make claims on the personal productivity of other individuals—claims the state legitimizes and effects through the tax-transfer system. The crucial difference between what is here suggested and what currently prevails is that under the constitutional alternative, the claims individuals make on one another under state aegis would be uncontingent, not varying according to fluctuating electoral fortune. The rights that citizens possessed by virtue of such constitutional arrangement of taxes and transfers would then be no different from other things they could properly construe as owning. At this point, notions of distributive justice and formal justice (as examined in Chapter 7) overlap. Because distributive justice considerations are applied to the rules rather than merely to outcomes, and because these considerations are endorsed and applied under constitutional consensus, the outcomes emergent under rules satisfy the requirements of “distributive justice,” whatever the characteristics of the distribution of income those outcomes may exhibit at any given time.
Finally, once it is recognized that criteria of distributive justice are applicable to the choice among rules rather than some imagined choice among imaginable distributional outcomes, one cannot simply presume that the set of rules most conducive to distributive justice will be ones that “transfer” income. It is certain that economists generally approach the issue of redistributive policy with a strong predilection for cash transfers as the most efficient form of securing desired distributions. But this proposition may not be true once the domain of discourse shifts from selection of the desired distribution toward the institutional structure from which desirable distributions may emerge.
There could be all sorts of rule changes that promoted greater equity in the pattern of emergent outcomes. In basketball, for example, we could diminish the natural advantages of tall players either by raising the height of the basket by five feet or by attempting to handicap tall players explicitly in some way (say, by weighting goals scored by the inverse of the height of the scorer). It is not obvious that the latter scheme would be more just, in any acceptable meaning. In the same way, rule changes in social affairs need not involve explicit redistribution through political process to secure more equitable outcomes. In light of our analysis of transfer patterns under simple majority rule, it would hardly be surprising if more efficient routes to distributive justice could be found.