Front Page Titles (by Subject) III.: Distributional Limits and Prospective Rules - The Collected Works of James M. Buchanan, Vol. 10 (The Reason of Rules: Constitutional Political Economy)
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III.: Distributional Limits and Prospective Rules - 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).
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Distributional Limits and Prospective Rules
There are obvious limits on the range of possible Paretian-Wicksellian changes from any defined status quo. This point can be seen most clearly if we shift to the more orthodox setting and define the status quo position as an imputation of valued goods among separate persons in the community. To the extent that a proposed change involves a purely distributional shift, it cannot be classified as Pareto superior, even as a conceptual possibility, if “goods” are defined to include all that persons value. (Of course, if the distribution were defined in terms of physically measurable commodities, Pareto-superior changes might be made.) If we think of some value-numeraire, any change from an initial distribution must reduce value for at least one person, whose agreement could then never be secured. That is to say, if a proposed change involves “taking away” valued goods from some person or persons and “giving to” others, the change could never be accepted voluntarily by those who would be harmed in the process.
A direct implication of this elementary point is that constitutional revolution, in the sense discussed here, would be impossible in a democracy if this revolution were conceived as a fundamental shift in the distribution of commonly valued goods and services or in the distribution of claims to such goods and services.
This distributional restriction on the scope of constitutional change may initially seem quite severe. This impression is misleading, however, and tends to be fostered by the total absence of realism in the definition of any status quo position as a distribution of goods. It is necessary to keep in mind that our concern is not with potential changes in specific end states, or outcomes, even if such changes were within the realm of the possible. If the relative positions of individuals in sociopolitical order are described by an imputation of valued goods, services, and claims, distributional reallocation must characterize any change. (No one would expect poker players to divvy up the chips after the game had been played.) Our focus is rather on the potential for changes in the rules or institutions of social order. These rules provide the framework within which patterns of distributional end states emerge from the interaction of persons (players) who play various complex functional roles. The precise distributional effects of a change in the rules on any identified person or group at any point in time may be difficult if not impossible to predict. A status quo defined only in terms of the rules (the laws and institutions) within which persons act is conceptually very different from a status quo described by a particular distribution of valued goods and claims. (The poker players may all agree on a change in the rules for future play, regardless of the rules under which play has proceeded during earlier rounds of the game.)
Let us digress, briefly, by noting that the proclivity of mathematical economists to force all analysis into mathematically tractable forms has done serious damage to clarity of thought with respect to the end-state-rules distinction. It has proved relatively easy, mathematically, to define distributions of goods in vector language. But how could a status quo be described mathematically if what exists is a set of rules that constrain but do not determine individual choices that, in turn, generate patterns of distributional outcomes? End states lend themselves to mathematical manipulation; processes do not.
Changes in rules are prospective in their distributional implications, whereas changes in observed distributions themselves are necessarily retrospective, with reference to the choice behavior of the persons who act to generate the results. Changes in rules that can lay any claim at all to consensual agreement can, at best, modify personal expectations about future distributional patterns. Rule changes cannot modify observed distributions as such, unless, of course, such changes are applied ex post facto.
An example of the distinction is provided by normative tax theory. A collective decision to levy a progressive tax on incomes is a change in fiscal rules. Despite the distributional consequences that might be predicted, such a decision may conceptually be agreed to by all persons in the community, particularly if there is a time lag between the agreement and actual levying of the tax. An individual would know that if he chose to earn income, this income would be taxed at progressive rates. But contrast this with a collective decision to levy a tax on wealth. In this case, persons who have accumulated wealth have made prior choices under other rules. A change in fiscal rules of this sort violates all criteria of “fairness” and could never lay claim to Pareto superiority, even as satisfying a purely conceptual criterion.
Acknowledgment of the prospective nature of any change in rules that qualifies as Pareto superior carries important implications for the design of proposals for reform. To the extent that proposed changes in rules explicitly embody time lags between approval and implementation, the ability of persons who are potentially affected to predict with accuracy the impact on their own identifiable positions must be reduced. Prospective rules introduce uncertainty into the calculus of those who participate in the decision making, and this uncertainty increases with the length of the time lags.
The temporal element becomes even more significant when it involves the duration or permanence of the proposed rules change. To the extent that persons who must choose among rules do so in either the knowledge or the expectation that any alternative, once chosen, is to remain in effect over an extended sequence of periods, they will be less able to predict how particular rules will affect their relative positions over the same sequence. The logical basis of the differentiation between the decision rule for making changes in the constitution (amendment procedures) and the decision rule for making choices within given constitutional rules lies in the recognition of this temporal distinction.
Proposals for changes in rules that are known to be or expected to be short-lived, even if adopted, are more predictable with respect to their distributional impacts. Hence, agreement on short-lived change may be more difficult to secure. Indeed, the meaning of “rule” implies quasi-permanence; a game whose rules were changed with every round of play would be little different from a game without any rules.3
In their book The Calculus of Consent (1962), James Buchanan and Gordon Tullock used the prospectiveness and permanence properties of constitutional rules as the essential means by which an individual can construct a bridge, of sorts, between short-term, identifiable private interest and long-term, nonidentifiable self-interest, which then becomes “public interest.”
The construction has a close affinity to the somewhat more familiar Rawlsian veil of ignorance.4 In the Rawlsian framework, the individual has a moral obligation to choose among principles of justice as if he were behind a veil of ignorance. And at a different level of analysis, the stance so depicted is held to describe empirically widely held notions about justice. That is to say, persons “should” try to adopt the veil-of-ignorance position, and, furthermore, persons do embody some such stance when they seriously consider, and talk about, basic rules for sociopolitical order. The Buchanan-Tullock derivation is, in comparison with the Rawlsian, less demanding on individuals in that, at least in the limit, they are forced by the circumstances of the choice setting to adopt a stance that is equivalent to the veil of ignorance. Because of the inherent uncertainties about their own positions, persons must, on rational self-interest grounds, use criteria akin to the fairness precepts outlined by Rawls. The effect of uncertainty is to mitigate substantially any purely distributional aspects of genuine constitutional choice.
[3. ]For a careful and comprehensive treatment of the significance of time lags in a constitutional calculus, see Antonio Pinto Barbosa, “The Constitutional Approach to the Fiscal Process: An Inquiry into Some Logical Foundations” (Ph.D. diss., Virginia Polytechnic Institute and State University, 1975).
[4. ]John Rawls, A Theory of Justice (Cambridge, Mass.: Harvard University Press, 1971).