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

V.

Constitutional Change and Free Riders

The barriers to constitutional reform discussed in Sections III and IV are significant. We should not underestimate either the distributional implications of any change in structure, with their feedback effects on potential consensus, or the effects of uncertainties in the political status quo. Nonetheless, it could be argued that these barriers to reform are less important than the one to be discussed in this section, one that is much more difficult to supersede in any normatively predictive sense.

We refer to the general problem of “publicness,” in the formal welfare-economics meaning of the term, and to the behavioral implications of this characteristic, which are often summarized under the rubric “free rider.” In its most comprehensive forms the question is, How is “public good” produced? How is “public bad” avoided? How is collective action motivated other than via the private interests of individuals?

It is relatively easy to conceptualize or model a small group of players in an ongoing game considering possible changes in the rules of play, the rules that describe the game itself. But what is the analogue in the larger, more comprehensive sociopolitical “game” in which there are literally millions of players? Who are to take upon themselves the personal burden of designing provisional proposals for basic changes in the rules when the promised benefits accrue publicly, that is, to all members of the political community, and with no differentially identifiable residual claims to the promised “social” profits? What is the constitutional equivalent of the patent law, which guarantees a special, even if limited, monopoly privilege to the inventor and which, in turn, offers incentives for creative effort by all potential inventors? What is the political-constitutional equivalent of entrepreneurial profits, the search for which drives the economy and motivates attempts to locate higher-valued ways of organizing production and combining resources, both within and across markets, broadly defined?

Can general rules be changed in a deliberative process of collective choice, even if there are acknowledged possibilities of Pareto-superior reforms? And if not through deliberative choice, how can general rules be modified? Must we resign ourselves to the acceptance of one of what seem to be only two alternatives? Must we acknowledge that changes in basic institutions can be imposed only nondemocratically, by a group seeking to promote its own interests, the alternative avenue of “reform” that we have refused to discuss in this chapter? Or failing conscious constitutional change and eschewing nondemocratic “reform,” must we fall back on slow, unconscious, and unintended processes of social-cultural evolution, with little more than pious hope that such changes as do occur will lead us toward rather than away from a set of arrangements that might be conceptually evaluated to be Pareto optimal?

Confronted with questions like these, the economist seems likely either to despair or to avoid relevant thought altogether by playing mathematical games. An economic model of behavior that lays any claim at all to predictive power must rely on the uniformity of human nature summarized in Homo economicus, or economic self-interest objectively defined. Such a model of behavior has served economists well; the model in all its variations explains much of what we know about the political-governmental sphere of human action in addition to the much more that we know and can explain about human action in market relationships. This economic model yields meaningful predictions; testable hypotheses can be derived about the organization and functioning of political parties, coalitions, committees, pressure groups, governmental agencies, and legislatures. Hypotheses about how bureaucrats behave, how budgets are constructed, how regulation operates—these and others emerge from application of the central Homo economicus postulate. But all such hypotheses rest, finally, on the explanatory power of this self-interest motivational assumption. The professional economist must look at the governmental-political process as driven by the same forces that drive the market process; even when analysis incorporates the recognition that self-interested behavior is not nearly so amenable to simple modeling in political as in market choice.

It should be evident, however, that the basic analytics of “positive public choice” cannot be readily extended to explain changes in the basic rules of political order that are necessarily “public” in scope. The individual actor in the positive public-choice model does not act contrary to his defined self-interest, even if it is not so easily defined as some of the simplistic exercises might suggest. To the extent that “investment” in institutional analysis, design, argument, dialogue, discussion, and persuasion is costly in a personal sense, the individual of the orthodox model will forgo such investment in favor of more immediate gratification of privately directed desires. Why should anyone do “good”? There is no way that economists who stay within the strict limits of the discipline can respond to such a question; they cannot manipulate utility-maximizing actors so as to offer a satisfying response.