Abstract
The economic model of government that has been developed throughout the previous nine chapters is built on a foundation of agreement and exchange. The constitutional rules which form the basis of government are a product of an agreement to exchange protection for tribute, and constitutional rules themselves are the agreed-upon principles that define the long-term relationship between a government and its citizens. As developed in the economic model of government, this agreement can be coercive in the sense that citizens might be threatened with harm if they do not go along with the government’s offer to exchange protection for tribute. Citizens are better off, nonetheless, agreeing to the constitution rather than being left unprotected in a state of anarchy.
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Notes
This notion of agreement is similar to that used by James M. Buchanan, The Limits of Liberty (Chicago: University of Chicago Press, 1975). Buchanan had individuals consider whether they would expect to be better off if the social contract were renegotiated from anarchy.
One model of this type is Harold M. Hochman and James D. Rodgers, “Pareto Optimal Redistribution,” American Economic Review 59 (September 1969), pp. 542–557, which uses the idea that one person’s utility enters into another’s utility function, thereby making altruistic behavior benefit both the donor and the recipient.
The literature on sociobilology, pioneered by Edward O. Wilson, Sociobiology (Cambridge: Harvard University Press, 1975), has spilled into economics to a limited extent.
See Gary S. Becker, “Altruism, Egoism, and Genetic Fitness: Economics and Sociobiology,” Journal of Economic Literature 14, No. 3 (September 1976), pp. 817–826,
and his “Reply to Hirshleifer and Tullock,” Journal of Economic Literature 15, No. 2 (June 1977), pp. 507–507,
which replies to Jack Hirshleifer, “Shakespere vs. Becker on Altruism: The Importance of Having the Last Word,” Journal of Economic Literature 15, No. 2 (June 1977), pp. 500–502,
and Gordon Tullock, “Economics and Sociobiology: A Comment,” Journal of Economic Literature 15, No. 2 (June 1977), pp. 502–506.
See Robert Higgs, Crisis and Leviathan: Critical Episodes in the Growth of American Government (New York: Oxford University Press, 1987), for an argument of this type.
See Carl Joachim Friedrich, Constitutional Government and Democracy (Boston: Ginn and Company, 1950), pp. 14–15 for a discussion.
Murray Edelman, The Symbolic Uses of Politics (Urbana: University of Illinois Press, 1964).
Douglass C. North, Structure and Change in Economic History (New York: W.W. Norton & Company, 1981).
See, for examples, James B. Kau and Paul H. Rubin, “Self-Interest, Ideology, and Logrolling in Congressional Voting,” Journal of Law & Economics 22 (October 1979), pp. 365–384,
Joseph P. Kalt and Mark A. Zupan, “Capture and Ideology in the Theory of Politics,” American Economic Review 74 (June 1984), pp. 279–300,
and Sam Peltzman, “Constituent Interest and Congressional Voting,” Journal of Law & Economics 27, No. 1 (April 1984), pp. 181–210.
Friedrich Hayek has incorporated the theme of the evolution of efficient institutions “as a result of human action but not of human design” throughout his work. See, for example, his Studies in Philosophy, Politics, and Economics (Chicago: University of Chicago Press, 1969).
Armen A. Alchian, “Uncertainty, Evolution, and Economic Theory,” Journal of Political Economy 58 (1950), pp. 211–221, discusses this idea with regard to firms in the private sector.
An overview of various criteria is given in Randall G. Holcombe, “Social Welfare,” pp. 159–185 in John Creedy, ed., Foundations of Economic Thought (Oxford: Basil Blackwell, 1990).
Among modern contractarians, this premise is especially evident in Buchanan The Limits of Liberty, which compares the well-being of individuals living under a social contract with a much less desirable position of anarchistic equilibrium. Randall G. Holcombe “A Contractarian Model of the Decline in Classical Liberalism,” Public Choice 35, No. 3 (1980), pp. 260–274, analyzes this model of the social contract.
Leland B. Yeager, “Rights, Contract, and Utility in Policy Analysis,” Cato Journal 5, No. 1 (Summer 1985), p. 271.
The references in Yeager’s quotation are to Randall G. Holcombe, Public Finance and the Political Process (Carbondale: Southern Illinois University Press, 1983),
and James M. Buchanan, The Limits of Liberty (Chicago: University of Chicago Press, 1975).
Tibor Machan, “Individualism and the Problem of Political Authority,” The Monist 66, No. 4 (October 1983), pp. 500–516, makes this point.
See also Machan’s Individuals and Their Rights (La Salle, Illinois: Open Court, 1989).
Credit is often given to Anthony Downs, An Economic Theory of Democracy (New York: Harper & Row, 1957). for this insight.
See Steven Kelman, “Public Choice’ and Public Spirit,” The Public Interest 87 (Spring 1987), pp. 80–94, who argues that damage is being done because public choice analysis is overturning this fiction.
Charles M. Tiebout, “A Pure Theory of Local Expenditures,” Journal of Political Economy 64 (October 1956), pp. 416–424.
This idea is explored in Donald J. Boudreaux and Randall G. Holcombe, “Government by Contract,” Public Finance Quarterly 17, No. 3 (June 1989), pp. 264–280.
See also Spencer Heath MacCallum, The Art of Community (Menlo Park: Institute for Humane Studies, 1970), for a discussion of the way in which optimal community arrangements can be developed through the market process.
Oliver E. Williamson, The Economic Institutions of Capitalism (New York: The Free Press, 1985), pp. 35–39 discusses the company town. Contrast this will MacCallum, The Art of Community, which discusses the benefits of having a single owner for property in an area.
Harold J. Berman, Law and Revolution: The Formation of the Western Legal Tradition (Cambridge: Harvard University Press, 1983), p. 384.
James M. Buchanan, “Utopia, the Minimal State, and Entitlement,” Public Choice 23 ( Fall 1975), pp. 121–126, discusses Rawls’ views on the criteria on which people would be likely to agree.
See James M. Buchanan, “A Contractarian Paradigm for Applying Economic Theory,” American Economic Review 65, No. 2 (May 1975), pp. 225–230, for a comparison with other approaches.
See James M. Buchanan and Richard E. Wagner, Democracy in Deficit: The Political Legacy of Lord Keynes (New York: Academic Press, 1977).
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© 1994 Randall G. Holcombe
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Holcombe, R.G. (1994). The Concept of Agreement. In: The Economic Foundations of Government. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-13230-0_10
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