Abstract
The economic model of government is based on exchange. Individuals find it in their mutual self-interests to create constitutions that define individual rights and the limits of government power, and to grant governments the means to monitor and enforce the structure of rights defined by the constitution. While based on exchange, the model differs from what has sometimes been referred to as the exchange model of government because threats as well as promises could be used to encourage the observation of rights, so the resulting government could be forced upon some individuals.1 The use of the word force is not unambiguous in this context, however, especially in light of the contractarian model of the state. In what sense might people be said to be in agreement with the constitution under which they are governed? Looked at in another way, clubs might be thought of as institutions that their members voluntarily agree to join, whereas people are forced to abide by the rules of their governments whether or not they agree. What distinguishes a club from a government?
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Notes
The fiscal exchange model of government is described by James M. Buchanan, “Taxation in Fiscal Exchange,” Journal of Public Economics 6 (July–August 1976), pp. 17–29.
James M. Buchanan, “An Economic Theory of Clubs,” Economica (February 1965), pp. 1–14.
Sir Ernest Barker, Social Contract (New York & London: Oxford University Press, 1960), traces the origins of the social contract theory to Plato.
James M. Buchanan, The Limits of Liberty: Between Anarchy and Leviathan (Chicago: University of Chicago Press, 1975).
John Rawls, A Theory of Justice (Cambridge: Belknap Press, 1971).
Some criticisms are presented by Scott Gordon, “The New Contractarians,” Journal of Political Economy 84, No. 3 (June 1976), pp. 573–590,
and Leland B. Yeager, “Rights, Contract, and Utility in Policy Espousal,” Cato Journal 5, No. 1 (Summer 1985), pp. 259–294. Gordon’s review article included Rawls and Buchanan as well as Robert Nozick, Anarchy, State, and Utopia (New York: Basic Books, 1974), although Gordon finds Nozick’s brand of contractarianism to be significantly different at its foundations than that of Rawls and Buchanan. Yeager’s critique of contractarianism cites Buchanan’s Limits of Liberty and Randall G. Holcombe’s Public Finance and the Political Process (Carbondale: Southern Illinois University Press, 1983) for examples of contractarian arguments.
See Bernard H. Siegan, “Non-Zoning in Houston,” Journal of Law & Economics 13, No. 1 (April 1979), pp. 71–147.
Robert A. Dahl, Democracy and Its Critics (New Haven: Yale University Press, 1989), p. 42. Note that this definition is given as Dahl explains the arguments of another writer, but Dahl accepts the definition and goes on to explain why it may be desirable for the state to act coercively. On page 107, Dahl defines government by saying that “The decisionmakers who make binding decisions constitute the government of the association” (original emphasis). Dahl thus defines government as a group of people, but explicitly notes that this definition could apply to the governing institutions of a voluntary organization as well as a state.
Note that Dahl is not as interested in delineating state activity from other collective activity, but rather in promoting democracy. But while noting that voluntary organizations have governing structures, Dahl concentrates on democracy within the state. See also his Democracy, Liberty, and Equality (Oxford: Oxford University Press, 1986) and A Preface to Economic Democracy (Berkeley: University of California Press, 1985) for similar views on government.
Dahl, Modern Political Analysis, 3rd ed. (Englewood Cliffs, N.J.: Prentice-Hall, 1976), p. 10.
Max Weber, The Theory of Social and Economic Organization, translated by A.M. Henderson and Talcott Parsons (Oxford: Oxford University Press, 1947), p. 154.
This definition is the opening sentence of Rand’s essay, “The Nature of Government,” in The Virtue of Selfishness (New York: New American Library, 1961). It seems considerably more enlightening than the dictionary definition (from Webster’s New World Dictionary, College Edition, 1968), the exercise of authority over an organization, institution, state, district, etc.; direction; control; rule; management. Following this definition, it would make sense to talk about the government of a bridge club, but without implying that the bridge club is a government.
Weber’s definition seems to be commonly accepted among individuals studying government. Yet another adopter of his definition is Richard D. Auster and Morris Silver, The State as a Finn: Economic Forces in Political Development (Boston: Martinus Nijhoff, 1979), p. 21.
Carl Joachim Friedrich, Man and His Government: An Empirical Theory of Politics (New York: McGraw-Hill. 1963). p. 182
Murray N. Rothbard, The Ethics of Liberty (Atlantic Highlands, N.J.: Humanities Press, 1982), pp. 162–163.
Note that while they do not define government in this way, Geoffrey Bennan and James M. Buchanan, The Power to Tax: Analytical Foundations of a Fiscal Constitution (Cambridge: Cambridge University Press, 1980), are concerned with ways in which to constitutionally constrain the government from abusing its powers of taxation.
Charles M. Tiebout, “A Pure Theory of Local Expenditures,” Journal of Political Economy 64 (October 1956), pp. 416–424.
For a discussion, see James M. Buchanan and Charles J. Goetz, “Efficiency Limits of Fiscal Mobility: An Assessment of the Tiebout Model,” Journal of Public Economics 1 (1972), pp. 25–43.
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© 1994 Randall G. Holcombe
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Holcombe, R.G. (1994). The Distinction between Clubs and Governments. In: The Economic Foundations of Government. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-13230-0_5
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