The Conflict Between Constitutionally Constraining the State and Empowering the State to Provide Public Goods

Abstract

James M. Buchanan advocated constitutional constraints on tax-funded activity in order to limit it to cases where government could provide Pareto improvements, namely “genuinely public goods of the pure Samuelsonian type.” However, even the most benevolent government agents cannot improve on imperfect market outcomes in the presence of free-rider or demand-revelation problems because—being human and not omniscient—they cannot know the public’s true but necessarily unobserved willingness to pay for unpriced services. The claim that project x’s expense to each individual will be exceeded by the value the individual places on its services can never be falsified given the free-rider or demand-revelation problem built into the Samuelsonian concept of a public good. It follows that to give a human bureaucracy the constitutional mandate to provide public goods would provide no firm barrier to the scope of government.