Constitutional Law, Economics Of

Methodological Foundations

Normative constitutional economics could deal with a variety of questions. For example, how should societies proceed to bring about constitutional rules that fulfill some criterion like being “just” or “efficient”? What content should the constitutional rules have? Which issues should be in the constitution—and which should be left to subconstitutional choice? What characteristics should constitutional rules have? Buchanan answered none of these questions directly but hoped to offer a conceptual frame that would make them answerable. He based that frame on social contract theory as developed most prominently by Thomas Hobbes (1588–1679). According to Buchanan, the purpose of this contractarian approach is justificatory in the sense that “it offers a basis for normative evaluation. Could the observed rules that constrain the activity of ordinary politics have emerged from agreement in constitutional contract? To the extent that this question can be affirmatively answered, we have established a legitimating linkage between the individual and the state” (1987: 249).

The value judgment that no one's goals and values should a priori be more important than those of anyone else (that is, normative individualism) is the basis of Buchanan's entire model. One implication of this norm is that societal goals cannot exist. According to this view, every single individual has the right to pursue her own ends within the frame of collectively agreed-upon rules. Therefore, a collective evaluation criterion that compared the societal “is” with some “ought” could not exist, since there is no such thing as a societal “ought.”

Nevertheless, it is possible to derive a procedural norm from the stated value judgment. Buchanan borrowed this idea from Knut Wicksell, who in 1896 argued that one should judge an agreement to exchange private goods as advantageous if the involved parties agree voluntarily. The agreement is supposed to be “efficient,” “good,” or “advantageous” because the involved parties expect to be better off with the agreement than without it. Often, economists consider the exchange activities to be taking place between only two parties, the seller and the buyer. Buchanan followed Wicksell, who had demanded the same evaluation criterion for decisions that affect more than two parties, at the extreme an entire society. One can only evaluate rules that have consequences for every single member of a society as advantageous if every single member of that society has voluntarily agreed to them. This is the Pareto criterion applied to collectivities. Deviations from the unanimity principle could occur during a decision process on the production of collective goods, but this would be within the realm of the Buchanan model only as long as the constitution itself provided for a decision rule below unanimity. Deviations from the unanimity rule would have to be based on a provision that was brought about unanimously.

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