Politics as exchange: the classical liberal economics and politics of James M. Buchanan
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We provide a short introduction into the concept of Constitutional Economics. This approach is a subfield within Public Choice Theory. Public Choice and Constitutional Economics are closely related to the name of James Buchanan who, together with his colleagues, initiated Public Choice Theory in the 1950’s and Constitutional Economics in the 1980’s. The latter emphasizes the choice of these rules, e.g. the constitutional framework of a society that structures social order. The choice of rules is modeled as acts of exchange in the political process.
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This chapter addresses a new and fertile research program: constitutional law and economics. Constitutional law and economics asks questions like, ‘What is the extent of the U.S. Congress’s power to regulate commerce?’; ‘How much legislative authority can be delegated to administrators?’; and ‘When should constitutional change happen through judicial updating rather than formal amendment?’ To address such questions, constitutional law and economics blends positive, normative, and interpretive analysis. This chapter describes all three but emphasizes interpretation, which is new to many economists and paramount to lawyers. After introducing these modes of analysis, we turn to constitutional law. Six processes make and sustain constitutions: bargaining, voting, delegating, entrenching, adjudicating, and enforcing. Economic theory illuminates these processes, and constitutional law reflects them. We cannot describe all of the relevant economic theory here, but we provide some snapshots. Afterwards, we apply the theory to concrete problems in constitutional law. We demonstrate what constitutional law and economics has achieved and showcase its potential.
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With a new constitutional amendment (Federal Law Gazette I No. 2/2008), Austrian constitutional law has seen its most comprehensive reform since 1945. In particular, the fragmented structure of Austrian constitutional law had previously been seen as a failure of the constitution in its functional approach as a basic order of a society and led to various attempts to reform Austrian constitutional law. But earlier constitutional amendments resulted only in a further complication of Austrian constitutional law.
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The various subdisciplines within the emerging ‘new institutionalism’ in economics all draw special attention to the legal-political constraints within which economic and political agents choose and therefore represent a return of economics to its appropriate legal foundations. By changing the name of his research program to constitutional political economy Buchanan distanced himself from those parts of the public choice literature that remained too close to the traditional welfare economics approach. This chapter draws lessons for law and economics from recent developments in the re-emerging field of constitutional political economy. CPE compares alternative sets of institutional arrangements, in markets and the polity, and their outcomes, using ‘democratic consent’ as an internal standard of comparison. The chapter discusses the methodological foundation of the CPE approach, presents Buchanan’s reconstruction of the Coase theorem along subjectivist-contractarian lines and gives an overview of recent contributions to the literature. JEL classification: B41, D70, H10, K; Keywords: Constitutional Economics, Constitutional Political Economy, Public Choice, James M. Buchanan, Methodological Foundation
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This chapter reviews the literature on public choice theory and constitutional design, focusing in particular on the sub-discipline of constitutional political economy. The basic framework of constitutional political economy has been in place for several decades and has produced some important insights into particular institutions. Other institutions, however, have been ignored, and there is a relatively small amount of empirical work testing the propositions. The chapter summarizes the work to date and identifies areas for more attention in the future. The chapter first reviews the core assumption that constitutional politics are really different than ordinary politics, and the corollary that the constitutional level is more likely to produce public-regarding behavior. It finds these assumptions to be less than fully convincing, in part because constitutional endurance seems to require some level of interest group behavior, and because constitutions can be transformed through amendment.
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“The starting point of public choice economics is simple: Individuals, when acting as voters, special interest groups, politicians, or bureaucrats are self-interested and try to maximize their own utility. The ending point of public choice economics is governmental failure. Public choice is use of economic tools to deal with traditional problems of political science. Public choice explores intersection between economics and political science and fosters exchange between economists and political scientists. Constitutional economics, also known as “constitutional political economy” derived from public choice is a research program of joint study of economics and constitutionalism. It may be described as the economic analysis of constitutional law. Constitutional political economy explores intersection between economics and rules and institutions. After James M. Buchanan won Nobel Prize in 1986, public choice and constitutional economics were incorporated into analysis of political and constitutional decision making widely. Public choice and constitutional political economy are twin sister of Buchanan’s political economy. Turkish economists, political scientists and legal/constitutional law scholars stayed or preferred to be irrelevant to public choice and constitutional political economy in last half century. They disregarded so-called public choice revolution. This critical essay aims to explore relavance of irrelavence of Turkish scholars towards research programs of public choice and constitutional political economy.
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The various subdisciplines within the emerging ‘new institutionalism’ in economics all draw special attention to the legal-political constraints within which economic and political agents choose and therefore represent a return of economics to its appropriate legal foundations. By changing the name of his research program to constitutional political economy Buchanan distanced himself from those parts of the public choice literature that remained too close to the traditional welfare economics approach. This chapter draws lessons for law and economics from recent developments in the re-emerging field of constitutional political economy. CPE compares alternative sets of institutional arrangements, in markets and the polity, and their outcomes, using ‘democratic consent’ as an internal standard of comparison. The chapter discusses the methodological foundation of the CPE approach, presents Buchanan’s reconstruction of the Coase theorem along subjectivist-contractarian lines and gives an overview of recent contributions to the literature. JEL classification: B41, D70, H10, K; Keywords: Constitutional Economics, Constitutional Political Economy, Public Choice, James M. Buchanan, Methodological Foundation
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