The Calculus of Consent: Logical Foundations of Constitutional Democracy
The Calculus of Consent: Logical Foundations of Constitutional Democracy was written by James M. Buchanon and Gordon Tullock in 1962. It has been republished by Liberty Fund in The Selected Works of Gordon Tullock, Vol. 2 and The Selected Works of James M. Buchanon, Vol. 3 much more recently.
The authors introduce a methodologically-individualistic concept of what a state ought to be.
- Individuals have different interests for reasons other than ignorance.
Individuals make rational decisions about consent based on expected costs and benefits.
- This concept can only form predictions about the structural characteristics of group choice, nothing more.
The authors are specifically interested in studying what group decisions result in public/collective action, as opposed to leaving decisions for individual action. Furthermore, how such group decisions are made.
- The fact that a meaningful portion of total economic activity is governed by the state, and the fact that special interest groups believe that they can gain benefits from the state, both suggest that such a theory is necessary.
- There must be some economic decision making.
- Pork barrel politics is not an error of the constitutional design, it is normal behavior within it.
What is meant by consent?
Assume that constitutional rules are founded with unanimity.
- Assume that individuals make a rational decision about consenting to constitutional rules.
In order to assess this, we need a common understanding of how a change in constitutional rules leads to an expected change in group decisions, so that individuals can possibly make a rational decision.
Society doesn't realistically form constitutional rules from nothing. Most societies have standing rules and norms, if not a standing constitution. Not an issue; a state is merely an artifact of decision making. It can be changed, and it ought to be changed to improve collective welfare.
Public goods and services are complicated.
A law of public demand must be assumed. There is fundamentally just one transaction in the market, whereas private economic activity can be studied to validate a law of demand.
- Group decision making imposes uncertainty, loss of control, loss of direct consequences, etc. These all weaken an individual's ability to make rational decisions.
- Mitigating factors: real societies are a continuous repeating game. Individuals have the status quo as a reference point.
cost approach to group decisions: the goal is removal of externality costs. there is an expected cost (costs of interdependence) to participating in group decision making about those externalities. this takes the form of decision making costs and of externalities imposed by a group decision that isn't optimal for an individual. if there were no such costs, externalities would be settled by individuals coordinating through agreements. if a negative externality is significant, action will be taken. will it be individual or collective? the prediction is that as decision making costs increase, collective action becomes the more efficient option. more generally, tullock is trying to formulate a theory about this cost approach in terms of g (expected costs of collective action), a (of individual action), and b (of individual coordinated action). by simplifying individuals' cost-benefit analyses to these factors, it is supposed that actionable inferences can be gathered. and by studying real interactions with measurable factors, with this theoretic lens, it is supposed that the theory can be tested.
considering consent of constitutional rules now: an inverse relationship exists between the expected externality cost component of the costs of interdependence and the number of individuals' consent required to make a group decision. if unanimity were the constitutional rule, an individual would veto all decisions that impose such a cost on themselves--the expected cost is 0. if any single individual were authorized to make group decisions, the expected cost would be higher. if a specific individual held the sole authority, then that individual would expect no costs, while all others would expect some. but it likely would not be as high as the 'any single individual' constitutional rule. a correlated relationship exists between the expected decision making cost component of the costs of interdependence and the number of individuals' consent required to make a group decision. if unanimity were the constitutional rule, all individuals must be bargained with, and in many cases they must be convinced to take less public goods or services. a single decision maker takes all decision making costs on themselves, sparing all others. it is expected that individuals will consent to constitutional rules based on a cost-benefit analysis on these lines. more specifically, based on the minimization of the sums of these two cost components, in terms of number of individuals' consent required. reality does not follow the structure of a game with a setup 'constitutional rule' phase and then repeated 'decision' phases. individuals find themselves in the middle of a repeating game with recurring opportunities to propose and consider rule changes. if individuals think along the lines of this theory, they target an overall personal minimization that considers all matters that are up for group decisions.
if all individuals can predict the matters that are up for group decisions, and if all individuals expect that they balance out 'losses' with 'wins' in terms of the optimality of group decisions, then constitutional rules should trend towards the societal minimization of those costs. from any starting point, individuals will consent to rule changes that move towards their personal minimization. the individual minimizations are expected to look like a societal minimization. (essentially an assumption of independence between group decisions.) a 'selfish' individual thus acts much like a 'selfless' individual. social cleavages make this prediction less useful. a majority group with consistent interests can and will impose rules and group decisions upon a minority group. (potentially an admission that this theory does not recommend such a constitution for such nations? potentially a hypothesis that dissolving social cleavages makes such a consitution more viable?) another side note: majority rule is arbitrary, just one out of many possibilities, and we likely have over fixated on that threshold.
altogether, constitutional rules can be based on unanimous consent, and group decisions can be made, without all decisions being pareto optimal. the expectation for suboptimal decisions was factored into the consent.
competition is the reason we don't expect bargaining in economic markets.as in, bluffing and posturing over incentives. rational actors working with marginal costs and marginal gains would not invest their resources into behavior that reduces overall profit. or put more simply, bargaining would introduce a cost on at least one actor who would face reduced incentive to participate in any deal, and over repeated rounds of bargaining we expect that either true incentives would be revealed or the damaged actors would abandon the deal. and given that, we expect the damaging actors to eventually abandon bargaining positions. political/constitutional decisions are rarely like this. there is not typically an option to 'walk away'. actors then may be forced into numerous rounds of bargaining, creating significant costs. and the expected costs grow with the number of people whose consent is required.
if non-unanimity is allowed, bargaining costs should fall. the introduction of alternatives means that damaging actors could force damaged actors away by maintaining a bargaining position, allowing deals to made that exclude them. in summary, people may be willing to consent to non-unanimous decision making even though it will introduce an externality. social cleavages, especially in a context of social violence, may lead a society to prefer a high threshold for social decision making, so high that it is unattainable given those cleavages. this would look like representative democracy thatnis paralyzed into inaction. this is perfectly rational. by contrast, a deeply homogenous social unit may prefer a low threshold, even though higher rates of participation could be acheived at a low marginal cost, simply due to the relative similarity between people's incentives. marginal benefits of participation are simply similarly low. this is also perfectly rational.