The Reason of Rules: Constitutional Political Economy

Geoffrey Brennan and James M. Buchanan's The Reason of Rules develops the notion that rules are needed for "reconciling the behavior of separately motivated persons so as to generate patterns of outcome that are tolerable to all participants" (p. 7). Simple-majority-rules democracy, while intuitively the best political system thought up by mankind, unfortunately still leads to some questionable outcomes. In the short term, elected officials may crank up tax rates because it will increase their revenues, even though in the long run it will also drag down economic activity. In the short term, elected officials may issue government debt to finance their expenditures, even though in the long run this leads to a government sector that is far larger than citizens would want it to be if they actually had to pay for those government expenditures. To combat such deficiencies, the authors propose that we add constraining rules to our political system. Such rules should not be added at the statutory level, because here people tend to vote based on their short-term interest, which is what leads to the shortcomings of democracy in the first place. Instead, these rules should be at the constitutional level, since in the long run people are less driven by how a law affects him or her today than by how laws make for good policy for the country as a whole. Economically, the reason why individuals agree to impose behavioral constraints (rules) on themselves is that they do so as part of an agreement, or exchange, under which other people agree to do the same. The arrangement is reciprocal rather than unilateral. Politically, the reason why individuals agree to be governed, even though in doing so they forfeit a degree of personal liberty, is the benefits from public goods and services they expect to receive in exchange. Before the authors published their argument, received thinking was that the fairness of rules is evaluated by a notion of justice that is independently determined (how is not always clear, and has shifted over the centuries). The authors argue instead that rules are what is needed to define justice in the first place, which in and of itself is another reason for rules. The book's argument is persuasive because it drills the analysis down to the level of decision making by individuals: institutions (such as governments) do not make choices. Instead, the individuals who populate those institutions (such as voters, politicians, bureaucrats, etc.) make choices, and unless we consider what it is that motivates these individuals, the analysis is incomplete. The book was written in response to criticism to a previous collaboration, The Power to Tax, volume 9 in the Buchanan Collected Works series, but can be easily read on a stand-alone basis. It is one of the earlier publications of a branche of public-choice theory called constitutional political economics, hence its subtitle. The year after its initial publication, co-author James Buch