Constitutional Economics

The constitution Economics is an area of research which, among other social policy should help clarify issues and dealt with this aspect of social inequality.

Taxis

The constitutional economics builds its argumentation in principle on a natural state, comparable with that of the natural law with Thomas Hobbes . In this state everyone has the right to everything. Buchanan calls this state of chaos . It is easy to understand that this condition applies to individualsis not satisfactory. That is why the people in this - ahistorical, so only exist in the form of a thought experiment - state a collective state treaty. In this state, which Buchanan dubbed taxis, individuals have given up their right to everything. What constitutes this state of affairs, however, is that there is a form of individual justice in it. Although every individual is treated fairly (however this justice is ultimately designed), the implementation of individual justice is extremely time-consuming. In the state of the taxis, division of labor is also possible for the first time, but the possible exchange profits remain small due to the individual justice and the costs of this system due to the individual justice remain high. In contrast to the subsistence economy, the division of labor creates profits through specialization, although these are still small for the time being. In this respect, the taxis can only be assessed as a form of transition and a theoretical intermediate step in constitutional economics.

cosmos

The final stage Buchanan is aiming at is that of the cosmos. This is a rule-controlled society. Basically, this means a control based on law, i.e. on laws . However, generally applicable laws have the disadvantage that they do not guarantee individual justice in every case. This was still possible in the taxis. This means that laws are determined by a majority (e.g. by representatives of the people), but not with an absolute majority, as would be necessary for individual justice. The advantage, however, is that the number of veto players is significantly lower in this case and that this system is not as complicated and time-consuming (transaction cost argument) as that of taxis. Much greater profits are now possible through comparative cost advantages and market swaps, but there are also losers in the system. Since these losers in principle have the opportunity to reject the rule control system, i.e. to mobilize their potential for defects and thus to destroy the profits in the rule control system, something must be done about it.

Tolerance bonus and social policy measures

This is where the concept of the tolerance premium and social policy measures come into play. Social policies in this case are seen as an exchange rather than a form of handout . The losers of the Kosmos system receive benefits, e.g. B. from tax transfers, and exchange for the acceptance of the system. It is precisely this thought that is new in constitutional economics. Basically, the idea is old. So the Bismarck social policy was something like a tolerance bonus. Because here the policy was even aimed particularly at the groups of workers (worker question) who worked in the factories, i.e. who could easily have mobilized as a collective and thus had a great potential for defects. In this respect, then, this is a historical example of a tolerance premium to stabilize a certain political system. However, this view of social policy has gradually disappeared over time.

In scientific and political discussions, social policy was often viewed as alms - that is, as a service without consideration. The market and social policy opposed each other like two antipodes . More of one meant less of the other. In this way of thinking, social policy had to iron out the damage to the market. Constitutional economics opposes this view. The toleration of the system is bought for a premium. This is a perfectly normal market swap. According to this line of argument, one can no longer speak of a “social policy against the market”, but rather a “social policy for the market”. That does not mean that the price of the tolerance cannot be negotiated (social cuts). However, the price should be reasonable.

Gaps in the system

The question arises as to why those who are disadvantaged in the system with regular control do not always prefer the state of the taxis. Although there is case-by-case justice in the state of taxis, this justice takes place at a low level. This system is less efficient and so there is less inequality, but at a low level. In short, this means that for the losers in the cosmos, the gain from tolerance bonuses is still greater than the gain in a system with individual justice. “The pie grows with inequality”, which means that relatively the losers receive less, but nominally more than in the taxis system. At this point, the danger of excessive cuts in social benefits becomes clear. If they fall below the anticipated level in the taxis, the tolerance of the cosmos ceases. This could even mean that if the system crashes, the system will initially return to its natural state.

Investments

The tolerance premium can also be seen as an investment incentive. As already explained, greater gains are possible in the system of the cosmos than is the case in taxis and chaos. So it is worth investing. However, such an investment is not without risk and, since a loss of the same amount as a profit is assessed as relatively greater by risk-averse individuals, a socio-politically guaranteed subsistence level can be seen as an investment incentive. So if there were no subsistence level in the form of a tolerance premium for the losers of the system, many a risky investment with probably high profit would not be made. In this respect, social policy helps to make investments and thus ensures on a large scale that the “cake” to be distributed becomes bigger, so that even the losers benefit from this system. With this argument it becomes clear once again why constitutional economics speaks of social policy for the market . Schumpeter gave a nice example from practice. He says, "that cars with brakes drive faster than they would otherwise", and so it is with social policy.

literature

Karl Homann, Ingo Pies : Social policy for the market: Theoretical perspectives on constitutional economics. In: Ingo Pies, Martin Leschke (eds.): James Buchanan's constitutional economics. Tübingen 1996, pp. 203-239.