Review 2: Property Rights and the Limits of Democracy, edited by Charles K. Rowley

David N. Laband,
Auburn University,
Journal of Economic Literature Vol. XXXIII, 835-836 (June 1995)

"How can the economic blessings of a liberal order grounded in private property and freedom of contract and association be secured? How can such an institutional framework be established and maintained? These questions, articulated by Professor Richard E. Wagner, provide the unifying theme of this fine collection of four short essays in political economy. By both progressive example and critical appraisal of 30 years' worth of contributions to scholarly literature, Professors James M. Buchanan, Gordon Tullock, Richard E. Wagner and .Charles K. Rowley provide focused and insightful answers to these questions. With customary lucidity and depth of analysis (customary for him, that is, not necessarily the rest of us), Professor Buchanan leads off with Property as a Guarantor of Liberty. In this essay, he argues that private property underpins our freedom to enter into and, critically, exist from voluntary exchange and relationships. This freedom is positively valued in its own right. In addition, freedom to contract guarantees an individual's economic liberty, in the sense of being able to choose freely how independent/interdependent she will be with respect to others.

By way of illustrating the economic costs of the Faustian bargain implied by the relinquishment of individual liberty in favor of a central authority that is granted power to secure private property rights, Gordon Tullock offers a thorough, concise review of the literature on rent seeking. Professor Tullock is at his best: as intellectual founder of, and frequent contributor to, the rent-seeking literature and as long-time editor of Public Choice, in which much of this literature appeared, he has an unmatched interest in, knowledge of, and appreciation for the significant contributions. His is a first-rate synopsis of 30 years' worth of scholarly discussion; graduate students studying rent seeking can one-stop shop with this essay.

In Parchment, Guns and Constitutional Order Richard Wagner analyzes the institutional organization of commonwealths. He draws a compelling analogy betwen sports referees and a central governing authority. Referees are useful as enforcers of a set of rules of the game, which define players' property rights. However, the integrity of the fame itself is destroyed when referees function as interpreters or revisionists of those rules. Similarly, a central authority whose role is limited to enforcement of private property rights may serve the individual and collective interests of society. However, in any kind of revisionist capacity, the central authority serves to enforce a tyranny of the majority and, indeed, in representative democracies may enforce a tyranny of the minority. In recognizing that our present form of government permits revisionism, Professor Wagner makes the eminently believable case that the parchment upon which our constitution is written does not afford much protection against creeping socialism (my characterization, not his). Based on our experience since the New Deal, a more apt description would be "sprinting socialism".

Finally, in Liberty and the State, Charles Rowley retrospectively exposes how advocates of central planning and social engineers have drawn selectively from social choice theory to justify state incursions on individual liberty. As with Tullock and rent-seeking, so with Rowley and social choice theory: he is admirably suited for his task. Rowley's analysis is incisive and merciless. He castigates the so-called constructive rationalists (whom he identifies as including economists Paul Samuelson, Kenneth Arrow, and John Kenneth Galbraith) for their unconstrained vision of government, in which perfectly informed policy experts behave so as to maximize some sort of social welfare function. Professor Rowley diagnoses these individuals as suffering from synoptic delusion, noting (correctly in my opinion) that the assumption of unbounded rationality leads to "seriously flawed science". He then reviews the impossibility of aggregating individual preferences into any sort of meaningful social welfare function. By the time Professor Rowley is finished the methodological seas within which the seemingly ubiquitous social planner fish (schoolers, not loners, obviously) swim have been exposed as barren salt flats. They (the fish) are left flopping, their gills working feverishly to pump life-sustaining oxygen that simply does not exist.

Although a different reader might react otherwise, I thought that Tullock's essay on rent seeking should have followed Wagner's rather than preceded it. Rent seeking in the common understanding of the term is a consequence of revisionist government, although a good cause can be made that it also is a continuing cause of revisionist government.

My presentational comment notwithstanding, this book of essays conveys a powerful message. It is best read by those individuals too blinded by their own innate genius and capacity to do good (are you listening Bill, Hillary, Al, and Tipper) to pay heed to the lessons to be learned from the fact that just about everywhere except America, economically destitute people are ripping down the twin flags of communism and socialism and kicking intrusive government out of their private lives. Unfortunately, it is precisely these individuals who are least likely to read the book."