__________________________________________________________________ Colleen E . Haight , Andrés Marroquín Gramajo and Nikolai G . Wenzel The Calculus of Consent : 50 th Anniversary Introduction James M . Buchanan and Gordon Tullock wrote The Calculus of Consent fifty years ago , in 1962 . We write this article to celebrate the occasion . The three of us were graduate students at George Mason University when Buchanan and Tullock were actively participating in seminars and workshops in the early 2000s . The book was novel in the sense that it applied economic tools — and , more specifically , microeconomic tools — to the study of collective decision-making . They were not the first ones in this endeavor . The Swedish economist Knut Wicksell had already attempted to apply economics to politics , without much success . But his work inspired James Buchanan . Calculus extended the assumptions of economic theory about individuals in the marketplace to political actors . Among their numerous contributions , Buchanan and Tullock argued that from an economic standpoint majority rule was not “ the best ” criterion to make collective decisions . Every decision-making rule generates costs . They proposed the unanimity rule as an ideal , especially when it came to deciding the “ constitutional rule .” Colleen E . Haight teaches economics at San Jose State University ( California , USA ). Andrés Marroquín teaches economics at Universidad Francisco Marroquín ( Guatemala ). Nikolai Wenzel is Visiting Professor at Florida Gulf Coast University ( Florida , USA ). In 1964 Buchanan wrote the article “ What Should Economists Do ?” 1 In that article he reflects on Adam Smith ‟ s idea that human beings have a natural tendency to trade . For Buchanan , the main task of economists should be precisely the study of trade and exchange in different contexts , and The Calculus of Consent does exactly that : it looks at the political sphere and pays attention to how trade occurs . For this reason , Buchanan and Tullock ‟ s analysis is often called “ the study of politics as exchange .” In 1986 , the Nobel Prize was awarded to James Buchanan “ for his development of the contractual and constitutional bases for the theory of economic and political decision-making .” One wonders why Tullock was left out . James Buchanan and Gordon Tullock have been exemplary to many economists , both because of their innovative contributions , and also because of their passion and love for what they studied . Our article presents the main arguments in the book , part by part , and then briefly presents some reflections on how the arguments in the book relate to political economy , constitutional economics , institutional economics , and development economics . 1 James M . Buchanan , “ What Should Economists Do ?” Southern Economic Journal , 30 ( Jan 1964 ): 213-22 . Laissez-Faire , No . 36-37 ( Marzo-Sept 2012 ): 88-96

__________________________________________________________________ Part I The Main Ideas of The Calculus 2 The purpose of Part I of The Calculus of Consent is to ensure that readers all embark on the same train of intellectual discovery . Buchanan and Tullock carefully outline in the first four chapters a few key parameters within which they frame their arguments . Charles Rowley , in his introductory comments , refers to these parameters as “ hand grenades ” ( p . xi ). This description is quite apt , as the authors engage in a creative destruction that breaks down old accepted notions of romantic government , and use the first part of their book to clear the field for the insights to come in later chapters . Buchanan and Tullock propose the goal of their work as defining not what “ the State or a State actually is , but ... what we think a State ought to be ” ( p . 3 , italics in original ). They are careful to distinguish their approach to the political realm as micro-oriented , positing that groups do not make decisions , individuals do . Diverse individuals making choices based on self-interest and their own particular preferences do not always arrive at a group decision reflecting the choice of every individual . Universal consensus is recognized as an ideal standard , superior to majority rule , but also more costly . This issue brings to light the consent issue : Does an individual consent to a group decision that does not reflect his choice ? The authors build on methodological 2 Page references to The Calculus of Consent will be provided in parentheses in the main text , and will be to the Liberty Fund edition , published as vol . 2 of The Selected Works of Gordon Tullock ( Indianapolis : Liberty Fund , individualism and reject an “ organic interpretation of collective activity ” ( p . 11 ). As such they discard notions of the general will of the people , as well as class distinctions and theories which involve exploitation of a ruled by a ruling class . The authors point out that “ public interest ” as a concept is faulty ; only separate interests of private individuals are expressed through the political mechanism . As for government , it is seen as “ nothing more than a set of processes , the machine , which allows such collective action to take place ” ( p . 13 ). Buchanan and Tullock frame the political sphere as a type of market where exchanges take place between individuals seeking to realize separate goals . This concept of politics as exchange is absolutely revolutionary . Prior political theory was fundamentally rooted in the idea of political actors who sought the common good or acted in the “ public interest .” However , Buchanan and Tullock , having dismissed all notions of the existence of a public interest , instead propose that political behavior consists of voluntary exchanges between individual political actors . As with any voluntary exchange , it is not assumed that one actor succeeds at the expense of another , but that both parties to the exchange benefit . Buchanan and Tullock propose that the political sphere is marked by positive-sum exchange rather than conflict by individuals who , while participating in a collective decision process , are only seeking to maximize their own utility . Part I ends with a brief but important discussion of rationality . In a discussion of rank-order and transitivity as applied to individual decision making , the authors explain the basics of rationality . An individual makes a choice given his own personal preferences and goals . A successful 2004 ). choice propels the individual toward his __________________________________________________________________ 89

__________________________________________________________________ goal , an unsuccessful choice does not . Buchanan and Tullock explain that when individual choice is aggregated by a collective decision process , the link between action and result is unclear . As they point out , “[ n ] o longer is there the one-toone correspondence between individual choice and final action ” ( p . 35 ). Because there is no precise relationship between the two , behavior tends to be less rational in the collective . 3 Part II In Part II of The Calculus , Buchanan and Tullock seek to define the realm of social choice . Set against a backdrop of methodological individualism and rational actors engaged in political exchange , they begin by explaining the specific circumstances under which an individual selects his decision-making process . The authors propose that the determining factor rests with the externalities of the decision process : The choice between voluntary action , individual or co-operative , and political action , which must be collective , rests on the relative costs of organizing decisions , on the relative costs of social interdependence ( p . 46 , italics in original ). In essence , an individual compares the costs of private decision-making with the costs that he expects to be imposed upon him by collective decision-making , and chooses the less costly method . After defining which decisions might fall under which type of decision-making rules , Buchanan and Tullock set out to explain how a society might select a system of decision rules , or a constitution . 3 See also James Buchanan , “ Social Choice , Democracy , and Free Markets ,” Journal of Political Economy , 62 ( April 1954 ): 114-23 . They examine the costs associated with different types of decision rules and the impact of decisions made under the different rules upon the individual actor . Using two extreme cases , where either one individual is able to use the process to impose costs upon a group or where the entire group must agree upon a course of action , the authors illustrate the idea that there is no optimal rule for every situation . While a unanimity rule provides the greatest protection for an individual , such a rule also imposes great costs : For a given activity the fully rational individual , at the time of constitutional choice , will try to choose that decisionmaking rule which will minimize the present value of the expected costs that he must suffer ( p . 67 , italics in original ). Buchanan and Tullock are explicit about the trade-off between the protection afforded by a more inclusive rule and the lower costs of a less inclusive rule . Interestingly , while the authors propose it is rational to have a constitution defining the decision-making rules , they argue that it is not obvious that a majority rule system is implied by their analysis . Instead they propose that “ 51 per cent of the voting population would not seem to be much preferable to 49 per cent ” ( p . 77 ). Buchanan and Tullock indicate that the unanimity rule is the only rule that can achieve a Pareto-optimal result , and as such , is decidedly superior . They concede , however , that reaching decisions under unanimous decision rules is very costly . Both at the time of writing and today , the majority rule retains tremendous popularity . However , the authors say that majority rule has value only so far as it is an imperfect compromise where unanimous agreement would be too costly to obtain . __________________________________________________________________ 90

__________________________________________________________________ Buchanan and Tullock elaborate on the various costs associated with collective decision-making . They acknowledge that even purely private decisions involve some cost to determine an optimal choice . These costs remain for the individuals participating in collective decisions , but also include bargaining costs and costs related to group size and diversity . Larger groups and heterogeneous groups will tend to have higher bargaining costs as they are more likely to lack consensus on fundamental issues . Part III The third part of The Calculus presents the analysis of decision-making rules . Buchanan and Tullock argue that “[ a ] ny rule must be analyzed in terms of the results it will produce , not on a single issue , but on the whole set of issues extending over a period of conceptually finite length ( p . 116 ). The analysis starts by stating that votes have economic value ( otherwise , “„ corruption ‟ would be impossible ,” p . 117 ). If votes have economic value , they represent the “ purchasing power ” of a voter , and a market will tend to emerge . The participant in political decisions , therefore , follows economic motives . Buchanan and Tullock analyze majority rule in great detail . One of the problems with it is that it can create negativesum games . This means that the majority can use the rule to impose costs on the minority . It can make some individuals worse off as a consequence of the decision process driven by the preferences of the majority . voting for something of which he disapproves but about which his feelings are weak exactly matches the expected marginal benefit of the vote or votes secured in return support for issues in which he is more interested ( p . 141 ). Trade could occur in the form of side payments or in the form of “ logrolling ” ( votes exchange : I vote for your preferable option if you vote for mine ). This solution can be Pareto efficient when all the voters participate in the decision . Logrolling takes place frequently in Western democracies . In spite of being Pareto efficient , logrolling can nevertheless lead to overspending : “ Each individual in the group would be behaving quite rationally , but the outcome would be irrational ” ( p . 136 ). Buchanan and Tullock propose unanimity to decide on the fundamental rule : the constitutional rule , or “ the contract .” Unanimity is the only decision rule that does not allow the exploitation of the minority by the majority , or vice-versa . It is the only rule that guarantees a symmetric allocation of the gains ( or costs ) among the individuals who participate in the decision process . Unanimity does not need to be applied to any single decision by the members of a social group . Dayto-day decisions can be taken by majority rule , qualified majority rule , etc ., as long as the way these decisions are taken is consistent with the fundamental constitutional rule everybody has agreed upon unanimously . Unanimous agreement can emerge when trade is possible . A powerful message that Part III of the Calculus conveys is : If the intensity of preferences varies among voters , then trade is possible : Potentially , the voter should enter into ... without side payments , there is nothing in any particular voting rule to insure that collective decisions will move the group to the Pareto-optimality surface or that such bargains until the marginal “ cost ” of such decisions will keep the group on the __________________________________________________________________ 91