Aschwin de Wolf recently posted a a couple of old reviews of Anthony de Jasay’s “The State”. de Jasay’s work is one of the few examples of the use of rational choice method to model the “total state” in liberal political theory. This approach is liable to get one branded a crank–as evidenced by the first review embedded at de Wolf’s site–but de Jasay is able to get away with it because he is independent of the academic establishment. The second review, penned by James Buchannan, takes de Jasay’s analysis more seriously. So much, in fact, that he suggests that a liberal model of refutation(of the total state model) should be a primary endeavor of the academic(liberal political philosophic) class.
de Jasay’s Model: The Assignment of Self-Interest Rationality to State Actors Extends to the Sphere of the Commitment Problem
A naive “first-order” rational choice analysis will argue the need for the State as means for a credible enforcement of commitments between rational, self-interested actors. A more realistic “second-order” analysis will also extend this same rational,self-interested agency to State actors. A second-order analysis is then concerned with examining the logic of an Agency that is endowed with the same properties of agency that supposedly necessitates its role of external Agency in the first place. In a sense, Thomas Hobbes, the pioneer of the liberal method, engaged in a “second-order” analysis to justify Leviathan. Hobbes did not exempt state actors from self-interested agency. Hence, the need for a state agency of “one”(the monarch as Leviathan) to prevent the “war of all against all” within the State agency itself(and between the State agency and its subjects). Later liberal philosophers, who had no interest in preserving the old order of the monarchies, would discount a second-order analysis of the State agency. Well, not entirely, of course. Standard liberal theory proposes the State agency bound by constitutional constraints and accountability to a democratic process. Breaches of these constraints are grounds for termination of political obligation.
de Jasay’s method in “The State” is to deconstruct the second-order commitment problem. Are “constitutional constraints and democratic accountability” credible mechanisms to enforce the commitment between the State and it’s subjects to ensure the ends of the State do not compete with the ends of its subjects? Alternatively, is there any credible enforcement of the commitment between the State and its subjects if we assign rational agency to both parties? In other words, who “enforces” the “social contract” if we assign rational, self-interested agency to both the State and its subjects? de Jasey argued that there is no credible enforcement of the second-order commitment problem. This condition leads to an inevitable “total state.”
One misconception I wish to clear up–and I’ve discussed this previously–is any explicit identification of Public Choice with libertarianism. Public Choice,as a discipline, is by and large unconcerned with the problem of political obligation vis a vis second-order commitment problems. The Public Choice method assigns rational agency to State actors and is a model of political failure. But this failure stops short of questioning political obligation. The model of failure is generally restricted to the problem of mapping democratic preference to public policy outcomes, particularly with respect to a policies of social welfare redistribution.
For example, naive neoclassical economics(which does not consider the second-order rationality of state actors) held that public policy redistribution was actually redistributing something. The cost of this redistribution was just a deadweight loss. Public Choice was saying something different: there is nothing being redistributed(in net rent terms). And it is a quite socially wasteful process. This is the argument that government intervention is socially wasteful. But it is not an argument that the failures of government intervention dissolve the social contract.
In the Buchannan review that I previously referenced, Buchannan is smart enough to realize that a model of political failure that relies on a method of second-order assignment of rationality to State actors not only takes out interventionist social welfare redistribution, it can also take out political obligation if the model is extended to the commitment problem. This is why Buchannan, who is obviously concerned with protecting the public choice method in the scope of liberalism, suggested the need of it to shore up its flanks against commitment problem attacks. Others, such as the first reviewer, would dismiss any extension of public choice to a second-order commitment problem, noting that the public choice method is a model of political competition that results in wasteful rent dissipation and not one that predicts a unitary rent redistributing actor.
The Empirical Collapse of the Traditional Models of Competitive Rent Dissipation
We should note that de Jasay’s book was published in the mid 1980s. The two reviews I have referenced were published during the same time period. At that time, the consensus model of the rent-seeking game was one of competitive entry among agents wasting real resources to transfer no rents. There were essentially two competing variants of this model. One we could loosely call the “Chicago” model. If we define a rent dissipation ratio, D=C/R, where C=total transaction costs of rent-seeking, R=total rent, then the “Chicago model” would be:
(i)In equilibrium, D =1. The rent-seeking game is one of free competitive entry among equal agents. Free entry will result in the cost of rent-seeking equaling the rent. In other words, full rent dissipation.
The other model would be the Virginia School(Tullock):
(i)In equilibrium, D > 1 is a possible solution set. The Tullock model is much more dependent on the returns of scale of rent-seeking technology. This “returns of scale” is parametrized as a mathematical exponent. If the value of this exponent exceeds the ratio (n/n-1), where n=the number of rent-seeking agents, then you will have over-dissipation of rents.
In the “Chicago model,” the amount of the social waste equals the rent. In the Tullock model, the social waste can exceed the “total rent,” depending on the returns of scale being captured by the rent-seeking technology.
However, by the late 1980s, Tullock began to tackle the empirical divergences from the classical theories: political competition was not fully dissipating exogenous rents. This was a serious problem that in the words of Charles Rowley threatened the entire public choice method(it actually only dooms the classical liberal model of it). Tullock attempted to reconcile facts with theory by proposing extreme and deliberate inefficiencies in the rent-seeking technology. However, in “Efficient Rent-Seeking: Chronicle of an Intellectual Quagmire,” Tullock conceded that the classic models of rent-seeking have no real equilibrium.
A Radical Public Choice Model
A Public Choice Model extended to the the second-order commitment problem can give us a radically different model of Political Competition. We can loosely identify one such example as the “de Jasay Model.” In this model, the State behaves as a unitary actor in the sense of:
(i) D < 1. Political competition does not dissipate exogenous rents.
(ii) The ends of the State Agency are in competition with the ends of the State’s subjects
(iii) democratic accountability is replaced with a churning of manufactured consent
(iv) the rational ends of the State Agency is the maximization of discretionary power
(i)-(iii) gives us a model of the State as a firm. The firm can be thought of as a form of economic governance(Oliver Williamson), a DRO. However, our Firm, which is in competition with its own citizens, is not really in the business of settling civil disputes. It is DRO organ for political competition. Our Firm, the State, is an agency for exogenous rents.
(iv) we have a firm but what does it seek to maximize? Utility, rents or wealth are not particularly explanatory nor predictive. de Jasay suggested the thing being maximized is “discretionary power.”
We thus pithily summarize our model:
The State as agency for exogenous rents whose ends are the maximization of discretionary power
The model can explain what we see with our own eyes: “how state and society interact to disappoint and render each other miserable.” It explains why even if 100% hate the State, the State can still persist. It explains why people like Henry Kissinger, a supposed crown prince of the ruling class, now has his dick fondled at the airports by the blue-collar plebes of the security apparatus. It explains why the supposed standard-bearer of “the first world economy” more and more resembles the wealth patterns of a third world country. It explains, as predicted, the burgeoning phenomenon of brain drain exit from the United States. It explains the otherwise utterly baffling and unexplainable phenomenon(in liberal political theory) of how an entire legislative and political class of the “world’s greatest democracy” serves as direct agency for the right-wing policy objectives of a foreign Apartheid State.
We can easily synthesize our Rational Choice model of the “Total State” with the classical libertarian class theory of the French liberals. The French Liberal treatment of class theory was tied to a political economy of a military industrial complex. It’s not difficult to see that political competition for exogenous rents in a political economy of a military industrial complex is likely to result in a maximization of discretionary power.