Constitutional economics
Constitutional economics is a research program in economics and constitutionalism that has been described as explaining the choice "of alternative sets of legal-institutional-constitutional rules that constrain the choices and activities of economic and political agents". This extends beyond the definition of "the economic analysis of constitutional law" and is distinct from explaining the choices of economic and political agents within those rules, a subject of orthodox economics.[1] Instead, constitutional economics takes into account the impacts of political economic decisions as opposed to limiting its analysis to economic relationships as functions of the dynamics of distribution of marketable goods and services.
Constitutional economics was pioneered by the work of James M. Buchanan. He argued that "The political economist who seeks to offer normative advice, must, of necessity, concentrate on the process or structure within which political decisions are observed to be made. Existing constitutions, or structures or rules, are the subject of critical scrutiny."[2]
Constitutional economics has been characterized as a practical approach to apply the tools of economics to constitutional matters. For example, a major concern of every nation is the proper allocation of available national economic and financial resources. The legal solution to this problem falls within the scope of constitutional economics.[3] Another example is to study the "compatibility of effective economic decisions with the existing constitutional framework and the limitations or the favorable conditions created by that framework".[4]
Legal approach[edit]
Judge Richard Posner emphasized the importance of a constitution for
economic development. He examines the interrelationship between a constitution and the economic growth. Posner approaches constitutional analysis mainly from the perspective of judges, who constitute a critical force for interpretation and implementation of a constitution, thus—de facto in common law countries—creating the body of constitutional law. He emphasizes the importance of constitutional provisions "in setting broader outer bounds to the exercise of judicial discretion". Thus, a judge, when trying a case, is guided firstly by the spirit and letter of the constitution. The role of economics in this process is to help "identify the consequences of alternative interpretations" of the constitution.
He then explains that "economics may provide insight into questions that bear on the proper legal interpretation". In the end, as Posner emphasizes, "the limits of an economic approach to deciding constitutional cases [are] set by the Constitution". In addition, he argues that "effective protection of basic economic rights promotes economic growth".[19]
Concurrently with the rise of academic research in the field of constitutional economics in the US in the 1980s, the Supreme Court of India for almost a decade had been encouraging public interest litigation on behalf of the poor and oppressed by using a very broad interpretation of several articles of the Indian Constitution. The former Chief Justice of Indonesian Constitutional Court, Jimly Asshiddiqie, also published his book "Konstitusi Ekonomi" (2010) in promoting the idea of Economic Constitution. This is a vivid example of a de facto practical application of the methodology of constitutional economics.[20]
The President of the Constitutional Court of the Russian Federation, Valery Zorkin, made a special reference to the educational role of constitutional economics: "In Russia, the addition of such new academic disciplines as constitutional economics to the curricula of university law and economics departments becomes critically important."[21]
Russian school[edit]
The Russian school of constitutional economics was created in the early twenty-first century with the idea that constitutional economics allows for a combined economic and constitutional analysis in the legislative (especially budgetary) process, thus helping to overcome arbitrariness in the economic and financial decision-making. For instance, when military expenses (and the like) dwarf the budget spending on education and culture. Constitutional economics studies such issues as the proper national wealth distribution. This also includes the government spending on the judiciary, which in many transitional and developing countries is completely controlled by the executive.
The latter undermines the principle of checks and balances, instrumental in the separation of powers, as this creates a critical financial dependence of the judiciary. It is important to distinguish between the two methods of corruption of the judiciary: the state corruption (through budget planning and various privileges being the most dangerous), and the private corruption. The former makes it almost impossible for any business to facilitate the optimal growth and development of national market economy. In the English language, the word "constitution" possesses a whole number of meanings, encompassing not only national constitutions as such but also charters of corporations, unwritten rules of various clubs, informal groups, etc.
The Russian model of constitutional economics, originally intended for transitional and developing countries, focuses entirely on the concept of constitution of a state. This model of the constitutional economics is based on the understanding that it is necessary to narrow the gap between practical enforcement of the economic, social, and political rights granted by the constitution and the annual (or midterm) economic policy, budget legislation and administrative policies conducted by the government. In 2006, the Russian Academy of Sciences officially recognized constitutional economics as a separate academic sub-discipline.[22]
Criticism[edit]
Walter Block and Thomas DiLorenzo criticize the possibility of constitutional economics as a science. They maintain that politics cannot be equated with the market and therefore, as a study, it cannot exist.[23] They maintain that unlike the market, consent is not the foundation of politics, and that politics is driven by violent, historically bellicose, coercion. Therefore, they believe that the constitutional economic method only clouds the discussion of public choice and political economy. Buchanan, Voigt, Macey, and even Beard all implicitly assume that politics is the exchange of political "goods", a strong social contract view.
But for Block and DiLorenzo, politics is one powerful group coercing free rides from a weaker group. From the Roman Empire to the present, they trace how the state always comes from conquest and exploitation, never consent. The Calculus of Consent, a foundational text for constitutional economics, bears much of their attack. If they are correct that no state has been or can be voluntary and that voluntary government is inherently contradictory, constitutional economics as a discipline cannot exist.
William Campbell explains the weakness of constitutional economics in its assumption that the goal of a regime must be efficiency, individual liberty, and libertarian rights, not morality or super-individual good.[24]