Essays in constitutional economics

Abstract: Essays in Constitutional Economics uses the theoretical tools developed in public choice and constitutional economics to analyze how institutions of various sorts influence the individual choice calculus. Institutions are seen as formal and informal rules that can be evaluated and, although oftentimes durable, reformed. The primary purpose of institutions is to guide and constrain human behavior in a world characterized by uncertainty and self-interested motives, such that human actions are more conducive to long-term, aggregate preference satisfaction. The first essay, "Social Order through Constitutional Choice: A Contractarian Proposal," introduces a normative criterion for legitimate constitutional change, based in James Buchanan’s brand of contractarianism, and proceeds to outline a specific constitutional proposal. The proposed constitution consists of a common core, representing Nozick’s minimal state, and a set of subconstitutions between which citizens can choose, irrespective of geographic location, and which encompass different scopes of government. The second essay, "Rhetoric or Reality? An Economic Analysis of the Effects of Religion in Sweden," views religious beliefs, themselves taken as given, as entailing moral positions, here seen as informal institutions, which influence behavior in a predictable fashion. An empirical study of divorce rates, rates of children born out of wedlock, abortion rates, and rates of not paying one’s debts in Swedish municipalities reveal that the stronger the religious involvement, the less of these particular behaviors is seen. Interestingly, the negative influence of involvement in the Lutheran state church is greater, on the margin, than the negative influence stemming from involvement in (generally more conservative) independent churches. The third essay, "Economic Freedom and Equality: Friends or Foes?" looks at economic policies as sets of variable institutions which influence economic activities, and thereby efficiency and the income distribution, in various ways. A cross-country study reveals that economic freedom, defined in the form of an index measuring such things as tax pressure, protection of property rights, a functioning judicial system, low inflation, and freedom to trade, can be positively related to income equality. This holds in developing countries when economic freedom is increased over a longer time period in a stable manner and when the increase is the result of trade and capital-flow liberalization. Then, the poor seem to be able to take advantage of the freer economy to a larger extent than those who are better off.