BUCHANAN'S NON-COERCIVE ECONOMICS FOR SELF-INTERESTED INDIVIDUALS: ETHICS, SMALL GROUPS, AND THE SOCIAL CONTRACT

Market failures, which are usually viewed as a consequence of self-interest, are also supposed to be a major justification for coercive state interventions. This was the view of, among others, Richard Musgrave and Paul Samuelson, but not of James Buchanan. The latter certainly admitted that individuals are self-interested, that markets fail to allocate resources efficiently, but did not believe in the need for coercion. In this paper, we show that, to Buchanan, coercion can be unnecessary if certain post-constitutional conditions are satisfied. We show that he believed that self-interested individuals voluntarily adopt pro-social behavior in small groups. Small groups or small numbers represent a post-constitutional alternative to the veil of ignorance.