From The Calculus of Consent to extended logrolling, negative externalities, and the Coase theorem

Abstract

My first exposure to some of the ideas analyzed in The Calculus of Consent took place in spring 1963. At that time, I participated in a seminar of Edward Banfield during the months I spent as a Rockefeller Fellow at Harvard University. Banfield, a well-known political scientist always open to new approaches, had invited three young scholars who worked at the forefront of what soon became known as public choice theory, namely Anthony Downs, Lieutenant Mancur Olson, and Gordon Tullock. We seminar participants where highly interested in their presentations, and on all three occasions a lively discussion arose. I had already used ideas of Downs’s An Economic Theory of Democracy in my habilitation thesis on Aussenpolitik und internationale Wirtschaftsbeziehungen (Foreign Policy and International Economic Relations), but the subjects presented by Mancur Olson and Gordon Tullock were new to me. No wonder that I soon read The Calculus of Consent. The book impressed me with the proof that different procedures for making political decisions recommended themselves, depending on the costs of decision-making for the problems to be solved compared to the disadvantages brought about by excluding members of society from the decision-making process. However, one of my early students, Malte Faber, now professor at Heidelberg University, found some problems with the result. He analyzed the question whether the assumption of unanimity at the constitutional level always prevented problems in establishing adequate decision rules at the operational level. He was able to show that in certain cases, especially when questions of income redistribution are at issue, the unanimity rule at the constitutional level leads to the establishment of the same rule at the operational level under plausible conditions. But this means that the approach used by Buchanan and Tullock is unable to explain income redistribution (Faber 1973). For my own research, however, it turned out that quite by chance other ideas of the Calculus gained a bigger influence. When I began to work on my book Grundlagen der Politischen Okonomie (Foundations of Political Economy) in the beginning of the 1970s,