Constitutional Economics Perspective Research Articles

The constitutional economics of the World Health Organization.

This paper brings a constitutional economics perspective to bear on the World Health Organization (WHO), the flagship United Nations intergovernmental health organisation, which is obligated by its Constitution to achieve 'the highest possible level of health' for the world's peoples. The WHO has in the seven decades of its existence used its formidable legislative powers only sparingly. It has been widely chided for being weak in regional coordination and unresponsive to transnational emergencies like the West African Ebola outbreak of 2014-2016. In 2020, it found itself at the centre of the COVID-19 pandemic and in the middle of the Sino-American geopolitical tug-of-war. This paper traces the discordance between the Constitution's stated purposes and the actual track record of the WHO not back to its organisational culture nor to weak leadership but to the design of the Constitution itself. It analytically distinguishes the Constitution's expressive from its instrumental halves, and shows that, whilst the former embodies a 'constitutional moment' of international health solidarity right after the Second World War, the latter embodies a reserved and limited delegation from member-states that are jealous of their sovereignty.

Walter Eucken's Role in the Early History of the Mont PPlerin Society

In the history of economic thought Walter Eucken is mostly known for his impact in establishing the Social Market Economy in post-war Germany. Even though there is a growing interest in his ideas especially from an Austrian and a Constitutional Economics perspective, his influence on the discussions within neoliberalism and, more specifically, his impact in the course of the foundation of the Mont Pelerin Society (MPS) are not yet widely considered. In this paper we attempt to show that Eucken was very influential in the formation of the MPS and that German ordoliberalism had a significant imprint on the early history of the society. It is primarily Eucken’s correspondence with F. A. Hayek and Wilhelm Ropke in this context which we present and analyze, complementing it with some hypotheses about early influences between Eucken and Hayek in terms of methodology and epistemology. Subsequently we show, by regarding the first MPS meetings between 1947 and 1949 (general and organizational), that there was – even at this early stage in the development of the MPS – a widening gap between a Continental European and an Anglo-Saxon understanding of neoliberalism, despite the personal friendships and high collegial respect especially between Eucken, Hayek and Ropke; Ludwig von Mises playing a special role in this setting. We illustrate this development also by discussing personal memories of Leonhard Miksch, a student of Eucken and a participant of the MPS meeting in 1949, recorded in his so far unpublished diary.

A Constitutional Economics Perspective on Soft Paternalism

SummaryUsing a framework that distinguishes short‐term consumer preferences, individual reflective preferences and political preferences, we discuss from a constitutional economics perspective whether individuals find it in their common constitutional interest to endow representatives and bureaucrats with the competence to impose soft paternalist policies. The focus is specifically on soft paternalist policies, because these often work with non‐transparent “nudges” that are considered as manipulative in some contributions to the literature. We show that those soft paternalist policies that are manipulative indeed collide with three criteria of consumer sovereignty, reflective sovereignty, and citizen sovereignty that can be argued to represent common constitutional interest of citizens. On the other hand, we argue that the set of paternalist policies that is deemed acceptable on the constitutional level is restricted to non‐manipulative instruments, and their application as government policies is limited to cases with stable and very homogenous preferences. However, we also argue that competitive markets are capable of supplying many mechanisms that allow individuals to cope with problems in their decision‐making processes on a private level.

Der OECD-Aktionsplan gegen die Steuervermeidung multinationaler Unternehmen – eine ordnungsökonomische Analyse der Maßnahmen und Reformoptionen

Abstract On July, 19th, 2013 the OECD published an „Action Plan on Base Erosion and Profit Shifting“, a catalogue of 15 actions against the tax avoidance strategies of multinational companies. The intention of the present paper is to investigate and evaluate if such a coordination of the national policies is necessary from a constitutional economics perspective. The thesis is that the planned actions against the tax avoidance strategies of multinational companies can strengthen the relation of the national corporation tax revenues to the use of public goods. However, the question arises if for interest and royalty payments an international coordinated withholding taxation would not be preferable and if the European Union additionally should not agree on a common assessment base for corporate taxation.

A Constitutional Economics Perspective on Soft Paternalism

Using a framework that distinguishes short-term consumer preferences, individual reflective preferences and political preferences, we discuss from a constitutional economics perspective whether individuals find it in their common constitutional interest to endow representatives and bureaucrats with the competence to impose soft paternalist policies. The focus is specifically on soft paternalist policies, because these often work with non-transparent nudges that are considered as manipulative in some contributions to the literature. We show that those soft paternalist policies that are manipulative indeed collide with three criteria of consumer sovereignty, reflective sovereignty and citizen sovereignty that can be argued to represent common constitutional interest of citizens. On the other hand, we argue that the set of paternalist policies that is deemed acceptable on the constitutional level is restricted to non-manipulative instruments, and their application as government policies is limited to cases with stable and very homogenous preferences. However, we also argue that competitive markets are capable of supplying many mechanisms that allow individuals to cope with problems in their decision-making processes on a private level.

Eine europäische Bemessungsgrundlage für die Körperschaftsteuer? Konzeption und ordnungsökonomische Analyse / Conceptual design and constitutional economics analysis of a European tax base for corporate taxation

Zusammenfassung Die Europäische Kommission macht sich seit geraumer Zeit für eine gemeinsame Bemessungsgrundlage für in Europa steueransässige Körperschaftsteuersubjekte stark. Mit dem Richtlinienentwurf vom 16.3.2011 liegt nun ein konkreter Vorschlag zu einer einheitlichen steuerlichen Gewinnermittlung vor, um vom Ecofin-Rat der nationalen Wirtschafts- und Finanzminister angenommen zu werden - die Steuerwelt wartet gespannt auf eine Beschlussfassung. Ein wichtiges Ziel dieser partiellen Harmonisierung ist, die grenzüberschreitende Verrechnung von Steuergewinnen und -verlusten zu ent-problematisieren, wobei durch eine Formelzuteilung das endgültige Besteuerungsrecht bei den Mitgliedstaaten verbleiben soll. Der vorliegende Beitrag möchte die technische Diskussion um das konkrete GKKB-Design um Grundsätzliches zu dieser angedachten Änderung des europäischen Steuerrechtsgefüges ergänzen. Die ordnungsökonomische Sicht soll verdeutlichen, dass die GKKB ein begrüßenswerter Eingriff für mehr Steuertransparenz und allokative Effizienz durch eine nutzungsorientierte Erhebung wäre, der körperschaftsteuerliche Standortwerbung weiterhin zuließe.

Direct Democracy and the Constitution

This chapter applies a comparative view to evaluate initiatives and referendums in the context of Constitutional change. Instruments of direct democratic decision making are compared to those of a purely representative democratic system in which members of parliament decide Constitutional issues like basic rights, the scope of democratic decision making and market exchange, the organization of government and the judiciary, and the federal structure of the country. Section 2 briefly describes aspects of direct democratic decision making that we deem critical from a Constitutional economics perspective. In particular, we hint to changes in the political process if citizens are directly involved through initiatives and referendums.

Islamic constitutionalism and rule of law: a constitutional economics perspective

This study investigates the relationship between Islamic constitutionalism and rule of law. Al Azhar, one of the most respected Sunni religious institutions in the world, developed a model of an Islamic constitution. This study uses Al-Azhar’s constitution as a model of Islamic constitutionalism and examines its stance in regard to the rule of law. We find the Al-Azhar’s constitution to be incompatible with essential concepts of rule of law. For example, the powers vested in the head of the Islamic state are enormous, making the executive branch of government far superior to the legislative and judicial branches. Women and non-Muslims are explicitly discriminated against throughout the constitution. Moreover, laws stemming from this constitution are not stable since many differences exist among schools of Islamic jurisprudence (fiqh). Consequently, we show that state-of-the-art Islamic constitutionalism lacks essential components needed in any constitution based on rule of law.

Deepening regionalism in Europe and ASEAN – the role of an economic constitution

The article examines the creation of an internal market in Europe and Southeast Asia from the perspective of constitutional economics. It assesses whether the success or failure of a regional integration process depends on the quality of the economic constitution that is chosen by participating countries, that is, on the set of rules and institutions, which bind the actions and transactions of operators within a jurisdiction and towards the operators of other jurisdictions. The article commences with an overview of the analytical instruments of constitutional economics in order to evaluate the success of a regional agreement on the basis of the ‘quality’ of its economic constitution. It then examines internal market creation in the EU and the Association of Southeast Asian Nation (ASEAN). The article concludes that it is the commitment to the implementation of a social contract that determines the successful establishment of a single market.

The meaning of non-profit mission breadth: A constitutional economics perspective

Given the non-profit management imperative of formulating optimally broad mission statements, this paper explores the meaning and the determinants of non-profit mission breadth. By adopting a constitutional economics perspective, the paper argues that mission breadth is ultimately determined by the trade-off between costs of collective decision-making in non-profit organizations and transaction costs of creating and maintaining these organizations. Developing optimally broad missions is shown to result in minimizing the sum of these costs, thus leading to an expansion of the non-profit sector and to an improvement of its problem-solving potential.

Moral und Wirtschaftsordnung: Zu den ethischen Grundlagen einer freien Gesellschaft / Morality and Economic Order: On the Ethical Foundations of a Free Society

Zusammenfassung Der Beitrag behandelt aus ordnungsökonomischer Perspektive die Frage, welche ethischen Anforderungen an die Wirtschaftsordnung in einer freien Gesellschaft zu stellen sind und wie im Lichte dieser Anforderungen die ethische Qualität der Marktwirtschaft zu beurteilen ist.

The ‘science-as-market’ analogy: a constitutional economics perspective

The ‘science-as-market’ analogy has been used in support of the notion that in science just as in markets competition works as an effective instrument for reconciling the self-interested ambitions of individual agents with the social function that science and markets are supposed to serve. This paper examines the analogy from a constitutional economics perspective, drawing attention to the role that the rules of the constitution of the ‘game of science’ as well as the ‘market game’ play in conditioning the ways in which competition works in the two realms.

Constitutional Economics of the WTO

This chapter examines the World Trade Organization (WTO) from the social scientific perspective of constitutional economics. This chapter thus seeks to identify the causes and consequences of constitutionalization. Assuming that states act with intentionality and accuracy in their establishment of organizational features, the cause of constitutionalization is the desire to effect the consequences of constitutionalization, so the focus here is on the potential consequences of constitutionalization in and in connection with the WTO.

Social Market Economy: origins, meanings and interpretations

This paper investigates various possible meanings of ‘Social Market Economy’—60 years after its political initiation in Germany. We focus on the variety of intellectual sources that influenced the formation and interpretation of the concept in Germany during the first half of the last century. Our particular attention is on Muller-Armack’s definition of a rather dualistic concept of ‘social’ versus ‘market economy’ and the subtle differences it has with an original (Freiburg School) view of ordo-liberalism that lends itself more easily to a constitutional economics perspective.

50 Jahre Europäische Ordnungspolitik: ordnungs- und konstitutionenökonomische Anmerkungen / 50 years of European „Ordnungspolitik”, remarks from a constitutional economics perspective

Zusammenfassung Die ordnungspolitischen Leistungen der Europäischen Integration der letzten 50 Jahre sind wechselhaft und widersprüchlich. Vor dem Hintergrund von Hayeks optimistischer Vision einer freiwilligen Integration unter dem Vorzeichen universalisierbarer Freiheitsgewährungen und Erhards Befürchtungen vor einem Europäischen Interventionsstaat diskutiere ich theoretische Gründe, die den gemischten empirischen Befund erklären können. Hayeks Optimismus läßt sich polit-ökonomisch vor allem unter Ver weis auf die Logik des Stimmentauschs und die Eigeninteressen Europäischer Organe relativieren. Erhards Pessimismus wiederum kann durch gewollte oder ungewollte Selbstbindung der Vertragsparteien sowie eine durchaus oft ordnungspolitisch weitreichende Interpretation der Verträge durch EuGH und Kommission in wichtigen Teilen widerlegt werden. Die weitere Entwicklung Europäischer Ordnungspolitik dürfte von den Reibungen zwischen Vertiefung (Harmonisierung, Zentralisierung) und Erweiterung der Union geprägt sein. Aus konstitutionenökonomischer Sicht empfiehlt sich ein Modell flexibler, freiwilliger Integration nach Politikbereichen in „clubs”.

Constitutionalism and the Regulation of International Markets: How to Define the 'Development Objectives' of the World Trading System?

The latin adage 'ubi commercium, ibi jus' reflects the insight that the efficiency of markets and trade depend on legal guarantees of market freedoms (such as freedom of contract, property rights), legal security (e.g. as incentive for investments and division of labour) and on legal limitations of 'market failures' as well as of 'government failures'. Since Adam Smith, economists increasingly acknowledge these interdependencies between economic, legal and social order, for example between the economic objective of promoting consumer welfare through legal guarantees of consumer-driven competition and open markets, and the democratic objective of protecting individual self-government and peaceful cooperation among citizens through constitutional guarantees of equal freedoms and social justice. The lawyers, economists and politicians belonging to the post-war German schools of 'ordo-liberalism' (including German chancellor L. Erhard and his secretaries of state, W. Hallstein and A. Muller-Armack, who represented Germany in the EEC Treaty negotiations) succeeded in basing the German and EC 'economic constitution' on constitutional guarantees of market freedoms, competition rules and a 'social market economy' committed to respect for human rights. Yet, the EC initiatives for 'constitutionalizing' the world trading system - for example, by correcting 'international market failures' by means of new WTO competition, environmental, investment and development rules, and for limiting the WTO's 'governance failures' by democratic and judicial reforms - appear to have foundered after more than 5 years of negotiations in the 'Doha Development Round.' This contribution discusses 'constitutional problems' of national and intergovernmental economic governance from the perspective of constitutional theory and constitutional economics by using the example of the disagreement among the 151 WTO Members on defining the 'development objectives' of the WTO's 'Development Round.' Constitutional theory suggests to define development as individual freedom, consumerdriven competition and autonomous development of human capacities protected by constitutional rights that limit abuses of power at national, transnational and international levels of human interactions.

Corporate social responsibility and the ‘game of catallaxy’: the perspective of constitutional economics

The paper examines the issue of corporate social responsibility (CSR) from the perspective of constitutional economics, focusing on the distinction between a political community’s constitutional choice of the rules of the “market game,” and the market players’ sub-constitutional choice of strategies within these rules. Three versions of CSR-demands are identified and discussed, a “soft,” a “hard”, and a “radical” version. The soft version is concerned with the issue of how “socially responsible” corporations ought to play the market game within existing rules. The hard version is about how the rules of the market ought to be changed in order to induce “socially responsible” corporate behavior. And the radical version questions the compatibility of CSR and the logic of the market game, calling in effect for adopting some alternative economic regime.

Armutsexternalitäten: Verfassungsökonomische Rechtfertigung für eine kollektive Grundsicherung

Abstract This paper analyzes the institution of benefit payments from the constitutional economics point of view. Benefit payments cannot be legitimized only by the veil of uncertainty about the personal future income position. From the constitutional economics perspective, they are only justified if externalities of poverty as a genuine public good problem are taken into account. A system of public benefit payments raise up two problems: first it has to overcome the problem of free-riding with regard to transfer payments, and secondly it should not provide incentives for the beneficiary to restrain the own efforts to work. Hence a double commitment is necessary: On the one hand, this commitment must regulate, in which way a citizen is engaged in the financing transfer payments, and on the other hand it has to include obligations for the potential recipients of the transfer payments to immediately return to working life.

Konstitutionenökonomische Überlegungen zum Konzept der Wettbewerbsfreiheit

Zusammenfassung Das Konzept der Wettbewerbsfreiheit spielt in der ordoliberalen Tradition eine zentrale Rolle als Richtschnur für Wettbewerbspolitik. Seine genaue Bedeutung und sein normativer Gehalt sind allerdings keineswegs unumstritten. In diesem Beitrag geht es darum, aus konstitutionenökonomischer Perspektive einige der Interpretationsprobleme näher zu untersuchen, die dieses Konzept aufgeworfen hat, und Vorschläge zu ihrer Klärung zu machen. Im Zentrum steht dabei die Unterscheidung zwischen der konstitutionellen und der sub-konstitutionellen Bedeutung von „Wettbewerbsfreiheit“.

The Constitutional Dilemma of European Integration

The paper analyzes European integration from a constitutional economics perspective. It is argued that the use of the Prisoners' Dilemma as a description of the advantages of European integration is fallacious. If the situation is a PD, the solution is impossible; if it is not, it is unnecessary.