BUCHANAN’S SOCIAL CONTRACT AND THE PRISONER’S DILEMMA

Buchanan’s early work, best expressed in his and Gordon Tullock’s 1962 Calculus of Consent, demonstrates a commitment to classic liberal philoso­phy. This book argues that starting with a premise of rational self-interest, individuals can design a constitution that at least minimally serves everyone’s interests and secures nearly unanimous agreement.⁵ Such a view coheres with the libertarian adage that the government that governs least, governs best.

However, as the 1960s gave way to the 1970s, the major theme on Buchanan’s mind was not so much the threat of communism as it was that of social anarchy, as expressed in student protests, and what he took to be a general breakdown of social decorum. His 1975 Limits of Liberty: Between Anarchy and Leviathan is a response to this latter problem of social order. Buchanan articulates his main theme on the first page of the preface: “‘Law,’ in itself, is a ‘public good,’ with all of the familiar problems in securing voluntary compliance. Enforcement is essen­tial, but the unwillingness of those who abide by law to punish those who violate it, and to do so effectively, must portend erosion and ultimate destruction of the order we observe.”⁷ According to Buchanan, we live in a dark world in which the

⁵ James M. Buchanan and Gordon Tulluck, The Calculus of Consent (Ann Arbor: University of Michigan Press, 1962).

⁶ Amadae, Rationalizing Capitalist Democracy, 2003.

⁷ Buchanan, Limits of Liberty, 1975, ix.

only force standing between civilization and chaos is the sword. Moreover, the weak link is not only actors’ reluctance to comply with social norms and rules but additionally actors’ reticence to punish offenders, which welcomes disorder.

The turbulence of the 1960s and early 1970s is thus as important to assessing the origins of contemporary neoliberalism as were the threats of communism and totalitarianism to the reconceptualization of classic liberal principles in the 1950s.^[424] The newly articulated Enlightenment-era blueprint for capitalism offered by Adam Smith was predicated on the voluntary renunciation of any claims on others’ personhood, property, and contracts, in keeping with sympa­thetic and impartial judgment of third-party injuries, personal conscience, and the legitimate rule of law.^[425] The central unifying theme was that of “negative liberty,” or the “no-harm principle”: all individuals should be free to do as they please, so long as they does not violate the integrity of persons or their posses­sions. Smith argued that if the rule of law were restricted to commutative justice, relinquishing any role for redistribution, then prosperity would emerge. Each person, in advancing personal well-being limited only by refraining from injur­ing and stealing from others, would necessarily contribute to the joint stock comprising a nation. Voluntary consent was seen as the foundation of interac­tions in the marketplace, and subsequently that of individuals’ social contract with government, as the franchise continued to increase throughout the nine­teenth and twentieth centuries. By contrast, the neoliberal justification of gov­ernment is predicated on an analysis of individuals’ partially aligned and partially conflictual private preferences over social outcomes. Individuals’ iden­tity is formulated in terms of their logically ordered preferences over all con­ceivable states of the world and their actual opportunities, instead of by the legal and normatively regulative attributes of their personhood, property, and con­tractual obligations. The predominant operating theme of this new relationship between the individual and government is contained in the Prisoner’s Dilemma.

To some extent, the Prisoner’s Dilemma corrective to classic liberalism may be viewed as a realistic admission that no one ever really consents to a social contract, and that status quo property rights cannot be metaphysically or historically justified. Hobbes’s idea of submitting to the sovereign, regardless of the actual terms for each individual, on a voluntary basis invites the additional assumption that any specific terms will only be agreeable if backed by sufficient coercive power.^{[426] [427]} This conclusion, as will become evident ahead, would become the position Buchanan articulates in Limits to Liberty. However, neoliberal political thought jettisons the Archimedean reference point of classic liberalism of voluntary consent in a two-person agreement that presumes the possibility of uncontested status quo property rights and builds on actors’ reciprocal respect for the other’s inherent right to exist. Recall that Hobbes built his social contract theory out of the reasonableness that individuals reaching an agreement they directly participate in ratifying will voluntarily comply with it.

Consider a routine single-meeting bargaining situation, for example, on the western frontier with one individual who has a gold coin and another who has a horse. Each hopes to secure both the horse and the gold coin for personal possession but also worries about receiving the “sucker’s payoff” of personal injury and no goods. If both would-be traders cooperate, they will achieve an amicable exchange; if both renege, the coin is lost, and the horse runs away. According to John Nash’s analysis of bargaining encompassed by noncoo­perative game theory, any rational individual caught in such a situation will necessarily not cooperate, thereby achieving a worse outcome than would be achieved by cooperating.11 The PD structure of individuals’ preferences that only register instrumental gain of salient scarce resources ensures that regard­less of what the other agent does, every individual is better off defecting.

In the transition from neoclassical economics to late twentieth-century neoliberal economics, strategic rationality and by implication the Prisoner’s Dilemma became the guide for comprehending many human interrelations. Consider the contrast between Friedrich Hayek’s description of trade and that of Buchanan. Hayek presents trade as occurring between individuals on the basis of voluntary consent rather than the threat of coercion.^[428] However, to neoliberals like Buchanan, in any exchange transaction, each party has the incentive to cheat the other. Because individuals are incapable of forming binding agreements by consent, trade itself must be encased within a system of government-enforced sanctions to ensure that no one opts to cheat the other. This leads to a great irony: if we are to have a minimal state in which the unfettered market thrives, then that state needs to be able to broadly monitor and enforce that market. At the same time that the concept of a public was being hollowed of content, individual privacy was as well.^[429] Solving the Prisoner’s Dilemmas abounding throughout society requires pervasive inspec­tions of individuals’ activities. Employees’ phone conversations are routinely recorded; trucks are marked “How’s my driving, call 1-800-555-1212 to report.” No one is trusted to do her job as it is assumed all will cut any corner they can get away with.

To the rational choice theorist, the problem of achieving social order out of anarchy and the problem of maintaining compliance with the rule of law are Prisoner’s Dilemmas.16 Therefore, it comes as no surprise that Thomas Hobbes’s Leviathan is the favorite point of departure of rational choice theorists who maintain that all exchange is subject to a Prisoner’s Dilemma. The solution to the problem of social order then must be that of government via sanctions to prevent, or punish if necessary, defection in transactions ranging from one-off exchanges to more complex multiparty interactions.^[433] Game theorists can then claim that Buchanan’s endorsement of a maximal security state was anticipated by Hobbes, who astutely understood the impossible Prisoner’s Dilemma debacle in which we all find ourselves when we attempt to cooperate with one another (in Chapter 5, “Hobbesian Anarchy”). Buchanan alludes to this in the subtitle of his book: Between Anarchy and Leviathan.

The rational choice resolution of the Prisoner’s Dilemma with a Leviathan­like state might give one pause.¹⁸ However, if it can be presented as a clear descendant of an earlier form of argumentation already bequeathed to us by Hobbes and amended by Adam Smith as well as by Immanuel Kant, then it might not seem so significant or problematic by itself.

Buchanan’s Prisoner’s Dilemma-based analysis of the problem of social order in Limits of Liberty demarcates the precise moment when this new logic of governance was articulated and ready to be implemented. It is over this point

1 ⁸ Brian Skryms, for example, argues that the social contract is better modeled in terms of the Stag Hunt game, but he relies on repeating interactions not relevant to large-scale, anonymous late- modern society; see his Stag Hunt and the Evolution ofSocial Structure (Cambridge: Cambridge University Press, 2003).

1 ⁹ For an insightful discussion, see Edward F. McClennen, “The Tragedy ofNational Sovereignty,” Nuclear Weapons and the Future of Humanity, ed. by Avner Cohen and Steven Lee (Totowa, NJ: Rowman & Allanheld, 1986), 391-406.

²⁰ Hargreaves Heap andVaroufakis, Game Theory, 2004, 175.

²¹ Cass Sunstein and Richard Thaler, Nudge: Improving Decisions about Health, Wealth, and Happiness (New York: Penguin, 2009). David G. Rand et al. provide a prominent recent example of how cooperating in a PD-like situation is regarded as a result of “spontaneous intuition,” as opposed to a rational course of action, ignoring that actors may instead be exhibiting team reasoning, fair play, or other-regarding behavior or viewing outcomes in terms beyond fungible scarce resources, “Spontaneous Giving and Calculated Greed,” Nature (2012) 489, 11457, pub­lished online, doi:10.1038/nature11467; www.nature.com/nature/journal/v489/n7416/abs/nat ure11467.html, accessed July 1, 2015.

²² Hargreaves Heap and Varoufakis, Game Theory, 2004, 175. that Buchanan and public choice, not to mention much rational choice scholar­ship, diverge from John Rawls’s approach to justice and good governance.^[434] Buchanan proposes that government and law are inseparable from incentives and sanctions. Not only the progressive liberal Rawls, but also the libertarian Nozick holds that mutual consent and mutual forbearance are a mandatory basis for maintaining a civil society.^[435] This point of division is not just that between Buchanan and Rawls, but a reflection of a much greater disagreement about the foundation of civil society: the neoliberal practice of government relies on the Prisoner’s Dilemma assessment of the problem of social order, which is mutually exclusive with any concept of legitimacy through express consent and voluntary participation or through the tacit recognition that a process of deliberation would ratify the general contours of the rule of law.^[436] This breaks sharply with traditional liberal theory, according to which law is bequeathed its legitimacy from due process entailing the actual or implicit consent of its citizens. However, whether the law is deemed to arise from self- evident reflection or impartial judgment, as Adam Smith and Robert Nozick argued, or leaving room for the participatory engagement of those it governs, as recommended by John Lock and John Rawls, neoliberalism marks a significant break by repudiating either the legitimacy of law’s content or its binding quality even were all actors unanimously to consent to its particular form.^[437] It is not that classic liberals held an idealistic view of human intention and expression, but they did entertain the possibility that people have a choice of acting out of mutual respect in direct contrast to the late-modern neoliberal view espousing that rational actors treat others as complex objects to be manipulated to secure personal gain.^[438]