This is from Vera Lex 8 (1988)) and is Appendix 4 of Frank Forman, _The Metaphysics of Liberty_ (Dordrecht, Holland: Kluwer Academic, 1989).

"With the clash of authority came the end of authority." Thus wrote H.L. Mencken in 1908 in the first biography of Nietzsche in English^, and quite possibly still the best. He was speaking of Nietzsche's early rejection of religion on the grounds that there could not be more than one absolute Truth, but the statement may apply to natural rights doctrines as well. There are just too many philosophers laying down diverse pronouncements, each of them final, about which of the various natural rights are the true ones. Might it not be better for the people themselves to make up their own minds about which rights, whether they call them natural or not, to protect? After all and unless we believe society is some god or some transcendental object and rights only a manifestation of its glory, then rights ought to benefit people. And who is in a better position to know which rights are beneficial than the people themselves?

^Mencken, H.L. 1908. _The Philosophy of Friedrich Nietzsche_. Boston: John W. Luce & Co.

Thus, the justification of the idea of a social contract is that the people have decided upon it. Yet "authorities" known as philosophers take over the interpretation of this idea and *tell* the people what they have agreed to. Thomas Hobbes, for example, tells them that they are so frightfully warlike that the only right they have kept is to remove a sovereign who fails to keep the peace. John Locke, who holds a less fearsome view of human nature, lets them keep a good deal more. John Rawls, as East Coast liberals read him, says the people have agreed to East Coast liberalism, though my own reading of _A Theory of Justice_^ makes me think he moved in a libertarian direction during the twenty years he spent writing it. (I got this impression by reading it cover to cover in a week, or about 1/1040 the time he spent writing it.)

^Rawls, John 1971. _A Theory of Justice_. Cambridge: Harvard University Press.

This all would seem to mean the end of authority, too, in that even the Mayflower Compact could no doubt be regarded as coerced, surely so far as the children on board were concerned, to say nothing of those yet unborn. But we can move away from authority in the direction of realism, and such is the perspective an economist can give, a perspective which I shall herein explore under the name of *economic contractarianism*. My basis here is James M. Buchanan's magnum opus, _The Limits of Liberty_ (1975)^. He sees the social contract as economists see contracts: as [p. 182:] agreement, exchange, bargain, compromise. Before the agreement, there is what he dubs an "anarchist equilibrium" of production, predation, and protection. Anarchists in a state of nature might negotiate a peace pact to reduce predation and protection, so as to better concentrate on production. Such a pact is not likely to be self-enforcing, and so they will empower a government to enforce the pact. Just what pact will come about, that is, what rights will be protected, is up to the anarchists. No pact, and the state of nature persists.

^Buchanan, James M. 1975. _The Limits of Liberty: Between Anarchy and Leviathan_. Chicago: University of Chicago Press; paperback as A Phoenix Book, 1978.

In the strict historical sense, we are still in a state of nature, because there are always enough people around (it only takes one) who are simply *dis*agreeable, thus blocking any agreement. But we can assess how closely any situation approximates unanimity. Compromises can be made, and we don't have to wait for everyone to agree with every jot and tittle that John Rawls, or John Locke, or Thomas Hobbes wrote. Maybe even this distinguished trio could come to some sort of agreement, if only to stop fighting one day a week and hold a pow-wow on the ideal social contract. Buchanan very definitely recognizes that a social contract need not at all be the best one possible.

Buchanan has also distinguished the protective from the productive state, in which a government goes beyond protecting rights to engage in producing public goods. The people don't decide for all time what goods the government will provide and how they will be paid for. This is asking too much. Rather they set up a constitution that grants limited authority to pass legislation under a set of rules. Thus the contractarian productive state solves the problem of providing such public goods as national defense and sanitation, before which libertarians must usually modify their position. It is true that not everyone will approve every publicly financed scheme, but they could agree to a set of legislative rules that will benefit everyone over the long haul. Some public goods may be judged as "necessary," but most will not, and the *quantities* of all will be decided on the basis of individual values and trade-offs. Natural rights theories do not offer much of a method or solution here.

On the other hand, natural rights theories can have their uses when it comes to setting up the rules for the protective state. Authorities continue to clash, but the basic idea behind natural rights theories, that the broad features of human *nature* determine *natural* rights, is certainly worthy of attention. The important point is that the social contractors see that they merely need to get out of the state of anarchy [p. 183:] and do not have to resolve the clash of authorities perfectly and for all time. They may agree that reason is man's tool for survival and that this implies the protection of life, liberty, property, and the pursuit of happiness. They need not agree upon the existence of "positive welfare rights" (e.g., a guaranteed minimum income paid for by taxes) to tax monies nor on redistributive schemes for "social justice." Philosophers certainly have not established even negative rights (e.g., property rights) absolutely--in other words, they continue to clash--and a great deal of philosophy is given over to replacing big holes in their arguments with little holes. In all strict logic, a hole is a hole, but the contractors will not wait around in a state of anarchy until the authorities stop clashing: At some point they will decide that some alleged rights have been established plausibly enough and set up a protective state. As it happens, the case for negative rights has been far better made than that for positive rights and redistribution. It would seem that the unanimity ideal--that an agreement be a genuine meeting of the minds--is an excuse for the minimal libertarian state. Two replies: First, advocates of positive rights had better get busy and cook up far more persuasive arguments than they have to date, and second, the productive state goes beyond libertarian minimalism anyhow.

The economist's contractarian approach has a further advantage over a natural rights approach, in that it pays attention to institutional design. While natural rights authorities clash over whether, say, intellectual property (patents, copyrights, trademarks, and trade secrets) is a genuine natural right, social contractors can simply(!) weigh costs and benefits of establishing rights in intellectual property. Moreover, they can empower a legislature to set the *duration* of patents, something that natural rights theories are utterly incapable of doing. Social contractors can also set up machinery to make trade-offs between the costly accumulation of evidence in criminal cases and the probability of wrongful conviction. Economists habitually, even compulsively, reckon with trade-offs, a perspective generally absent among philosophers.

The social contractors, as I have said, are something approximating real people, who may disagree with one another, but hopefully not so much that there is no prospect of moving out of the state of nature. They are also real in that they will act on inconclusive arguments and information and not delay moving out of the state of nature indefinitely. They can agree upon the machinery of both the protective and the productive state. Can they also agree upon schemes to establish social justice and [p. 184:] redistribution? In one sense, of course they can: they can agree upon whatever they wish. But are they likely to? To answer this, we have to make some assumptions about the contractors. Let us assume, rather heroically, that the contractors are all good economists and have studied the applications of economics to political markets, called Public Choice theory. They have enough appreciation of how a constitution may be expected to work out that their signing of the contract will be informed. They will also be sure to build in constitutional safeguards to ward off the ever-present threat of Leviathan. They are also metaphysical individualists, in that they do not grant the existence of a transcendental entity called society, which has values of its own apart from those of the individuals that compose it. Moreover, they have absorbed the lessons of Friedrich Hayek's _The Mirage of Social Justice_ (1976)^ and realize that remote consequences of human action so far dwarf immediate ones that it is futile to try to calculate the corrections necessary to bring rewards in line with gut feelings about desert on a case-by-case basis. They will cheerfully pay the price of living in a society controlled by abstract rules and suppress their desire to take away even the high incomes of rock "musicians."

^Hayek, Friedrich A. 1976. _Law, Legislation and Liberty_, vol. 2: _The Mirage of Social Justice_. Chicago: University of Chicago Press; paperback as A Phoenix Book, 1978.

In short, these contractors are economists who have absorbed not only the logic of the market but also the creative aspects of capitalism emphasized by Ludwig von Mises, Friedrich Hayek, and others of the so-called Austrian School of economics. Natural rights theories are often greatly informed by economics, so the two approaches overlap quite considerably on what human nature consists of. Nevertheless, there is some room for social justice or redistribution, though not of the sort to attempt to rectify each and every discrepancy between reward and desert. Social justice can become an issue, not because the original social contract is unfair--after all, everyone benefits from moving out of the state of nature and the workings of competition will erode initial privileges over time anyhow--but because new members are added involuntarily to the society by birth. (I hold that voluntary immigration is up to the contractors.) Inheritance laws that forbid the alienation of property and are designed to perpetuate family wealth, such as primogeniture laws or even provisions like the entail that allow such perpetuation, can be viewed as unfair to involuntary entrants. And it may be felt that rich parents provide their children with an unfairly large head start in life, by way both of gifts of capital and the provision of education and otherwise superior upbringing. [p. 185:]

However and as it happens in the United States, movements to confiscate inheritance have never been very robust and have been restricted to moderately graduated inheritance and gift taxes and public financing of education. (Hayek himself approves of the latter, surprisingly for a man supposed to be a libertarian. Whether the government should *operate* schools, as opposed to financing vouchers, is another issue.) Evidently, Americans hold that the incentive to pass wealth on to one's offspring is a powerful factor in its creation and choose to *balance* this against any unfairness, with the result being only moderately graduated inheritance and gift taxes.

I will not try to argue that the observed inheritance taxes and public support for education can be justified on the basis of an historic social contract, far from it; but the important points from a contractarian perspective are that it is up to the people to decide how to treat new entrants *and* it is up to them to decide what the *trade-offs* are to be between pursuing their own conception of social justice and their many other objectives. Social justice is neither something existing outside of individual values, nor is it to be pursued at the expense of everything else. The pursuit of any goal without limit will doom liberty.

A few other points: (1) The other kind of justice, impartial administration of laws, is a noble ideal, but the very existence of public goods, prisoners' dilemmas, and externalities, as well as the sheer finitude of the human brain, render perfect neutrality unworkable. Besides, the social contract is supposed to change things. (2) In a market economy, alleged biases in the law, e.g., rental contracts favoring landlords over tenants, will very often get corrected by market mechanisms, e.g., by rents going down. (3) Legislators and bureaucrats can try to help the poor, but the voters can and do respond by electing politicians to change marginal tax rates. In other words, in well-oiled political markets, voters get the amount of redistribution they themselves want. (4) Arguments that, say, school teachers are unjustly underpaid are usually just so many arbitrary assertions or else involve externalities and public goods, which is a matter for the productive state to handle, not so much a matter of social justice. (5) While the protective and productive states, under a well-designed constitution, are positive-sum games, they quickly become negative when social justice becomes thought of as an unlimited, transcendental objective. Since people never do agree on the transcendental, the free society degenerates [p. 186:] into what Ayn Rand called "the aristocracy of pull."

In sum, the economist-contractarian perspective is not dissimilar from natural rights approaches, but the former has several advantages: (1) It lets the people act while authorities clash, adopting whatever sorts of natural rights arguments they see fit as a basis for their social contract. (2) It can take public goods into account. (3) It can deal with specific questions of institutional design in deciding which rights to protect and how much. The right to privacy, for example, *comes into being* when people conceptualize it (a process still going on) and seriously want it. (4) It allows for trade-offs. (5) It can advance a limited conception of social justice to take care of babies. (6) It makes a point of recognizing that people differ and need to bargain as opposed to finding some external truth. (7) It is constantly on the lookout for Leviathan. But above all, economic contractarianism is pluralistic: Different peoples will care differently about different rights and can arrange themselves accordingly. It rests upon the greatest tribute to the genius of our Founding Fathers, namely federalism. It assumes and makes room for a tolerance that, unhappily, most authorities cannot abide. No mean advantage, this, to allow for experiment and improvement.