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«Introduction Even though neither theoretical arguments nor historical evidence provide reasons to believe that the ideals of liberalism may be better ...»

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Constitutional Liberalism and Individual Sovereignty The essence of the liberal ideal of private autonomy is the notion that voluntary agreement among the parties involved should be the principal mode of social coordination. It implies that exchange transactions and cooperative ventures derive their legitimacy only from such voluntary agreement among the participants.12 It is this very notion that legitimacy in social matters derives from the voluntary agreement among the participating individuals that must, as I suppose, be regarded as the fundamental norm on which the ideal of liberalism is based. The liberal ideal of private autonomy specifies this norm with regard to the internal functioning of the private law society, i.e. within the context of a given framework of rules. In its more general interpretation, for which I use the term individual sovereignty, the notion of the legitimizing role of voluntary agreement can, however, not only provide us with a criterion for evaluating the legitimacy of the rules of private law that constitute private autonomy, but also with a criterion for judging the appropriateness of the demarcation line between the civil law society and the state. Looked at in this way the ideal of private autonomy is simply a specification of the more general normative principle of individual sovereignty, the principle that legitimacy in social matters, including the legitimacy of the rules of private It is in this sense that the market order, constituted by rules of private law, can be viewed as the paradigmatic case of a liberal order. A market is, in the ultimate analysis, nothing other than an institutionally secured arena for voluntary exchange (Vanberg 2001a). - In his seminal contribution to the research program of the Freiburg school of law and economics, “Privatrechtsgesellschaft und Marktwirtschaft” (see footnote 10 above), Franz Böhm (1980; 1989) has emphasized the twin-relation between private law society and market economy. – For more details see Vanberg 2001c.

law themselves, derives only and exclusively from voluntary agreement among the persons involved.13 The interpretation suggested here may draw support from J.M. Buchanan”s (1995/96) distinction between “individual liberty” and “individual sovereignty” that I

quoted earlier in this paper, a distinction on which Buchanan comments:

It may be useful to clarify the distinction. What is the ultimate maximand when the individual considers the organization of the political structure? … (T)his maximand cannot be summarized as the maximization of (equal) individual liberty from political-collective action. … A more meaningful maximand is summarized as the maximization of (equal) individual sovereignty. This objective allows for the establishment of political-collective institutions, but implies that these institutions be organized so as to minimize political coercion of the individual. … So long as one’s agreement to such political action is voluntary, the individual’s sovereignty is protected even though liberty is restricted.14 If, as I suppose, the principle of individual sovereignty must be regarded as the fundamental normative premise of the liberal ideal, a consistent “liberalism” must be more than a “private law liberalism” or “free market liberalism.” It must include a constitutional liberalism,15 a liberalism that views individual persons not only as sovereigns within the legal framework of the private law society, but draws attention to the fact that individuals must be respected no less as sovereigns at the antecedent, constitutional level of choice at which the “rules of the game” themselves are chosen.

Just as voluntary agreement legitimizes social transactions and corporate arrangements within the private law society, voluntary agreement among the parties involved must also be considered the ultimate source of legitimacy of the legal framework within which individuals exercise their private autonomy. From the perspective of a constitutional liberalism the questions of what are the appropriate rules for a private law society and how the demarcation line between the civil society and the state should be drawn cannot The notion that the principle of individual sovereignty is the normative foundation of the liberal ideal appears to be implied when Hayek (1972: 59) notes: “It is this recognition of the individual as the ultimate judge of his ends, the belief that, as far as possible his own views ought to govern his actions, that forms the essence of the individualist position.” Buchanan (1995/96: 267f.; emphasis added).

It is, in particular, J.M. Buchanan who has developed a generalized, and more consistent, liberal paradigm that includes the constitutional dimension of individual sovereignty. For a more detailed discussion of the notion of a constitutional liberalism and Buchanan’s contribution to it see Vanberg 2001b.

be answered by recourse to criteria that are external to or independent of the preferences of the individuals concerned, but only in terms of what sovereign individuals voluntarily agree upon.16 Constitutional liberalism is, in this sense, naturally ‘democratic.’17 Constitutional Liberalism versus Anarcho-Libertarianism In its contractarian approach to the issue of constitutional choice a constitutional liberalism18 is in stark contrast to anarcho-libertarian views that, because of their denial of any legitimate role of collective-political choice, ignore the categorical distinction between the sub-constitutional and the constitutional level at which individuals may choose to cooperate. Or, more, specifically, they ignore the distinction between subconstitutional choices that are made within a private law framework and constitutional choices that are made about how the framework itself is to be defined and enforced. In essence, their rejection of any role for government is based on the claim that private contracting among individual proprietors is sufficient to secure a functioning social order and that there are no problems of defining and enforcing law for which government would be needed or justified.19 There is no place in the anarcho-libertarian scheme for a political-constitutional contract among individuals who establish among themselves a Buchanan (1999a: 288): “The justificatory foundation for a liberal social order lies, in my understanding, in the normative premise that individuals are the ultimate sovereigns in matters of social organization, that individuals are the beings who are entitled to choose the organizational-institutional structures under which they will live. In accordance with this premise, the legitimacy of social-organizational structures is to be judged against the voluntary agreement of those who are to live or are living under the arrangements that are judged. The central premise of individuals as sovereigns does allow for delegation of decisionmaking authority to agents, so long as it remains understood that individuals remain as principals. The premise denies legitimacy to all social-organizational arrangements that negate the role of individuals as either sovereigns or principals. On the other hand, the normative premise of individuals as sovereigns does not provide exclusive normative legitimacy to organizational structures that – as, in particular, market institutions – allow internally for the most extensive range of separate individual choice. Legitimacy must also be extended to ‘choice-restricting’ institutions so long as the participating individuals voluntarily choose to live under such regimes.” Buchanan (1999b: 392): “(B)y adherence to the individualistic postulate … the whole of the constitutional economics research program rests squarely on a democratic foundation.” Buchanan and Congleton (1998: 4): “The … contractarian conception of law and politics is based squarly in the rejection of any claim that the institutions and the policies that are good for the community are ‘out there’ waiting to be discovered by experts or anyone else. The rules for living together – the basic law and political structure – are, quite literally, made up or created in some participatory process of discussion, analysis, persuasion, and mutual agreement.”

As H.-H. Hoppe (2001: 235f.), one of the most outspoken advocates of anarcho-liberalism, puts it:

“Liberals will have to recognize that no government can be contractually justified …. That is, liberalism has to be transformed into the theory of private property anarchism (or a private law society) …. Private property anarchism is simply consistent liberalism; liberalism thought through to its ultimate conclusion, or liberalism restored to its original intent.” self-governing political community by which they organize the (re-)defining and enforcing of the ‘rules of the game’ under which they wish to live.

What allows anarcho-libertarians to ignore the issue of political-constitutional choice are two core assumptions on which their whole argument rests. First, the assumption that there are rights – so called ‘natural rights’-- that antecede and exist independently of any political organization,20 such that a political process is neither needed nor authorized to define rights. Second, the assumption that enforcement of these pre-existing rights can be provided by competing private protection agencies without any need to rely on governments as territorial monopolists.21 Both assumptions are subject to criticism.

There is, to be sure, a meaningful sense in which rights can be said to precede government, namely in the sense – explained by Hayek in numerous writings22 – that long before people organized in political communities and began to deliberately shape the ‘rules of the game’ under which they lived, rules of conduct had evolved that provided the foundation on which governmental enforcement and deliberate legislation were to build. But this uncontroversial observation is worlds apart from the claim that ‘natural rights’ exist ‘out there’ from which the rules that should govern human interaction now and here could be deduced as an exercise of logic, rules the enforcement of which could be safely left to private protection agencies.23 Apart from other objections that could be raised against such claim, one obvious objection concerns the problems which arise where members of a community disagree on what the content of the supposed ‘natural rights’ is. Who is entitled, and on what grounds, to provide the ‘authoritative’ and Hoppe (2001: 226): “According to liberal doctrine, private property rights logically and temporally precede any government.” Referring to von Mises’ comments on the issue (see fn. 8 above), Hoppe (2001: 226) censures “liberals” for having concluded that the “indispensable task of maintaining law and order is the unique function of government.” As Hoppe (ibid.) argues: “Whether this conclusion is correct or not hinges on the definition of government. It is correct if government simply means any individual or firm that provides protection and security services to a voluntary paying clientele of private property owners. However, … government possesses two unique characteristics. Unlike a normal firm, it possesses a compulsory territorial monopoly of jurisdiction (ultimate decisionmaking) and the right to tax. However, if one assumes this definition of government, then the liberal conclusion is false.” For references see Vanberg 1994.

Hayek (1976: 60): “The evolutionary approach to law (and all other social institutions) which is here defended has as little to do with the rationalist theories of natural law as with legal positivism.” binding interpretation, and by whom or how is it supposed to be enforced?24 And what does legitimize, from a liberal perspective, the procedures – whatever they may be – that are employed to settle disputes? From the perspective of constitutional liberalism there is a clear answer to this question, namely that the ultimate source of legitimacy for whatever procedures are applied must be the voluntary agreement among the members of the respective community. This criterion of legitimacy is internal to the community of participants in the – explicit or implicit – constitutional contract. What do anarcholibertarians suggest should be done in cases in which this internal criterion of legitimacy gets into conflict with what they mean to be able to deduce from ‘external,’ pre-existing (‘natural’) rights? They must either deny people the right to voluntarily choose the constitutional regimes under which they wish to live, thus coming into conflict with the ideal of voluntary choice, or give up the claim to possess a predefined, external standard for judging the legitimacy of socio-political arrangements.

According to the anarcho-libertarian argument it is the virtue of enforcement by private agencies that, in contrast to enforcement by monopoly-governments, it takes place in a competitive context where individuals are free to contract with their preferred agency. The objection to this image of a world where private protection agencies peacefully compete for freely choosing customers is that it presupposes what it is supposed to explain, namely the presence of conditions that insure the voluntariness of transactions carried out and contracts concluded among the participating agents. The effectively enforced framework of private law within which ordinary market transactions take place serves exactly this function. Yet, this private law framework within which the anarcho-libertarians presume the competition among competing private protection agencies to take place, cannot be established itself by the voluntary contracts that are concluded under its umbrella.25 We surely need to distinguish here between two levels or kinds of contracts. In addition to the contracts that are concluded within the framework of As von Mises (1957: 49) has commented on this issue: “Thus the appeal to natural law does not settle the dispute. It merely substitutes dissent concerning the interpretation of natural law for dissenting judgments of value.”

R.G. Holcombe (2004: 332) makes the same argument in his critique of the anarcho-libertarian position:

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