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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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“Economic theorists … make the assumption that market exchange arises from mutual agreement, without theft or fraud. In the analysis of protection firms, this assumption of voluntary exchange amounts to an assumption that the industry’s output is already being produced – as a prerequisite for showing that it can be produced by the market!” a private law order, i.e. at the sub-constitutional level, there must be an explicit or implicit contract by which the framework itself is established or legitimized, a politicalconstitutional contract that binds a territorially defined community and that is to be enforced within the respective territory. Whatever the social arrangement may be through which such political-constitutional contracts are concluded and through which their enforcement is administered, it is, in effect, a government, whether it is called thus or not.

With its deceptive simplicity and seeming logical rigor the libertarian “theory of private property anarchy” has the unfortunate effect of distracting attention from the issue that the liberal discourse on the role of government should rather focus on, namely how those matters that people need to decide on as territorially defined political communities can be organized in ways that are most compatible with the ideals of individual liberty and sovereignty. Instead of speculating about the logical feasibility of a world without government, liberal intellectual energies are better put into a comparative analysis of alternative political institutions, as they exist and as they might be realized.26 While anarcho-libertarians claim that a ‘consistent liberalism’ must adopt their vision I argue here that a consistent liberalism, i.e. a liberalism that consistently adheres to the principle of individual sovereignty, must regard as “legitimate” at the politicalconstitutional level no less than at the sub-constitutional level of market choices whatever the individuals involved voluntarily agree upon. To be sure, the test of “voluntariness” cannot be quite the same at both levels, at the level of private autonomy and at the level of constitutional choice. At the level of private autonomy the rules of the game imply a definition of what counts as “voluntary,” a definition that can be adjudicated. At the constitutional level the relevant meaning of “voluntary contracting” is clearly more difficult to specify. This cannot be an excuse, however, for ignoring the role that a consistent liberalism must assign to the principle of individual sovereignty at this level no Holcombe (2004: 338) notes in the same spirit: “A libertarian analysis of government must go beyond the issue of whether government should exist. Some governments are more libertarian than others, and it is worth studying how government institutions can be designed to minimize their negative impact on liberty.” – Godefridi (2005: 134) comments on the intricacies of libertarian aprioristic reasoning: “Now why do these anarcho-libertarians entangle themselves in these nasty intellectual morasses where they are forced to sustain the unsustainable? They have a reason for doing so …: to elude the political question. Indeed, if the whole body of law cannot be derived a priori from basic principles, then someone will have to determine the content of the rules. … This brings us to the very essence of the political question: who will make the rules? The scope of the possible answers is finite: a self-chosen legislator (a dictator, in other words), an oligarchy, or a limited or unlimited democracy, and their different variants.” less than at the level of private autonomy. The challenge to a consistent liberalism is to give an answer to the question of how, in recognition of the factual difficulties that exist at this level, voluntariness in constitutional contracting can be defined in the most meaningful way, and be secured most effectively, given the inherent constraints that are unavoidably present at this level.

Adopting the perspective of constitutional liberalism does not mean to ignore the fact that people may well have erroneous beliefs about the working properties of rules and may, therefore, come to agree on rules that work in fact to their disadvantage. It means, however, to acknowledge that this problem can surely not be a legitimate reason for not respecting the right of sovereign individuals voluntarily to choose the “rules of the game” under which they wish to live. Recognizing the problem of “constitutional ignorance” can only provide an argument for taking adequate precautions in the choice of rules that govern the process in which the rules for the “social games” are chosen.27 Surely, the rules of the civil law society as well as the demarcation line between the “private” and the “public” domain should be prudently chosen, informed by adequate knowledge of the actual working properties of alternative constitutional regimes. Yet, as far as the legitimacy of constitutional regimes is concerned there is simply not a substitute for the voluntary approval of the persons involved. Constitutional recommendations to sovereign individuals can, in the last resort, be no more than conjectures for how they may advance their common interests. And there can be, of course, no other ultimate test for what serves their common interests than their voluntary agreement.28 F.A. Hayek on Democracy and Liberalism The relationship of liberalism and democracy is one of the central themes in F.A.

Hayek’s works. The Constitution of Liberty (1960) devotes special attention to it; it is at the center of the third volume of his trilogy Law, Legislation, and Liberty (1979), and it is the principal subject of a series of articles published in the 1950s, 60s, and 70s.

For a more detailed discussion see Vanberg and Buchanan 1994.

Rawls (1999: 84): „If rational individuals have willingly and knowingly joined a cooperative scheme …, and if they persist in their willing cooperation and have no wish to retract or no complaints to make, then that scheme is fair or at least not unfair.” According to Hayek, liberalism is “the same as the demand for the rule of law in the classical sense of the term,” (1967: 165),29 i.e. as the demand to limit the coercive power of government to the enforcement of universal rules that apply to everyone in the same manner, “protecting a recognizable private domain of individuals” (ibid.: 162).30 Hayek

emphasizes in particular that the liberal principle is based on the ideal of a nondiscriminating, privilege-free order.31 As he notes:

The basic conception of classical liberalism, which alone can make decent and impartial government possible, is that government must regard all people as equal, however unequal they may in fact be, and that in whatever manner the government restrains (or assists) the action of one, so it must, under the same abstract rules, restrain (or assist) the actions of all others (1979: 142).32 “By the insistence on a law which is the same for all and the consequent opposition to all legal privilege” (1978b: 142), liberalism was, as Hayek explains, originally closely connected with the democratic movement and its demand for equal political participation rights.33 And he adds that in “the struggle for constitutional government in the nineteenth century, the liberal and the democratic movements indeed were often undistinguishable” (ibid.). In Hayek’s account the ideals of liberalism and democracy came only to appear to be in conflict with each other when the victory of democracy over authoritarian regimes lead to the false belief that “the safeguards men once painfully devised to prevent abuse of government power are all unnecessary once that power has been placed in the hands of Citations from Hayek’s work will be identified in the text only by the year of publication, without the author’s name.

Hayek (1978b: 109): “Today it is rarely understood that the limitation of all coercion to the enforcement of general rules of just conduct was the fundamental principle of classical liberalism, or, I would almost say, its definition of liberty.” – See also Hayek (1948: 18f.; 1960: 192).

Hayek (1972a: ixf.): “The essence of the liberal position, however, is the denial of all privilege if privilege is understood in its proper and original meaning of the state granting and protecting rights to some which are not available on equal terms to others.” -- Hayek (1948: 30): “Individualism is profoundly opposed to all prescriptive privilege, to all protection, by law or force, of any rights not based on rules equally applicable to all persons.”-- See also Hayek (1960: 164f.). – W.H. Hutt (1975: 29) refers to the “non-discrimination rule” as “the ultimate rationale of classic liberalism.” Hayek (1978c: 141): “Liberalism merely demands that so far as the state determines the conditions under which the individuals act it must do so according to the same formal rules for all. It is opposed to all legal privilege, to any enforcement by government of specific advantages on some which it does not offer to all.” – As Hayek emphasizes, the liberal ideal does not rule out that “government may render…, by the use of the means placed at its disposal, many services which involve no coercion except for raising of the means by taxation” (1978c:144). -- See also Hayek (1967: 162, 165-66, 177).

Hayek (1960: 103): “Equality before the law leads to the demand that all men should also have the same share in making the law. This is the point where traditional liberalism and the democratic movement meet.” the majority of the people” (1978c: 96).34 It was this erroneous belief, he argues, that fostered a perception of democracy which he criticizes as “doctrinaire” and “dogmatic” (1960: 105f.), a perception that regards “current majority opinion as the only criterion of the legitimacy of the powers of government” (1978c: 143), and according to which “this same majority must also be entitled to determine what it is competent to do” (1960: 107).

It is not the original ideal of democracy but its currently predominant interpretation that Hayek blames for promoting “the particular forms of democratic organization, now regarded as the only possible form of democracy” (1978b: 107), a form that he describes as unlimited democracy, and which he charges with producing “a progressive expansion of government control of economic life” (ibid.). Hayek expressly does not want his critique of the democratic contemporary institutions to be understood as a critique of the “basic ideal of democracy” (1979: 1)35 but instead as a plea for institutional reform towards an effectively constrained democracy.36 He insists that we must distinguish between the “basic principle of democracy” (ibid.: 4), namely that all political power originates from the people (2001: 84), and the now prevailing institutional realization of this principle, namely unrestricted majority rule.

The liberal ideal of “freedom under the law” (1960: 153) and the principle, derived from this ideal, “of the necessary limitation of all power by requiring the legislature to commit itself to general rules” (1978b: 108)37 are, in his view, not threatened by the ideal of democracy as such but solely by the erroneous belief “that this omnipotence of the representative legislature is a necessary attribute of democracy” Hayek (1979: 3): “The tragic illusion was that the adoption of democratic procedures made it possible to dispense with all other limitations on governmental powers.” – Hayek (ibid.: 128): “But the endeavour to contain the powers of government was almost inadvertently abandoned when it came to be mistakenly believed that democratic control of the exercise of power provided a sufficient safeguard against its excessive growth.” -- Cf. also Hayek (1960: 403f.; 1978d: 152f.).

Hayek (1978d: 152): “The concept of democracy has one meaning – I believe the true and original meaning – for which I hold it a high value well worth fighting for.” With a critical eye on “the antidemocratic strain of conservatism” (1960: 403) Hayek notes, “But I believe that the conservatives deceive themselves when they blame the evils of our time on democracy. The chief evil is unlimited government…The powers which modern democracy possesses would be even more intolerable in the hands of some small elite” (ibid.).

Hayek (1960: 403): “But it is not democracy but unlimited government that is objectionable, and I do not see why the people should not learn to limit the scope of majority rule as well as that of any other form of government.” – Cf. also Hayek (1979: 11, 98).

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