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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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In this sense, Hayek notes (2002: 47), the liberal ideal of ‘the rule of law’ must be understood as ‘a rule for the legislator.’ (ibid.).38 The target of his objections is not the principle of the sovereignty of the people, understood as the principle “that whatever power there is should be in the hands of the people” (1979: 33). Rather, what he objects to is the “constructivist superstition of sovereignty” (ibid.), the belief that the representative legislature operating under majority rule should enjoy unlimited power.39 Democracy: Majority Rule and Citizen Sovereignty While he explicitly distinguishes between the “true content of the democratic ideal” (1979: 5) and “the particular institutions which have long been accepted as its embodiment” (ibid.: 1f.), Hayek is not entirely unambiguous about what he regards as part of the ‘true ideal’ and what as part of ‘the particular institutional embodiment’. In particular his comments on the status of the majority rule40 are somewhat ambiguous in this regard. In some of his comments on this issue he seems to imply that the majority principle is not an integral part of the democratic ideal itself, but a part of its institutional embodiment. This reading is suggested, for instance, when he notes that, by contrast to its “wider and vaguer” meaning the word “democracy” is also “used strictly to describe a method of government – namely majority rule” (1960: 103). By contrast, the opposite view, namely that majority is part of the core of the democratic ideal, seems to be implied when Hayek asserts: “If it could be justly contended that the existing institutions produce results which have been willed or approved by a majority, the believer in the basic principle of democracy would of course have to accept them” (1979: 4).41 In The Calculus of Consent (1962) James M. Buchanan and Gordon Tullock have detailed the reasons why, from an individualistic perspective, the majority principle should be regarded as a particular institutional implementation of the ideal of democracy, but must not be confused with the fundamental ideal itself. According to their argument, Hayek (1978c: 143): “Liberalism is thus incompatible with unlimited democracy, just as it is incompatible with all other forms of unlimited government. It presupposes the limitation of powers even of the representatives of the majority by requiring a commitment to principles … so as to effectively confine legislation.” – Cf. Hayek (1979: 101,103).

Cf. Hayek (1960: 103f.; 106f.; 1978b: 142f.) Hayek (1948: 29): “(D)emocracy is founded on the convention that the majority view decides on common action.” See also Hayek (1979: 6): “If all coercive power is to rest on the opinion of the majority, then it should also not extend further than the majority can genuinely agree.” in a free society, as in any association of free people, the majority rule cannot be regarded as an a priori legitimate or self-legitimizing decision rule. Rather, it must be regarded as a rule that can derive its legitimacy solely from the fact that the members-citizens of a polity or association voluntarily agree, explicitly or implicitly, to decide on their common affairs according to this rule.42 In other words, as an institutional feature of democracy the majority principle is indirectly legitimized by the more fundamental normative principle that, in associations of free individuals, voluntary consent among the participants is the ultimate source of legitimacy.

Implicit in Buchanan and Tullock’s “contractarian exercise of legitimization or justification for politics” (Buchanan and Congleton 1998: 18) is the concept of “politics as exchange.”43 This is the notion that, as in ordinary market exchange, it is the prospect of mutual gains that provides the rationale for free individuals to engage in collective political action and that, as in ordinary market exchange, voluntary agreement among the participants is the relevant test of mutual advantage.44 It is the voluntary exchange of commitments at the constitutional level that, in terms of the “politics as exchange” paradigm, provides legitimacy to the coercive elements that are necessarily present in collective political action.45 In essence, the exchange perspective on politics is equivalent to the notion of a democratic polity as a citizens’ co-operative, a notion that John Rawls (1971: 84) employs when he speaks of a democratic society “as a cooperative venture for mutual advantage.” In analogy to ordinary co-operative enterprises or voluntary associations, democratic polities are viewed as member-owned organizations. The

In their chapter on “A Generalized Economic Theory of Constitutions” Buchanan and Tullock (1962:

63-84) discuss the prudential reasons that members-citizens of polities or associations have for agreeing to adopt the majority rule.

Buchanan (1999c: 461): “Politics is a structure of complex exchange among individuals, a structure within which persons seek to secure collectively their own privately defined objectives that cannot be efficiently secured through simple market exchanges.” Buchanan and Tullock (1962: 19): “The market and the State are both devices through which cooperation is organized and made possible. … At base, political and collective action under the individualistic view of the State is much the same. Two or more individuals find it mutually advantageous to join forces to accomplish certain common purposes.” – Buchanan (1995/96: 260): “Normatively, the political structure should complement the market in the sense that the objective for its operation is the generation of results that are valued by citizens.” Buchanan (1999b: 389): “In agreeing to be governed, explicitly or implicitly, the individual exchanges his own liberty with others who similarly give up liberties in exchange for the benefits offered by a regime characterized by behavioral limits.” – Buchanan (1999c: 461): “Without some model of exchange, no coercion of the individual by the state is consistent with the individualistic value norm on which a liberal order is grounded.” citizens as members of the co-operative political enterprise jointly “own” the polity as a territorial organization. They are the “sovereigns” with whom the ultimate authority to decide on the polity’s affairs resides.46 To be sure, drawing an analogy between democratic polities and “ordinary” co-operative enterprises or voluntary associations is not meant to deny the differences that separate the two kinds of associations. Among the distinguishing features of polities is, in particular, the fact that they are territorial and intergenerational organizations. Their territorial nature means that exit is typically much more costly, compared to ordinary voluntary associations from which one can exit without the need to move into some other jurisdiction, with all the inconveniences that this involves. Because of the very significance of exit costs, a principal means for enhancing voluntariness in political constitutional choice is to adopt organizational methods, such as competitive federalism and subsidiarity that tend to facilitate the choice among alternative polities and to reduce exit costs. Polities are intergenerational associations in the sense that, by contrast to private voluntary associations, membership status is typically obtained by being “born into the polity” rather than by an explicit act of voluntary entry. While all members of private voluntary associations can justly be said to have, by the very fact of joining the association, expressed their voluntary agreement to its constitution, this can obviously not be supposed in the same way for citizensmembers.47 This does not alter the fact, however, that for a democratic polity no less than for any other co-operative enterprise the consent of its members is the crucial test for the ultimate legitimacy of its constitution, i.e. of the rules that determine how decisions on common affairs are to be made.48 It only means that the factual test of voluntariness is a Rawls (1999: 577) describes “democratic citizenship in a constitutional democracy” as “a relation of free and equal citizens who exercise ultimate political power as a collective body.” – In similar terms J.

Habermas (1996: 278) characterizes the democratic state as an “association of free and equal citizens (Assoziation freier und gleicher Rechtsgenossen)” and as “self-government of free and equal persons (Selbstherrschaft von Freien und Gleichen)” (ibid.: 290).

To the extent that exit options are available and not taken advantage of, the fact that a person remains within a polity may, though, be taken as an indicator of implicit agreement. There may, in fact, be good reasons for requiring citizens who acquired their membership status by birth to explicitly choose, even if only symbolically, at some age whether they wish to maintain their citizenship status, and thereby declare their consent to the polity’s constitution, or whether they wish to adopt a different status such as e.g. that of a ‘resident alien.’ V. Ostrom (1997: 280) points out that the American federalists in developing their covenantal concepts of a self-governing polity “drew on prior experiences in constituting free cities, monastic orders, religious congregations, merchant societies, craft guilds, associations among peasants, markets, and other patterns of human association.” more complex matter due to the particular characteristics of polities as human associations.

The view of the democratic state as a member-owned, co-operative enterprise or, in short, as a citizens’ co-operative49 allows for a clear distinction between, on the one hand, the issue of what must be regarded as the fundamental ideal of democracy, and, on the other hand, the issue of which procedural rules or “institutional embodiments” can be expected, under real-world constraints, to serve this ideal best. The fundamental ideal of democracy must surely be seen in the normative principle that a democratic polity, as “a cooperative venture for mutual advantage,” ought to serve its members common interests, i.e. the interests that all its members have in common. Accordingly, as a matter of principle, democratic politics should be organized in ways that best insure responsiveness to citizens’ common interests. This ideal can, I submit, properly be called citizen sovereignty. By contrast, identifying the specific set of institutions that are best suited to serve this ideal is a matter of prudence. Actual and potential alternative democratic constitutions can, as institutional embodiments of the ideal of citizen sovereignty, be compared in terms of how well they are suited to promote citizens’ common interests. In other words, they can be compared in terms of their capability to ensure, as far as this can be ensured at all at the level of collective decisionmaking, that only such decisions and actions are taken that serve the interests of all citizens, and that decisions and actions are prohibited that run counter to the interests of all or part of the citizenry.

In requiring that the ultimate source of democratic legitimacy must be located in citizens’ voluntary agreement to the polity’s constitution, the principle of citizen sovereignty implies, as a still more fundamental normative premise, the ideal of individual sovereignty, i.e. the tenet that the individuals are to be respected as the I have discussed the concept of the democratic state as a citizens’ co-operative – in German ‘Bürgergenossenschaft’ -- in more detail in Vanberg (2000: 267ff.). On the use of the term ‘Genossenschaft’ or ‘co-operative’ as label for a democratic community V.

Ostrom (1991: 10) notes:

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