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Opting-Out: the Constitutional Economics of Exit

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  • Peter Kurrild-Klitgaard

    (University of Southern Denmark)

Abstract

The central aspect, which makes markets operate differently than governments, is the ability of market actors to "exit" from future interactions. This point is applied to constitutional analysis, with an emphasis on the constitutional possibility of individuals or groups in a society "exiting," wholly or partly, from the political community or from specific institutions within such. Hobbesian and Lockean states-of-nature are sketched using a common framework of some simple games, and the Lockean solution to the danger of tyranny is formalized. This solution is compared to the typical interaction in a market economy, where the possibility of "exit" from future interactions with disagreeable parties introduces severe restrictions on the possible exploitation. This analysis is extended to the political sphere, and it is argued in general terms that a constitutional set-up utilizing a semi-Lockean right to "exit" (e.g., federal structures with rights of secession, voucher systems, etc.) could be an efficient guarantee against sub-optimal solutions and function so as to reduce redistributive conflicts and make welfare-increasing transactions possible. Copyright 2002 The American Journal of Economics and Sociology.

Suggested Citation

  • Peter Kurrild-Klitgaard, 2002. "Opting-Out: the Constitutional Economics of Exit," American Journal of Economics and Sociology, Wiley Blackwell, vol. 61(1), pages 123-158, January.
  • Handle: RePEc:bla:ajecsc:v:61:y:2002:i:1:p:123-158
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    Cited by:

    1. Peter Kurrild-Klitgaard, 2010. "Exit, collective action and polycentric political systems," Public Choice, Springer, vol. 143(3), pages 339-352, June.
    2. Susanne Lechner & Renate Ohr, 2011. "The right of withdrawal in the treaty of Lisbon: a game theoretic reflection on different decision processes in the EU," European Journal of Law and Economics, Springer, vol. 32(3), pages 357-375, December.
    3. Benjamin Powell & Edward Stringham, 2009. "Public choice and the economic analysis of anarchy: a survey," Public Choice, Springer, vol. 140(3), pages 503-538, September.
    4. Kurrild-Klitgaard, Peter, 2005. "Ulysses and the Rent-Seekers: The Benefits and Challenges of Constitutional Constraints on Leviathan," Ratio Working Papers 68, The Ratio Institute.
    5. Knoll Bodo & Koenig Andreas, 2011. "Leviathan Europa – Stärkung der Nationalstaaten und der EU durch konstitutionelle Schranken?," Zeitschrift für Wirtschaftspolitik, De Gruyter, vol. 60(2), pages 127-145, August.
    6. Benjamen F. Gussen, 2013. "On the problem of scale: Spinozistic sovereignty as the logical foundation of constitutional economics," The Journal of Philosophical Economics, Bucharest Academy of Economic Studies, The Journal of Philosophical Economics, vol. 7(1), November.
    7. Peter Kurrild-Klitgaard, 2012. "Modeling constitutional choice: reflections on The Calculus of Consent 50 years on," Public Choice, Springer, vol. 152(3), pages 407-413, September.

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