Constitutional Political Economy

There is a categorical distinction to be made between constitutional economics and non-constitutional, or ordinary, economics—a distinction in the ultimate behavioral object of analytical attention. In one sense, all of economics is about choice, and about the varying and complex institutional arrangements within which individuals make choices among alternatives. In ordinary or orthodox economics, no matter how simple or how complex, analysis is concentrated on choices made within constraints that are, themselves, imposed exogenously on the person or persons charged with making the choice. The constraints that restrict the set of feasible choice options may be imposed by nature, by history, by a sequence of past choices, by other persons, by laws and institutional arrangements, or even by custom and convention. In the elementary textbook formulation of demand theory, for example, the individual consumer-purchaser confronts a range of goods available at a set of prices, but is restricted by the size of the budget. This budget is not within the choice set of the consumer-purchaser during the period of choice under scrutiny. Indeed, it would seem unnatural or bizarre, within the mind-set fostered by ordinary economics, to consider or limit the set of available choice options. Within this mind-set, the utility of the chooser is always maximized by allowing for choices over the whole range allowed by the exogenously determined constraints.

This chapter is a reprint of an essay that appeared in The Encyclopedia of Public Choice edited by Charles K. Rowley and Friedrich Schneider and published in 2004 by Kluwer Academic Publishers, Volume I, 60–67. An earlier version of this chapter was first published under the title: “The Domain of Constitutional Economics’ in Constitutional Political Economy 1, (1990), 1–18.