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The state of nature in the shadow of contract formation: Adding a missing link to J.M. Buchanan's social contract theory

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  • Hans-Jörg Schmidt-Trenz

Abstract

The social contract theory of J.M. Buchanan provides no clear-cut answer on the question which one of the multitude of possible Pareto-efficient contracts is chosen by individuals who shape a contract in an (imaginary) state of nature. This deficiency is remedied in this paper by adding the Nash-bargaining theory. It seems to be in line with at least part of Buchanan's reasoning. Whereas for Buchanan the configuration of contract depends unilaterally on the natural equilibrium of the state of nature, we are able to show that the parties' (rational) contractual expectations have repercussions for their behavior in the state of nature. That is why the location of the natural equilibrium proves to be heavily dependent on the chosen bargaining theory. The implication is that assessing the legitimacy of a given constitutional order or contract (on the basis of the natural equilibrium) depends on the particular bargaining theory chosen to solve the underlying constitutional distribution problem. Copyright Kluwer Academic Publishers 1989

Suggested Citation

  • Hans-Jörg Schmidt-Trenz, 1989. "The state of nature in the shadow of contract formation: Adding a missing link to J.M. Buchanan's social contract theory," Public Choice, Springer, vol. 62(3), pages 237-251, September.
    • Handle: RePEc:kap:pubcho:v:62:y:1989:i:3:p:237-251
    DOI: 10.1007/BF02337744
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    References listed on IDEAS

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    1. Damme, Eric van, 1986. "The Nash bargaining solution is optimal," Journal of Economic Theory, Elsevier, vol. 38(1), pages 78-100, February.
    2. Harsanyi,John C., 1986. "Rational Behaviour and Bargaining Equilibrium in Games and Social Situations," Cambridge Books, Cambridge University Press, number 9780521311830, September.
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    Cited by:

    1. Kyriacou, Andreas, 2000. "A viable solution to the Cyprus Problem in the context of European Union accession," MPRA Paper 115929, University Library of Munich, Germany.
    2. Dieter Schmidtchen & Hans-Jörg Schmidt-Trenz, 1990. "The division of labor is limited by the extent of the law," Constitutional Political Economy, Springer, vol. 1(3), pages 49-71, September.

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