Toward a Constitutional Theory of Property Rights to Escape the Transitional Gains Trap: A View from the Machiavellians

Since at least Adam Smith, political economists have inquired into the nature and causes of the wealth of nations. From a public choice perspective, this economic transition from poverty to wealth can be reframed in terms of an escape from the transitional gains trap (Tullock, Bell J Econ 6(2):671–678, 1975). Understood this way, the question of why the West first escaped from poverty is a question into how the political process gradually transformed from a means to secure privileges to a means to secure private property rights. Such an inquiry implies that any realistic inquiry into economic and political development must entail a study of how and why violence becomes organized throughout society in the foreground of analysis. Taking inspiration from Burnham’s The Machiavellians (1943), I will offer a constitutional theory of property rights grounded in classical liberal theory, one that emerges as a by-product of political exchange and entrepreneurship (Wagner, Papers Non-Market Decision Making 1:161–170, 1966). From a constitutional perspective, I argue that private property rights emerge to internalize the cost of using violence, particularly to minimize rent dissipation from escaping the transitional gains trap. I illustrate this argument through the lens of entangled political economy by explaining the emergence of constitutional democracy in Western Europe as by-product of political exchange.