Buchanan explains that the unanimity principle does not have to apply to the stage of post-constitutional operations of the government established by the constitution. The level of routine government operations takes place under the constitutional process rules that are meant to apply to every individual situation. Buchanan says that rational contractors will unanimously agree to less than unanimity rules which reduce decision making costs with respect to routine collective decisions. Obtaining unanimous consent is too costly so the framers set up a legislative process by which the original distribution of property rights could be changed in order to create otherwise unattainable public goods.

          According to Buchanan, people have agreed to majority voting because they expect to be more often in a winning coalition than in a losing coalition. Individuals within the political sector base their choices and coalition memberships on their personal evaluation of costs and benefits. He notes that majority coalitions tend to be unstable, temporary, and ever-changing. Majority rule is apt to lead to inefficient outcomes such as the overprovision of collectively supplied goods and services and majority cost-shifting of some of the costs onto the minority. These are the allocative effects of majority rule. Buchanan observes that when redistribution occurs individuals are no longer functioning under a veil of ignorance.

          Majority-voting rules permit a multitude of separate potential coalitions to put forth taxing and spending proposals. At the post-constitutional stage a losing minority cannot legitimately claim that they were forced by the majority. Buchanan explains that government compulsion with respect to the supply of public goods is legitimate if the original contract (i.e., the constitution) is the product of an effective unanimity rule. Decisions regarding the financing of collective projects are regarded as the outcome of voluntary agreements among citizens. Political voting mechanisms thus serve as substitutes for decentralized private decisions where opportunities (for public goods) exist that cannot be easily embodied in private contracts.
 

Post-Constitutional Analysis

          Politics consists mainly of individual and group attempts to obtain the most benefits from government and to pay the least amount of taxes. According to Buchanan, post-constitutional analysis involves the examination of strategies players adopt within defined constitutional rules and principles. During the post-constitutional stage players treat the rules of the game as constraints and devise strategies to deal with them. Today, most government taxation and spending policy is dictated by pressure groups acting in their own perceived special interests and not by politicians acting in the public interest.

          Buchanan distinguishes between the protective state and the productive state which has "evolved" into the redistributive state. He says that what we generally consider to be a "limited" state actually includes more than merely the protective and judicial services associated with the "night watchman" state – it also includes the productive state which furnishes public goods such as roads and schools. The protective state enforces agreed-to rights and the productive state produces collective goods. The protective state enforces neutral, unanimously agreed upon law. In turn, the productive state may operate through rules of less than unanimity given that at the constitutional stage those rules find unanimous agreement. Whereas the protective state functions in an objective fashion to determine rule infractions, the actions of the productive state are subject to choice. Buchanan's economic theory of the origins of law is consistent with the state provision of public goods. When the protective state was set up, the consenting persons discerned that public goods in the future may be wanted and that without a productive state many public goods would be unobtainable. The framers realized that there would be difficulties financing projects because anyone can use such services without contributing financially.

          The modern state is transforming into the illiberal and redistributionist state as the productive state does not simply provide public goods but also intervenes in the private economy by promoting the same ends pursued in the private sector. The government has taken over many functions previously left to markets. With no meaningful distinction between public and private interests, people dissatisfied with their results in the private sector will increasingly turn to the public sector. Coalitions of voters seek special advantages from the state to obtain legislation favorable to them. Buchanan explains that looking to the government to remedy things can lead to more harm than good.

          Much of today's politics can be viewed as rent-seeking activity (e.g., pork barrel politics). A rent-seeking society leads to the redistributive state that transfers wealth from one party to another through collective action. If there is value to be gained through the political process, people will invest time and resources in their attempts to capture this value for themselves. The emergence of the welfare state and the growth of government have increased opportunities for, and rewards of, redistributive activities. Interest groups in a rent-seeking society will make efforts to gain their own benefits at the expense of others through the use of government. More and more, individuals are investing in rent-seeking and rent protection.

          The Public Choice application of the logic of microeconomics to politics has revealed the prevalence of rent-seeking and free riding on the part of voters, politicians, bureaucrats, and the recipients of public monies. With costs spread over the taxpayers at large, individuals with concentrated interests in increased government expenditures (as benefits) take a free ride on people with diffuse interests in lower taxes. This reflects the logic of concentrated benefits and dispersed costs. Politics produces a policy mix which affords short term and easily identified benefits at the expense of largely hidden and long term costs. The resulting cost shifting leads to the overprovision of government goods and services as majority voting rules allow for many separate coalitions. When factions dominate the voting process, projects tend to be funded that cannot be justified on an aggregate cost-benefit basis. Value taken in the form of such transfers make the investment wasteful in an overall sense.
 

Politicians and Public Servants

          What about the behavior of politicians, legislators, and bureaucrats? Buchanan explains that problems are exacerbated by the rational, self-interested behavior of such individuals. He contends that when people enter government they act on the same motives as when they are agents in the private sector. It follows that bureaucrats want to maximize their budgets thereby obtaining greater power, larger salaries, and so on. Government officials make choices based on their self-interest thereby generating pressure for higher taxes, bigger budgets, more regulations, and more power. Politicians act, at least to a certain extent, out of self-interest and will attempt to gain as many votes as possible to reach positions of power and to receive larger budget allocations.

          Public Choice studies the behavior of politicians and bureaucrats in a representative democracy like we have in the United States. Before Public Choice, economists assumed an objective welfare function which government officials sought to maximize and thought that political agents were inspired to pursue that objective welfare function. The assumption was that nobody in government maximized for himself – there was only the public good. Buchanan understood that political decision makers are not necessarily seekers of the public good but instead they are interested players who trade to their own advantages such as increased power and reelection. He says that people do not change when they take an oath of office or when they join a government agency.

          Politicians, bureaucrats, and other public servants may say that they are devoted to the public interest, common good, general welfare, or social justice, or that they act from some altruistic motivation, but Buchanan maintains that public officials are not motivated by disinterested service to the public and that they, like everyone else, endeavor to maximize their own utilities. It is in the interest of political representatives to spend and say to their constituents that they voted for the benefit of their community. The result is competition between politicians for constituency support through the use of promises of discriminatory transfers of wealth. Bureaucracies tend to grow because of rent seeking, pork-barrel politics, deficit spending, and a tax system with loopholes, exemptions, credits, and so on. A massive expansion of the power to tax has enabled public officials to promote evermore alleged social ends.

          The rules of decision making regarding public spending are outlined in the constitution and create in the representatives a tendency to spend more than the revenue collected. Democratic governments have a significant tendency toward deficit spending unless they are constrained by some fundamental constitutional principle like that of the classical balanced budget. In addition, there was once the pre-Keynesian principle that public expenditures were to be funded by taxation and private spending was to be financed with people's income. Both citizens and politicians abandon their fiscal discipline when they resort to a debt-financed government. When the proper scope of the government is extended, it is difficult to limit its expansion. When budgets are maximized and deficits are incurred, the results include higher government spending, inefficient allocation among government agencies, and inefficient production within them.

          Keynesians have failed to consider the implications of the intergenerational transfer of the debt burden. The burden of debt is passed on to future generations rather than paid for currently with the consumption of real resources. The phenomenon of stealing through the majoritarian processes of government is exacerbated through fiscal deficits that produce intertemporal wealth transfers.
 

Constitutional Reform

          Buchanan claims that we need fundamental constitutional change if special interest legislation and factional rent-seeking or transfer-seeking activity is to be minimized. He says that we should be concerned with processes or procedures (i.e., rules and principles) through which interacting individuals create certain states of affairs. Men need to rethink and redesign their institutional structures in order to revive the classical political economy of the 18th century. He says that lasting reform results from adopting a constitutional perspective with respect to systemic change in the rules of government.

          Buchanan employs primarily an "economic man" assumption and sees government officials as revenue maximizing rather than as wealth maximizing. He therefore wants rules that constrain the revenue-raising ability of government and the government freedom to select the spending mix. Buchanan advocates constitutional revisions in order to provide safeguards and to avoid a slippery slope. He says that taxes should be earmarked for particular services so that each type of government activity is financed by a tax on a base that is logically related to that activity. Buchanan explains that a system of multiple excise taxes, rather than a small number of broad-based taxes would enable taxpayers to better control government by allowing them to avoid some taxation by decreasing their purchases of high-taxed items. In addition, he advocates constitutional rules requiring balanced budgets. Under a balanced budget requirement, money would be so limited compared to demand for it that near unanimity would be required before financing for a project would be approved.

          Buchanan says that his contractarian approach and unanimity principle provide a way of normatively evaluating existing constitutional provisions and proposed constitutional changes. Unanimity thus becomes the benchmark for efficiency. He predicts that something like a 2/3 super-majority rule for the operations of the productive state should be, and would be, agreed upon at the constitutional stage. Buchanan says that people would want rules that are not so permissive that they permit the demise of individual property rights.
 

Contractual Rights versus Natural Rights

          Buchanan states that each person has an ethical obligation to join an ongoing constitutional dialogue but he fails to adequately describe the source of this ethical obligation. Remember that he has dismissed the possibility of any absolute moral values. He is a social contractarian who does not subscribe to the notions of natural law, natural rights, or natural objective moral value. Contractarian individual rights for Buchanan come from having reached an agreement. They are not something that is established by reference to human nature. Buchanan's subjective, nominalist, and deterministic philosophy would be much stronger if he had acknowledged that natural rights are an objective characteristic of the human social realm. If he had, then he may have realized that the "rules of the game" are metanormative in nature and that only the protective state can be justified. Such a state would be concerned solely with protecting the self-directedness of individuals thus ensuring the freedom through which individuals can pursue their flourishing and happiness. There would be no justification for the productive state or the redistributive state.