Laurence E . Lynn, Jr. Editor

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Note to Book Publishers: Please send all books for review directly to the Book Review Editor, Professor Laurence E. Lynn, Jr., Harris Graduate School of Public Policy Studies, University of Chicago, 1155 E. 60th Street, Chicago, IL 60637.

Susan Rose-Ackerman

A New Constitutionalism: Designing Political Institutions for a Good Society, edited by Stephen L. Elkin and Karol Edward Soltan. Chicago: University of Chicago Press, 1993, 240 pp., $15.95 Paper.

Bargaining with the State, by Richard A. Epstein. Princeton, NJ: Princeton University Press, 1993, 322 pp., NPA.

Fragile new democracies are struggling to establish the rule of law in Eastern Europe and Latin America. The democratic character of the Euro- pean Union is in doubt as i t moves to increase its membership and take on new powers. In the United States a Democratic president is struggling with a Congress controlled by his own party and a judiciary full of appointees from the previous Republican administrations. Worldwide, as the cold war fades in memory, the responsible exercise of democratic power has become a highly salient issue.

Even conservative scholars, such as Richard A. Epstein, who prefer drastic cutbacks in public sector activities, accept the reality, if not the legitimacy, of an active, interventionist state. Epstein argues that constitutional law must constrain the coercive power of the state when it bargains with its citizens. His book is a contribution to American constitutional law, but many of his arguments are relevant to any effort at constitutional reform. To liberal public policy analysts the challenge of his book is to separate the reasonable proposals from those whose logic depends upon an unbending commitment to utilitarianism and to the distribution of property rights produced by his- tory and the common law.

Journal of Policy Analysis and Management, Vol. 14, No. 1, 161-189 (1995) 0 1995 b the Association for Public Policy Analysis and Management PublisheJby John Wiley & Sons, Inc. CCC 0276-8739/95/010 161 -29

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Stephen L. Elkin and Karol Edward Soltan’s edited volume can help with this evaluative exercise. In addition to Elkin and Soltan’s own contributions, the book contains papers by James W. Caeser, Charles W. Anderson, Theo- dore J. Lowi, Cass R. Sunstein, and Edwin T. Haefele. The premise of the book is essentially the opposite of Epstein‘s. Rather than trying to limit government, The N e w Constitutionalism seeks to analyze the state’s affirma- tive role. Like Epstein, the authors seek political institutions that will check arbitrary power, but their goal is not to reduce the role of the state but to make the exercise of power more legitimate and effective. Epstein focuses only on arbitrary stare action; Elkin and Soltan recognize that other institu- tions, such as private corporations, may also need to be controlled. Instead of focusing on keeping the state from doing harm, they ask what democratic states ought to be doing and how they should design political institutions to make legitimate choices. Although the experience of the United States in- forms many of these essays, the authors’ ambitions are broader than Ep- stein’s. The spate of constitution writing going on worldwide provides a background and adds urgency to their enterprise.

In spite of their contrasting premises, the books both draw on recent schol- arship in political science, economics, and law. Policy analysts will find their substantive concerns placed in the context of broader social theory. Epstein, in particular, covers a wide range of topics from public roads and profes- sional licensure to unemployment benefits and welfare rights.

Epstein emphasizes the hazards of dealing with the state. Ordinary citizens risk state expropriation of their property and risk being placed in an unfair bargaining position by government requirements. The U .S. Constitution forbids conditions that violate people’s constitutional rights. Drawing on the doctrine of “unconstitutional conditions,” Epstein seeks to determine which conditions are unconstitutionally coercive. At the same time he recognizes that the state must be able to force its citizens to take certain actions in the public interest. He understands that private mar- kets do not produce efficient solutions in all circumstances. He shares with policy analysts an appreciation of the market failure justifications for state action. However, given these market failures, he criticizes many of the solutions.

Epstein criticizes the legalistic claim that “the greater power implies the lesser.” For example, as long as the state has the power to impose a property tax, some claim that it also has the power to charge variable rates or to exempt certain property from taxation. Epstein argues that one should not accept this proposition since it would permit the government to treat indi- viduals differently based on wholly arbitrary criteria such as political con- nections or ethnic affiliation. If differential tax rates and exemptions can be justified as ways to reduce transactions costs and produce a more efficiently operating society, Epstein would find them constitutional. Otherwise, they should not be permitted.

There is much to support in this position. A mechanical application of “the greater power implies the lesser” principle has nothing to recommend it to a policy analyst or political theorist. According to one widely accepted inter- pretation of the Just Compensation Clause of the U.S. Constitution, the clause prevents programs that impose disproportionate burdens on a subset of the population. Where Epstein parts company with many of his more

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liberal law and economics colleagues, however, is in what counts as “dispar- ate treatment.”

In order to determine if someone has suffered “disparate treatment,” the state must establish a baseline level of entitlement. Epstein’s baseline distri- bution would minimize the transaction costs of putting resources to their most efficient use. Since there are “bargaining difficulties that are associated with markets, and bargaining difficulties that are associated with politics” (p. 37), a balance must be found. He argues that individuals own their own labor and other aspects of their person. For what Epstein calls “external things,” the common law provides a baseline. It distinguishes between things such as land where private ownership rights prevail and other resources, such as water, where universal access is the cost-minimizing presumption.

Epstein’s support for a private property baseline supplemented by com- mon law rules produces a presumption in favor of the existing distribution of property entitlements. The fairness of the resulting distribution does not concern Epstein. He views rights as merely instrumental to his overall utili- tarian goal. For him, minimizing transaction costs is the key to setting the baseline. “Distributional issues have nothing to do with this inquiry” (p. 39). Deviations from the baseline must be justified in utilitarian terms. Programs which generate net losses in cost-benefit terms but which produce a more egalitarian distribution of income are, in his view, unconstitutional. They have a disparate impact on the wealthy that is not overcome by the dollar gains to the poor.

Epstein never deals with the ambiguity of his preferred baseline. Common law rules applied to new situations could redistribute wealth for reasons that may be hard to justify in utilitarian terms. If a firm creates newly recognized externalities for others, do its owners have a property right to cause harm that must be purchased by others, or is the right held by those who suffer the harm? If the harm is an artifact of modern life, old legal precedents will not be determinative and ownership expectations may be unclear. When Epstein himself discusses externalities (pp. 69-74), he emphasizes cases in which the government imposes external harms on citizens, neglecting the cases where private individuals impose externalities on each other in the absence of gov- ernment regulation.

Existing common law rules may be either inefficient or unfair. If they are, why shouldn’t the people who benefited from the unsatisfactory past situa- tion bear a disproportionate share of the costs of improving the situation? Such people would have a strong incentive to argue the contrary case in legislative or administrative fora-a healthy incentive in a democracy. If they lose, however, they must accept the judgment of the political actors. An individual could still argue before an administrator or in court that the application in his or her own case was biased and unfair, but could not challenge the overall cost distribution decision. The majoritarian character of the American political system implies that the status quo given by history, practice, and statutory law has no sacrosanct constitutional status. Thus, although few would disagree with Epstein’s claim that the U.S. Constitution seeks to constrain the bargaining power of the state vis-a-vis citizens and property owners, the precise nature of the trade-off between individual rights and the effective operation of state programs remains controversial.

Epstein’s analysis of redistributive programs in the welfare state demon-

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strates the ambiguities of his position. He discusses tax exemption, and un- employment, welfare, and educational benefits. He focuses, not on the pro- grams themselves, but on the possibly unconstitutional conditions imposed on potential beneficiaries. To anyone who has studied these programs the discussion is oddly one sided. Since Epstein is opposed to the underlying programs, he frequently concludes that the conditions are so onerous that the entire policy should be discontinued. In areas such as the funding of the arts and abortion counseling and referral Epstein would limit the government’s role to providing tax deductions for private charitable donations. When he recognizes that such an outcome is not politically feasible, he is caught tak- ing uncharacteristically wishy-washy positions. He concludes, for example, that “the unconstitutional conditions challenge to the Hyde Amendment should fail-but perhaps only by a bare 5 to 4 vote” (p. 294; the Hyde Amend- ment to the Medicaid Act provides that medicaid benefits cannot be used to pay for the cost of abortions).

Like Epstein, the papers commissioned by Elkin and Soltan deal with the legitimate exercise of state power in the context of the modern welfare state. Their perspective, although not fully developed, is more philosophically so- phisticated and consistent with American constitutional law than Epstein’s effort. In their attempts to reconstruct an older tradition of political econ- omy, the authors’ “aspiration [is] to prescribe as much as to describe and explain” (p. 10). They aim both to articulate goals and to recommend appro- priate institutional structures. Thus the public policy community will find this book more congruent with their own interests than much of the work in political science.

Public policy analyses of substantive problems and their integration into legislative, judicial, and bureaucratic structures represent one part of the authors’ agenda. The merger of scholarly expertise and real world advice that is central to the work of public policy schools is at the core of Elkin and Soltan’s volume. None of the authors is, however, an economist. They are all political scientists or lawyers. Both the cost-benefit analysis and rational choice models of politics are put rather firmly in their place. The authors are not hostile, but they think that something more is needed for the study of political institutions and the creation of value in political life. According to them, rather than evaluating policies given a set of political institutions, one should ask if a particular policy might produce changes in the political struc- ture itself (Caeser in Elkin and Soltan, p. 58). Would a doubling of the budget for secret intelligence gathering undermine democratic accountability? Will intergovernmental grants contribute to the breakdown of independent state and local governments?

Political institutions, the authors believe, form values as well as aggregate existing preferences. Deliberation is a central requirement of democratic institutions (see especially Cass Sunstein in Elkin and Soltan). The authors, however, also recognize that institutions must be designed to account for the fallibility, self-interest, and ignorance of citizens. A s James Caeser observes, the rational choice approach is in one sense too optimistic about individual motivations. It “misses motivations related to intense anger, to a desire for retribution connected with feelings of injustice, and to passionate reactions stemming from alternative understandings of customs and gods” (p. 53). Mere economic self-interest can look rather benign and simplistic in con- trast. Although self-interest models are too narrow, Caeser’s view suggests

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that democratic theories that depend on idealized good citizen are also likely to be falsified in practice. The goal of these scholars is a realistic view of government that recognizes the selflessness and the selfishness of both citi- zens and politicians.

As Soltan points out (p. 84), countervailing power and competitive pres- sures are familiar ways to check arbitrary power. Epstein notes the essential role that competition plays in private markets and argues for the extension of this method of control to the public sector as well. As both Soltan and Ep- stein recognize, this is not always possible. Soltan emphasizes the alternative of impartial standards and rules to introduce “both principle and the rule of law” (p. 84). The rule of law is a way to control, not only public officials, but private organizations as well. Former Eastern Bloc bureaucrats have had difficulty learning that legal rules can be used as a valid reason for not following the whims of superiors. A visitor to the United States from a newly democratic Latin American country marveled at employees of private air- lines invoking federal laws as reasons when dealing with passengers. In his country, he claimed, such an invocation of the law would have no impact if not backed up with credible sanctions.

Elkin and Soltan’s edited volume is more a manifesto for a new kind of interdisciplinary study than an actual example of the method in action. Unlike most edited volumes, the book has a clear and unified message ex- pressed with a variety of nuances by the invited authors. It provides a useful counterweight to Epstein’s book, especially since it echoes Epstein’s central concern with control of arbitrary power. Nevertheless, one finishes the book longing for something concrete. What would a move to proportional repre- sentation mean in the United States? How is statutory implementation af- fected by an independent judiciary that can review bureaucratic actions? Does health care reform in the United States pose any dangers to democratic institutions and the federal structure of government? Elkin and Soltan and their colleagues suggest that such questions are important, but they do not have answers to give. Epstein has provided answers to a series of related questions, but many of them will only be satisfactory to someone who shares his generally minimalist view of the proper role of government. A N e w Con- stitutionalism has set an agenda. Schools of public policy are likely places to look for scholars with the inclination to follow-up.

SUSAN ROSE-ACKERMAN is Henry R . Luce Professor of Jurisprudence in the Law School and the Department of Political Science at Yale University

Bruce R. Guile

Empowering Technology: Implementing a U.S . Strategy, edited by Lewis M. Branscomb. Cambridge, MA: MIT Press, 1993, 315 pp., $37.50 cloth, $17.95 paper.

Science Policy and Politics, by Alexander J. Morin. Englewood Cliffs, NJ: Prentice-Hall, 1993, 195 pp., NPA.

These two books, taken together, can lead a reader to what I consider to be the frontier of informed thinking about U.S. science and technology policy in the 1990s. I don’t promise a smooth trip but the two volumes give me confi-