Philosophy Dictionary of ArgumentsHome
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| Costs: In economics, costs represent the resources or sacrifices incurred to produce goods or services. These include explicit costs (direct expenses like wages, materials) and implicit costs (opportunity costs, such as foregone alternatives). Costs influence production decisions, pricing strategies, and overall economic efficiency, essential in assessing profitability and resource allocation._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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James M. Buchanan on Costs - Dictionary of Arguments
Parisi I 204 Costs/Buchanan/constitions/constitutional economics/Voigt: Deviations from the unanimity principle could occur during a decision process on the production of collective goods, but this would only be within the realm of the Buchanan model as long as the constitution itself provided for a decision rule below unanimity. Deviations from the unanimity rule would have to be based on a provision that was brought about unanimously. It is exactly this idea that is developed in more detail in the Calculus of Consent (Buchanan and Tullock, 1962)(1). There, Buchanan and Tullock are interested in the choice of decision-making rules and introduce three cost categories to make this choice subject to a rational calculation. 1) External costs are those costs the individual expects to bear as a result of the actions of others over which he or she has no direct control. Less inclusive decision rules are expected to cause higher external costs. At the limit, when a single individual makes binding decisions for the entire society, they will reach their maximum. 2) (…) decision-making costs, which the individual expects to incur as a result of the individual's own participation in an organized activity. These costs include only the estimated costs of participating in decisions when the agreement of two or more individuals is required. These costs are assumed to be increasing with inclusion. In other words: the higher the required majority to get to a decision, the higher the decision-making costs. There is, hence, a trade-off because it is impossible to minimize external and decision-making costs simultaneously. Buchanan and Tullock deal with the trade-off by summing up these two cost categories into a third category, 3) the costs of social interdependency, or simply interdependence costs. For purely private activities, these will be zero. According to Buchanan and Tullock, a rational individual confronted with questions of constitutional choice will opt for their minimization. The minimum of the interdependence costs will depend on the policy area considered. This implies that different policy areas should be Parisi I 205 endowed with different majority requirements. The majority requirements will, in turn, be agreed upon unanimously. >Consent/Constitutional economics, >Efficiency/constitutional economics, >Governmental structures/Constitutional economics. 1. Buchanan, J. M. and G. Tullock (1962). The Calculus of Consent - Logical Foundations of Constitutional Democracy. Ann Arbor, MI: University of Michigan Press. Voigt, Stefan. “Constitutional Economics and the Law”. In: Parisi, Francesco (ed) (2017). The Oxford Handbook of Law and Economics. Vol 1: Methodology and Concepts. NY: Oxford University_____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
EconBuchan I James M. Buchanan Politics as Public Choice Carmel, IN 2000 Parisi I Francesco Parisi (Ed) The Oxford Handbook of Law and Economics: Volume 1: Methodology and Concepts New York 2017 |
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Ed. Martin Schulz, access date 2024-04-29