Constitutionalism - Constitutional Economics

Constitutional Economics

Constitutionalism has been the subject of criticism for its previous ignorance of economic issues but this criticism is now taken into account by the development of constitutional economics. Constitutional economics is a field of economics and constitutionalism which describes and analyzes the specific interrelationships between constitutional issues and the structure and functioning of the economy. The term “constitutional economics” was used by American economist – James M. Buchanan – as a name for a new academic sub-discipline. Buchanan received in 1986 the Nobel Prize in Economic Sciences for his “development of the contractual and constitutional bases for the theory of economic and political decision-making.” Buchanan rejects “any organic conception of the state as superior in wisdom, to the individuals who are its members.” This philosophical position is, in fact, the very subject matter of constitutional economics.

A constitutional economics approach allows for a combined economic and constitutional analysis, helping to avoid a one-dimensional understanding. Buchanan believes that a constitution, intended for use by at least several generations of citizens, must be able to adjust itself for pragmatic economic decisions and to balance interests of the state and society against those of individuals and their constitutional rights to personal freedom and private happiness. Constitutional economics draws substantial inspiration from the reformist attitude which is characteristic of Adam Smith’s vision, and that Buchanan’s concept can be considered the modern-day counterpart to what Smith called “the science of legislation.” Concurrently with the rise of academic research in the field of constitutional economics in the U.S. in the 1980s, the Supreme Court of India for almost a decade had been encouraging public interest litigation on behalf of the poor and oppressed by using a very broad interpretation of several articles of the Indian Constitution. This is a vivid example of a de facto practical application of the methodology of constitutional economics.

The Russian school of constitutional economics was created in the early twenty-first century with the idea that constitutional economics allows for a combined economic and constitutional analysis in the legislative (especially budgetary) process, thus helping to overcome arbitrariness in the economic and financial decision-making: for instance, when military expenses (and the like) dwarf the budget spending on education and culture. In the English language, the word “constitution” possesses a whole number of meanings, encompassing not only national constitutions as such, but also charters of public organizations, unwritten rules of various clubs, informal groups, etc. The Russian model of constitutional economics, originally intended for transitional and developing countries, focuses entirely on the concept of state constitution. In 2006, the Russian Academy of Sciences officially recognized constitutional economics as a separate academic sub-discipline.. Since many a country with transitional political and economic system continues treating its constitution as an abstract legal document disengaged from the economic policy of the state, the practice of constitutional economics becomes there a decisive prerequisite for democratic development of the state and society.