Bargaining With the State.

• Author: Colburn, Christopher B.

Professor Richard Epstein in his book Bargaining with the State has extended his argument for a well specified and constrained role for government made in his previous book, Takings: Private Property and the Power of Eminent Domain, to include contracting with the government. The form of the contracting with the government is not solely the purchase of resources but includes contracts that are implicitly formed by the creation of the welfare state and by the state specifying property rights. Provocative questions such as the creation of corporations, tax preferences, abortion, and unemployment and welfare benefits are all investigated within a bargaining context. The main question that the book deals with is when government engages in some activity that generates an increase in the total surplus how is that surplus to be divided between the separate economic agents?

In Part One of the book, "Theoretical Foundations: The Problem of Coercion," Professor Epstein outlines the theory that will be used to access government behavior. Significant in this section is the definition of a bargain, which occurs when a trade takes place that has some improvement in welfare in the Pareto (or Potential Pareto) sense. Epstein argues that the government should enforce bargains (protect property rights) when there are joint gains between the contracting individuals and/or when there are interests that affect any third party. In Chapter 1 the context of the issues of a bargain between the state and individual (involving "givings and takings") is developed. Chapter 2 presents an outline of the remaining chapters of the book. In Chapter 3 the baseline, the initial distribution of property rights, are discussed as these will be used for comparison purposes when analyzing state performance. Chapter 4 provides a discussion of the movements away from the initial baseline discussed in the previous chapter that are acceptable and are unacceptable. In Chapter 5 the alternative bargaining structures are discussed. These bargaining structures are important in determining the relative bargaining strength of the different economic agents. Included as bargaining structure issues are market structures such as perfect competition and monopoly, gaming activity related to the prisoner dilemma, and externalities. Chapter 6 focuses on the movement from the role of government as a definer of property rights to the governments role in the enforcement of property rights. In this...