An essay on human rights and the market for social contracts.

• Author: Francis, Andrew M.

1. Introduction

   Although the notion of human rights can be traced to Greek philosophy, classical Roman law, and Judeo-Christian scripture, it was not until the haunting experiences of World War II and the Holocaust that the international community recognized the importance of human rights with the adoption of the Universal Declaration of Human Rights in 1948. Since issues of human rights intersect with a number of fields in economics including development economics, law and economics, and political economy, it is worth raising the following questions: What are human rights, and how are they determined? What are the borders of state sovereignty? What is the proper role of the international community? In this article, I take an economic approach to explore these themes.

   To begin, I theorize the existence of an international competitive market for social contracts, or bundles of rights. The market matches citizens who demand rights with states that supply rights to determine the equilibrium social contracts. In this competitive framework, human rights are the set of rights common to all social contracts. The optimality of the market depends on perfect competition, which requires a number of assumptions about migration costs, freedom of exit, information, and state market power. In practice, states may renege on their promises to citizens and may interfere with the market for social contracts. Additionally, geographic and other factors unrelated to state actions may reduce the efficiency of the market. In light of these problems, the economic theory provides justification for bounds on state sovereignty and suggests that the international authority promote three objectives: (i) to enforce the social contract between state and citizen, taking action with respect to states that fail to fulfill promises; (ii) to enhance the efficiency of the market for social contracts, taking action with respect to states that interfere with the market; and (iii) to enhance the efficiency of the market for social contracts, taking action to ameliorate other market imperfections.

   The human rights theory in this article contrasts markedly with other theories. The most prevalent view of human rights stems from the natural law tradition, which posits that there exists a set of immutable laws of nature that imply certain individual rights (Kunz 1961; Henkin et al. 1999; Hayden 2001). In contrast with the market-based approach, the natural law approach "essentializes" rights and fails to take into account feasibility and diverse economic, social, and technological circumstances. Consistent with the economic approach to the social contract, Robert Nozick underscores the importance of competition among diverse communities for citizens (Nozick 1974). However, he applies the theory only to communities within a state, relies on natural rights theory, and is committed to proving the optimality of the minimal state. John Rawls establishes the boundaries of state sovereignty with reference to an ideal benchmark, as the theory in this article does, but so-called Rawlsian primary goods are neither universal across peoples nor determined in a market context (Rawls 1971, 1993).

   A considerable number of studies in economics address human rights issues, typically with respect to development or international law, but rely primarily on natural rights theory (e.g., De Kadt 1980; Streeten 1980; Rogge 2001; Fielding 2002; Neumayer 2002; Gauri 2004). Economists have articulated justifications for specific rights based on economic efficiency (e.g., Mialon 2005; Mialon and Mialon 2008), but general economic theories of human rights are relatively scarce. Some economists have interpreted human rights as property rights subject to Coasian bargaining (Rubin 1982; Veseth 1982). Others have theorized that the constitution is a contract or collection of decision-making rules arising from market-like conditions that specify individual rights (Buchanan and Tullock 1962; Tullock 1971; Buchanan 1975; Mueller 1991). Nevertheless, they do not apply these notions to universal human rights and do not imagine the existence of an international market that determines the social contract or constitution. It turns out that the theory in this article has more in common with models of Tiebout sorting and hedonic prices (Hirschman 1970; Rosen 1974; Carruthers and Vining 1982). In addition, Amartya Sen and Martha Nussbaum advance a theory of human rights, which emphasizes that individuals have certain fundamental capabilities that make life uniquely human (Fukuda-Parr 2003; Nussbaum 2003; Osmani 2005; Sen 2005). Not only does this approach essentialize rights, but it also requires a definition of humanity, an inherently problematic task.

2. An Economic Theory of Human Rights

   To begin, I postulate the existence of a competitive international market for the social contract, a bundle of rights and duties that characterizes key aspects of living in a nation. As such, the social contract is a set of promises of the state to the citizen as well as promises of the citizen to the state. For example, it might include economic, political, and social rights and duties; religious rights; legal rights; the right to a minimum level of consumption; access to a certain standard of education and health care; and the duty to perform military and other national service. Denote the social contract as, r = ([r.sub.1], ..., [r.sub.N]), where [r.sub.n] represents the "amount" of each of the rights, duties, and other state characteristics. The price function, p(r) = p([r.sub.1], ..., [r.sub.N]), gives the minimum price of any potential...