In a new article on Public Discourse, Samuel Gregg explores social contract theory and how that may apply to the current budget battles:

In very broad terms, social contract theory is a way of understanding the relationship between governments and the people. It holds that, having agreed upon the need for a government, individuals create a state on the basis of mutual promises. This permits the state to claim that its authority is based on a delegation of people’s rights to pursue their particular interests in their own way.

Our present economic disputes are, at a deeper level, about the precise content of those mutual promises. One influential interpretation may be found in John Rawls’ Theory of Justice.

On the basis of what reasonable people in an imaginary “original position” and blinded by a “veil of ignorance” about their future abilities, social status, etc., would want, Rawls argued that each person had “an equal right to the most extensive total system of equal basic liberties with a similar system of liberty for all.”

As part of this calculation, Rawls maintained that no one in the original position would risk being abandoned at the bottom of the social heap. Rawlsian social contract theory has thus, economically speaking, usually been interpreted as translating into extensive entitlement programs and large welfare states.

At the other end of the social contract spectrum is an older concept. This was given prominent expression in John Locke’s Second Treatise of Government.

In Locke’s view, what he called “the Law of Nature” meant that individuals were morally bound not to damage other people’s lives or property. The only way to ensure that this was given effect was through a government that defended everyone against anyone else’s attempts to damage their lives or property. The citizens thus agreed to set up a state that would protect the life, liberty, and property of everyone living under its sovereignty.

In economic terms, this position broadly equates to a state that focuses upon protection of property rights and adjudication of contractual disputes. Issues of distribution according to criteria such as need are deemed beyond the petence.

The significance of these understandings of the social contract is difficult to overstate. The Lockean conception profoundly shaped the Declaration of Independence and much of today’s movement for limited government. By contrast, the Rawlsian interpretation represents the most contemporary philosophical underpinnings of modern American progressivism.

Not only does Gregg explain the problems with different ideas of social contracts, but he articulates what is needed for people to flourish in a society. Gregg states that many times it is the principle of subsidiarity that allows people to be successful:

Subsidiarity’s genius is the manner in which it uses this attention to free choice, human flourishing, and the need for support to provide guidance concerning how we apply subsidiarity’s two axioms of non-interference and assistance. It helps us determine (1) what economic roles can only be performed by the state (such as the provision of courts to adjudicate contractual disputes); (2) when the state should allow munities to provide assistance (private banks should normally be the first place of call for loans); (3) when the state should intervene outside its normal economic responsibilities (when munities that would normally assist are clearly unable to do so); and (4) when such interventions should cease (when they start impeding human flourishing or when munities that normally provide assistance are now able to do so).

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