Having knowledge of potential uses for resources is one thing. Putting that knowledge into action is another. Human action is costly. For every action we take, we necessarily forgo taking innumerable others. When I chose to write this morning, this choice foreclosed me from working in my yard, reading a book, or going shopping-all things that I would also have liked to do. I chose to write because I thought that, all things considered, on balance, the benefits that would accrue to me from writing would make me happier than those that would result from doing any of these alternatives, not to mention the countless other actions that I would like even less. By allowing me the jurisdiction to make this choice, the rights of several property and freedom of contract permit me to pursue my partial interests by putting into action my personal knowledge of how I might best pursue happiness.

My choices might well turn out to be wrong - the benefits that would have accrued to me by reading that book may have been subjectively greater than those which I gained from writing. For example, reading might have led to an intellectual discovery that would have profited me more than even a productive day at the word-processor. Of course, I will never know for sure. Because time is scarce, by acting, I made a choice that cannot be reversed. I have forever lost the opportunity to have done something different with my today.

This is what James Buchanan has called the subjective "cost of choice": "Cost is that which the decision taker sacrifices or gives up when he makes a choice. It consists in his own evaluation of the enjoyment or utility that he anticipates having to forego as a result of selection among alternative courses of action." [1] Buchanan identifies six features of this choice-bound conception of cost:

(1) Most importantly, cost must be borne exclusively by the decision-maker; it is not possible for cost to be shifted to or imposed on others.
(2) Cost is subjective; it exists in the mind of the decision-maker and nowhere else.
(3) Cost is based on anticipations; it is necessarily a forward-looking or ex ante concept.
(4) Cost can never be realized because of the fact of choice itself; that which is given up cannot be enjoyed.
(5) Cost cannot be measured by someone other than the decision-maker because there is no way that subjective experience can be directly observed.
(6) Finally, cost can be dated at the moment of decision or choice.[2]

This subjective choice-bound conception of the cost of action has important implications for our conception of justice. Not only are individuals (and voluntary associations) in possession of the personal and local knowledge on which to base choices, they must also bear the cost of any choice among potential actions in the form of forgone opportunities that can never be measured or reclaimed. Like the knowledge possessed by individuals, the costs incurred by action are also inherently and unavoidably their own. just as they and only they are in possession of their own personal knowledge, they and only they incur the opportunity cost of putting their personal knowledge into action. None of this is to deny that sometimes people make choices that do not turn out as they expect. Sometimes people regret the choices they made and wish they could reclaim the opportunities they gave up. And, as was discussed in Chapter 3, sometimes others are in a better position to make decisions than oneself. Moreover, a sole focus on the costs of choice does not take into account the adverse effects that individual choices might have on others (though any such adverse effects are not "costs" as Buchanan is using the term).

Nonetheless, as was also discussed in Chapter 3, the nature of personal and local knowledge supports a presumption that persons and associations with access to information are generally best able to make knowledgeable decisions (though it is sometimes necessary to make individual exceptions for demonstrated incompetence). And, as was discussed in Chapter 7, the impact of choices on third parties is "compartmentalized" by the disparate nature of several property rights, as well as the general prohibition on interfering by force or fraud with the jurisdiction that others have over what is theirs.

The subjective cost of choice suggests another reason, wholly apart from the need to solve the first-order problem of knowledge and the partiality problem, why the jurisdiction to make choices over resource use-the natural rights of several property, freedom of contract, and first possession-should be allotted to individuals and associations. Since they alone must bear the cost of their actions in the form of forgone opportunities, their ability to pursue happiness depends upon being able to make these choices for themselves. The order of preferences which determines a person's cost of choice is highly personal knowledge and what constitutes a forgone opportunity is also subjective in that it reflects what,the choosing party would have chosen second. Those who incur the costs of choice are in the best position to know what their alternative opportunities are and how they rank them. For this reason, their interests are likely to be harmed by having choices imposed upon them by others.

In sum, while the recognition of rights of ownership and freedom of contract is initially explicable in terms of the need to solve the first-order problem of dispersed knowledge, violating these rights is also likely to adversely affect the interests of those whose freedom of choice is overridden by the choices of others. We are now in a position to see that the right to own oneself and external resources as well as the right to transfer consensually alienable property rights to others have, not one, but at least two distinct bases in the nature of human beings and the world in which they find themselves:

(1) the personal and local knowledge possessed by individuals and associations is inescapably their own and largely inaccessible by others; and
(2) the cost of action is inescapably incurred by those who act and cannot be shifted onto another.

If individuals are to pursue happiness, then they ought to be afforded the opportunity to put the knowledge that is at their disposal into practice by making the best choices they can under the circumstances. For they will have to bear the costs of any choices imposed upon them.

Suppose, for example, that a Ann and Ben are a childless couple because Ann has a medical condition that would make pregnancy dangerous to her health. They would be willing to have an egg from Ann that has been fertilized by Ben's sperm implanted into the womb of another woman who would then bring the resulting fetus to term and give birth to their baby. They come to learn that there is a woman, Cynthia, who would be willing to perform this wonderful service, but only in return for payment of a substantial sum of money. Ann and Ben agree to pay Cynthia $20,000 and all her medical expenses, and Cynthia agrees to become impregnated, give birth to the baby, and waive any parental rights she might claim in the child.[3] Now suppose that a statute exists that makes it illegal for Ann and Ben to offer or for Cynthia to accept the $20,000 and Cynthia refuses to perform the service for free. The statute in question has imposed a choice on Ann, Ben, and Cynthia that they would not otherwise have made. The opportunity forgone by Ann and Ben is the chance to be parents of their biological child; the opportunity forgone by Cynthia is the chance to earn $20,000 and spend it as she chooses. Their interests have been adversely affected in two closely related ways.

First, of course and most obviously, they have lost the happiness that this particular opportunity might have afforded each of them. Ann and Ben will never know the joy of bringing life into being, and Cynthia will not be able to enjoy that which she might have obtained with the money, perhaps a new car, a down payment on a house, or a college tuition fund for her own child. True the choice to proceed with the implantation might have caused great unhappiness. The child might have been still-born or born with a- severe disability, or Cynthia might have developed health complications during pregnancy or emotional trauma from having to give up the child she gave birth to. The important issue is jurisdictional: who is to decide? Unless they are shown to be incompetent, given that they are in the best position to know their own preferences and that they will bear the cost of choice-for better or for ill-it would seem that the choice should belong, jointly, to Ann, Ben, and Cynthia.

Second, imposing a choice on Ann, Ben, and Cynthia undermines substantially their incentive to use their knowledge in such a way as to enhance their well-being by discovering this opportunity. Ann and Ben would have no interest in consuming their scarce time and efforts to seek out a physician and enquire about the feasibility of such a procedure, nor of contacting a fertility center about locating a woman who would be willing to become impregnated. And there would be greatly reduced incentive for anyone to set up a fertility center to locate women who would be willing to perform this service, if they and the women they located were unable to collect a fee for their time and efforts. Moreover, in the absence of this "market" or demand, biologists and physicians would have little reason to develop such procedures.

Thus the subjective cost of choice yields the following problem of interest that I shall call the incentive problem:

The Incentive Problem: ensuring that persons have an adequate incentive to make choices reflecting the knowledge to which they have access and to discover new information; it is the need to close the gap between the conduct that justice permits and a right-holder's interest to act knowledgeably with his or her resources.

Let us briefly consider how the background rights of first possession and freedom of contract-both freedom from and freedom to contract-that comprise part of the liberal conception of justice address this problem.

[1] Buchanan, Cost and Choice, pp. 42-3.Return

[2] Ibid. 43.Return

[3] These facts are loosely bseed on that of Johson v. Calvert, 19 Cal. Rptr. 2d 494, 851 P.2d 776 (1993), in which the Supreme Court of CAlifornia upheld the enforceability of a contract between a couple, Mark and Crispina Calvert, and a woman Anna Johnson, who had been impregnated with the couple's fertilized egg, in which Anna had agreed to forgo any parental claims in the child to whom she gave birth. In the actaul case, there was no California statute barring such contracts, but such statutes have been eneacted elsewhere.Return