The Exchange Paradigm of Constitutional Economics: Implications for Understanding the Third Sector

Abstract:     
This paper reconsiders the exchange paradigm of constitutional economics from the perspective of the theory of the division of labor. According to this theory, human wants can be satisfied by two basic mechanisms - exchange and self-sufficiency. The exchange paradigm of constitutional economics emphasizes the former mechanism while neglecting the latter. Building on major economic theories of the third sector, it is argued that the latter mechanism is more helpful than the former in explaining the existence of third sector organizations. The paper concludes by discussing implications of this argument for the further development of constitutional economics.

Number of Pages in PDF File: 13

Keywords: third sector, nonprofit sector, exchange paradigm, contractarianism, self-sufficiency

JEL Classification: D02, D23, L31

Accepted Paper Series