Escape from Europe: A Calculus of Consent Model of the Origins of Liberal Institutions in the North American Colonies

Abstract

The migration out of Europe and the establishment of North American colonies presents us with a great puzzle: Why did the colonists establish democratic forms of governance? Considering that early democratic colonies appeared even before philosophical works such as those of Locke and Montesquieu were written, it is difficult to make the case that ideology was the driving factor. We show that the calculus of consent model proposed by Buchanan & Tullock (1962) offers a simple but subtle solution this puzzle. Because migrants formed homogeneous communities, and because, thanks to the large geographical expanse, the inter-jurisdictional externalities were small, the efficient level of consensus within each colony was much greater than in Europe, and the scope of efficient centralized decision-making was much smaller. Hence, a structure of decentralized democratic communities emerged as the efficient outcome.

We explain why the calculus of consent is particularly well suited to understand the institutional effects of mass migration, develop three calculus of consent theorems about how the equilibrium decision rules are affected by changes in the underlining costs, and show how these theorems can be used to make pattern predictions about changes in democracy, federalism and economic freedom. We apply the model to explain the differences between Britain and North American colonies. and show that the model also provides useful insight about the differences between colonies, in particular between New England and Chesapeake colonies. In conclusion we briefly discuss the fact that the calculus also provides a quick explanation for the institutional evolution in United States and Europe, in particular for the growth of government.

Keywords: Institutional Formation, Federalism, Chesapeake Bay Colonies, New England Colonies

JEL Classification: D02, H41, P16, N41