Freiburger Diskussionspapiere zur Ordnungsökonomik 16/04
The paper is organized as follows. Section 2 looks at the principal tenets of the social contract tradition. Section 3 reviews the 18th century origins of the “invisible hand” paradigm as the theoretical core of the economics tradition. Section 4 examines the limits of invisible hand accounts, specifically with regard to the problems posed by social dilemmas. Section 5 deals with the modern revival of social contract theory. Section 6 looks specifically at the contractarian constitutionalism of James Buchanan, the economist among the “new contractarians.” The concluding section relates the contrast between the invisible hand paradigm and social contract theory to the distinction between the “two kinds of order”, spontaneous orders and corporate orders, that plays a central role in F.A. Hayek’s work.