This post is part of a series on ‘Economic Aspects of the Constitution’. The other posts in the series will be available here.

Whether one subscribes to the notion of the ‘ancient constitution’ or not, it is not the most controversial claim to make that the British constitution is one of the most resilient in the world, originating in the constitutional events of 1688. It has certainly undergone change since then, but this has always been incremental. The processes of change and reform of the British constitution has been approached from various angles. Yet it is surprising, in the country where utilitarianism was born as a school of thought, that there has been little explicit study of the economic value of the British constitution. 

In this post I will share some preliminary thoughts on how to explain the British constitution’s resilience from an economic perspective, as an initial contribution to filling this gap. There are different methods of assessing constitutions from an economic perspective, depending on whether one adopts mainstream (Law and Economics, with different nuances therein too) or heterodox approaches (Law and Political Economy, Marxist approaches). In this post I will mostly focus on the mainstream Law and Economics standpoint. I will also introduce the hypothesis that the debate on legal and political constitutionalism can better be understood by focusing of the issue of reforming the economic constitution.

I have already introduced many terms that require definition so let’s begin with the notion of the constitutional form. I believe that this notion has crucial analytical value which warrants further investigation and elaboration. But for the purposes of this post I will focus on three main characteristics of the British constitutional form: i) its flexible character due to the lack of entrenchment; ii) its conservative and reformist character which favours incremental change; and iii) its neutral appearance which is partly due to its longevity, resilience and reformist nature. The main question is whether these characteristics are seen as positive or negative from an economic perspective.

Law and Economics assessment of the British constitutional form

Law and Economics (L&E) has a rather ambiguous assessment of these characteristics. But first, what is L&E? What are its methodological assumptions and its normative prescriptions based on which the British constitutional form can be assessed? L&E stands for the modern doctrine of the economic analysis of law, which developed primarily in the context of the Chicago School of Law and Economics. The methodological foundation of L&E is the homo economicus. Homo Economicus is the behavioural model which assumes that individuals act rationally and in their own self-interest to maximise their own benefits.

In addition to this, L&E is characterised by an adamant faith in the market: an open market operating in a competitive environment is the most important consensual institution, not only for protecting individual rights but also for promoting social welfare and the general interest. The faith in the market’s superiority assumes such force that L&E, it is argued by its opponents, naturalises the existing economic, social and juridical condition. It follows from it that law’s purpose is not to subvert, change or even manipulate the economy to achieve social goals or ideals, but to ensure economic efficiency. In this context, public law serves primarily to reduce transaction costs and address market failures. The ideal constitution places the basic governmental arrangements beyond the power of the normal political process.

How does L&E approach democratic constitutions from a normative standpoint? This is shaped by the twin concerns over: i) the threat of redistribution, and ii) the preservation of social peace. Democracy increases the risk of redistributive policies which are not economically efficient. To use a metaphor from Homer’s Odyssey, democracy unbind the ‘People-Ulysses’ from the mast, to make decisions under the influence of all kinds of Sirens. The ‘sirens’ here being the demands of the popular strata expressed through different institutions and organisations, like political parties and trade unions. In this context, arguments against franchise extension and popular participation in the decision-making process result from the fear of redistributive policies. This view also explains the phenomenon of agencification and the conferral of economic decision-making powers to independent institutions (e.g. the operational independence of the Bank of England or the establishment Office for Budget Responsibility), as well as the requests for constitutionalisation of economic principles (see for instance the constitutionalisation requirement for balanced budgets found in the Fiscal Compact of 2012 in the EU context).

As far as rights are concerned, L&E views rights in general as indisputable values that promote economic efficiency by allowing individuals to make optimal choices and satisfying important needs at the lowest cost. The right to property, for instance, is necessary for enjoying an asset without the cost of endless bargaining and conflict with others. On a macro level, general respect for rights enhances the credibility of an economy and invites (domestic and foreign) investment which leads to economic growth. Nevertheless, recognising the economic value of the general respect for fundamental rights does not mean that all rights have equal economic value. L&E views secure property rights as leading to higher income levels while social rights have the exact opposite effect.

Social rights are not discarded altogether. L&E at times recognises their economic value as maybe ‘the cheapest method of preserving social peace’. But it is generally accepted that property rights and social rights stand in competition, as any promise of the state to promote social rights must be paid for by someone. This economic argument can help explain the judicial treatment of social and economic rights in liberal democratic states as separate from and inferior to civil and political rights.

On this methodological and normative basis, how might L&E assess the British constitution? As mentioned above, the assessment is ambiguous. On the one hand, it is negative due to the lack of security – i.e. entrenched constitutional protection of the fundamental prerequisites for the market to operate and investment to take place in a stable environment of trust. The British constitution is found weak, from this standpoint, due to its inability to entrench the prohibition of wealth redistribution, the deregulation of the labour market, the depoliticisation of economic decision-making, and so on. Examples of constitutions that entrench neoliberal values we find in the constitution of the European Union, where the Treaties safeguard the fundamental principles of the internal market, or in the US where entrenched protection of the markets is carried out through the constitutional interpretation of the US Supreme Court (not just in the Lochner era but still to this day with examples like the Citizens United case where the SC entrenched the right of major corporations to influence elections). On the other hand, the British constitution could be assessed positively regarding the low costs involved in constitutional reform, compared to countries with entrenched constitutions. Let me elaborate.

Legal and political constitutionalism under an economic lens

At this point I would like to articulate a pertinent hypothesis regarding the debate between legal and political constitutionalism. I believe that one useful way into this debate is to approach it under an economic lens. It is certainly of significant value for an economic analysis of the British constitutional form. From its original form – i.e. the debate between John Griffith and Lord Hailsham – to this day, the main issue underlying this debate is the reform of the economic constitution, i.e. the rules and principles that determine how the state and citizens relate to the economy – in other words how the economy should run.

For Lord Hailsham, the economic constitution should be reformed and for this to happen so should the formal constitution. His notion of the ‘elective dictatorship’ was a critique of the British political constitution for being inadequate to protect against abuse of power by transient majorities in the House of Commons. These contingent majorities could take advantage of the first-past-the-post system, the whip system, the Commons dominating Parliament, and enact legislation that attacks property rights, redistributes wealth without any consideration for traditions, hierarchies and vested interests.

His critical comments on post-war public spending policy, contributing to increase of national debt and the rise of inflation, and his warning of a ‘takeover’, whereby the system would be ‘infiltrated from without and made the vehicle of a real tyranny committed to the destruction of the present order of society’, together with references to the ‘implicit strategy of all militant leftist groups to use the power of Parliament to communise the country’ provide the diagnosis for his prescriptions which involved urgent constitutional reform, including the imposition of ‘legal limits beyond which politicians may not be allowed to go without a special mandate protected by proportional voting and referenda’ and ‘a second chamber proportionately elected side-by-side with the House of Commons’.

It seems that Lord Hailsham’s calls for constitutional reform that protects against the potential abuses of the political constitution stem from his diagnosis of the need to reform the economic constitution so as to protect property and free trade against wealth redistribution or even outright socialisation of the means of production. In this light, John Griffith’s response of the British political constitution, which raised concerns over judicial activism against elected political institutions, can be seen as a reflection of the Left’s strategic approach view of the political constitution in this country throughout the twentieth century – and for some theorists even to this day – as an instrument of social change.

It is ironic that the original debate on legal and political constitutionalism was carried out shortly before the Conservative Party took power in 1979, only to use the British political constitution to promote the exact opposite politico-economic framework (i.e. neoliberalism) from that which Hailsham fought against (i.e. a Keynesian welfare state). The neoliberal restructuring carried out by the Conservative New Right, in other words the transition from nationalisation to privatisation, from public investment to technocratic supervision of fiscal decision making, from forms of collective organisation of labour force to a flexible labour market, was facilitated by the flexible nature of the constitution. To the point that praise for the political constitution now comes predominantly from the right side of the political spectrum. 

I argue that this development is largely due to a – to a certain extent maybe even unconscious –positive evaluation of the economic value of the British constitutional form. After all, it was precisely this form, i.e. the political, unentrenched, constitution, that allowed the change of the macro-economic model, arguably without the social, economic and political cost that would have been paid in other systems. We saw above that from a L&E perspective, the ideal constitution enhances economic efficiency by reducing the so-called transaction costs. That is precisely what the British flexible and unentrenched constitution does by enabling major constitutional change without the formal and cumbersome process of constitutional amendment.

Conclusion

We conclude that from a L&E perspective the British constitutional form on the one hand entails the danger of (democratic and/or socialist) ‘takeover’ and alteration of basic parameters of the free market capitalist economy, but on the other, and as long as this danger seems contained, it allows for flexible adjustment to sudden and unexpected changes in the process of capital accumulation and social conflict. At the same time, this concluding point opens the door to alternative heterodox perspectives of economic analysis, such as the Law and Political Economy or the Critical Political Economy perspective, which put emphasis on the contradictory processes and social relations in capitalist society.

Such a class analysis of the constitution would approach social legitimacy as an economic factor. This is based on the assessment of the state’s role in capitalist society, from a Critical Political Economy perspective, according to which the state’s primary functions are to ensure conditions for the profitable investment of capital while also securing social legitimacy and preventing social unrest. Once this is taken into account, the economic value of the British constitution appears in different light for two reasons. First, the British constitutional form rests on an appeal to tradition and incremental change. The conservative nature of the British constitution consists not in that it avoids change but in that it supports gradual change through reform, while dismissing radical change through revolutionary breaks. This links to the third trait of the British constitutional form, which is its innate appearance of neutrality regarding its class content or politico-economic orientation. Its malleability and unentrenched character encourages this view of neutrality which invites different political forces to endorse this form as long as it allows them to proceed with changing the socio-economic content. The fact that there are no entrenched obstacles to changing the country’s economic policy enhances this perception that all that is required to promote or prohibit socialism, for example, is to have the majority in the House of Commons. 

This view could explain both the Conservative approach to the constitution and the deep reformism of the Left in this country. It shows how the L&E perspective does not exhaust the economic analysis of the British constitution. But it is a good starting point to analyse the value of this constitutional form for the free-market capitalist economy and society.

                  Dimitrios Kivotidis is Senior Lecturer at the City Law School.

(Suggested citation: D. Kivotidis, ‘Economic Analysis of the British Constitution: Preliminary Thoughts’, U.K. Const. L. Blog (29th June 2026) (available at https://ukconstitutionallaw.org/))