An Exchange Economy of Essential Liberties and Power

Axioms order preferences over endowments of essential liberties and power, but not all goods are modeled as non-satiated. Essential liberties are normal goods with respect to the budget constraint of power up to thresholds of satiation of power, after which essential liberties model as Giffen goods. State and federal amended constitutions are examples of the more general results obtained within. Of significant normative and positive interest is establishing the thresholds of power satiation with respect to civil liberties. The paper offers the normative theory that social compacts seek to minimize Type I AND Type II errors of the null hypothesis that a defendant is innocent in a civil or criminal suit. The thresholds are then the significance and specificity that are conditional on the degree of perceived social cost (the difference between the means of the null and alternate hypothesis) and the moments of the test statistic (evidence).