The "incentive compatible" mechanisms that Bailey utilizes received recent attention by the Nobel Prize Committee. In awarding the 1996 Nobel Prize to William Vickrey, the Nobel Committee recognized the importance of Vickrey's contribution to providing ways to "overcome the public goods problem" (the subject of B&T's Chapter 2). The Committee noted that an idea analogous to the Vickrey auction "underlies the so-called Clarke-Groves mechanism for eliciting truthful tenders for public projects. Vickrey anticipated this important result by an important time margin". Whereas this and other work cited by the Committee (particularly the "Vickrey auction") has had many important practical applications in the allocation of goods in private markets (i. e. spectrum auctions and Treasury debt auctions), it has been more difficult to apply the ideas in the public sector.

Part of this difficulty may be the result of certain perceived "technical limitations" of what Bailey calls the (Vickrey-Clarke-Groves" (VCG) mechanisms, the operation of which are described thoroughly in Chapter II of B&T. Over 25 years, the literature has spawned a number of criticisms centering on these technical limitations. Throughout the body of the work and especially in Part II, Bailey has shown how most, if not all, of these difficulties can be surmounted, mostly through the self enforcing incentive structure embedded in the appropriate constitution.

In my own 1980 book (which was an extension of my 1978 University of Chicago dissertation), I tried to deal with many of these difficulties as well as other difficulties being raised outside the conventional "rational choice" framework of analysis. For example, political scientists were asserting that altruism invalidates the VCG mechanisms. Bailey's work greatly extends previous attempts, such as mine, in dealing with these technical limitations and criticisms, and offers important and pathbreaking fresh perspectives as well.

The book, in my mind, does an excellent job at stimulating readers ranging from the layperson with only a rudimentary understanding of economics all the way to mathematical economists thoroughly familiar with the current state of the art in "incentive compatible" mechanism design. The great strength of the work is in how it is all put together through a combination of incentive compatible devices and self enforcing incentive mechanisms, starting in chapter 2, and running through the exciting "draft constitution" in Chapter 3, concluding with a Chapter 4 with "perspectives and alternatives" which analyses other attempts to address the public goods problem and deals with the possible objections that others might raise to the approach suggested by Bailey. The ways in which Bailey combines the mechanisms (i e. the VCG mechanisms and the Thompson mechanism, the latter being treated separately in Chapter 5 of this book), for example, is particularly important and stimulates one to immediately want to explore practical applications.

Others would surely find important insights in carefully studying Bailey's response to criticisms and misunderstandings (for example the perception that altruism invalidates the VCG mechanism) all the way to perceptions that abound in the political science literature that subvert any attempts to institute decisionmaking mechanisms that would amount to a simple aggregation of individual preferences. (This is the longstanding "liberalism against populism" debate that would try to invalidate any mechanism that relies on direct democracy implemented through a mechanism that relies on voting rules that reflect the intensity of individual voter preferences). In this respect, Bailey's book is a useful supplement to Mueller's Constitutional Democracy (1996) which also provides a defense of the more complex, sophisticated procedures (though not necessarily the VCG mechanisms), leaning somewhat more to the use of the "preference intensity" rules for use in representative or parliamentary settings, rather than through individual voter referenda. All this is a roundabout way of saying that Bailey's work is a important and pathbreaking addition to the rapidly growing "constitutional democracy" literature and will be stimulating to anyone interested in this area.

I should note the relationship of this work to Bailey's other work on social choice, now readily accessible in his 1994 Essays on Normative and Positive Economics. His approach to "social choice" (contained in a "commentary" in those essays) sets the stage for this book, where he truly demonstrates that the impossibility results that haunted social choice for many decades is really a problem of a "plenty of possibilities". Whereas I may be an enthusiast for his particular perspective, the rigor and thoroughness of his work will be appreciated by those approaching the subject matter from sharply differing perspectives and who will find the rigor of his analysis helpful in sorting through the "plenty of possibilities". In this way, his work makes an important contribution to scholarly research in this important area.

I became aware of Bailey's work in late June, 1996 when Professor Bailey sent me a earlier draft. Professor Bailey has made strenuous efforts to cover some of the areas that I and others felt deserved more treatment. For example, I pointed out the altruism (Margolis) controversy and Bailey subsequently devoted an entire appendix to Chapter 2 in dealing with the controversy in what I believe to be a convincing and dispositive manner.

In terms of real world applicability, Bailey explicitly recognizes that a more complex Federal structure (rather than a small country) would require the use of a more complex decisionmaking structure than is set forth in this book. He has pointed the way for useful further research in this more complex area and in the field of constitutional democracy (and economics) generally. Others, like myself, have been or will likely be stimulated to develop possible real world applications of these principles in particular institutional settings.

I believe the book will be widely read by scholars in the fields of social choice and public choice. It will also command a good general audience along economists and political scientists, all of whom will find Part I readily accessible. It is hard to judge how wide ranging the general audience could be. I suspect there will be a good deal of "retailing" of Bailey's ideas, so the work will likely be widely cited in the economics, political science and some of the other social sciences. The ideas may catch on in a wider general audience in the near term and even become a public economics classic in later years. I think it could eventually become one of the "great books" in public economics. It will also possibly command some interest in such areas as philosophy and social theory and will surely become a classic in the rapidly expanding literature on "constitutional economics", perhaps ranking beside Buchanan and Tullock's Calculus of Consent (1962) which first stirred modern interest in this field.

In some respects, particularly the material contained in appendices A-D in Chapter 6) is heavy going for any nonmathematical economist, like myself. However, Chapter 6 (which summarizes these appendices) is a masterful and understandable presentation of very difficult material (i.e. adjustments for income effects) that has previously perplexed me, a close student of this subject matter, for many years. I can now say I much better understand what has been a difficult real world condition (i. e. income effects) that I usefully assumed away in originally developing and presenting my formulation of the VCG mechanism, but which must be adequately dealt with in many practical settings where one seeks to make decisions based on a consistent ordering of preferences. In this respect, Bailey's treatment of the asymmetry between the "willingness to pay" of those opposed and those in favor of a public project in Chapter 6 is an important new contribution to the literature....