A Nozick-Buchanan contractarian governance as solution to some Invisible Hand failures

We show how contractarian governance may restore Pareto-optimality in a class of symmetric, proportional and budget balanced decentralized production environments, which, under laissez faire, normally results in Invisible Hand failures (IHF). We formulate a governance in the spirit of Buchanan, which chooses that particular Sen tax that restores Pareto-efficiency under membership symmetry. The rules governing the choice of the Sen tax will be adopted unanimously by rational agents and no alternative governance can do better. Under membership asymmetry, we introduce the possibility of partitioning the community into subgroups of identical members. Then a set of K contractarian Sen taxes potentially solves the set of K IHFs. Partitioning is implemented by the federalist program of Buchanan and Nozick.