Reapplying behavioral symmetry: public choice and choice architecture

April 2018 By in Economics, Politics

MICHAEL DAVID THOMAS

PUBLIC CHOICE

Abstract: New justifications for government intervention based on behavioral psychology rely on a behavioral asymmetry between expert policymakers and market participants. Public choice theory applied the behavioral symmetry assumption to policy making in order to illustrate how special interests corrupt the suppositions of benevolence on the part of policy makers. Cognitive problems associated with market choices have been used to argue for even more intervention. If behavioral symmetry is applied to the experts and not just to market participants, problems with this approach to public policy formation become clear. Manipulation, cognitive capture, and expert bias are among the problems associated with a behavioral theory of market failure. The application of behavioral symmetry to the expanding role of choice architecture will help to limit the bias in behavioral policy. Since experts are also subject to cognitive failures, policy must include an evaluation of expert error. Like the rent-seeking literature before it, a theory of cognitive capture points out the systematic problems with a theory of asymmetry between policy experts and citizens when it comes to policy making.

The Past and the Future of Innovation: some lessons from Economic History

April 2018 By in Economics, History

JOEL MOKYR

EXPLORATIONS IN ECONOMIC HISTORY

Abstract: In recent years, economists have revived the specter of slow growth and secular stagnation. From the point of view of economic history, what should we make of such doomster prophecies? As economic historians all know, for 97 percent or so of recorded history, the stationary state well-describes the long-run dynamics of the world economy. Growth was slow, intermittent, and reversible. The Industrial Revolution rang in a period of sustained economic growth. Is that growth sustainable? One way to come to grips with that question is to analyze the brakes on economic growth before the Industrial Revolution and examine how they were released. Once these mechanisms are identified, we can look at the economic history of the past few decades and make an assessment of how likely growth is to continue. The answer I give is simple: there is no technological reason for growth in economic welfare to slow down, although institutions may become in some area a serious concern on the sustainability of growth.

Barriers to prosperity: the harmful impact of entry regulations on income inequality

March 2018 By in Economics, Law, Political Theory

DUSTIN CHAMBERS, PATRICK A. MCLAUGHLIN, LAURA STANLEY

PUBLIC CHOICE

Abstract: Entry regulations, including fees, permits and licenses, can make it prohibitively difficult for low-income individuals to establish footholds in many industries, even at the entry-level. As such, these regulations increase income inequality by either preventing access to higher paying professions or imposing costs on individuals choosing to enter illegally and provide unlicensed services. To estimate this relationship empirically, we combine entry regulations data from the World Bank’s Doing Business Index with various measures of income inequality, including Gini coefficients and income shares to form a panel of 115 countries. We find that countries with more stringent entry regulations tend to experience more income inequality. In countries with average inequality, increasing the number of procedures required to start a new business by one standard deviation is associated with a 7.2% increase in the share of income accruing to the top decile of earners, and a 12.9% increase in the overall Gini coefficient. This result is robust to the measure of inequality, startup regulations, and potential endogeneity. We conclude by offering several policy recommendations designed to minimize the adverse effects of entry regulations.

De-moralization as Emancipation: Liberty, Progress, and the Evolution of Invalid Moral Norms

March 2018 By in Philosophy, Political Theory

ALLEN MUCHANAN and RUSSELL POWELL

SOCIAL PHILOSOPHY AND POLICY, Volume 34, Issue 2

Abstract: Liberal thinkers of the Enlightenment understood that surplus moral constraints, imposed by invalid moral norms, are a serious limitation on liberty. They also recognized that overcoming surplus moral constraints — what we call proper de-moralization — is an important dimension of moral progress. Contemporary philosophical theorists of liberty have largely neglected the threat that surplus moral constraints pose to liberty and the importance of proper de-moralization for human emancipation. This essay examines the phenomena of surplus moral constraints and proper de-moralization, utilizing insights from biological and cultural evolutionary thinking.

30 years after the nobel: James Buchanan’s political philosophy

March 2018 By in Philosophy, Political Theory

MICHAEL C. MUNGER

THE REVIEW OF AUSTRIAN ECONOMICS

Abstract: There are three main foundations of Public Choice theory: methodological individualism, behavioral symmetry, and “politics as exchange.” The first two are represented in nearly all work that identifies as “Public Choice,” but politics as exchange is often forgotten or de-emphasized. This paper—adapted from a lecture given on the occasion of the 30th year after Buchanan’s Nobel Prize—fleshes out Buchanan’s theory of politics as exchange, using four notions that are uniquely central to his thought: philosophical anarchism, ethical neutrality, subjectivism, and the “relatively absolute absolutes.” A central tension in Buchanan’s work is identified, in which he seems simultaneously to argue both that nearly anything agreed to by a group could be enforced within the group as a contract, and that there are certain types of rules and arrangements, generated by decentralized processes, that serve human needs better than state action. It is argued that it is a mistake to try to reconcile this tension, and that both parts of the argument are important.

 

The ethics of pure entrepreneurship: An Austrian economics perspective

February 2018 By in Economics, Philosophy

THE REVIEW OF AUSTRIAN ECONOMICS

ISRAEL M. KIRZNER

Abstract: This paper focuses on the justice of income distribution in a system of private property rights. Milton Friedman argued that the “ethical principle that would directly justify the distribution of income in a free society is ‘to each according to what he and the instruments he owns produces’” (1962: 161–2). In this paper we (a) show that the winning of pure entrepreneurial profit cannot be justified on the basis of Friedman’s ethical principle, and (b) argue that a fuller understanding of the meaning of “pure entrepreneurial profit” reveals that Friedman’s universal ethic is of little relevance to capitalism, properly understood as a free enterprise system. To pass ethical judgment on pure entrepreneurial profit, it is necessary to supplement Friedman’s ethical principle with additional ethical insights. This paper does not argue directly in favor of any one such possible additional insight; it will simply demonstrate how one such additional insight might, if it passes final ethical screening, serve as the ethical defense of pure capitalism, which, we argue, Friedman’s ethical principle is unable to do.

A short history of constitutional liberalism in America

January 2018 By in History, Law, Politics

CONSTITUTIONAL POLITICAL ECONOMY

ROGER D. CONGLETON

Abstract: American liberalism emerged before the most famous European liberal intellectuals put their pens to paper. It was grounded partly on liberal ideas that were in the air before those works were written, but mostly on the attractive communities generated by liberal institutions and policies. American liberalism is empirically, rather than theoretically, grounded. This paper uses excerpts from colonial and constitutional documents to demonstrate the long history of liberal institutions in the territories that became the United States. American liberalism is an evolutionary rather than an intellectual phenomenon.