Judaism and Liberalism: Israel’s Economic Problem with its Haredim


ECONOMIC AFFAIRS, Volume 37, Issue 2

Abstract: This article argues that, in the arrangements for the public provision of welfare for the poor and a basic education for all in both biblical and post-biblical times, Judaism is more closely in accord with classical liberalism than it is with those variants of liberalism which favour no more than the minimal night-watchman state as well as those which favour the extensive welfare states of contemporary Western social democracies. To the extent that Israel’s ultra-orthodox Jews (its Haredim) have been able to secure more by way of state subsidies (through exploiting the leverage their country’s national system of proportional representation has given them, which often leaves them holding the balance of power), not only are they endangering Israel’s viability as a vibrant, developed liberal democracy, they are also guilty of departing from the religious teachings and tradition of Jewish orthodoxy.

Culture, Politics, and Economic Development



Abstract: For a generation, political science has been dominated by the analysis of interests within the framework of rational choice. Although this has enabled major advances, it struggles to provide a plausible analysis of many instances of sociopolitical dysfunction. This article reviews recent innovations in economics, psychology, and economic history that are converging to rehabilitate culture as a legitimate element of analysis. Culture matters, and its evolution is amenable to formal scientific analysis. But these processes need not be benign: There is no equivalent to the invisible hand of the market, guiding a culture toward social optimality. An organizational culture can trap a vital public agency, such as a tax administration, into severe dysfunction. A societal culture can trap an entire country into autocracy or poverty.

Quality of government and regional competition: A spatial analysis of subnational regions in the European Union



Abstract: Building on previous work on competition networks and governmental performance among British local governments, this article investigates the diffusion of government quality across subnational regions of Europe through strategic interaction with neighbouring regions or competitor regions more generally. The article demonstrates the presence of spatial interdependence using standard spatial regression models and controlling for common explanations of quality of government. In particular for regions with high levels of autonomy from the national government, there is clear adjustment in government quality to be seen in response to disparities with competitor regions. The article further investigates the intensity of this geographical effect separately in the north and south of Europe in order to estimate the potential for virtuous or vicious cycles of good governance in the two regions, respectively. It is found that while regions in the north develop relatively independently of each other but respond to competitive pressure across Europe, in the south regions demonstrate a higher level of local interdependence, increasing the possibility of virtuous cycles – but also of vicious ones.

The market process of capitalization: a laboratory experiment on the effectiveness of private information



Abstract: The notion of present value is an integral part of economics. So far, however, its rationale rests upon the well-known neoclassical assumptions of complete information and perfect rationality. The present value derives as the result of a calculation that requires the knowledge of the discount rate and the future returns of the evaluated assets. This paper presents a laboratory experiment that demonstrates that the present value of assets can also be discovered by participants of a production process endowed with incomplete information. The knowledge concerning future returns is not given to any one, but dispersed among the participants who, in addition, have no idea of their position in the production chain. In accordance with Hayek’s theory of the market process as a discovery procedure, the present value is found without any one subject being able to determine it individually.

Do liberal ties pacify? A study of the Cod Wars

Abstract: The Cod Wars, three militarized interstate disputes between the UK and Iceland (1958–1961, 1972–1973, 1975–1976), have often been presented as an egregious exception to the liberal peace. There are, however, few comprehensive analyses of the liberal dimensions of the Cod Wars. This paper comprehensively analyses the ways in which each of the Cod Wars is consistent or inconsistent with the liberal peace. I find that while the supposedly pacifying factors of the liberal peace – democracy, trade and institutional ties – effectively made the disputes more contentious, they also ensured that escalation to actual war was impossible.

A city of trades: Spanish and Italian immigrants in late-nineteenth-century Buenos Aires, Argentina



Abstract: The city of Buenos Aires in the 1890s is an extreme case in immigration history since the native workers accounted for less than one-third of the labour force. In this paper, we look at the labour market performance of Argentineans vis-à-vis the largest two immigrant groups, Italians and the Spaniards. We find that, on average, Argentineans enjoyed higher wages, but workers specialised in particular occupations by nationality. Immigrants clustered in occupations with lower salaries. Despite higher literacy levels and the language advantage, Spaniards did not outperform Italians in earnings. Ethnic networks facilitated the integration of immigrants into the host society and played a role in the occupation selection of immigrants. Our results suggest that Italian prosperity in Buenos Aires was not based on superior earnings or skills but on older and powerful networks.

Adam Smith’s Philosophy of Science: Economics as Moral Imagination



Abstract: The paper takes a fresh look at two essays that Adam Smith wrote at the very beginning of his career. In these essays, Smith explains his philosophy of science, which is social constructivist. A social constructivist reading of Smith strengthens the scholarly consensus that The Wealth of Nations (WN) needs to be interpreted in light of the general moral theory he explicates in The Theory of Moral Sentiments (TMS), as the two essays and TMS stress the importance of the same concepts: e.g., moral imagination, the socially embedded individual, and humility. The connecting tissue between all three works is made up of sentiments and values. Smith regards the socially embedded human as the agent in all three realms (knowledge creation, morality, economics), and humans are always driven by values. Smith not only conceives of economics as an applied moral philosophy, but also bases both research areas on a view of knowledge creation that stresses specific epistemic values. If mainstream economic theory (and business theory that is based on it) wants to have any claim to Adam Smith, it would have to change not only what it argues but also how it argues. Economists would have to replace the language of mathematics with the language and logic of moral philosophy and give values centre stage.