Economic freedom and human capital investment

HORST FELDMANN

JOURNAL OF INSTITUTIONAL ECONOMICS, Volume 13, Issue 2

Abstract: Using data from 1972 to 2011 on 109 countries, this paper empirically studies the impact of economic freedom on human capital investment. Enrollment in secondary education is used as a proxy for such investments. Controlling for a large number of other determinants of education, it finds that, over the sample period, economic freedom had a substantial positive effect. This is probably because more economic freedom increases the return on investing in human capital, enables people to keep a larger share of the return, and, by facilitating the operation of credit markets, makes it easier for them to undertake such investments in the first place.

The Evolution of Culture and Institutions: Evidence From the Kuba Kingdom

SARA LOWES, NATHAN NUNN, JAMES A. ROBINSON, JONATHAN L. WEIGEL

ECONOMETRICA, Volume 85, Issue 4

Abstract: We use variation in historical state centralization to examine the long-term impact of institutions on cultural norms. The Kuba Kingdom, established in Central Africa in the early 17th century by King Shyaam, had more developed state institutions than the other independent villages and chieftaincies in the region. It had an unwritten constitution, separation of political powers, a judicial system with courts and juries, a police force, a military, taxation, and significant public goods provision. Comparing individuals from the Kuba Kingdom to those from just outside the Kingdom, we find that centralized formal institutions are associated with weaker norms of rule following and a greater propensity to cheat for material gain. This finding is consistent with recent models where endogenous investments to inculcate values in children decline when there is an increase in the effectiveness of formal institutions that enforce socially desirable behavior. Consistent with such a mechanism, we find that Kuba parents believe it is less important to teach children values related to rule-following behaviors.

Sentiments, Conduct, and Trust in the Laboratory

VERNON L. SMITH and BART J. WILSON

SOCIAL PHILOSOPHY AND POLICY

Abstract: In this essay we provide a brief account and interpretation of The Theory of Moral Sentiments showing that it departs fundamentally from contemporary patterns of thought in economics that are believed to govern individual behavior in small groups, and contains strong testable propositions governing the expression of that behavior. We also state a formal representation of the model for individual choice of action, apply the propositions to the prediction of actions in trust games, report two experiments testing these predictions, and interpret the results in terms directly related to the model. In short, we argue that the system of sociability developed by Adam Smith provides a coherent non-utilitarian model that is consistent with the pattern of results in trust games, and leads to testable new predictions, some of which we test.

A liberal theory of externalities?

CARL DAVID MILDENBERGER

PHILOSOPHICAL STUDIES

Abstract: Unlike exploitative exchanges, exchanges featuring externalities have never seemed to pose particular problems to liberal theories of justice. State interference with exchanges featuring externalities seems permissible, like it is for coercive or deceptive exchanges. This is because exchanges featuring negative externalities seem to be clear cases of the two exchanging parties harming a third one via the exchange—and thus of conduct violating the harm principle. This essay aims to put this idea into question. I will argue that exchanges featuring negative externalities are not unjust in this straightforward way, i.e. because they would constitute an instance of wrongfully causing or risking a bodily or material harm. In fact, unless we are subscribing to particularly demanding variants of liberalism—e.g. perfectionist liberalism—or unless we are exclusively focusing on borderline cases of externalities—i.e. of effects of exchanges hardly to be called externalities—there is no liberal theory of how exchanges featuring externalities are unjust.

Moral markets: A marginalistic interpretation of Adam Smith

WALTER G. CASTRO, RAFAEL E. BELTRAMINO

THE REVIEW OF AUSTRIAN ECONOMICS

Abstract: The article is built upon James Otteson’s analogy between the structure of moral and economic rules. In Otteson’s interpretation of Adam Smith’s works both of them develop from an exchange of information of interacting agents. We develop that concept about Adam Smith’s Theory of Moral Sentiments, analyzing those exchanges, and considering them Moral Market processes, in the Austrian Tradition of markets as processes. We think that Smith’s emphasis on graduality and his metaphor of the Impartial Spectator allows us to propose a marginalistic approach to those markets stating how, in some of them which we call moral exchanges of justice, and through a great number of exchanges, moral rules of justice emerge. Finally, we present the problems that arise when legislation tries to change the results of these exchanges, in what we called a price control in the moral market.

Taxation in the Liberal Tradition

ROBERT A. LAWSON, J.R. CLARK

THE REVIEW OF AUSTRIAN ECONOMICS

Abstract: In this essay, we argue that liberal economists should take more seriously the problems of public goods and externalities as well as the capacity of taxation and state action to improve human welfare. While taking seriously the public choice concerns about how the political process works as well as Austrian concerns about the limits of our knowledge in the absence of market price signals, we should also acknowledge that public goods and externalities do exist and taxation can provide a means to improve human welfare.

Libertarianism and Basic-Income Guarantee: Friends or Foes?

JUAN RAMÓN RALLO

JOURNAL OF BUSINESS ETHICS

Abstract: The Basic-Income Guarantee is a governmental programme of income redistribution that enjoys an increasing predicament among academic and political circles. Traditionally, the philosophical defence for this programme has been articulated from the standpoint of social liberalism, republicanism, or communism. Recently, however, libertarian philosopher Matt Zwolinski also tried to reconcile the Basic-Income Guarantee scheme with libertarian ethics. To do so, he resorted to the Lockean proviso: to the extent that the institutionalization of private property impoverishes certain people by depriving their access to natural resources, these people deserve compensation and the most pragmatic way of providing this is through a Basic-Income Guarantee. This paper examines Zwolinski’s arguments and responds by demonstrating that the Basic-Income Guarantee is incompatible with libertarian ethics: the current levels of poverty are not caused by the institutionalization of private property and the Basic-Income Guarantee does not constitute a pragmatic approach to eradicate poverty.