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

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.

Individualism, Collectivism, and Trade

AIDIN HAJIKHAMENEH, ERIK O. KIMBROUGH

EXPERIMENTAL ECONOMICS

Abstract: While economists recognize the important role of formal institutions in the promotion of trade, there is increasing agreement that institutions are typically endogenous to culture, making it difficult to disentangle their separate contributions. Lab experiments that assign institutions exogenously and measure and control individual cultural characteristics can allow for clean identification of the effects of institutions, conditional on culture, and help us understand the relationship between behavior and culture, under a given institutional framework. We focus on cultural tendencies toward individualism/collectivism, which social psychologists highlight as an important determinant of many behavioral differences across groups and people. We design an experiment to explore the relationship between subjects’ degree of individualism/collectivism and their willingness to abandon a repeated, bilateral exchange relationship in order to seek potentially more lucrative trade with a stranger, under enforcement institutions of varying strength. Overall, we find that individualists tend to seek out trade more often than collectivists. A diagnostic treatment and additional analysis suggests that this difference may reflect both differential altruism/favoritism to in-group members and different reactions to having been cheated in the past. This difference is mitigated somewhat as the effectiveness of enforcement institutions increases. Nevertheless we see that cultural dispositions are associated with willingness to seek out trade, regardless of institutional environment.

Trust, Trade and Moral Progress: How Market Exchange Promotes Trustworthiness

JONATHAN ANOMALY

SOCIAL PHILOSOPHY AND POLICY, Volume 34, Issue 2

Abstract: Trust is important for a variety of social relationships. Trust facilitates trade, which increases prosperity and induces us to interact with people of different backgrounds on terms that benefit all parties. Trade promotes trustworthiness, which enables us to form meaningful as well as mutually beneficial relationships. In what follows, I argue that when we erect institutions that enhance trust and reward people who are worthy of trust, we create the conditions for a certain kind of moral progress.

Socialized View of Man vs. Rational Choice Theory: What Does Smith’s Sympathy Have to Say?

JOURNAL OF ECONOMIC BEHAVIOR & ORGANIZATION

ELIAS L. KHALIL

Abstract: To explain the anomaly of cooperation in finitely repeated games, some economists advance a socialized view of man as an antidote to rational choice theory. This paper confronts these economists insofar as they trace the socialized view to Smith’s theory of sympathy in The Theory of Moral Sentiments (TMS). TMS rather advances a view that anticipates rational choice theory. These economists misinterpret TMS because they fail to realize that Smith’s sympathy actually involves two functions of sympathy: one that determines the optimal decision and another that determines the command of that decision. The dual function of sympathy parallels the two senses of rational choice: rationality as making the optimal decision and rationality as commanding that decision. Thus Smith’s sympathy does not support the socialized view of man.

Ludwig Lachmann’s peculiar status within Austrian economics

VIRGIL HENRY STORR

THE REVIEW OF AUSTRIAN ECONOMICS

Abstract: Lachmann occupies a strange position within modern Austrian economics. He is viewed as something of an outsider and his views are often regarded as outside the mainline of modern Austrian thought. But, on several key issues – especially subjectivism and institutions – Lachmann’s positions are the dominant positions within the school. This article argues that, with little fanfare but in several important respects, Austrian economics has moved in a decidedly Lachmannian direction.

‘A Burthen Too Heavy For Humane Sufferance’: Locke on Reputation

STUART-BUTTLE, T.

HISTORY OF POLITICAL THOUGHT, Volume 38, Number 4

Abstract: Locke emphasized that a concern for reputation powerfully shaped the individual’s conduct. Most scholarship suggests that Locke portrayed this phenomenon in negative terms. This article complicates this picture. A concern for reputation served a constructive role in Locke’s theory of social development, which offered a powerful alternative explanation of the origins of moral consensus and political authority to Hobbes’s. Locke nonetheless suggested that misunderstandings engendered in Christian commonwealths regarding the nature of political and religious authority had impacted negatively on the moral regulation of societies. The forces governing society, which once habituated individuals in beneficial ways, now led them astray.

Marsilius of Padua on Representation

MULIERI, A.

HISTORY OF POLITICAL THOUGHT, Volume 38, Number 4

Abstract: The concept of representation plays an important role in Marsilius of Padua’s major work, the Defensor Pacis. Yet, with a few notable exceptions,Marsilius’ concept of representation has received relatively little attention among recent scholars. The main purpose of this article is to fill this gap and scrutinizeMarsilius’ concept of representation as an autonomous theoretical and political problem in the Defensor Pacis. The paper first surveys the different meanings of repraesentatio that appear in Marsilius’ 1324 work. It then identifies an understanding of political representation — repraesentatio identitatis — that unites most cases in which Marsilius explicitly deploys a political language of representation, whether in the context of secular or church governance. Marsilius’ usage of the concept of repraesentatio identitatis is particularly innovative as it turns a notion coming from corporate theory in civil and canon law into a specifically philosophical-political theory.