nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2006‒06‒03
fourteen papers chosen by
Erik Thomson
University of Chicago

  2. The Normativity of Law in Law and Economics By Péter Cserne
  3. La metodología de la investigación en la Economía Aplicada; The Research Methodology in Applied Economics By Alejandro Diaz-Bautista
  4. Recht, Eigentum und Effizienz: Zu F. A. v. Hayeks Verfassung der Freiheit* By Dieter Schmidtchen
  5. The Secret Life of Mundane Transaction Costs By Richard N. Langlois
  6. Measuring Poverty in the United States: History and Current Issues By Daniel Weinberg
  7. Procedural Justice By Lawrence Solum
  8. Hedonic Capital By Graham, Liam; Oswald, Andrew J.
  9. MARX: IL VALORE DELLA TEORIA, le forme adeguate ai concetti By francesco schettino; gianfranco pala
  10. Trust, Honesty, and Corruption: Reflection on the State-Building Process By Susan Rose-Ackerman
  11. The uses of the past By Axel Leijonhufvud
  12. Democracy and Protectionism By Kevin H. O'Rourke; Alan M. Taylor
  13. Chen Yun 1949-1956. Retouches à un portrait By Thierry Pairault
  14. Social capital, social cohesion, and economic growth By Jesus Clemente; Carmina Marcuello; Antonio Montañes; Fernando Pueyo

  1. By: Mariusz Golecki (University of Lódz)
    Abstract: Economics of law is thought to be a relatively new discipline. As a matter of fact it seems to be a Herculean effort to explain what economics of law in reality is. Some authors draw attention to its origins rooted deeply in a well known article of Ronald Coase and his theorem. It is Coase who has shown how much economy depends on sound legal system, especially on acknowledgement of private rights and liabilities. Others regard Garry Beckers’ efforts to provide a solid and objective basis for social theory and legal reforms as the origins of contemporary law and economics. In this essay I will claim that methodology of law and economics should be changed from implementing price theory and welfare economics (economisation of law) into the interdisciplinary project embracing jurisprudence. The basis for such project is purported by Coase theorem, but may also be found in the writings of Hayek and “old institutionalist”, such as Veblen, Hale and Commons. These efforts are visible as far as new institutional economics and transaction cost economics are concerned. The aim of this essay is thus threefold: firstly, to present briefly the most powerful and popular approach to economics of law, being at the same time influential legal theory as presented by the Chicago school, predominantly by Judge Richard Posner, and to point out limits of this approach from jurisprudential, economic and methodological point of view. The second aim is to analyse the existing alternative approaches to economics of law, related to Austrian school (Hayek), “old institutional” economics (Commons) and transaction cost economics (Coase) as well as the social systems theory (Pearsons, Luhman and Teubner). The first three theories I call foundationalist because they regard law as a foundation of economic order. Foundationalism also seems to admit the existence of the universally accepted foundations of law as well as economy regarded as human activity concentrated on managing of resources. The last theory, namely the system theory emphasising autonomy of both economy and law as social systems, is thus antifoundationalist. This division seems to be significant in the context of the present discussion within jurisprudence, especially concerning the difference between modern and post-modern legal theories. The third objective is to present an alternative point of view on both economy and law from jurisprudential perspective. I would claim that only an interdisciplinary project on law and economics is apt to supersede the dichotomy in contemporary jurisprudence between foundationalism and antifoundationalism. In this paper the term economics of law will be used in the same meaning as the majority of scholars use the term law and economics. I would like however to avoid the association of this term with the theory purported by Posner. Therefore, Posner’s approach will be named economic analysis of law. Economics of law as well as law and economics have certainly a broader meaning. The meaning is associated with a methodological approach - the economic analysis of law as well as the revision within economics itself. I prefer the name economics of law to law and economics because it seems more realistic at the moment - the insight of law in economics is either poor or redefined in economic terms. The impact of economics on law is enormous and a realistic approach cannot neglect this fact. At the same time, while the impact of law on economy is essential, it is not, however, reflected in theory. I use the term jurisprudence when referring to general reflection upon law and justice. The philosophy of law is its synonym. The particular type of reflection within jurisprudence I call jurisprudential theory.
  2. By: Péter Cserne (Universität Hamburg)
    Abstract: The Normativity of Law in Law and Economics Péter Cserne* 1. Introduction This paper is about some theoretical and methodological problems of law and economics (economic analysis of law, EAL). More specifically, I will use game theoretical insights to answer the question, relevant both for law and economics and legal philosophy, how should a social scientific analysis of law account for the normativity of law (the non-instrumental reasons for rule-following) while retaining the observer's (explanatory or descriptive) perspective. The goal is to offer a constructive critique of both traditional law and economics scholarship and mainstream analytical legal philosophy (the "Jurisprudence of Orthodoxy", see Leith and Ingham, 1977) in this respect. I will try to find out what EAL has to do with the "internal aspect of law", i.e. the fact or the claim that law provides specific reasons for action, in order to successfully challenge mainstream legal theory. EAL can be conceived either as a (consequentialist) normative legal philosophy, as an explanatory/descriptive theory about law (rational choice theory applied to law) or as a set of propositions for legal reform (legal policy). In this paper I will concentrate on the second, explanatory branch. In this second sense, EAL seeks to explain, first, how law influences human behaviour by changing incentives (law as explanans) and, second, to analyse legal (and possibly non-legal) rules as the outcome of individual actions (law as explanandum). This explanatory/descriptive approach has to confront a clear and central problem, often raised as a (self)critique of standard EAL: its inability or inadequacy to deal with the internal perspective on law. In fact, even if this approach has several more or less sophisticated versions what seems to be common to all of them is to treat legal rules (rule-following) instrumentally. Thus the case of rule-guided behaviour is either included in these theories in an ad hoc manner or is missing altogether. On the other side, contemporary analytical legal philosophy which is (at least in the English-speaking world) generally considered as a branch of practical philosophy, usually treats legal rules as specific non-instrumental reasons for action. In this view, even if empirically there are different motives why people obey the law (including conformism, fear of sanctions, etc.), the nature of law is defined by this specific reason, while the further motives are not reasons in a genuine sense for compliance with the law. Now, in order to be taken seriously as an explanatory legal theory, EAL has to account for this feature i.e. that law offers reasons for action, and to answer (or at least take side in the current philosophical debate on) some fundamental questions about the normativity of law. These questions are both conceptual/analytical ('What is the conceptual difference between regularity of behaviour and rule-following?', 'What does it mean to follow a rule?') and explanatory ('Why people obey the law if they do?'). At the same time, in order to be taken seriously as sound social science, EAL has to stick to the methodological principles of rational choice theory as explanatory social science. In the following I shall enquire whether EAL can fulfil this double challenge. One consequence of these methodological principles should be emphasised right at the beginning. The normative or justificatory question, central to mainstream analytical legal philosophy conceived as a part of normative practical philosophy, 'Is there a (moral) duty to obey the law?' should remain outside the scope of this paper (and in general, explanatory/descriptive EAL). But the moral or prudential standpoint of the participants who face this question in some form should, of course, be recorded and included in the analysis as an object of explanation. To repeat, I shall be speaking about EAL throughout only in the second sense as an explanatory enterprise. As a different enterprise, it might be possible to work out a full-fledged normative legal philosophy as a version of EAL, based roughly on welfarist (consequentialist) principles, which would have to answer that justificatory question. But this prospect doesn't concern me here.1 In the last decades serious efforts have been made within rational choice theory (especially game theory) to deal with norms both as explananda and as explanantia. In these analyses norms are often denoted more specifically as 'social norms' and considered explicitly as non-legal, i.e. in contradistinction to legal norms. As it will be clear, these models are still highly relevant for my purposes. In part, but not only because the mechanisms exposed in these rational choice models are general enough to be applicable to legal rules too. My question is now, whether the incorporation of these results of rational choice theory in EAL makes it possible to approach the abovementioned basic problems of legal theory in a new way. In a broader perspective it might be possible that also the gap between explanatory social science and normative practical philosophy can be bridged via evolutionary game theory, especially the indirect evolutionary approach. The structure of the paper is the following. Section 2 presents how rule-following is modelled in standard EAL scholarship. Section 3 is about the jurisprudential meaning, importance and explanations of the normativity of law. Instead of the detailed analysis of jurisprudential and legal philosophical issues related to the normativity of law I will restrict myself to sketch the most characteristic standpoints. Section 4 overviews rational choice models of norms and normativity and discusses some features of the legal system in view of the previous insights. This section is intended to be systematic (maybe at some price of details and originality) but is evidently far from exhaustive. Section 5 concludes.
  3. By: Alejandro Diaz-Bautista (COLEF)
    Abstract: Sumario La ciencia económica es un tipo específico de conocimiento dentro de las ciencias sociales. Para lograr realizar un estudio del conocimiento económico de tal naturaleza, o sea, para hacer ciencia económica, es preciso seguir determinados procedimientos que nos permitan realizar un estudio de economía aplicada. No es posible obtener un conocimiento económico racional, sistemático y organizado actuando de cualquier modo; es necesario seguir una metodología y técnicas que ya son aceptadas en la profesión económica para poder tener un camino que nos aproxime a nuestra meta que es la realización del estudio económico. El propósito del presente documento es el de explicar la metodología de la economía, al combinar la teoría y las aplicaciones económicas, para poder realizar un estudio económico científico aplicado. Abstract The purpose of the study is to explain the methodology of economics, using economic theorizing and econometric applications in order to help the researcher write an applied economics scientific paper.
    Keywords: Economic Methodology, Latin America, Applied Economics.
    JEL: B
    Date: 2005–09–29
  4. By: Dieter Schmidtchen (Universität des Saarlandes)
    Abstract: F. A. von Hayek hat drei Versuche unternommen, die Grundsätze einer liberalen Gesellschaftsordnung zu formulieren. Die Ergebnisse des ersten Versuches finden sich in seinem wohl berühmtesten Buch The Road to Serfdom" (1944). Hier behandelt er zwar Probleme, die für die Schaffung und Erhaltung einer Gesellschaft freier Menschen zentral sind, aber das Buch enthält kein systematisch ausgearbeitetes Konzept der Freiheit. Ein solches findet sich erstmals in Hayeks zweitem großen Werk The Constitution of Liberty" (1960), welches aber immer noch wichtige Fragen unbeantwortet ließ: The first result of the efforts of explaining the nature of an order of freedom was a substantial book called The Constitution of Liberty (1960) in which I essentially attempted to restate and make more coherent the doctrines of classical nineteenth century liberalism. The awareness that such a restatement left certain important questions unanswered led me then to a further effort to provide my own answers in a work of three volumes entitled Law, Legislation, and Liberty " (Hayek 1976: XX). Die wichtigen, nicht beantworteten Fragen, von denen im obigen Zitat die Rede ist, hängen mit der unbefriedigenden Definition des Begriffs Freiheit zusammen. In der Constitution of Liberty [deutsch: Die Verfassung der Freiheit (1971)] wird individuelle oder persönliche Freiheit definiert als Zustand, in dem der Mensch nicht dem willkürlichen Zwang durch den Willen eines anderen oder anderer unterworfen ist" (Hayek 1971: 14). Der Begriff Zwang wird jedoch ohne Rückgriff auf eine Strukturtheorie des Rechts zu definieren versucht (siehe auch Hamoway 1978: 287), wodurch große konzeptionelle Probleme entstehen: all attempts to define freedom result in hopeless conceptual muddles without such a theory" (Hamoway 1978: 287). Hayek hat sich die Kritik zu Herzen genommen und in der Tat mit der Trilogie Law, Legislation and Liberty [deutsch: Recht, Gesetz und Freiheit (2003)] die Grundsätze einer Verfassung der Freiheit formuliert, die von Anfang an in einer Strukturtheorie des Rechts verwurzelt sind. Der zentrale Abschnitt befindet sich in Band I Regeln und Ordnung" und trägt die Überschrift Nomos: Das Recht der Freiheit". Hier legt Hayek dar, daß Recht, Freiheit und Eigentum eine unteilbare Dreieinigkeit sind (siehe Hayek 2003:110). In diesem Beitrag soll die Tragfähigkeit einer auf Nomos gestützten Verfassung der Freiheit überprüft werden. Zu diesem Zweck wird in Abschnitt II zunächst der für Nomos zentrale Begriff der protected domain" erläutert und mit dem Konzept der compossibility" von Rechten verknüpft, das Hillel Steiner (1977) entwickelt hat. Es folgen Implikationen und Erläuterungen des Konzepts von Nomos. Insbesondere wird auf die Verwandtschaft zur modernen Theorie der Property rights hingewiesen. In Abschnitt III geht es um die Frage, wie protected domains" abzugrenzen sind. Hier muß Hayeks Idee, daß dazu Regeln gerechten Verhaltens (rules of just conduct) notwendig sind, erläutert und geprüft werden. In diesem Zusammenhang ist auch das von Hayek vorgeschlagene Kriterium für die Zuteilung von Property rights, nämlich die Verträglichkeit mit dem überlieferten Rechtssystem, zu behandeln. C. C. von Weizsäcker hat in seiner Besprechung zweier Bände aus Hayeks gesammelten Schriften in ORDO, 54 (2003), eine Vermutung geäußert, die in Abschnitt IV behandelt werden soll. Er deutet die Möglichkeit an, daß Hayek mit seiner Hinwendung zu einer Strukturtheorie des Rechts in Coasesches Terrain eingedrungen ist. Zwar hat das Coase-Theorem bei Hayek keine merkbaren Spuren hinterlassen, auch spielt der Begriff Transaktionskosten bei Hayek eine untergeordnete Rolle (Weizsäcker 2003: 336), aber beide Autoren befassen sich mit der Evolution des Common law, und beide Autoren sind - bei allen Unterschieden in der Begriffswahl - davon überzeugt, daß das Recht in Richtung Effizienz evolviert: Wir können uns fragen: Sprechen Hayek und Coase in Wirklichkeit nicht einfach über dasselbe?" (Weizsäcker 2003: 336). Abschnitt V widmet sich Hayeks Interpretation der Herrschaft des Gesetzes (Rule of Law). Abschnitt VI beschließt den Beitrag.
  5. By: Richard N. Langlois (University of Connecticut)
    Abstract: Transaction costs, one often hears, are the economic equivalent of friction in physical systems. Like physicists, economists can sometimes neglect friction in formulating theories; but like engineers, they can never neglect friction in studying how the system actually does let alone should work. Interestingly, however, the present-day economics of organization also ignores friction. That is, almost single-mindedly, the literature analyzes transactions from the point of view of misaligned incentives and (especially) transaction-specific assets. The costs involved are certainly costs of running the economic system in some sense, but they are not obviously frictions. Stories about frictions in trade are not nearly as intriguing as stories about guileful trading partners and expensive assets placed at risk. But I will argue that these seemingly dull categories of cost what Baldwin and Clark (2003) call mundane transaction costs actually have a secret life. They are at least as important as, and quite probably far more important than, the more glamorous costs of asset specificity in explaining the partition between firm and market. These costs also have a secret life in another sense: they have a secret life cycle. I will argue that these mundane transaction costs provide much better material for helping us understanding how the boundaries among firms, markets, and hybrid forms change over time.
    Keywords: transaction costs, division of labor, modularity, standards, property rights.
    JEL: D23 L22
    Date: 2005–11
  6. By: Daniel Weinberg
    Abstract: Formal measurement of poverty in the United States is now about 40 years old. This paper first briefly describes the origins and basis of the official poverty thresholds adopted by the federal government in the late 1960s. Then, it discusses in some detail some of the more current issues that observers suggest must be addressed if changes are to be made. The final sections discuss recent efforts to propose alternates to the current official approach.
    Date: 2006–04
  7. By: Lawrence Solum (University of San Diego)
    Abstract: Procedural Justice offers a theory of procedural fairness for civil dispute resolution. The Article begins in Part I, Introduction, with two observations. First, the function of procedure is to particularize general substantive norms so that they can guide action. Second, the hard problem of procedural justice corresponds to the following question: How can we regard ourselves as obligated by legitimate authority to comply with a judgment that we believe (or even know) to be in error with respect to the substantive merits? This Article responds to the challenge posed by the hard question of procedural justice. That theory is developed in several stages, beginning with some preliminary questions and problems. The first question - what is procedure? - is the most difficult and requires an extensive answer: Part II, Substance and Procedure, defines the subject of the inquiry by offering a new theory of the distinction between substance and procedure that acknowledges the entanglement of the action-guiding roles of substantive and procedural rules while preserving the distinction between two ideal types of rules. Part III, The Foundations of Procedural Justice, lays out the premises of general jurisprudence that ground the theory and answers a series of objections to the notion that the search for a theory of procedural justice is a worthwhile enterprise. These two sections set the stage for the more difficult work of constructing a theory of procedural legitimacy. Part IV, Views of Procedural Justice, investigates the theories of procedural fairness found explicitly or implicitly in case law and commentary. After a preliminary inquiry that distinguishes procedural justice from other forms of justice, Part IV focuses on three models or theories. The first theory, the accuracy model, assumes that the aim of civil dispute resolution is correct application of the law to the facts. The second theory, the balancing model, assumes that the aim of civil procedure is to strike a fair balance between the costs and benefits of adjudication. The third theory, the participation model, assumes that the very idea of a correct outcome must be understood as a function of process that guarantees fair and equal participation. In Part V, The Value of Participation, the lessons learned from analysis and critique of the three models are then applied to the question whether a right of participation can be justified for reasons that are not reducible to either its effect on the accuracy or its effect on the cost of adjudication. The most important result of Part V is the Participatory Legitimacy Thesis: it is (usually) a condition for the fairness of a procedure that those who are to be finally bound shall have a reasonable opportunity to participate in the proceedings. The central normative thrust of Procedural Justice is developed in Part VI, Principles of Procedural Justice. The first principle, the Participation Principle, stipulates a minimum (and minimal) right of participation, in the form of notice and an opportunity to be heard, that must be satisfied (if feasible) in order for a procedure to be considered fair. The second principle, the Accuracy Principle, specifies the achievement of legally correct outcomes as the criterion for measuring procedural fairness, subject to four provisos, each of which sets out circumstances under which a departure from the goal of accuracy is justified by procedural fairness itself. In Part VII, The Problem of Aggregation, the Participation Principle and the Accuracy Principle are applied to the central problem of contemporary civil procedure - the aggregation of claims in mass litigation. Part VIII offers some concluding observations about the point and significance of Procedural Justice.
  8. By: Graham, Liam (University College London); Oswald, Andrew J. (University of Warwick)
    Abstract: This paper proposes a new way to think about happiness. It distinguishes between stocks and flows. Central to the analysis is a concept we call ‘hedonic capital’. The paper sets out a model of the dynamics of wellbeing in which bad life-shocks are smoothed by the drawing down of hedonic capital. The model fits the patterns found in the empirical literature: the existence of a stable level of wellbeing and a tendency to return gradually towards that level. It offers a theory of hedonic adaptation.
    Keywords: Adaptation ; wellbeing ; evolution ; happiness ; habituation
    JEL: D1
    Date: 2006
  9. By: francesco schettino (università di roma, la sapienza, dipartimento di economia pubblica); gianfranco pala (università di roma, la sapienza, dipartimento di economia pubblica)
    Abstract: Sulla tematica del valore si dovrebbero scrivere migliaia di pagine. Peraltro, Marx già l’ha fatto. È quindi del tutto inutile, e sbagliato, ripeterlo in peggio. Oltre all’emblematica frase marxiana riportata in occhiello [tratta dal quaderno III, foglio 13], sono innumerevoli i luoghi in cui Marx cerca di spiegare chiaramente la determinazione del valore nel lavoro. Che quest’ultimo sia l’elemento determinante anche del valore e del capitale – pur apparendo “estinto” in esso, come Hegel ha insegnato “logicamente” a Marx – non significa appunto che sia dominante in quello. Così, nel valore “semplicisssimo” che sta alla base di tutti gli ulteriori mutamenti di forma, che sono nella sostanza ma non sono la sostanza stessa, non può esaurirsi la ricerca di chi si sentisse appagato del risultato iniziale. Cionondimeno, se non si mette a tacere l’impazienza di vedere subito gli sviluppi finali più concreti (dai prezzi alle crisi, ecc.), ai quali comunque bisogna arrivare, si anticipano impropriamente i tempi dell’analisi e si rischia di smarrire la strada (o anche peggio). Ora – proprio all’interno del modo di produzione capitalistico, e in generale pure della semplice produzione mercantile, laddove domini lo scambio di produttori privati indipendenti – è il valore che diviene dominante sul lavoro, il quale perciò sembra lì dileguarsi. Questo suo dileguamento apparente, che è reale in quanto è proprio così che appare come fenomeno, non può che costituire l’inizio – il “cominciamento” – dell’intero processo di svolgimento della realtà effettuale. Ma proprio perché “inizio” non ha senso fermarsi a esso. Occorre proseguire e mostrare tutto il percorso, certo, ma partendo da lì. Perciò, una volta accantona-ta la ridondante scrittura di molte pagine sul “valore”, l’obiettivo limitatissimo di questo opuscolo – per ren-derlo “leggibile” quale agile schema (il che non vuol dire facile) – può consistere soltanto nell’indicare alcu-ne questioni frequentemente sollevate, e, con molta probabilità, maggiormente fondanti. Certamente – nonostante alcune apparenti ripetizioni, che però tali non sono, se si coglie la necessità di tornare via via su un medesimo argomento, una volta esauriti i temi che lo precedono – vengono però a man-care tutti gli sviluppi, che è necessario rintracciare pazientemente altrove. Ma è sembrato utile dare qui solo i principali riferimenti affinché possa essere fatta la doverosa chiarezza, sollecitando un’opportu¬na riflessione su di essi. Tale riflessione ha l’ambizione di ricondurre le questioni teoriche più articolate a quanto accade nella realtà, per fornire a questa basi scientifiche di spiegazione (valga per tutte l’annosa, e uggiosa se così ridotta, questione della cosiddetta “trasformazione” dei valori in prezzi di produzione: altrimenti, a che – e a chi – serve?). Dunque, si vedrà come la teoria del valore e del plusvalore sia fondamento dell’intera teoria marxiana del capitale, in tutti i risvolti. “Il prodotto diventa merce; la merce diventa valore di scambio; il valore di scam-bio della merce è la sua immanente qualità di denaro; questa sua qualità di denaro si stacca da essa in quanto denaro, acquista un’esi¬stenza sociale universale, separata da tutte le merci particolari e dalla loro forma di e-sistenza naturale; il rapporto del prodotto con se stesso in quanto valore di scambio diventa il suo rapporto con un denaro che esiste accanto a esso, ovvero di tutti i prodotti col denaro esistente al di fuori di essi tutti. Come lo scambio reale dei prodotti – così Marx svolge la forma delle categorie che si susseguono, nell’adeguatezza ai loro concetti stessi, nel foglio 15 del I quaderno dei Lineamenti fondamentali – genera il loro valore di scambio, così il loro valore di scambio genera il denaro: l’esistenza del denaro accanto alle merci non implica fin dal principio delle contraddizioni, che sono date insieme a questo rapporto stesso? È desiderio tanto pio quanto sciocco – prosegue perciò nei fogli da 11 a 13 del II quaderno – che il valore di scambio non si sviluppi in capitale o che il lavoro che produce il valore di scambio non si sviluppi in lavoro salariato. Nella teoria il concetto di valore precede quello di capitale, ma d’altra parte per il suo sviluppo puro presuppone a sua volta un modo di produzione fondato sul capitale”.
    Keywords: marx, value theory
    JEL: B
    Date: 2005–04–14
  10. By: Susan Rose-Ackerman (Yale Law School)
    Abstract: Trust implies confidence, but not certainty, that some person or institution will behave in an expected way. A trusting person decides to act in spite of uncertainty about the future and doubts about the reliability of others' promises. The need for trust arises from human freedom. As Piotr Sztompka (1999: 22) writes, "facing other people we often remain in the condition of uncertainty, bafflement, and surprise."Honesty is an important substantive value with a close connection to trust. Honesty implies both truth-telling and responsible behavior that seeks to abide by the rules. One may trust another person to behave honestly, but honesty is not identical to trustworthiness. A person may be honest but incompetent and so not worthy of trust. Nevertheless, interpersonal relationships are facilitated by the belief that the other person has a moral commitment to honesty or has an incentive to tell the truth. Corruption is dishonest behavior that violates the trust placed in a public official. It involves the use of a public position for private gain.I focus on honesty and trust as they affect the functioning of the democratic state and the market. I am interested in informal interactions based on affect-based trust only insofar as they substitute for, conflict with, or complement the institutions of state and market. The relationship between informal connections and formal rules and institutions is my central concern. The institutions of interest are democratic political structures, bureaucracies, law and the courts, and market institutions.As Mark Warren points out, governments are needed in just those situations in which people cannot trust each other voluntarily to take others' interests into account. The state is a way of managing inter-personal conflicts without resorting to civil war. Yet, this task is much more manageable if the citizenry has a degree of interpersonal trust and if the state is organized so that it is trusted by its citizens, at least, along some dimensions. The state may be able to limit its regulatory reach if interpersonal trust vitiates the need for certain kinds of state action (Offe 1999). Conversely, if the state is reliable and even-handed in applying its rules, that is, if people trust it to be fair, state legitimacy is likely to be enhanced (Offe 1999, Sztompka 1999: 135-136). Thus, there are three interrelated issues. First, do trust and reliability help democracy to function, and if so, how can they be produced? Second, do democratic governments help create a society in which trustworthiness and honesty flourish? Third, given the difficulty of producing trustworthiness and honesty, how can institutional reform be used to limit the need for these virtues?This paper provides a framework for thinking about these broad questions. Section I organizes the research on trust especially as it applies to the relationship between trust and government functioning. With this background, section II discusses the mutual interaction between trust and democracy. The alternative of limiting the need for trust leads, in section III, to a discussion of corruption in government and commercial dealings. Corruption occurs when dishonest politicians and public officials help others in return for payoffs. Because their actions are illegal, they need to trust their beneficiaries not to reveal their actions. Corrupt officials are also, of course, betraying the public trust insofar as their superiors are concerned. Reforms here can involve a reorganization of government to limit the scope for lucrative discretionary actions. Conversely, one might focus on changing the attitudes of both officials and private actors so that existing discretion is exercised in a fairer and more impartial manner.This paper analyzes the interactions between trust and democracy at a general level. However, its initial aim was to provide a context for a workshop at the Collegium Budapest on honesty, trust, and corruption in post-socialist countries. My companion paper in Kyklos makes that link explicit by bringing in survey evidence on public attitudes and behavior. Here, I conclude in section IV with some thoughts on the special character of the transition process. I highlight the tensions between interpersonal trust and trust in public institutions in the context of the transition to democracy and a market economy.
  11. By: Axel Leijonhufvud
    Date: 2006
  12. By: Kevin H. O'Rourke; Alan M. Taylor
    Abstract: Does democracy encourage free trade? It depends. Broadening the franchise involves transferring power from non-elected elites to the wider population, most of whom will be workers. The Hecksher-Ohlin-Stolper-Samuelson logic says that democratization should lead to more liberal trade policies in countries where workers stand to gain from free trade; and to more protectionist policies in countries where workers will benefit from the imposition of tariffs and quotas. We test and confirm these political economy implications of trade theory hypothesis using data on democracy, factor endowments, and protection in the late nineteenth century.
    JEL: F11 F13 N70
    Date: 2006–05
  13. By: Thierry Pairault (CECMC - Centre d'études sur la Chine moderne et contemporaine - [CNRS : UMR8561] - [Ecole des Hautes Etudes en Sciences Sociales])
    Abstract: Portrait d'un économiste réformateur modéré dans la tourmente des premières années de la Chine populaire
    Keywords: Chine;économie;réformes;Chen Yun;années 1950
    Date: 2006–05–25
  14. By: Jesus Clemente; Carmina Marcuello; Antonio Montañes; Fernando Pueyo
    Abstract: The study of determinants of economic growth and development is a special interest area to the economists. Theoretical investigation in this topic is characterized by a growing complexity and empirical work has not obtained satisfactory results. The incorporation of human capital and technical progress with endogenous character have not obtained the appropriate results to explain with clarity the key mechanisms of this economic phenomenon. In the last years, the researchers have focused part of their efforts in a new factor, namely social capital. The underlying idea is that the physical factor (productive capital) and the human (human capital) are not sufficient to explain the economic growth and economic development. Recent work suggests that previous studies omit a relevant dimension: social character of the economic activity (social capital), as is emphasized in Temple and Johnson (1998) and in Knaff and Keefer (1997), among others. Nevertheless, the discussion on definition and mechanisms through social capital is created, disappears, is accumulated or influences on the economic activity is still opened. Although, many studies are discussing the social capital definition and measurement from interdisciplinary point of view (Paldman, 2000). Paldman examines different indicators of social capital, most of them related to the nonprofit organizations or associational activity of a country and expectations and trustworthiness in which economic agents operate. Our paper contributes to this line of research in order to advance in the discussion of these aspects: social capital definition, relationship between social capital and other socio-economics factors, role of social capital in economic growth –as productivity factor or thecnology–; the consideration of convenient data base set and the use of appropriate econometric thecniques. The final objective is to provide theoretical and empirical evidence on the relationship between social capital and economic growth. As well as, between the social capital and the traditional factors considerated, that is to say, human capital and physical capital. This general objective will proceed as follows. In the first section we approach the social capital definition. Social capital can be constituted in a variety of ways. It is a particular situation that requires a meticulous revision of the literature in order to adopt a methodological position that in our case will be fundamentally functional and is focused on the importance of the nonprofit sector as component of social capital . In second section, we analyze the relationship between social capital and physical capital and, mainly, with the human capital and the public sector. Social capital is a complex resource and we can observe that there are others factors, for example the educational level that is affected by social capital, but is itself an influence on social capital. We argue that there is a strong interaction between sanitary policy, fiscal policy, cultural context and social capital. In third section we examine theoretically the mechanisms of relationship between social capital, as capacity of working jointly, and economic growth. In the discussion is fundamental the arguments established by Paldman and Svendsen (2000). The authors pointed out two mechanisms: (a) social capital as productive factor -that is to say, nonprofit organizations, associational activiy indicates the work capacity in equipment and, consequently, it supposes an productive factor; b) social capital as technology: that is to say, indicates the capacity of a society to generate the mechanisms that reduce the transaction and control costs within productive system. In fourth section, we observe the problems derived to use data of different countries. These studies supposed the presence of a same behavior at aggregate level for heterogeneous countries, and we consider that, the empirical results are biased because they use non appropriate econometric techniques. Thus, we propose that the analysis at regional level improves the results obtained because of allows to reduce some of these limitations, owing to exist an evident homogeneity concerning educational level, tax system, culture, etc. Finally, we develop an empirical analysis for the Spanish case where it is considered to establish if the social capital is relevant to explain the economic growth of the Spanish regions. We use as indicator of social capital some proxies as the density of associational activity, composition of these associations, inequality index, etc. The paper concludes with the main results.
    Date: 2004–08

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