The nature and implications of a process conception of rationality based on social learning

Even while acknowledging the autonomy of “laws” specific to economics, theology situates the view of economics as a “means-ends” science of human choices within an unavoidable overarching moral order. After all, economic life is merely part of a much larger personal quest for happiness. Thus, the efficient selection of means for particular ends necessarily takes place within the context of objective standards of economic rights and obligations as part of human nature. The teleological perspectives of theology add much to our understanding of economic life by providing the warrants for these rights and obligations.     

Getting past “rational man/emotional woman”: comments on research programs in happiness economics and interpersonal relations

Orthodox neoclassical economics portrays reason as far more important than emotion, autonomy as more characteristic of economic life than social connection, and, more generally, things culturally and cognitively associated with masculinity as more central than things associated with femininity. Research from contemporary neuroscience suggests that such biases are related to certain automatic processes in the brain, and feminist scholarship suggests ways of getting beyond them. The “happiness” and “interpersonal relations” economics research programs have made substantial progress in overcoming a number of these biases, bringing into consideration by economists a wide range of phenomena which were previously neglected. Analysis from a feminist economics perspective suggests several fronts on which research could most profitably continue.     

Knowledge and economic behaviour. A constructivist approach

The knowledge of human knowledge claims a place of its own in economics. Beyond the walls of our discipline, spectacular progress is taking place in the field of empirical research into human knowledge -the so-called “cognitive sciences”. In the light of such advances, the old and new classicals' axiom that nothing scientific can be said beyond the axioms of substantive rationality now looks very much like the protective belt of a degenerating programme. On the other hand, criticisms and alternative programmes will hardly be effective so long as their arguments are purely negative or are drawn from armchair introspection. In the present study I wish to outline a pattern of human knowledge emerging from cognitive research that may be called “constructivist”, and to point out the restrictions it sets on economic analysis. It is also my argument that such a pattern is consistent with the present non- or post-Walrasian trends in economic theory, and that it may provide them with firmer cognitive foundations.     

Religion,economics and politics: The Bishops and Keynes in the post-Keynesian ERA

The present is adapted from Bruce J. Malina and Thomas O. Nitsch, “The Bishops' Pastoral Letter and the Poverty Problem: Early vs. Contemporary Concerns and Doctrines,” presented at the Fourth World Congress of Social Economics, Toronto, Canada, 15–18 August 1986, 34 pp. The author is deeply indebted to colleagues Malina, professor of theology at Creighton University, and John E. Elliott, professor of economics at the University of Southern California, for helpful critical insights and comments.     

Human capital composition, growth and development: an R&D growth model versus data

The effect of human capital composition on growth and development has been somewhat neglected in economic literature. However, evidence has suggested the importance of engineering and technical (high-tech) skills to economic growth, and international organizations have suggested their shortage in developed countries. Using a standard increasing variety growth model, we propose various measures of human capital composition that are related with economic growth and development. When compared to data, the model does well in explaining the rate of growth and the level of development as a function of these measures. “the British colonies had a better educated population (...). Education was secular with emphasis on pragmatic skills and yankee ingenuity (...). The 13 British colonies had nine universities in 1776 for 2.5 million people. New Spain, with 5 million, had only two universities (...) which concentrated on theology and law.” –(Maddison, 2001)     

Exchange and evolution

This paper offers an extension of the distinction of [Kohn, Cato Journal, 24:303–339 (2004)] between the two paradigms of modern economic theory—value and exchange—as derived from the generic–operant framework of [Dopfer and Potts, The general theory of economic evolution, Routledge, London, (2007)]. I argue that Austrian and evolutionary economics can be analytically unified about a general framework of rule coordination and change that I shall call the generic value paradigm. This is an analytic generalization of Kohn’s “exchange paradigm” that will allow us to redefine his conception of the “value paradigm” as the operational value paradigm in terms of the economics of known and fully exploited opportunities. The generic value paradigm, in turn, underpins the economics of the growth of knowledge and the evolution of the economic order as an open-system process due to the origination, adoption, and retention of novel generic rules. Austrian economics is then circumscribed as a special case of the more general “generic” analysis of the coordination and evolution of economic rules.      

An economics for development and peace: With a particular focus on the thought of Ernst F. Schumacher

Ernst F. Schumacher'sSmall is Beautiful seems thoroughly persuasive even at the turn of the century, as reckless material development is increasingly recognized as a threat to peace. This article describes how his thought was influenced by Mahatma Gandhi. Gandhi's and Schumacher's ways of thinking are considered as alternative development theorees, different from any of those stemming from laissez-faire economics or Marxism. The formulation and proliferation of Schumacher's ideas about intermediate technologies are traced in both Indian and global contexts, to evaluate their sufficiency as bases for development. Moreover, their implications for contemporary economics are discussed, with the assistance of Amartya K. Sen's concepts of “capability,” “sympathy” and “commitment,” which are in clear contrast to the conventional concept of “economic man.” Finally, it is concluded that Schumacher's alternative development theories and practices, as well as Sen's economics, may play important roles in development and peace studies in the 21^st century. I am grateful to William Volgor, Michael McPherson, David Schrom and Mark Kurowski for their helpful suggestions on drafts of this article.     

Social capital and social economics

The “discovery” of social capital in the early 1990s led to an upsurge of research into the economic impact of social cohesion and governmental effectiveness. This paper outlines key developments in the social capital literature over the past 13 years. It then examines theory and evidence of the links between social cohesion, quality of governance, economic performance and human welfare. The literature indicates that social capital makes a measurable contribution to economic development and overall wellbeing, particularly in developing countries. Partly in response to this emerging body of evidence, there has been increased interest in the application of community development principles to economic development initiatives. This paper argues that the advent of social capital theory represents a partial convergence between social economics and mainstream economics, and signifies an increased acceptance that economic activity cannot be meaningfully “disembedded” from social and political context.     

The Economics of Non-Convex Ecosystems: Introduction

The word “convexity” is ubiquitous in economics, but absent fromeconomics. In this paper we explain why, and show what differenceit makes to economic analysis if ecosystem non-convexities aretaken seriously. A simple proof is provided of the connectionbetween “self-similarity” and “power laws”. We also provide anintroduction to each of the papers in the Symposium and draw outthe way in which they form a linked set of contributions.     

Do economists have anything to contribute to the debate on urban sprawl? (and would anbody listen to them if they did?)

This essay explores reasons for the relative shortage of work by economists on the subject of urban sprawl. I argue that a correct economic understanding of the sprawl issue is difficult to communicate. Meanwhile, a simplified caricature of economic thinking on sprawl has emerged. It argues that decentralized, low-density development has been chosen by the “free market”, therefore the problem signified by the word sprawl does not exist. This argument, made in the name of economics but not always by economists, has served to polarize the detabe as much as to enlighten it. I propose an alternative understanding of the economics of sprawl that provides common ground for debate among economists, planners, and politicians. The author is associate director of the Center for Regional Economic Issues at Case Western Reserve University's Weatherhead School of Management. In a prior life, he studied cost-of-sprawl issues for the New Jersey Office of State Planning. Thanks go to Rachael Callanan for assistance on this paper.     

The economics of Frank H. Knight: An Austrian interpretation

This paper interprets, in the modern Austrian economics perspective, Frank H. Knight's three core contributions; namely, economic methodology, theories of human action, uncertainty and entrepreneurship. Though Knight is regarded as one of the founding fathers of the Chicago School of economics, this paper argues that Knight's contributions are essentially Austrian. Influenced by William James, Henri Bergson and Max Weber, Knight's subjectivist economics can be seen as a link between Carl Menger and Ludwig von Mises in the history of Austrian subjectivism. This paper further suggests that Knight may be more appropriately located in the Austrian-German School, for the reason that the term “Austrian School” is too narrow to accommodate german influences. This paper concludes that Knight's legacies have left much to be appreciated by neoclassical mainstream economists in general and Austrian economists in particular. The author thanks Dian Kwan for her proof reading in this essay.     

Menger’s causal-realist analysis in modern economics

Carl Menger pioneered a unique theoretical research method which served as the foundation of the early Austrian school of economics. Menger’s causal-realist analysis was revived and formalized just before and after World War 2 by Ludwig von Mises as the “praxeological method.” Murray Rothbard, a student of von Mises’, utilized the method in formulating a comprehensive system of economic theory in his treatise, Man Economy, and State published in the early 1960s. Rothbard’s treatise became the foundational work for the “Austrian revival” in the 1970s. In this paper, we address several issues related to the role of Menger’s method in modern economics. First, ample evidence is adduced that von Mises and Rothbard each expressed a surprising ambivalence with respect to his own work in relation to the early Austrian school. Second, von Mises viewed Rothbard’s treatise as beginning a new epoch in economic theory. Third, contrary to the conventional view, a careful analysis of his treatise shows that Rothbard drew heavily on the contemporary neoclassical literature in developing his theoretical system and that his intent was never to set up a heterodox movement to challenge mainstream economics. Rather, his main aim was to consistently apply the praxeological method to rescue economics from what he considered the alien methodology of positivism, which was imported into economics after World War 2. Lastly, I will tentatively suggest that the term “Austrian economics” as the designation for the intellectual movement that coalesced in the early 1970s may now have outlived its usefulness. This term, which initially served an important strategic purpose in promoting the revival of the broad Mengerian tradition, may have come to obscure the meaning and importance of the praxeological research paradigm that Menger originated.     

Theory,history, and the great recession

This paper honors Don Lavoie’s work on the relationship between theory and history in Austrian economics by using the current recession as an example of many of the ideas found in his paper on the “Interpretive Dimension of Economics.” More specifically, I start from the premise that all history comes from theory because it is theory that guides what we count as “facts” or “data.” From Menger onward, a core element of the Austrian approach has been to see the purpose of theory as rendering human action and its unintended consequences intelligible. We do that by telling historical narratives where theory is the logical glue that holds the story together. I look at the Austrian story of the Great Recession in light of these ideas. What the Great Recession demonstrates is that the core theoretical elements of Austrian business cycle theory are narrower than we might think, but that consciously recognizing the contingent elements gives the theory additional flexibility to explain more of various real-world crises when augmented by additional ideal typifications properly used.     

Economics,Democracy, and the Distribution of Capital Ownership

This article holds that widespread, practical access to capital acquisition is essential for sustainable widespread economic prosperity and democracy. The founders of the U.S.A. agreed that sustainable democracy required widespread ownership of land to provide a viable earning capacity sufficient to support robust participation in democratic government. The importance of widespread land ownership to individual prosperity and sustainable democracy was supported not only by the prevailing philosophical views of property, it was also apparent to the common man and woman. Compared to Europe, America offered widespread access to land ownership, higher wages, better work conditions, cheaper staples and greater individual freedom, equal opportunity, prosperity, and political participation. This conviction that widespread access to ownership is a necessary condition for widespread prosperity and sustainable democracy continued throughout most of the nineteenth century, but today public discourse reveals virtually no trace of this once universally held opinion. This article suggests that the disappearance of this conviction can be traced to an erroneous view shaped by neoclassical economics and Keynesian economics. According to this view, (1) the disappearance of the American frontier and industrialization made the goal of widespread capital ownership either impractical or of little or no economic significance and (2) by way of technological advance, sufficient earning capacity and consumer demand to promote growth and sustain democracy can be achieved, without widespread ownership, primarily through jobs and welfare. Although differing in many respects, both mainstream schools, along with Adam Smith’s classical economics, share one common but unstated economic assumption: the broader distribution of capital acquisition (in itself) has no fundamental relationship to the fuller employment of people and capital, the broader distribution of greater individual earning capacity, and growth. Contemporary thinking, shaped by these economic schools, also tacitly assumes that widespread capital ownership is not essential for the sustainable individual earning capacity needed to support robust democracy. This erroneous “ownership-neutrality assumption” (1) contradicts both the views of America’s founders and the colonial experience, and (2) provides theoretical justification for structuring capital markets and capital acquisition transactions to unfairly and dysfunctionally favor existing owners at the expense of broader ownership distribution, more widely shared prosperity, greater efficiency, ecologically friendly growth, and a vital democracy. America’s conscientious founders would be shocked by the diminished importance of the distribution of ownership in the mainstream analysis of prices, efficiency, production, growth, and democracy. Rather than enhancing democracy, they would view the “ownership-neutrality assumption” of mainstream economics as contributing to its deterioration and corruption. They would openly search for economic analysis built on an alternate assumption more consistent with their understanding of the requisite conditions for sustainable democracy. This article advances an economic analysis that suspends the ownership-neutrality assumption, replaces it with a “broader-ownership-growth assumption,” and suggests a voluntary market strategy for substantially broadening capital ownership, enhancing individual earning capacity, and providing the widespread economic prosperity needed for robust democracy.     

A resource-based view of Schumpeterian economic dynamics

This paper seeks to offer a theoretical platform where the modern “resource-based view” of the firm might meet with evolutionary economics and the study of entrepreneurship, and with the economics of industrial organization. It does so by proposing the concept of the “resource economy” within which productive resources are produced and exchanged between firms. This is presented as the dual of the mainstream goods and services economy – where the “resource economy” captures the dynamic capital structure of the economy. The paper is concerned to bring out the distinctive principles governing resource dynamics in the resource economy, capturing competitive dynamics in such categories as resource creation, replication, propagation, exchange and leverage; evolutionary dynamics in terms of resource variation, selection and retention; entrepreneurial dynamics in terms of resource recombination and resource imitation, transfer and substitution; and industrial organizational dynamics in terms of resource configuration, resource complementarities and resource trajectories.     

Corporate social responsibility and the ‘game of catallaxy’: the perspective of constitutional economics

The paper examines the issue of corporate social responsibility (CSR) from the perspective of constitutional economics, focusing on the distinction between a political community’s constitutional choice of the rules of the “market game,” and the market players’ sub-constitutional choice of strategies within these rules. Three versions of CSR-demands are identified and discussed, a “soft,” a “hard”, and a “radical” version. The soft version is concerned with the issue of how “socially responsible” corporations ought to play the market game within existing rules. The hard version is about how the rules of the market ought to be changed in order to induce “socially responsible” corporate behavior. And the radical version questions the compatibility of CSR and the logic of the market game, calling in effect for adopting some alternative economic regime.

Potential Contributions of Political Science to Environmental Economics

While political science has much to offer, at least some of its contributions might be difficult to incorporate into economic models. Nevertheless, we argue that environmental economics might benefit from supplementing, combining, or sometimes even replacing the rational choice approach with other approaches commonly used in political science. We develop our argument by examining three core components of political science analysis: ideas, power, and institutions. For each component we review political science approaches and propositions with a view to determining “what’s in it” for environmental economics.     

Emerging from the Hobbesian jungle: Might takes and makes rights

The conflict over scarce resources in the Hobbesian jungle may be avoided if rules of obligation delineating property rights develop along with institutions of governance. One possibility is a “duress contract” as the strongest individual threatens others who agree to enslavement. Thus, “might takes rights.” Alternatively, individuals with similar capacities for violence may enter a “consent contract” establishing rules of obligation and then voluntarily participating in governance. They will not agree to a rights assignment that produces less wealth than they expect through violence, however, so “might makes rights.” A might-takes-and-makes-rights analysis is outlined to explain the continuum of legal institutions and property rights allocations that can evolve between these two extremes of duress and consent. Increasingly finely delineated private property rights tend to evolve under institutions produced by consent contracts, while common pool problems tend to arise near the duress contract end of the spectrum. This paper draws from a larger project on “The Evolution of Law” which has been supported by the Earhart Foundation. Discussions with and comments by Randy Holcombe, Kevin Reffit, and two anonymous referees led to significant improvements in the development and presentation of the arguments, as did discussant comments on a related paper made by Douglas Ginsburg and participants in the Friedrich August von Hayek Symposium on “Competition Among Institutions” in Freiburg, Germany, June 1–4, 1994, sponsored by the International Institute at George Mason University and the Walter Eucken Institute, Freiburg.     

The pareto rule and welfare economics

It is [my] contention... that the wake for all welfare economics is premature, and that welfare economics can be reconstructed with the aid of the concept of demonstrated preference. This reconstruction, however, will have no resemblance to either of the “old” or “new” edifices that preceded it. In fact...our proposed resurrection of the patient may be considered by many as more unfortunate than his demise.     

Behavioural Economics,Hyperbolic Discounting and Environmental Policy

This paper reviews some recent research in “behavioural economics” with an application to environmental issues. Empirical results from behavioural economics provide a reminder that human behaviour is context-dependent, implying that policy may go awry if based upon models of behaviour which are inappropriate to the contexts in which decisions are made. Recognizing that agents may, in some contexts, systematically make mistakes raises challenging questions about the role of “paternalism” in government policy. The paper considers the research into hyperbolic discounting, and examines the implications for environmental policy. We develop a model of resource management under hyperbolic discounting, which shows that if a planner is unable to commit to a policy, the temptation to re-evaluate the policy in future could lead to an inadvertent collapse in the stocks of a natural resource.