THE FAILURE OF THE POLL TAX AND CLASSICAL LIBERAL POLITICAL ECONOMY: LESSONS FOR THE FUTURE

The failure of the Poll Tax has been claimed to be an indictment of the principles of classical liberal political economy that it was intended to apply to local government finance. This article argues that, on the contrary, the failure of the Poll Tax was entirely predictable from the perspective of classical liberal political economy, and, in particular, public choice economics, because it involved a politically impossible reassignment of the local tax burden, presented local electors with an insurmountable collective action problem and ignored the 'vote motive' underlying the actions of national politicians held accountable for the new tax. Finally, the article proposes some lessons for the future of local government reform from the experience of the Poll Tax.     

THE POLITICAL ECONOMY OF FISCAL DEFICITS: A SURVEY

Abstract This paper surveys recent literature, both theoretical and empirical, regarding political explanations for fiscal deficits. Political economy suggests conflicts of interest may lie behind the emergence of deficits: (1) Opportunistic politicians generate deficits to win elections, even in conflict with general welfare; (2) Conflicts of interests between politicians’ partisan preferences create incentives for (at least some) incumbents to run deficits and (3) Conflicts of interest between different social groups or regions generate tensions in the allocation of government resources leading to overspending. This paper reviews these different strands of the literature. It also covers contributions that highlight the crucial role of budget institutions in determining the extent to which the political motivations to generate deficits are indeed translated into poor fiscal outcomes. Promising avenues for future research are highlighted.     

THE POLITICAL ECONOMY OF ENVIRONMENTAL CONSEQUENCES: A REVIEW OF THE EMPIRICAL LITERATURE

As a key concern for human survival and development, environmental issues have been widely perceived to be impacted by various political institutional factors. A considerable body of literature has attempted to investigate how different political factors affect environmental policymaking and outcomes. In this paper, we critically review related scholarly works published in peer‐reviewed economic journals in the past 30 years, with an emphasis on the empirical literature. Political institutional factors considered in this survey include corruption, the general concept and specific elements of democracy, and the vertical structure of environmental regulation authority within different levels of governments (i.e. environmental federalism). Studies focusing on the interplay of these factors are also highlighted. Based on a critical review, we provide a guide to the datasets, methodologies, and main findings of the literature. We also point out the existing gaps, and put forward suggestions for future research directions.     

PRIVATIZATION AND EFFICIENCY: FROM PRINCIPALS AND AGENTS TO POLITICAL ECONOMY

Abstract.  We survey the theoretical literature on privatization and efficiency by tracing its evolution from the applications of agency theory to recent contributions in the field of political economy. The former extend the theory of regulation with incomplete information to address privatization issues, comparing state-owned enterprises with private regulated firms. The benefits of privatization may derive either from the constraints it places on malevolent agents or from the impossibility of commitment by a benevolent government because of incomplete contracts. Contributions dealing with political economy issues separate privatization from restructuring decisions. They either explore bargaining between managers and politicians or analyse the impact of privatization shaped by political preferences on efficiency. The theoretical results regarding the relation between privatization and efficiency do not lead to any definitive conclusion. Privatization may increase productive efficiency when restructuring takes place whereas its effects on allocative efficiency still remain uncertain.     

POLITICAL PROCESS AND THE FORMATION OF ECONOMIC POLICY

Institutional economics has some useful things to say about government policy-forming processes. It focuses attention on the structural components of government institutions which shape the direction of policy formation and its delivery. In this article, the author discusses how institutional models of government decision-making may be adapted to parliamentary systems of government. This approach has some merit because it rescues analysis of government processes from models based on the US constitutional system.     

THE MARKET ECONOMY AND THE TEACHINGS OF THE CHRISTIAN GOSPEL

The reality of the market economy is not an economy in which Christian values are generally evident. Although there are many prominent Christian capitalist writers, the real world is a world of rather more materialistic values. It does not have to be like that. It is possible for people to take Christian values out into the world of business and prosper.     

THE ECONOMICS, POLITICAL AND FINANCIAL IMPLICATIONS OF AGEING POPULATIONS

It is likely that most developed countries will see populations shrink over the coming generations. This brings with it various problems that are highlighted in this article. However, one medium-term benefit of the process of ageing may be a return to a higher level of saving in the USA. This will bring the US current account back towards balance.     

HOUSE PRICES AND THE ECONOMY

UK house prices more than doubled from 1985 until 1989, with house price inflation over the previous year peaking at 34 per cent in the fourth quarter of 1988. The ratio of house prices to average incomes reached levels which surpassed even those experienced during the 1972-73 house price boom. This sharp increase in housing wealth has been a major factor in the fall in the savings ratio over the past three years. This forecast release examines the prospects for future house price movements, discusses the sources of the recent house price boom and finally considers the possible impact on consumer expenditure.     

BEYOND THE HYPE: INTELLECTUAL PROPERTY AND THE KNOWLEDGE SOCIETY/KNOWLEDGE ECONOMY

Abstract.  This paper explores the debates surrounding whether or not we have now moved into a new knowledge economy and/or knowledge society and if so whether this shift is as significant and as far reaching as the industrial revolution. In this possible transformation the place of information communications technologies has been crucial. Debate has occurred across both economics and sociology with differing emphases as is shown in the ranges of definitions that we review in the paper. One consistent factor is the lack of clarity and consistency between them both within and across the disciplines. In order to explore the issues that the debates raises in a more grounded way, the paper explores them in relation to intellectual property (IP) and the intellectual commons in the process of innovation, growth and economic development. The paper is developed through an analysis first of the industrial revolution and the role within this of uncertainty, technologies, complementarities and elective affinities and the way IP was protected and controlled through patents, secrecy, being first to the market and copyright. The second part of the paper examines definitions of the knowledge economy and society and the role within these of information communication technologies in order to explore whether the ways that IP is protected and controlled have changed. In the debate about the 'knowledge economy and society' the role of innovation via human capital with a greater reliance on intellectual capabilities has been emphasized. The role of IP thus remains central but is now challenged by the rise of new forms of communication, which make its protection harder and move much of the concern with respect to regulation to a global rather than national and local level.     

POPULATION AND THE ECONOMY DURING THE DEMOGRAPHIC TRANSITION

The changes in population structure currently taking place in both developed and less‐developed nations are part of a very long‐term trend of demographic change that has yet to run its full course. The starting point of this trend is the complete rearrangement of demographic regimes characterised by significant declines in mortality coupled with widespread fertility control. This process started in a small group of European and non‐European societies during the nineteenth century and by the second half of the twentieth century had spread to much of the world. It has brought with it significant economic and social implications for societies affected which have differed by the timing of the transition but not in their basic thrust. Eventually the demographic transition promises to bring with it very rapid and widespread ageing and, within a few decades, world population decline. Some of the long‐term economic implications of this entire process are discussed in this article.     

LOWER OIL PRICES AND THE UK ECONOMY

Demand for oil remains weak, and OPEC production is running ahead of quota in most member countries, so the possibility that oil prices could fall in the near future has increased. In this Forecast Release we examine the medium-term impact on the UK economy of lower oil prices. We find that, if the government does not intervene to protect the exchange rate, there is an immediate stimulus to output growth. The inflation rate, though, is 1–2 percentage points higher after three years.     

THE MOST IMPORTANT BOOK ON THE MOST IMPORTANT TOPIC OF OUR DAY: A REVIEW OF AFTER WAR: THE POLITICAL ECONOMY OF EXPORTING DEMOCRACY,BY CHRISTOPHER J. COYNE1

Efforts to export democracy and liberty through military intervention have often been ineffective and have resulted in unintended and undesirable consequences. Countries are free because of belief systems, and institutions that follow from those beliefs, which support and reinforce political and economic freedom. Rational constructivist attempts at nation building are therefore likely to fail in places where there is no tradition of such beliefs and institutions. In this superb book Coyne argues that principled non‐interventionism and free trade have historically had the greatest degree of success and should be our guiding policies today.     

THE POLITICAL EMBEDDEDNESS OF PRIVATE ECONOMIC TRANSACTIONS*

Governments are able to manipulate economic transactions in order to achieve foreign policy goals. This article addresses the question: can managers of multinational enterprises (MNEs) structure economic transactions in ways that will limit the costs resulting from government intervention? Using a transaction cost framework, the efficiency of alternative structures (exporting, joint ventures, licensing, or wholly owned subsidiaries) for protecting a firm's interests are assessed. We argue that the traditional focus on the dyadic relationship between supplier and buyer misses sources of transaction costs; by conceptualizing economic transactions as embedded in a political context, additional sources of transaction costs are revealed. We examine three cases of home government intervention in US MNE transactions with the Soviet Union. We find that the full range of structural alternatives is affected by government sanctions, although sanctions are imposed on exporting relationships first and removed last. We find that MNEs are, therefore, beginning to insulate international transactions by making their overseas subsidiaries more independent of US technology and supplies with the hope that the US government will be less likely to impose its will extraterritorially by intervening in foreign subsidiaries’private economic transactions.     

A NEW VISION OF THE KNOWLEDGE ECONOMY

Abstract.  To date, more than half of the output in the major OECD countries has been knowledge based. This paper argues, however, that the current growth-oriented exposition of the knowledge economy rooted in the conventional concept of free competition is insufficient for promoting the long-term development of human societies. Although we now live in a knowledge economy, most countries have been concurrently characterized by serious phenomena such as environmental degradation and growing economic inequality. The prospect of meeting global commitments, for instance, to reducing inequality, as outlined in the 1995 World Summit for Social Development in Copenhagen and endorsed in the United Nations Millennium Declaration, is bleak and the global society as a whole has become less and less sustainable. Indeed, the world is better seen as composed of numerous (but finite) knowledge economies. To take up the challenge of sustainable development of human societies, we have to develop a pluralistic perspective of the knowledge economy and fully acknowledge the characteristics of each unique knowledge system (such as indigenous knowledge possessed by a small tribe). Once we can help each individual knowledge system develop into a specific set of economic institutions that freely exchange concepts and beliefs with each other in a global environment, we will be able to develop a global economy that embodies a value-committed basis that assures a sustainable path of development on earth.     

TOWARDS A SYNTHESIS OF ISLAM AND THE MARKET ECONOMY? THE JUSTICE AND DEVELOPMENT PARTY'S ECONOMIC REFORMS IN TURKEY

Turkey has some unique characteristics, one of which is that it is the only Muslim country seeking to join the European Union. Internally, it has been going through a new and challenging experience in recent years: implementing free-market economic policies under a 'Conservative Democrat' government, the leadership of which comes from moderate Islamism. Many observers think that Turkish experience shows how Islam and the market economy are compatible. This article critically evaluates these reformist economic policies implemented since late 2002 and highlights the major factors behind Turkey's success story.