Life in the Putty‐Knife Factory!1

ABSTRACT . The public choice approach can be used to analyze a wide variety of social phenomena, of which academic activity is one possible example. The object of this paper is to see if the public choice approach can throw useful light on its own rise as a potent body of ideas in contemporary social sciences. The particular focus is a set of reminiscences about the life of the Public Choice Center over the period 1969 to 1983 (and especially 1976 to 1983, when I was myself part of the Center). Reflecting on that period, I attempt to isolate those features of the Center's life that seem to me to have been most important to its success; and then ask broader questions about how much of that success public choice methods might illuminate. The aspect of public choice theory that I focus on in this connection is its account of agent motivation. I assert that the desire for esteem played a greater role in motivating the agents than the desire for “interests,” more narrowly construed. The paper concludes with some general thoughts about esteem as a motivating factor in academic circles and more generally.     

Heraclitian Vespers

ABSTRACT . Viewed retrospectively, the early research program in public choice was intellectually exciting, and especially as that program found its institutional home in Blacksburg, Virginia, in the 1970s and 1980s. The time was ripe for such a scientific development, and the events of the 1960s gave impetus to particular thrusts of the still‐emerging research agenda.     

Public Choice as an Academic Enterprise

Abstract . This paper treats the development of public choice as an academic enterprise that originated at the University of Virginia and that grew to maturity at VPI. It seeks to distinguish between the particularistic and personal sources of programmatic success on the one hand, and institutional and organizational sources on the other. Only to the extent the success is institutional or organizational is there something that potentially can be duplicated through the adoption of an appropriate institutional framework. Otherwise the success is idiosyncratic, and must be attributed to the particular qualities of James Buchanan and Gordon Tullock, independently of the institutional and organizational framework.     

A “calculus” for data envelopment analysis

DEA models are not amenable to differential arguments for extreme efficient units. Consequently, function representations of the approximating technology are not differentiable in the usual sense. Dually, this nondifferentiability is manifested by multiple optima to the Charnes et al. (Eur J Oper Res 2:429–444, 1978) DEA problem. This paper shows how a “calculus” can be applied to DEA, and, in particular, how this “calculus” resolves the resulting weight choice problem uniquely. The “calculus” is based on the concept of willingness to pay and well-known results in the convex analysis literature (Rockafellar, Convex analysis, 1970) for directional derivatives and their associated superdifferentials.     

Design-based or Prediction-based Inference? Stratified Random vs Stratified Balanced Sampling

Early survey statisticians faced a puzzling choice between randomized sampling and purposive selection but, by the early 1950s, Neyman's design-based or randomization approach had become generally accepted as standard. It remained virtually unchallenged until the early 1970s, when Royall and his co-authors produced an alternative approach based on statistical modelling. This revived the old idea of purposive selection, under the new name of “balanced sampling”. Suppose that the sampling strategy to be used for a particular survey is required to involve both a stratified sampling design and the classical ratio estimator, but that, within each stratum, a choice is allowed between simple random sampling and simple balanced sampling; then which should the survey statistician choose? The balanced sampling strategy appears preferable in terms of robustness and efficiency, but the randomized design has certain countervailing advantages. These include the simplicity of the selection process and an established public acceptance that randomization is “fair”. It transpires that nearly all the advantages of both schemes can be secured if simple random samples are selected within each stratum and a generalized regression estimator is used instead of the classical ratio estimator.     

Protection in numbers? Self-protection as a local public good

In many contexts with endogenous physical risks – e.g., households, neighbourhood traffic calming, production quality control – risk reduction is a local public good. Risk-reduction incentives then depend on the protected population’s size. Focusing on a household’s physical risks modelled as an i.i.d. Bernoulli trials sequence with endogenous “success” probability, I give sufficient conditions for safety to increase with the number protected via both monotone comparative statics methodology and a “first-order” approach. I utilise a recursive decomposition of a covariance involving a monotonic function of a binomial variable and first-degree stochastic dominance (FSD). Because “protection” problems are generally non-concave, I give a detailed treatment of the second-order condition, again via FSD.     

When Hard Heads Collide

ABSTRACT . In this article, Loren Lomasky begins with a firsthand account of some of the people he interacted with at the Center for the Study of Public Choice in Blacksburg and some of what he learned there. Aside from the revealing personal anecdotes, we learn something of the culture clash he experienced as a visiting fellow at the Center and about his introduction to intellectual activity as “blood sport.” Lomasky then reviews some of the strengths and weaknesses of public choice theory from a philosophical point of view and offers some suggestions. These primarily concern the theory's narrow focus on the material nature of interests. Finally, Lomasky offers techniques for including moral interests in the deliberations of decision makers.     

Neoliberalism and the Crisis in Higher Education: The Cost of Ideology

A number of factors have contributed to the crisis in higher education, including the long‐term transformation in funding. In this article, I argue that neoliberalism can explain many of the processes leading to our changing commitment to colleges and universities and the cost increases that this change has produced. A number of neoliberal assumptions firmly rooted in conventional wisdom have contributed to a “student‐as‐customer” phenomenon, which is, itself, a cost driver. I look at the development of the student as customer as a vehicle for exploring tuition increases. I also examine the tension between education as a public and a private good and the marketization of higher education as crucial drivers of these transformations. In doing so, I emphasize that the student as customer has been created by the changes in the way we think about, organize, and fund education, rather than any fundamental change in young people.     

Rallying the Troops or Beating the Horses? How Project‐Related Demands Can Lead to Either High‐Performance or Abusive Supervision

In today's high‐pressure work environment, project managers are often forced to “do more with less.” We argue that this imperative can lead project managers to engage in either high‐performance or abusive supervision behaviors. To understand this process, we develop a model and associated propositions linking a project manager's cognitive appraisal of project‐related demands to high‐performance work practices versus abusive supervision behaviors—both of which impact three project outcomes: stakeholder relationships, people‐related project success factors, and employee well‐being. We propose that the choice between high‐performance work practices and abusive supervision behaviors is moderated by a project manager's personal resources (psychological capital, emotional intelligence, and dark triad personality).     

Cooperative choice and its framing effect under threshold uncertainty in a provision point mechanism

This paper explores how threshold uncertainty affects cooperative behaviors in the provision of public goods and the prevention of public bads. The following facts motivate our study. First, environmental (resource) problems are either framed as public bads prevention or public goods provision. Second, the occurrence of these problems is characterized by thresholds that are interchangeably represented as “nonconvexity,” “bifurcation,” “bi-stability,” or “catastrophes.” Third, the threshold location is mostly unknown. We employ a provision point mechanism with threshold uncertainty and analyze the responses of cooperative behaviors to uncertainty and to the framing for each type of social preferences categorized by a value orientation test. We find that aggregate framing effects are negligible, although the response to the frame is the opposite depending on the type of social preferences. “Cooperative” subjects become more cooperative in negative frames than in positive frames, whereas “individualistic” subjects are less cooperative in negative frames than in positive ones. This finding implies that the insignificance of aggregate framing effects arises from behavioral asymmetry. We also find that the percentage of cooperative choices non-monotonically varies with the degree of threshold uncertainty, irrespective of framing and value orientation. Specifically, the degree of cooperation is highest at intermediate levels of threshold uncertainty and decreases as the uncertainty becomes sufficiently large.     

International Convergence of Accounting Practices: Choosing between IAS and US GAAP

This study examines reporting practices of a sample of foreign listed and domestic‐only listed companies from the United Kingdom, France, Germany, Japan and Australia to determine the extent to which companies voluntarily use “international” standards. Two types of use of non‐national standards in the consolidated accounts presented to the public are considered: adoption of “international” standards instead of national standards, and supplementary use where “international” standards are used in conjunction with national standards. “International” standards are defined as US GAAP or IAS (now IFRS). The study tests for a preference for either set of standards and considers the relationship of choice of regime with firm attributes. The results show significant voluntary use of “international” standards in all five countries and among foreign listed and domestic‐only listed companies. Companies using “international” standards are likely to be larger, have more foreign revenue and to be listed on one or more foreign stock exchanges. US GAAP is the predominant choice, but IAS are used by many firms in Germany and some in Japan. Firms listed in the United States' regulated markets (NYSE and NASDAQ) are more likely to choose US GAAP, but companies traded in the OTC market often select IAS. The study demonstrates for managers and regulators that there is considerable support for “international” standards, and that choice of IAS or US GAAP relates to specific firm characteristics which differ according to a firm's country of origin. Most use of “international” standards reflects individual countries' institutional frameworks, confirming the key role of national regulators and standard setters in assisting companies to achieve more comparable international reporting.     

Discrete choice models and the housing price and travel to work elasticities of location demand

Multinomial logit and nested logit models of mode choice in travel to work and housing location choice are estimated from 1970 U.S. census data aggregated to small zones of the Chicago SMSA. The estimated models are then used to derive the “housing rent,” “travel time,” and “travel cost” elasticities of location demand. The effects of sampling variation, sample size, attribute inclusion, model specification, and estimation method on the estimated elasticities are evaluated and found to be important. The elasticities are also compared and found to agree with those obtained from other discrete choice models and, in the case of “housing rent,” with estimates obtained from models based on other theoretical structure.     

Commentary on "The Quest for Meaning in Public Choice" by Elinor Ostrom and Vincent Ostrom

ABSTRACT . The Ostroms have created a paper that goes to the very heart of the public choice enterprise. They suggest that we should conceive of the evolution of constitutional procedures and laws in analogy with biological evolution. One of the paper's central goals is to establish the logical foundations of political order. I take this goal seriously and compare explicitly the task of explaining order in biology and politics. In the case of biology, the task of evolutionary theory has been to give an account of why there are complex arrangements of genetic material called “organisms” (including humans, giraffes, and whales) rather than just a nutrient‐rich primordial ooze with no apparent structure. For the social scientist, the task is to explain why there are rules, structure, and stability in societies.     

The Euro System as a Laboratory for Neoliberalism: The Case of Spain

Since the 1970s, neoliberalism has evolved from ideology to political agenda, from political program to public policy, and from public policy to a system that replaces democratic control over economic policy with a system of elite economic management. This process of change has been possible due to the endorsement of a meta‐political theory that destroys democracy and legitimizes technocratic despotism, financial deregulation, the debasement of labor into a new proletariat, and the purging of constitutional politics. In this article, we analyze this profound transformation of social and legal relations in the “euro system” and, specifically, in the regressive policies that have emerged from the “crisis” in Spain, a peripheral country of the European Union. The problems in contemporary Europe are a direct consequence of the neoliberal version of European economic unity. Their solution will depend on the capacity of the member states to create a social Europe that strengthens institutional democracy and develops universal systems of social protection. This, in turn, will depend on the ability of citizens to remodel state institutions in accordance with new social goals that place life at the center.     

Bargaining with the Devil

ABSTRACT . “Bargaining with the Devil: Commentary on the Ostroms’‘Quest for Meaning in Public Choice’” provides a commentary on Elinor Ostrom and Vincent Ostrom's paper, “The Quest for Meaning in Public Choice.” This discussion focuses on the challenging tension that exists between social scientific knowledge and social practices. It suggests that historical agents may have solved the dilemma of cooperation prior to rational choice theorists’ invention of the public goods problem.     

Developing a measurement approach for reputation of non‐profit organizations

• As a result of the increasing adoption of private sector firms' values and concepts, non‐profit organizations (NPOs) are becoming more and more aware of intangible assets' importance for achieving competitive advantages. Even though reputation can be considered an organization's central intangible asset, there is still no appropriate measurement approach for reputation in this context. In this paper, we identify the dimensions of NPO reputation and develop indices to measure these components. We develop a model by means of a qualitative inquiry and a quantitative study using a large‐scale sample from the German general public. We find support for a two‐dimensional measurement approach comprising an affective and cognitive component as well as four antecedent constructs (“quality,” “performance,” “organizational social responsibility (OSR),” and “attractiveness”). The results of a second quantitative study in which we examine NPO reputation's relationship with important outcome variables, such as willingness to donate or work as an honorary member, provide support for the measurement approach's stability as well as criterion validity. Furthermore, the results reveal the affective dimension's importance regarding positively influencing donor behavior.

Copyright © 2009 John Wiley & Sons, Ltd.     

Enhancing economic freedom via school choice and competition: Have state laws been enabling enough to generate broad-based effects?

An aspect of economic freedom that varies across U.S. states is K-12 educational freedom. Some states allow a degree of choice for families in selecting schools outside public schools for their children. However, the enabling laws for such programs are often quite restrictive and limited to few children. Can this limited degree of competition and choice have a noticeable effect on an entire state's overall K-12 performance? I find strikingly large test score gains for states that have adopted voucher programs and/or Education Savings Accounts (ESAs), swamping the effect of per pupil K-12 spending on test scores. Moreover, vouchers and ESAs are associated with less per pupil spending. These effects are robust to a host of specification checks. A key factor is the amount of a program's funding that “follows the student,” even if a small number of students are eligible. Overall, it seems that even a small measure of educational freedom has a large effect.     

Identifying some major determinants of entrepreneurial partnership, using a confounded factorial conjoint choice experiment

Many small businesses fail before their fifth anniversary, with proportionally more minority owned businesses failing than others. The bulk of these failing entities is often organized in the form of sole proprietorship, while sound business partnerships could potentially be conducive to better prospective entrepreneurships. The objective of this study was to evaluate the importance of prospective partners’ characteristics, on the willingness of business respondents to become business partners. In the process, we used a confounded factorial conjoint choice experimental design. We found “Values sharing”, “Term orientation”, and “Community membership” to be among the most influential factors for the determination of entrepreneurial partnership. The effect direction of “shared-attributes” suggested a central need for complementary diversity in the process of sound business partnership formation. Respondents were more likely to partner with technically skilled prospective partners, than with managerially skilled ones. White respondents displayed more of a preference for business partners who did not share their values, compared to their Black counterparts. The confounded factorial conjoint choice experiment approach used in this study proved to be a helpful tool for investigating factors that influence sound business partnership formation.     

Political Consumerism in Context: An Experiment on Status and Information in Ethical Consumption Decisions

This article investigates two possible explanations for willingness to engage in ethical consumption: increased status and improved information about the benefits of ethical consumption for producers and for nature. We approach our hypotheses through an experimental method in which people are asked, under varying conditions, to choose between fair trade and “conventional” coffee. Unexpectedly, status and information provision did not significantly affect consumption decisions. Implications of our findings for the ethical consumption literature and strategies aimed at increasing ethical consumption are discussed.     

Commentary on workfare: Servitude or success formula?

In his article entitled “Workfare: Servitude or Success Formula?” Patrick J. Keleher Jr. discusses Project Chance, an Illinois public aid program under which refusal of an aid recipient to participate in job training and work internships can result in termination of public assistance. Despite that seemingly coercive aspect of Project Chance, Keleher defends the program as consistent with the basic moral rights of welfare recipients. In my commentary I present reasons why I am not convinced by Keleher's defense of Project Chance.