Is ‘new’ behavioral economics ‘mainstream’?

When comparing ‘new’ and ‘old’ behavioral economics (BE), many argue that ‘new’ BE has close ties with what is often called ‘mainstream’ economics. The aim of this paper is to reframe the ‘old’ vs. ‘new’ BE debate and investigate the nature of the relationship between psychologists, behavioral economists, and ‘mainstream’ economists. This will lead us to develop the concept of ‘space of interaction’, building on Galison’s metaphor of ‘trading zones’, to emphasize the role of outsiders, strategic thinking, and negotiation in ‘new’ BE. By discussing some often implicit arguments in an otherwise disconnected literature, we seek to bring new arguments to the discussions through a careful study of those relationships in the history of ‘new’ BE and its more recent developments. Leaving aside the orthodox/heterodox contrast and comparative approaches, we hope to provide a different account of the changes in ‘new’ BE and its relationship with the ‘mainstream’.     

Positive public economics: reinterpreting ‘optimal’ policies

The standard positive/normative divide fails to capture the way economists use ‘optimal’ taxation models. This paper argues that the better way to understand public economics is through a three-part division between positive, normative, and instrumental models. An instrumental model is about means and ends. Once this additional dimension is acknowledged, one can see that ‘optimal’ taxation models are closely connected to what are generally seen as purely positive models. I argue that economists have been using similar standards to assess ‘optimal’ taxation models as they use to assess positive models. Recent advances in optimal taxation theory have embraced the positive aspects of models, even about social welfare functions, something that is generally classified as a normative.     

The ‘science-as-market’ analogy: a constitutional economics perspective

The ‘science-as-market’ analogy has been used in support of the notion that in science just as in markets competition works as an effective instrument for reconciling the self-interested ambitions of individual agents with the social function that science and markets are supposed to serve. This paper examines the analogy from a constitutional economics perspective, drawing attention to the role that the rules of the constitution of the ‘game of science’ as well as the ‘market game’ play in conditioning the ways in which competition works in the two realms.     

Political stability and trade agreements: Evidence for ‘endgame FTAs’

This paper empirically examines the idea that Free Trade Agreements (FTAs) are more likely to be signed by governments playing ‘endgames’; that is, when governments are about to lose power. Two empirical strategies shed light on this hypothesis. One relies on events that increase the probability of political turnover, the other on term limits. I find that countries are more likely to sign FTAs after the unexpected exit of their leaders, when political instability is high. The key finding is partly confirmed in the term-limits strategy as governments are found to form more FTAs during their last term in office.     

‘My Own Utopia’. The economics of Bentham's Panopticon

The paper analyses Bentham's theory of the economic management of the Panopticon prison he projected in 1786 and which was approved by the British Parliament in 1794, but never constructed. Its focus is on the economic arguments employed to justify the principles of management, most of which amount to the modern economic notions of market policies and principal-agent relationships. Bentham's way of conceiving these notions can be summarized in the problem of the junction of interest and duty. This paper shows that many modern notions concerning the economics of organizations and public economics are clearly foreshadowed, and sometimes even explicitly formulated, in Bentham's writings on prison management. Bentham was conscious of the important economic dimension of the Panopticon scheme and was persuaded, albeit illusorily, that an accurate economic theory of its management could favour its approval. Well before Charles Babbage's On the Economy of Machinery and Manufactures (), he went into a detailed theoretical analysis of the requirements and dilemmas of a complex economic organization oriented towards the joint fulfilment of the goals of a variety of stakeholders: taxpayers, the government, contract managers, keepers, taskmasters, subcontractors and prisoners. He also recognized that some institutional limits must be opposed to profit-oriented management in order to preserve the life, health and mental equilibrium of subordinates.     

The life cycle of scholars and papers in economics – the ‘citation death tax’

The information content of academic citations is a subject to debate. This article views premature death as a tragic ‘natural experiment’, outlining a methodology identifying the ‘citation death tax’ – the impact of the death of productive economists on the patterns of their citations. We rely on a sample of 428 papers written by 16 well-known economists who died well before retirement, during the period 1975 to 1997. The news is mixed: for half of the sample, we identify a large and significant ‘citation death tax’ for the average paper written by these scholars. For these authors, the estimated average missing citations per paper attributed to premature death ranges from 40% to 140% (the overall average is about 90%), and the annual costs of lost citations per paper are in the range 3–14%. Hence, a paper written 10 years before the author's death avoids a citation cost that varies between 30% and 140%. For the other half of the sample, there is no citation death tax; and for two Nobel Prize-calibre scholars in this second group, Black and Tversky, citations took off over time, reflecting the growing recognitions of their seminal works.     

The reason for ‘The Reason of Rules’

This paper is an attempt to locate the writing of the book, The Reason of Rules, in its intellectual and temporal setting. The object is to capture something of the ambitions of the book and to assess its limitations as perceived three decades after its writing. It includes some personal reflections on the experience of Buchanan as a co-author.     

The persistent institutional effect of liberal colonialism: evidence from China’s financial policies

ABSTRACT

The effect of liberal colonialism on the allocation of capital persists to this day. We exploit the colonial history of China during 1896-1911 with qualitative evidence to measure liberal colonialism. We document that liberal colonialism promotes the subsequent efficiency of financial policies on the capital allocation in 2004 through the quality of economic institutions.     

Robots and us: towards an economics of the ‘Good Life’

(Expected) adverse effects of the ‘ICT Revolution’ on work and opportunities for individuals to use and develop their capacities give a new impetus to the debate on the societal implications of technology and raise questions regarding the ‘responsibility’ of research and innovation (RRI) and the possibility of achieving ‘inclusive and sustainable society’. However, missing in this debate is an examination of a possible conflict between the quest for ‘inclusive and sustainable society’ and conventional economic principles guiding capital allocation (including the funding of research and innovation). We propose that such conflict can be resolved by re-examining the nature and purpose of capital, and by recognising mainstream economics’ utilitarian foundations as an unduly restrictive subset of a wider Aristotelian understanding of choice.     

Austrian economics and development: The case of Sudha Shenoy’s analysis

The aim of this paper is to describe Sudha Shenoy’s use of Menger, Mises, and Hayek (she explicitly called them ‘the older Austrians’) to explain development and growth. Her aim was to show that the application of Austrian economics, based on the notions of capital structure and division of labor, embedded in a specific legal framework (common law), historically promoted development and growth (as in early modern England); and can promote development and growth in underdeveloped countries (her specific focus was India). Shenoy also claimed that any policymaking as well as government’s intervention are either useless or dangerous, having two main dysfunctional effects, which are often interrelated; namely, make development slower (or even stop it), and increase corruption.     

The implications of the ‘learning curve’ for firm strategy and public policy

The objective of this paper is to examine the relationships between costs and cumulative output, and to explore the implications of these relationships for firm strategy and public policy.     

‘Medical altruism in mainstream health economics: theoretical and political paradoxes’ comments

In this article, which was published in the September 2014 issue of the Review, Batifoulier and Da Silva examine the role of medical altruism in health economics. They argue that abandoning homo economicus and the mainstream practice of incorporating patient well-being in the doctor’s utility function in order to explain the clinical behavior of doctors and switching from profit maximization to medical altruism both lead to a dead end. We agree but the authors leave us with no way out. We argue instead that the doctor’s clinical behavior whether expressed in terms of utility or altruism is not a fit subject for economics. The way out is to restrict economics to health care issues with financial dimensions. In their article, Batifoulier and Da Silva bring their French experience to the table. We bring to the table our American experience with more than 40 years of hands-on care for patients along with the experiences of four other physicians in our extended family. The specialties include intensive care pediatrics, emergency medicine, intensive-care pulmonary medicine, dermatology, and otolaryngology. Our premise in responding to Batifoulier and Da Silva is that apart from payment for services rendered, there probably are no serious differences in the actual practice of medicine in France compared to the United States. And even if there are such differences, they are matters to be taken up by medicine not economics.     

Think-tanks,policy formation,and the ‘revival’ of classical liberal economics

The Review of Austrian Economics - There is a widespread view that the ‘rise of neo-liberalism’ was a deliberate and designed phenomenon, brought about by ideologically motivated...     

Structural change and ‘new facts’ in Pantaleoni's non-equilibrium dynamics

The goal of this paper is to investigate Maffeo Pantaleoni's early 20th century dynamic theory, and, in particular, to highlight the novelty of his notion of second-kind dynamics. The main thesis is that Pantaleoni employed the notion to build a truly original, non-orthodox disequilibrium dynamic theory capable of accounting for the dynamic and structural instability of the economic system as well as for the ‘true’ uncertainty affecting decision-making processes.     

What's in a grade? Grading policies and practices in principles of economics

This study created an experimental design with which students can empirically assess their risk behavior with respect to exam grades within an expected utility framework. Specifically, the authors analyzed students’ risk preferences associated with taking exams and earning a “risky” unknown grade versus not taking exams and instead obtaining a “sure” grade. Students have grade-choice decisions in nonhypothetical situations that impact their actual exam grades. Estimates indicate that the more risk-averse a student is, the more willing he or she is to accept a lower certain grade and not take an exam than to run the risk of actually taking it. We believe that this experimental setup and its binding results make it an easy but effective way of teaching the obtuse concept of risk aversion.     

The role of transformational leadership and leaders’ skills for new agricultural cooperatives in post-soviet countries

Team leadership plays a crucial role in the management of agricultural cooperatives, especially in post-Soviet countries where farmers keep bad experiences from the collectivization of their farms. The main objective of the research was to investigate how important the role of leadership is in the process of establishing, initial sustaining of cooperation and members’ commitment among small farmers in Georgia, Moldova and Ukraine. Leadership was analysed from multiple perspectives using an explanatory sequential mixed approach involving quantitative and qualitative methods. We interviewed 293 cooperative leaders and members. The partial least squares structural equation model was used to examine the relationship between multiple constructs and variables. We concluded that leaders do differ in some of their characteristics from other members. They are the most active in the group, influencing all major decisions, playing a crucial role in trust-building and group cohesion. Their skills and leadership style are significantly important for members’ commitment to the group's success. However, the dominance of group founders and lack of understanding of cooperative principles among members indicate some emerging challenges to the cooperatives’ sustainability and efficiency, and it is necessary to focus on the progressive professionalization and capacity building of leaders while maintaining a transformational leadership style.