Military Expenditures and Industrialization in Africa

My purpose here is to strengthen Karl Polanyi’s work through critique of and extension to abductive processes. Polanyi presented history woven into a new paradigm for analysis of socioeconomic systems, demonstrated discovery similar to abductive processes, and extended abduction into a holistic context. One of Polanyi’s most important contributions to socioeconomic analysis is the explanation of three integrated network models of socioeconomic reciprocity. They are coadjuvancy, redistribution, and market exchange. Polanyi extended abductive reasoning in two ways. First, he extended it beyond the cognitive logic of a person to inferences and societal belief changes of institutions. Second, he showed that, in the real world, beliefs are not only fixed like an abductive process, they are fixed in law. Throughout Polanyi’s historical presentation, market beliefs are being revised, thus serving as a demonstration of the abductive process. I make both positive and negative critique of a number of Polanyi’s concepts, with special attention to reciprocity, the double movement, and freedom. This critique and abduction extension strengthens Polanyi’s paradigm for future socioeconomic analysis with his integrative network models.     

Gordon Tullock’s implicit analytical history of government

Gordon Tullock wrote widely on the emergence and effects of political and legal institutions. Although he did not provide an analytical narrative, perse, his work provides explanations for the emergence of the state, civil law, constitutional law, and democracy. When his work is organized as a historical narrative, it becomes clear that conflict, rather than trade or cooperation, are at the core of Tullock’s approach to constitutional political economy.     

Budgetary institutions and fiscal discipline: Edmund Burke's insightful contribution

Recent developments in the political economy of public finance literature have focused on the features of budgetary institutions that facilitate budgetary discipline — a sub-discipline of constitutional economics. In this literature, there has been no attempt to trace the development of economic thought on the relationship between budgetary institutions and fiscal discipline. This may be because debt accumulation in peacetime is seen as a late twentieth-century phenomenon. As a result, Edmund Burke's contribution, in his speech ‘On Economical Reform’, seems to have been forgotten. This paper highlights Burke's contribution and identifies the extent to which it captures those features of budgetary institutions that are currently recognized as facilitating budgetary discipline.     

DEVELOPMENT AS FREEDOM v - v AND AS WHAT ELSE?

To what extent can Amartya Sen's ideas on freedom, especially his conceptualization of development as freedom, enrich feminist economics? Sen's notion of freedom (as the capability to achieve valued ends) has many attractions and provides important opportunities to analyze gender inequalities. At the same time, Sen's recent emphasis on freedom as the dominant value in judging individual well-being and societal development also contains risks, not least for feminist analysis. We characterize the risks as an underelaboration and overextension of the concept of freedom. Drawing on Sen's earlier work and various feminist theorists, we suggest instead a more emphatically pluralist characterization of capability, well-being, and value, highlighting the distinct and substantive aspects of freedom, as well as of values besides freedom, in the lives of women and men. We illustrate this with reference to women's economic role as caregivers.     

State-led humanitarian aid: Another case of “government failure”

A review essay on Christopher Coyne’s Doing Bad by Doing Good: Why Humanitarian Action Fails (Stanford: Stanford University Press, 2013). The book considers whether state-led humanitarian actions can be expected to succeed in reducing human suffering. Finding that as a rule they cannot be expected to do so, Coyne devotes the greater part of the book to an analysis of such programs in the light of the economic way of thinking, which in his approach blends public choice, basic applied price theory, Austrian economics, and the new institutional economics. He concludes that the best way to reduce human suffering in the long run is by promoting sustained economic development and that the best way to achieve such development is by adopting institutions that protect economic freedom.     

Individuality and the economic order in Hegel's Philosophy of Right

This paper examines Hegel's perspective on the market economy, paying particular attention to how the market fits into his conception of freedom. Hegel's doctrine of freedom implies that market relations realize a distinctive form of freedom; however, due to the ontological deficiencies of this freedom, it must be subsumed under a superior freedom that is realized only within the state. The paper also explains why Hegel, although an economic liberal, does not accept the basic tenets of political liberalism, and why he does not regard economic science as a tool for public policy.     

Parasitical cultures? The cultural origins of institutions and development

Do cultural attitudes affect institutions and economic performance? This paper suggests they do. To measure the impact of cultural attitudes we use prevalence rates of the common parasite Toxoplasma gondii which is known to affect individual attitudes and societal values in predictable ways. By using prevalence rates of Toxoplasma as instrument for cultural variation, we are able to isolate the effects of cultural attitudes on institutions, distinguishing them from effects of institutions and economic outcomes on culture. We find that our indicators of cultural attitudes are significant determinants of institutional quality, and strong predictors of long-run economic performance.     

Property rights,entrepreneurship and coordination

The notion of plan coordination enjoys a central place in the analysis of institutions and competitive market processes. The conventional wisdom is that institutions and policies vary in the extent to which they promote competition and how quickly and completely they bring individuals’ plans into closer coordination with one another. Kirzner has provided the most fully elaborated statement on the use of coordination as a positive analytical device for explaining market dynamics and as a normative criterion for evaluating economic policies. We identify the core propositions in his analysis that elucidate how economic coordination depends upon that most fundamental of market institutions – the system of private property rights. We also probe into Kirzner's claims about inherent limitations in our ability to compare the coordinative potential of alternative property rights systems. We unpack the consequences of these core propositions using the economic theory of property rights. We also examine Kirzner's assertion that dynamic competition – including Schumpeterian innovation – is necessarily coordinative in its market effects. We find that his argument rests on the implicit assumption that property rights remain constant during the process of market adjustment. We provide a case study of the advent of commercial aviation as a potential counterexample to his claims.     

Keynes,the socialisation of trade,and international monetary institutions

While Keynes began formulating his ideas concerning the post-WWII international financial system in the early 1940s, the genesis of these ideas can be traced to his earlier work. The Keynes Plan represents the culmination of his search for adequate institutions that guide economic activity for the public good. The reasons given by Keynes for the establishment of an International Clearing Bank are relevant in the modern international economy, given the current imbalances in international trade. As Keynes argued for the socialisation of investment as a method to achieve full-employment in the domestic economy, he argued for the “socialisation of trade” as a method to achieve international economic balance among nations.     

The moderating role of culture on the benefits of economic freedom: Cross-country analysis

The implementation of pro-market policies and institutions is often suggested for enhancing a country's development. However, implementing pro-market policies and institutions has a mixed track record. Some have ascribed the bad results to the neglect of people's predispositions, often described as culture. In this study, we argue that successful implementation of pro-market policies and institutions requires that large parts of the population know how to use the resulting freedom in a way that can bring long term benefits. A panel analysis on a sample of 67 countries from 1970 to 2019 confirms this theoretical argument. We find that Long Term Orientation increases the effect of economic freedom on income per capita, whereas Uncertainty Avoidance weakens the positive relationship between economic freedom and income per capita. The policy implication is that the introduction of free market policies and institutions will particularly foster economic development in long-term oriented societies and in societies with low Uncertainty Avoidance.     

Constitutional Choice and Prosperity: A Factor Analysis

Forempirical purposes most studies on the influence of freedom on prosperity across nations use either aggregate measuresof economic freedom combined with a measure of political liberty,or single components of these aggregates to describe the freedom-variable.For a scholar of constitutional economics, both these approachesdo not seem to be satisfactory. From his theoretical viewpointhe would favor an approach that focuses on properties of thepolitico-economic order that can be interpreted as appropriateconstraints for preferred outcomes. Factor analysis is the methodused in this paper to extract from a pool of components thatdescribe freedom two main factors, namely (1) the appropriatenessof the framework in which the market operates, and (2) the degreeof political interventions into the market process. It is shownthat these two factors have great influence on the prosperityof nations.     

Constitutional safeguards against centralization in federal states: An international cross-section analysis

This paper contains an international cross-section analysis of the share of central government expenditure in total government expenditure for a sample of about 50 countries and a subsample of 23 industrial countries in 1989–91. The expenditure shares, their changes and the unexplained residuals for each country are reported in Table 1. As the analysis demonstrates, the share of central government is significantly lower, if income per capita and the country's area are large and if it is a federal state. The explanatory power of the equation rises considerably if the binary dummy for federalism is replaced by quantitative constitutional variables. The most powerful single explanatory variable is the age of the constitutional court in the complete sample or the constitutional court's independence of union institutions in the sample of industrial countries. The equation's explanatory power (adjusted for degrees of freedom) can be raised by allowing also for the degree of control which provincial institutions have over the constitution and over the second chamber and by taking into account whether an increase in federal tax rates requires a popular referendum. Other types of constitutional referenda and the relative age of the federal constitution do not seem to matter. Among the federal states, the share of central government is much larger than predicted in the United States and Mexico, and it is much smaller than predicted in Argentina and Canada. The constitutional variables are particularly helpful in explaining the relatively small share of central government in Switzerland, Malaysia, Germany and Austria. The last section draws conclusions for the design of constitutions with some special applications to the European Union.     

The Institutional Revelation: A comment on Douglas W. Allen’s The Institutional Revolution

Institutions are a central topic in economic history. Allen’s work differs in that he is interested in institutions per se, not as a means to economic performance and prosperity. The purpose of this book is to explain the institutions of the premodern world and to show why they changed. His argument is that in a Principal-Agent situation, before the Industrial Revolution, it was harder for the Principal to attribute whether the failure of the project was due to acts of nature or some acts of the agent, hence the “strange” institutions. In a modern world, with a much improved monitoring technology, we can use more “efficient” institutions, hence the Institutional Revolution. Although innovative and interesting, the author over-stresses his argument. Much more than monitoring in a principal-agent relationship is needed to explain the Industrial Revolution and the changes in institutions associated with it.     

GLOBALIZATION AND WOMEN'S PAID WORK: EXPANDING FREEDOM?

In Development as Freedom , Amartya Sen takes expanding freedom to be the primary end and the principal means of development. I discuss his emphasis on women's agency as central to development theory and practice and the strategies he advocates for enhancing it. Recent work in feminist economics and postcolonial studies tests Sen's complex account of freedom. Further levels of complexity need to be added when we examine how global forces of power interact with local systems of oppression in ways that often limit women's freedom. This argument rests on an analysis of how globalization affects a domain of freedom that is a central concern for Sen, that of increasing women's freedom to work outside the home as a way of strengthening their agency. Attending to elements missing in Sen's account will enhance freedom in women's lives.     

What is the Message of ‘Understanding the Process of Economic Change’ for Economic Historians?

This paper addresses Douglas North's latest book in the light of his intellectual lifework. North's original insistence upon the role of transaction costs did not require a departure from the neoclassical framework as clear-cut as the one required by North's latest emphasis on the role of intentionality. North's recent interest in the cognitive premises of institutional constraints to rational choice considerably expands the scope of the economic analysis of change. However, North still considers institutions supporting homo oeconomicus to be the most important progressive element in history. The paper argues that North's message goes beyond what he would be willing to transfer into the practice of economic historians. In particular, North's new conceptual framework should open the way to the acknowledgment that a plurality of progress-oriented institutions are possible, and that individualism itself could be seen as a multi-dimensional concept.     

Dutertenomics: Populism,Progress, and Prospects

In 2016, when Rodrigo Duterte was elected Philippine President the economy was growing robustly. Despite the record growth, his election is considered a populist revolt of the middle‐ and upper‐class Filipinos. Yet, his economic policies – from his initial 10‐point agenda to the laws he approved – are liberal. This paper distinguishes and relates Duterte's authoritarian‐populist political style (“Dutertismo”) and his economic agenda (“Dutertenomics”). The distinction follows from his lack of interest in economic affairs, which he delegated to his team of economic managers. This team ably pushes important economic reforms because of the president's style, which so far has earned him wide public approval. After slowing down during the first half of Duterte's term, growth has recently picked up. To keep the momentum and public attention off human rights violations, Duterte needs to accomplish his economic agenda by mid‐2022. Drawing on his powers and popularity, he may yet be able to elicit the full support of Congress.     

Old (Chicago) school,new century: the link between Knight and Simons’ Chicago plan to Buchanan’s constitutional money

James Buchanan had long been a champion of the early Chicago school’s emphasis on the essential role that institutions play in framing the market process. In his post-2009 analysis of the financial crisis, Buchanan echoed his old Chicago mentors like Frank Knight and Henry Simons in arguing that the Great Recession, like all previous financial crises, was primarily a failure of the rules governing our monetary-financial system. This “old Chicago” emphasis on the institutional “rules of the game” formed the basis of his essential post-2009 argument that the financial crisis fundamentally represented not a market failure, per say, but a constitutional failure. In this paper, I connect the dots in Buchanan’s post-2009 analysis of the Great Recession and his reaffirmation of the need for “constitutional money” to his old Chicago mentor’s strikingly similar calls for a radical restructuring of the monetary-financial system in the Chicago Plan of the 1930s. Though Buchanan’s twenty-first century resurrection of these ideas has yet to conjure up the academic support of his predecessors, certain elements of his “old school” monetary-financial reforms have experienced a strong revival since the financial crisis, as has Buchanan’s more general call to “constitutionalize money.”     

Political capitalism: The interaction between income inequality,economic freedom and democracy

We study the relationship between income inequality and economic freedom for a panel of 100 countries for the 1971–2010 period. Using a panel Granger non-causality approach, we reject the null hypothesis of Granger non-causality running from income inequality to economic freedom, but not vice versa. From a series of dynamic panel estimations we show that the effect of income inequality on economic freedom is negative and robust to the inclusion of additional controls. In particular, inequality is negatively associated with those components of economic freedom related to international trade, domestic market regulation as well as the rule of law and property rights protection. We argue that the negative effect of inequality on economic freedom is due to the economic elite converting its economic power into de facto political power to defend its economic interests; these interests run counter to economic freedom, discouraging innovation and competition as well as protecting the elite's rents. Finally, we show that economic freedom decreases with income inequality even in democratic countries, suggesting that democratic institutions do not prevent economic freedom from eroding. We argue that the latter finding corresponds to a system of political capitalism or captured democracy, where a powerful economic elite can nevertheless exercise de facto political power by cooperating with politicians and other decision-makers for their mutual benefit.     

Constraining Leviathan

This article commemorates James M. Buchanan and his contributions to public choice and constitutional political economy. It focuses on what Buchanan had to say about constraining the State, or as he often referred to it, Leviathan. It concentrates on a handful of his major works that I think capture important elements of his thinking. It discusses Buchanan’s writings on public debt and government deficits; the size of the state; federalism; and taxation, among other things. It is argued that the main emphasis in Buchanan’s work as it pertained to constraining the State was to include provisions in the constitution that could achieve this end. These included a balanced budget amendment, rules governing the expansion of the money supply, constraints on the types of taxes that could be levied, linking expenditure proposals to the taxes that would finance them, earmarked taxes, and a generality principle, which would avoid a majority coalition’s exploitation of a minority. The article also includes a discussion of the current constitutional crisis in the United States.     

Joseph Schumpeter and Thorstein Veblen on technological determinism,individualism and institutions

This article investigates Joseph Schumpeter's affinities with Thorstein Veblen with respect to technological change and determinism, the future of capitalism, individualism and institutions. From a methodological point of view, a common point in their analysis is their anti-teleological view regarding economics as a discipline. Also, in the Schumpeterian system, technology is the cornerstone of economic evolution and appears as the making of new combinations. In the Veblenian theoretical framework, the bearer of change is to be found, inter alia, in technology, just like in Schumpeter's works, although not without differences. They also share the opinion that technology revolutionises capitalism and has serious implications for its future as a system. Furthermore, regarding individualism, in his work Schumpeter stresses the importance of the social milieu on individual action, a fact which bears strong resemblance to the Veblenian notion of evolution as ‘depersonalized evolution’. In this sense, Schumpeter is very close to Veblen, although Schumpeter's approach could be classified in what is called institutionalist individualism, whereas Veblen could be classified as holist. Undoubtedly, the role of institutions is of great importance in both Schumpeter and Veblen. Ιnstitutions in the Schumpeterian schema play a central role closely related to the future of capitalism. Institutional and non-institutional factors enter into complex forms of interaction just like in Veblen's approach. There, institutions are part of the social milieu and their underlying framework, much wider than mere economic and social. Of course, the theoretical analyses of Schumpeter and Veblen are not devoid of differences springing mainly from their methodological approach such as the role of the individual in the capitalist process which is probably the most significant difference regarding the importance attributed to it in Schumpeter's early works. Also, the way technical change appears constitutes another difference. However, his views are quite close to Veblen's. After all, Schumpeter began to write in a social, political, theoretical and ideological environment at a time when evolutionary ideas dominated social thought.