Public choice versus constitutional economics: A methodological interpretation of the Buchanan research program

Through conceptual redirections, the Buchanan research program attempts to react to the fact that economic policy advice is often ignored. In terms of positive analyses, the research perspective is focused on institutions, i.e., the rules of economic as well as political games. In terms of normative analyses, the democratic criterion of unanimous consent is substituted for the normative efficiency criterion employed by welfare economics. The underlying idea is to direct positive analyses toward developing informative explanations on which normative analyses can build in order to provide intellectual orientation and thereby to contribute to democratic self-enlightenment. However, large parts of the existing public choice literature can be regarded as empirically oriented welfare-economic analyses of the political sector. Consequently, they run the danger of duplicating the failure of economic policy advice. This is why, during the 80s James Buchanan has changed the name of his research program from public choice to constitutional economics.     

Has Europe missed the endgame of telecommunications policy?

The European Electronic Communications Code (EECC) is a major milestone in the EU's telecommunications policy. But is it such a step forward and are the technical and market developments such that the EECC is the endgame? An endgame would mean that sustainable competition is reached in all telecommunications markets. The current paper argues that the EECC's new policy goal of investment in very high capacity connectivity could actually lead to policies that end in sustainable infrastructure competition. The EECC's policies, however, are not courageous enough to reach this goal. This lack of courage also characterizes the EU's gatekeeper policies on call terminations and net neutrality. In both these areas an endgame with sustainable competition is possible.     

Toward a combined merchant-regulatory mechanism for electricity transmission expansion

Electricity transmission pricing and transmission grid expansion have received increasing attention in recent years. There are two disparate approaches to transmission investment: one employs the theory based on long-run financial rights (LTFTR) to transmission (merchant approach), while the other is based on the incentive-regulation hypothesis (regulatory approach). In this paper we consider the elements that could combine the merchant and regulatory approaches in a setting with price-taking electricity generators and loads. The monopoly transmission firm (Transco) is regulated through benchmark or price regulation to provide long-term investment incentives. The two-part tariff approach used can be analyzed analytically only for well-behaved cost and demand functions. We explore a series of simplified transmission grids to argue that in a variety of circumstances those functions could have reasonable economic properties. The results suggest directions for further research to explore the properties of the cost functions and implications for design of practical incentive mechanisms and the integration with merchant investment in organized markets with LTFTRs.     

Inhumane Arbeitsbedingungen auf dem globalen Markt — Wer kann, wer soll handeln?

Workers in Asian factories producing for Western markets suffer under inhumane working conditions. Suicides at Chinese suppliers of computer manufacturers and a fire in a Bangladesh garment factory recently drew public attention to this problem. But would workers in developing countries really benefit from better working conditions and higher wages? It may be more likely that countries implementing these improvements would lose in global competition. Therefore, developing countries are limited in their ability to raise labour standards on their own. This competitive situation, however, is the very reason why labour rights have to be negotiated internationally. Existing voluntary international standards of the UN, ILO or OECD are useful but not sufficient, and trade sanctions in the WTO framework pose dangers of disguised protectionism. More promising but still imperfect avenues are Free Trade Agreements that could be used to enforce minimum ILO labour standards and transparent certifications, e.g. for fair trade products.     

Corporate Social Responsibility and the Benefits of Employee Trust: A Cross-Disciplinary Perspective

Research on corporate social responsibility (CSR) has tended to focus on external stakeholders and outcomes, revealing little about internal effects that might also help explain CSR-firm performance linkages and the impact that corporate marketing strategies can have on internal stakeholders such as employees. The two studies (N = 1,116 and N = 2,422) presented in this article draw on theory from both corporate marketing and organizational behavior (OB) disciplines to test the general proposition that employee trust partially mediates the relationship between CSR and employee attitudinal and behavioral outcomes. Both studies provide evidence in support of these general relationships. Theoretical and practical implications of these findings are discussed in the context of CSR and corporate marketing research.     

Why and How Combining Strong and Weak Ties within a Single Interorganizational R&D Collaboration Outperforms Other Collaboration Structures

The purpose of this paper is to demonstrate why and how an ambidextrous interorganizational R&D collaboration outperforms other collaboration structures in the creation of innovation. This research effort contributes to a growing stream of research in social network theory suggesting that the contradictory theories of the strength of weak ties and weak network structures on the one hand and the theory of strong ties and closed network structures on the other have a mutually reinforcing effect on innovation outcomes if combined rather than considered separately. An in‐depth exploratory single case study approach within an innovatively organized national R&D collaboration allowed giving further evidence for such a superior innovation performance and for this research to contribute to theory by demonstrating why and how such a combination may lead to higher innovation output and how this effect can be actively reinforced. It is suggested that the combination of strong and weak ties should occur at the individual rather than at the project or firm level. The authors distinguish between the additive effects of the respective innovation benefits of strong and weak ties, a positive interaction effect in the portfolio of dyadic ties of an individual and a second multilevel interaction effect of weak ties embedded in the ambidextrous network structure. Referring to previous empirical findings, intellectual property regulation and structural interdependency between network members showed a higher impact than trust with regard to leveraging weak ties and are important sources for achieving the multilevel interaction effect. Managerial implications of this research are that a large network will outperform several smaller, independent networks given that the right structure and processes are in place. Direct implications for the architecture of an ambidextrous R&D collaboration are discussed, and a framework for a new form of technology R&D collaboration called “semi‐open organization” is presented, which places itself between the extremes of traditional R&D in closed organizations and completely “open innovation” approaches.     

The Dodd‐Frank Wall Street Reform and Consumer Protection Act: Accomplishments and Limitations*

The Dodd‐Frank Wall Street Reform and Consumer Protection Act of 2010 is widely described as the most ambitious and far‐reaching overhaul of financial regulation in the United States since the 1930s. Together with other regulatory reforms introduced by regulatory agencies globally, the Act aims to put an end to the too‐big‐to‐fail problem and is expected to alter the structure of financial markets in profound ways. This article provides an overall assessment of the Act in three different ways: first, in light of first economic principles, or how theory suggests we should regulate the financial sector, given the systemic risk externality each financial firm imposes on other firms and the rest of the economy; second, from a comparative perspective that views the proposed reforms in relation to those undertaken in the 1930s following the Great Depression; and, finally, in the form of an assessment of how the proposed reforms would have fared in preventing and dealing with the crisis of 2007–2009 had they been in place at the time. The article also highlights key areas that are left wholly or partly unaddressed by the Dodd‐Frank Act—notably, the pricing of explicit and implicit government guarantees; dealing with inevitable opportunities for the financial sector to engage in regulatory arbitrage; and containing the systemic risk arising from collections of small institutions and markets such as money market funds and repo contracts.     

Individual choice or collective action? Exploring consumer motives for participating in alternative food networks

Alternative food networks (AFNs) are growing in number and relevance in Germany. Those networks include new models of production and distribution, such as food cooperatives (FoodCoops), self‐harvest gardens or community‐supported agriculture (CSA) schemes. AFNs, as an alternative to conventional food supply systems, are characterized by a close producer‐consumer interaction. They are typically located within urban or peri‐urban areas. The study aims to identify the rationale and motivation of urban residents in participating in AFNs and developing a consumer typology. We also assess whether AFNs potentially lead to collective action with societal impact. Therefore, we conducted a qualitative content analysis based on 18 interviews with members of existing AFN projects in three German metropolitan regions. Our results revealed that the willingness of urban consumers to participate in AFNs is driven by a broad range of motives. They include personal desire for high‐quality food (in terms of taste or freshness) and health reasons, but also political or environmental motives (opposition to conventional agriculture or short transport distances). Furthermore, consumers often want to support a certain farmer and his/her philosophy or they appreciate the community‐building aspect. Three different consumer types were derived from the motive combinations. Many consumers communicated a sense of belonging to a societal movement, however, our study revealed a lack of organization and collective action. Although AFNs can influence the consumption patterns of individuals, their potential to induce social change and to challenge traditional models of consumption in the near future does not appear to be high.