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Robust Institutions
Authors:Levy  David M.
Affiliation:(1) Department of Economics, Center for Study of Public Choice, George Mason University, Fairfax, VA 22030, USA
Abstract:I propose to show how to translate the economic analysis of institutions developed in the tradition of ldquoworst caserdquo political economy into the lingua franca of robust statistics. An institution will be defined as contingent upon a design theory and the difficulty we consider is the use of the institution by the designer.The technical bridge between institutional robustness and statistical robustness is the the possibility of exploratory data analysis [EDA] with respect to the design theory. In an institutional context with EDA comes the recognition that the model is not completely specified, that we do not fully understand the structure of world before studying it. In a statistical context with EDA comes a non-normal error distribution.The relationship between evolutionary institutions and robust institutions is discussed. A conjecture that ldquorule utilitarianismrdquo can be thought of as ldquorobust utilitarianismrdquo is defended with the historical example of William Paley's discussion of the utility of murder.
Keywords:robust  institutional analysis  public choice  exploratory data analysis
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