The Roadblock of Culturalist Economics: Economic Change á la Douglass North

In his 2005 book, Understanding the Process of Economic Change, North offers a rough account of economic change that can be called “culturalist economics.” In his account, he attributes the change of well being of individuals to, besides technology and demographics, cultural heritage or cultural beliefs. Using this basis, he then attributes "the mystery of the unique evolution of western Europe" to a causative view that combines "Christian dogma" and English "individualism." This combinatory belief assures property rights, and hence explains the success of Western Europe and the US and the failure of Islam and Latin America in terms of their respective economic development. But North’s culturalist economics faces a roadblock: it does not explain the origin of beliefs, and it neglects the role of rational choice in manufacturing beliefs. Specifically, it ignores the roles of agency, revolutionary change, and the dynamics of empire.cultural economics vs. culturalist economics; reification of culture; Christian dogma; individualism; mystery of rise of Europe; Islam

WEAKNESS OF WILL

The dominant view regards weakness of will an anomaly facing the standard theory of rationality. The paper argues the opposite: What is anomalous is that weakness of will is not pervasive enough. In a simple model, the paper shows that weakness of will is the dominant strategy in a game between current self and future self. This leads to the motivating question of the paper: Why is weakness of will is not pervasive???given that precommitment and punishment are not sufficiently pervasive to remedy the weakness of will? The paper argues that the answer lies in what Adam Smith calls the ???propriety??? mechanism: Humans demand self-respect and, hence, exercise self-command over appetites and emotions.property of others (justice); property of future self (prudence); decision-action gap (weakness of will); mechanisms (precommitment and propriety); trust; appetites and emotions; libertarian paternalism.

MORAL OUTRAGE

In March 2005, riots erupted in South Korea against Japan for claiming sovereignty over two small uninhabitable rocky islets (0.23 km2) which are equidistanced from South Korea and Japan. In February 2005, riots did not erupt in South Korea against North Korea for announcing it has nuclear weapons. How can we explain moral outrage in one case, where expected net benefit is miniscule, and the lack thereof in the other, where net expected benefit is huge? The paper constructs a forward-looking ???fight-or-fight??? model. The model, though, fails to explain moral outrage: There is no morality in the model to start with. As an alternative, the paper constructs two models: ???quarrel-or-reconcile??? and ???resist-or-submit.??? Both models incorporate the role of national identity. The models succeed to explain moral outrage and the lack thereof depending on the context.Identity; nationalism; fight-or-flight model; quarrel-or-reconcile model; resist-or-submit model.

Adam Smith and Three Theories of Altruism

Smith advanced a particular view of altruism that should prove to be relevant to the modem literature on the subject. It provided the back-bone of his critique of three different theories. These three theories have been reincarnated in three modem approaches : Robert Axelrod's "egoistic", Gary Becker's "egocentric", and George Herbert Mead and Robert Frank's "altercentric" views. Axelrod's approach repeats the failing, which Smith found in Mandeville's. Becker's theory echoes the shorteoming, which Smith identified in Hobbes'. Mead/Prank's view duplicates the fault, which Smith uncovered in the approach of Francis Hutcheson and other figures of the Scottish Enlightenment.Egoistic theory, egocentric theory, altercentric theory

Information, Knowledge and the Close of Friedrich Hayek's System: A Comment

The paper argues that there are two separate orders implied in Hayek's open society: market order and liberal order. The distinction rests on a difference between, what is called here, information and knowledge. While information is about facts such as prices, knowledge expresses the agent's belief about the world. Hayek argues that market order is superior to planned order because information is inherently dispersed. He also argues that liberal order is superior to communal order because the development of knowledge is innately personal. The paper contends that Hayek's arguments cannot be conclusively derived from his theories of information and knowledge.Information; Knowledge; Friedrich Hayek

Optimization, Path Dependence and the Law: Can Judges Promote Efficiency?

The thesis that judges could (voluntarily or not) promote efficiency through their decisions has largely been discussed since Posner put it forward in the early 1970s. There nonetheless remains a methodological aspect that has never (to our knowledge) been analyzed and that we address in this paper. We thus show that both promoters and critics of the judge-and-efficiency thesis similarly use a definition of optimization in which history, constraints and path-dependency are viewed as obstacles that must be removed to reach the most efficient outcome. This is misleading. Efficiency cannot be defined in absolute terms, as a “global ideal” that would mean being free from any constraint, including historically deposited ones. That judges are obliged to refer to the past does not mean that they are unable to make the most efficient decision because constraints are part of the optimization process; or optimization is necessarily path- dependent. Thus, the output of legal systems cannot be efficient or inefficient per se. This is what we argue in this paper.Judicial decision making; Historical inertia; Inefficiency; Adaptationism; Spandrelism; Global ideal; Rationality; Lock-in institutions.

The Roadblock of Culturalist Economics: Economic Change á la Douglass North

In his 2005 book, Understanding the Process of Economic Change, North offers a rough account of economic change that can be called “culturalist economics.” In his account, he attributes the change of well being of individuals to, besides technology and demographics, cultural heritage or cultural beliefs. Using this basis, he then attributes "the mystery of the unique evolution of western Europe" to a causative view that combines "Christian dogma" and English "individualism." This combinatory belief assures property rights, and hence explains the success of Western Europe and the US and the failure of Islam and Latin America in terms of their respective economic development. But North’s culturalist economics faces a roadblock: it does not explain the origin of beliefs, and it neglects the role of rational choice in manufacturing beliefs. Specifically, it ignores the roles of agency, revolutionary change, and the dynamics of empire

The Bayesian Fallacy: Distinguishing Four Kinds of Beliefs

This paper distinguishes among four kinds of beliefs: conviction, confidence, perception, conception. Conviction concerns self-ability:“I can build these stairs.” Confidence also concerns the self—ut focuses on the assertion of will in the face of weakness of will. Perception is about the environment such as weather prediction. Conception is also about the environment—but usually couched with context. While convictions are noncognitive and nonevidential beliefs, the other beliefs are either cognitive, evidential, or both. This paper uses the terms “cognition” and “evidentiality” as axes to distinguish the four beliefs. While “cognitive beliefs” are about one’s environment, “noncognitive beliefs” are about one’s self. While the cognitive/noncognitive divide is unconventional, it generates a payoff in light of the evidentiality axis. While “evidential beliefs” are correctable via Bayes’s rule, “nonevidential beliefs” are not. However, when the nonevidential belief is about the environment, the evidence can at least make the belief more (or less) warranted—where “warrantability” is a weaker criterion than “correctability.” And when the nonevidential belief is about the self, i.e., a conviction, the evidence cannot even make the belief more (or less) warranted. The evidence itself develops when one tries to test a conviction. This paper highlights that convictions are the basis of tenacity—crucial for entrepreneurship and economic growth. This paper further demonstrates how three major theories of action—standard rationality, normative theory, and procedural rationality—fail to distinguish the four kinds of beliefs. They, hence, commit, although in different ways, a set of confusions called here the “Bayesian fallacy.”Cognitive Dissonance; Internal Motivations (convictions); Normative Theory (embodied cognition); Other Beliefs (confidence, perception, conception); Procedural Rationality Theory (pragmatism); Self-Perception Theory; Standard Rationality Theory