Bygones are Bygones

'Bygones are bygones' might seem to be an analytic truth, lacking any substantive content. Yet, economists think that, when they state that bygones are bygones, they are asserting something interesting and important. Furthermore, others would argue that the statement 'bygones are bygones', when read appropriately, is false. By interrogating the statement 'bygones are bygones' we identify a number of key issues relating to rational choice theory and the treatment of intentions, habits and promises. The more philosophical discussion of the things that economists say (and what they might mean) is particularly appropriate in honoring Hartmut Kliemt, much of whose work has brought philosophy and economics into closer proximity.philosophy of economics, intervention principle, future-orientation

From the Australian Settlement to Microeconomic Reform: the Change in Twentieth Century Policy Regimes

This paper outlines and discusses explanations of the substantial shift in the economic policy regime in Australia. The first regime held from federation through the 1970s. It focused on extensive development, through the attraction and retention of selected immigrants by a set of mutually-supportive policies centered on trade protection. The second strategy, of recent vintage, concentrates more on intensive development and, in contrast with the earlier, relies on economic competition, rather than attempting to suppress it. Similar shifts in policy regimes have occurred in other countries, but with different timing and character. In the Australian case, there was bi-partisan support for the claims that liberalization was a desirable response to the changed external economic environment.

Trust, adjudication and the quis custodiet problem

There is a sense in which this familiar classical question - who shall guard the guardians? - is the central normative question in the public choice approach to politics and to institutional design more generally. It is so because public choice theory standardly makes what many would regard as extreme assumptions about the motives of those who hold political power - namely, that holders of political power will invariably tend to exploit that power to achieve their own ends at the expense of citizens at large. The assumption is nicely described by David Hume in a sentence often quoted in public choice circles: “in assigning the powers of government and in devising the several checks and balances of the constitution, every man ought to be supposed a knave and to have no other purpose in all his action but self-interest”. [Hume ‘ Of the Independency of Parliament’ Essays Moral, Political and Literacy p117-118

Keeping Company with Seabright

According to Paul Seabright, �the unplanned but sophisticated coordination of modern economies is a remarkable fact that needs an explanation.� In this paper, I explore what is remarkable about modern economies and investigate what Seabright identifies as the aspect �that needs an explanation.� Essentially, Seabright is interested in the fact that modern economies require a great deal in the way of trustworthy behavior (and trust) in order to function well�and these trust relations must operate specifically among �strangers�! The puzzle for him is how relations of trust (and trustworthiness) among strangers could conceivably have arisen from our tribal evolutionary past. I raise several queries about his diagnosis of this puzzle and of his answer to it

Paying for politics

In Disclosure V. Anonymity in Campaign Finance, Ian Ayres broaches a very particular issue in the design of democratic institutions, discusses that issue in a very particular context, and advocates a very particular institutional remedy. The specific issue concerns the regulation of information concerning political donations. The specific context has two relevant dimensions. Ayres is clearly concerned with the case of the US, and, implicitly and explicitly, the discussion takes many other aspects of the US political environment as the relevant background. At the same time, Ayres is primarily concerned with the prevention of corruption, so that the relevant criterion by which alternative institutional regimes are judged is just the extent to which corruption is deterred. Within this context, Ayres argues that the norm of full anonymity in respect of political donations would operate more effectively to prevent corruption than would the norm of full disclosure; so that rather than ‘sunlight [being] the best of disinfectants; electric light the most efficient policeman’, Ayres argues that total darkness is the real cure for corruption. Ayres’s constructed ‘veil of ignorance’ is nothing like Rawls’s, but it does involve a putatively constructive use of ignorance in the same way that Rawls’s construction does. The essential argument is simple enough. Under full information, all campaign donations are matters of public record, so that there can be nothing covert about the funding process; nevertheless, the possibility of buying political favours is still present. Indeed, in the limit, one might imagine that competitive political donations constitute a straightforward market for political influence that operates alongside the electoral process to determine political outcomes. Whether or not we describe open financial transactions in such a market as ‘corrupt’1, or ‘unfair’ (given an unequal distribution of income and wealth), there is certainly a presumption that such a ‘market’ might be expected to influence political outcomes and so reduce the reliance of political outcomes on the electoral process and other more strictly ‘political’ mechanisms. At the other extreme, under perfect anonymity, campaign donations are organised in such a way that no one (other than the donor - and specifically not the recipient) has any reliable information about the existence, or size, of any individual donation. In this case, so the argument goes, since there can be no proof that a donation has been made, there can be no political deals struck: it is impossible to buy influence if it is impossible to demonstrate payment. Of course, this sketch does not do full justice to Ayres’s argument, but we believe that it suffices to focus attention on the key issues: the idea that corruption takes the form of market-like deals that ‘pervert’ the democratic process in the sense that political outcomes differ from those that would be realised under purely political process; and the argument that such deals are effectively ruled out by complete anonymity. We also note that Ayres’s discussion is informed by a recurring analogy with the process of voting itself - and with the idea, in particular, that the secret or ‘Australian’ ballot provides an appropriate exemplar for secrecy in the political process. We will return to the significance of this analogical reasoning, and to other aspects of Ayres’s specific argument, in due course but first we wish to make some effort to widen the discussion a little. The design of democratic institutions may be approached in either of two styles - a ‘piecemeal’ style or a ‘synoptic’ one. A piecemeal style characteristically focuses on this or that piece of institutional practice and subjects it to scrutiny. A synoptic style is one that attempts to work from general principles in developing an overview of the operation of democratic institutions and to develop thereby implications for the design of particular institutional devices2. Clearly, neither style holds a monopoly on usefulness, and it is likely that the iteration between these styles offers the most plausible route to reasonable conclusions. It is for this reason that, initially at least, we wish to respond to Ayres’s piecemeal proposal in a rather more synoptic mode. Even if we narrow our range of concern to the institutional framework for financing democratic politics, we must recognise that a number of inter-related issues are raised: the relative merits of private and state funding of political parties or candidates; the possibility of regulating either the set of agents who may make political contributions, or the size of the political contributions they may make; the possibility of regulating the flow of information about the financial affairs of donors, parties or candidates; the possibility of regulating expenditures made by parties or candidates; and so on. None of these issues is trivial either in the sense that the normatively appropriate answer is obvious, or in the sense that the same practice has developed almost universally across democratic countries. And matters become still more complicated if we open up the possibility of interactions between these various issues, or with other aspects of the institutional fabric such as voting rules, the structure of representation, and so on. Indeed, it is not even obvious how we should go about addressing these matters. Two ingredients seem essential however - a reasonably clear statement of the model of democratic politics to be used as the test-bed within which to conduct the relevant thought-experiments, and a reasonably clear statement of the relevant normative criteria. Unfortunately, neither ingredient is readily available or widely agreed. The first aim of this brief essay is to say something about the appropriate ingredients to use in constructing particular arguments concerned with the funding of democratic politics or, indeed, any other aspect of the design of democratic institutions. Only then will we return to the specific issue of anonymity in political donations

Republican liberty and resilience

The object of this paper is to focus attention on the ‘resilience’ property of republican liberty – a property that, at least in some formulations, is among those features that distinguishes republican liberty from its more familiar ‘liberal’ counterpart. Our analysis proceeds by way of an analogy with the idea of risk aversion. After setting the stage with a brief description of what we are taking republican liberty to be (in Section I), we turn to the question of how to conceptualise resilience and how the notion might most plausibly be formulated (Section II). Examining alternative possible formulations serves to suggest an analogy between resilience and ‘risk aversion’. In Section III, we exploit that analogy to develop some implications that resilience carries for institutional design. Section IV offers a brief summary

Introduction: Ex Uno Plures. Welfare Without Illusion

Two competing visions of federalism have long held sway. The first is based on the idea of an administrative system of delegation, in which the system of delegations is based on some kind of geographic partitioning of the polity. The second sees federalism as a bottom-up structure in which the larger polity is a construct of the smaller polities of which it is composed. Specifically, the claim is that the effects of federalism cannot be fully understood without consideration of the vision of federalism that the participants in their various roles adopt. One important aspect of the vision is the attitude taken to grants from the central to subsidiary-level governments. On the top-down view, such grants represent simply the judgment that taxes and expenditures are subject to different patterns of optimal decentralization. On the bottom-up view, such grants break what is a critical link between spending and taxing decisions at the level of each sub-national jurisdiction

Fiscal Equity In Federal Systems

This paper examines the normative foundations of fiscal equalization an issue handled, apparently decisively, in a classic paper by James Buchanan (1950). Contrary to Buchanan's claims, we argue that fiscal equalization requires extremely strong value judgements at least in the case where fiscal differences arise from the interaction of public goods provision under different population size effectively committing one to a Rawlsian maximin rule. Much weaker forms of the 'social welfare function' in this public goods case will generate the requirement that private consumption levels be equalized, but specifically not public consumption levels in which sense private goods equalization seems normatively weaker than public goods equalization, If this is so, the hope of justifying federal fiscal equalization on the basis of relatively uncontroversial individualistic norms seems illusory

Social Norms, the Invisible Hand, and the Law

In this paper we argue that social norms are emergent orders, and that when they work well they function as invisible hands, leading each person to act in ways that inadvertently promote social welfare. While coercively enforced laws can achieve similar ends, we argue that lawmakers are apt to overlook the ability of social norms to solve collective action problems. Although there is no simple answer to the question of whether norms or laws should prevail, we outline some general principles to assess the moral trade-offs associated with each