The Moral Significance of Economic Life

Much of the modern perception of the role of economic production in human life – whether on the Left or on the Right of the political spectrum – views it as an inferior, instrumental activity oriented toward self-preservation, self-interest, or profit, and thus as essentially distinct from the truly human action concerned with moral values, justice, and various forms of self-fulfillment. This widely shared worldview is rooted, on the one hand, in the Aristotelian tradition that sees labor as a badge of slavery, and freedom as lying in the domain of politics and pure (not technical) knowledge, and, on the other hand, in the aristocratic mediaeval Christian outlook, which – partly under Aristotle’s influence – sees nature as always already adapted (by divine design) to serving human bodily needs, and the purpose of life as directed toward higher, spiritual reality. Marx, although he attacked the Aristotelian distinction between “action” and “production,” also envisaged the undistorted production process in essentially collectivist Aristotelian terms. As against this, liberal thinkers, above all Locke, have developed an elaborate alternative to the Aristotelian worldview, reinterpreting the production process as a moral activity par excellence consisting in a gradual transformation of the alien nature into a genuinely human environment reflecting human design and providing the basis of human autonomy. Adam Smith completed Locke’s thought by explaining how production is essentially a form of cooperation among free individuals whose self-interested labor serves the best interest of all. The greatest “culture war” in history is to re-establish the moral significance of economic activity in the consciousness of modern political and cultural elites

Driverless Cars and the Much Delayed Tort Law Revolution

The most striking development in the American tort law of the last century was the quick rise and fall of strict manufacturers’ liability for the huge social losses associated with the use of industrial products. The most important factor in this process has been the inability of the courts and academic commentators to develop a workable theory of design defects, resulting in a wholesale return of negligence as the basis of products liability jurisprudence. This article explains the reasons for this failure and argues that the development of digital technology, and the advent of self-driving cars in particular, is likely to force a comprehensive rethinking of products liability, a large-scale return to the principle of strict manufacturers’ responsibility, and a host of other developments of lasting historical and economic significance. The article argues that an integration of manufacturing and insurance industries may be one of these developments

Why Ownership Matters?: Politicization and Entrepreneurship in the Restructuring of Enterprises in Central Europe

This paper, base on a study of mid-sized firms in the Czech Republic, Hungary, and Poland, examines the sources of performance differences between state and privatized firms, particularly those that may be due to politicization and differences in the degree of entreprenurship. The paper presents empirical evidence that politicization of decision making is responsible for the observed inefficiencies in the cost behavior of state enterprises, but does not explain their inferior revenue performance, which is independent of the degree of state involvement.OWNERSHIP ; PRIVATIZATION ; HUMAN CAPITAL

From Sovereignty to Process: The Jurisprudence of Federalism after Garcia

On February 19, 1985, the Supreme Court, in Garcia v. San Antonio Metropolitan Transit Authority, overruled its 1976 decision in National League of Cities v. Usery. Although the continued vitality of National League of Cities had been in question in recent years, the Court\u27s abrupt repudiation of the very principle announced in that case is an event of considerable significance, beyond showing, one more time, that the rule of stare decisis has a limited application in the Court\u27s modern constitutional adjudication. Garcia\u27s importance lies, above all, in revealing the absence of anything approaching a well elaborated theory of federalism that would provide a solid intellectual framework for an articulation of the Justices\u27 divergent views on state-national relations. Three dissenting members of the Garcia Court state in no uncertain terms that they are prepared to reverse the course again in the near future. It is very important, therefore, for the scholarly community and the profession to conduct a thorough inquiry into the theoretical foundations of federalism before the Court embarks on further adventures. The position of federalism in our constitutional law is peculiar. On the one hand, next to separation of powers and individual rights, federalism is clearly one of the three main branches of our constitutional structure. On the other hand, judicial enforcement of any limits on national power that the concept of federalism might entail has a rather unfortunate history and, at least insofar as the limitations on national commerce power are concerned, seems to have been abandoned in the Garcia case in favor of what Professor Wechsler has called the political safeguards of federalism

Why Ownership Matters? Entrepreneurship and the Restructuring of Enterprises in Central Europe

This paper, based on a study of mid-sized firms in the Czech Republic, Hungary, and Poland, seeks to explain the reasons behind the marked impact of ownership on firm performance which has been observed in a number of studies in Eastern Europe and other parts of the world. Focusing in particular on the differential impact of ownership on revenue and cost performance, the paper argues that privatized firms controlled by outside investors are more entrepreneurial than those controlled by corporate insiders or the state. The paper provides evidence that all state and privatized firms in transition economies engage in similar types of restructuring, but that product restructuring by firms owned by outsider investors is significantly more effective (in terms of revenue generation) than that by firms with other types of ownership. The paper also examines the impact of managerial turnover on revenue performance, as well as differences among managers of firms with different types of ownership, and concludes that the more entrepreneurial behavior of outsider-owned firms is due primarily to incentive effects, rather than human capital effects, of privatization. More specifically, the authors argue that the success of outsider-owned firms is due to their greater readiness to accept risks (as evidenced by the higher variance of the revenues generated by restructuring) and a lesser need to defend, and account for, their managerial decisions.OWNERSHIP; PRIVATIZATION; POLITICIZATION; ENTREPRENEURSHIP; INCENTIVES; HUMAN CAPITAL

The Roles of the State and the Market in Establishing Property Rights

Using the experiences of Eastern Europe as an example, this article argues that, contrary to the economists\u27 assumption that property rights are a precondition of a market economy, market institutions are often a prerequisite for a viable private property regime. Progress in the development of complex property rights in Eastern Europe, thus, cannot be expected to come primarily from a perfection of the legal system. Instead, it is more likely to arise as a market response to the demand for property rights. Indeed, legal entitlements can only be expected to become effective against a background of self-enforcing market mechanisms

Impact Investing as a Form of Lobbying and its Corporate-Governance Effects

Impact investment is attractive to many because it seems to combine support for progressive causes with an apparent commitment to the principles of a market economy. In fact, however, a rational impact investor is not simply creating demand for certain types of corporate actions; he/she is attempting to use corporate governance mechanisms to influence fiduciary decisions of the management. The cost of this tactic for the health of the capitalist economy is potentially very considerable. The American capitalist system relies heavily on a relatively fragile corporate governance arrangement in which the agency problems of a modern corporation are minimized by making shareholder value into the ultimate objective of the management. A crucial assumption in this model is that shareholders are a homogenous group interested in the maximization of financial returns, which makes market price into a reliable criterion of corporate performance. The injection of a more complex corporate objective function – an inevitable consequence of impact investment – raises the potentially insoluble problem of aggregating the diverse interests of the shareholders and seriously weakens the ability of the shareholders to monitor management performance

Constitutional Politics in Poland: A Report on the Constitutional Committee of the Polish Parliament

This Article is neither a comprehensive historical account of the work of the Constitutional Committee of the Polish Parliament nor a theoretical synthesis of recent constitutional developments in Poland. Rather, it is a mixture of theory, anecdote, and personal reminiscence that I feel at this point most capable of providing. As will be seen, the work on the new Polish constitution has in some ways been overtaken by events that unfortunately have always lurked in the background of the drafters\u27 work and influenced their decisions. In fact, it is not clear that Poland will enact anything resembling the draft prepared in the process that this Article describes, and it would be premature to attempt a more systematic narration. My personal perspective also accounts for the Article\u27s focus on constitutional questions of institutional structure. Since February 1990, I have served as an expert adviser to the Subcommittee on Institutions of the Polish Parliament\u27s Constitutional Committee, and both by interests and experience I am best equipped to provide information on the emerging institutional structure of the Polish state. Therefore, this Article does not discuss the protection of individual rights in the next Polish constitution, except insofar as it relates to institutional considerations