Federalism as an effective antidote to terrorism

Many governments as well as terrorist experts see the use of military and police forces as the only way to effectively counter terrorism. The most effective negative sanctions are considered to be military strikes, aggressive actions (including kidnapping and killing) against individuals known or suspected of being terrorists, or against persons supporting and harboring terrorists. Overt and covert military and paramilitary action is also thought advisable to pre-empt and prevent actions by terrorist groups, as well as against states suspected of hosting or tolerating terrorists. This paper argues that decentralization constitutes a powerful antidote as it strongly reduces the incentives for terrorists to attack and because the expected damage suffered is much smaller than in a centralized society. It moreover strengthens society, as economic, political and social decentralization (or polycentricity) is an essential element of a free and vigorous society. This in turn makes a society less vulnerable to terrorist attacks. Indeed, terrorism has no chance of success against a society that actively guards its fundamental liberal institutions, of which decentralized decision-making forms an essential part

Tullock Challenges: happiness, revolutions and democracy

Gordon Tullock has been one of the most important founders and contributors to Public Choice. Two innovations are typical “Tullock Challenges”. The first relates to method: the measurement of subjective well-being, or happiness. The second relates to digital social networks such as Facebook, Twitter, or to some extent Google. Both innovations lead to strong incentives by the governments to manipulate the policy consequences. In general “What is important, will be manipulated by the government”. To restrain government manipulation one has to turn to Constitutional Economics and increase the possibilities for direct popular participation and federalism, or introduce random mechanisms.Happiness, social networks, constitutional economics, random mechanisms, public choice

Overprotected Politicians

This paper argues that politicians are overprotected. The costs of political assassination differ systematically depending on whether a private or a public point of view is taken. A politician attributes a very high (if not infinite) cost to his or her survival. The social cost of political assassination is much smaller as politicians are replaceable. Conversely, the private cost of the security measures is low for politicians, its bulk – including time loss and inconvenience – is imposed on taxpayers and the general public. The extent of overprotection is larger in dictatorial than in democratic countries.

Financial Instability and Credit Constraint: Evidence from the Cost of Bank Financing

This paper examines the relation between the degree of firms’ financial constraint and the observed rise in the cost of bank financing during the global financial crisis of 2008. It introduces a new measure of financial constraint: the lending rate paid by each firm on working capital loans. In line with previous research, the findings point to a more severe contraction in credit supply for more credit constrained firms. Additionally, the results show that the existence of collateral and a large portfolio of lenders mitigate the credit supply contraction observed in that period.

A Multiplicity of Approaches to Institutional Analysis. Applications to the Government and the Arts

Institutional Analysis; Government; Arts; Political Economics

Knight Fever – Towards an Economics of Awards

Awards in the form of orders, medals, decorations and titles are ubiquitous in monarchies and republics, private organizations, not-for-profit and profit-oriented firms. Nevertheless, economists have disregarded this kind of non-material extrinsic incentive.The demand for awards relies on an individual’s desire for distinction, and the supply of awards on the provision of incentives. Relative price and income effects are shown to be identifiable and strong. A number of empirically testable propositions are formulated. As awards are (at least so far) impossible to measure adequately, empirical tests are carried out using the technique of analytic narrativesincentives, motivation, awards, orders, distinction, principal-agent

Tullock Challenges: Happiness, Revolutions and Democracy

Gordon Tullock has been one of the most important founders and contributors to Public Choice. Two innovations are typical “Tullock Challenges”. The first relates to method: the measurement of subjective well-being, or happiness. The second relates to digital social networks such as Facebook, Twitter, or to some extent Google. Both innovations lead to strong incentives by the governments to manipulate the policy consequences. In general “What is important, will be manipulated by the government”. To restrain government manipulation one has to turn to Constitutional Economics and increase the possibilities for direct popular participation and federalism, or introduce random mechanisms.happiness, social networks, constitutional economics, random mechanisms, public choice

Direct Democracy for a Living Constitution

The development of the constitution must be based on the rule of law. Direct democratic rights allow citizens to participate in the amendment process. The direct democratic process of institutional change is theoretically and empirically analyzed. A number of counter arguments and issues for a gradual introduction are discussed. --