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The author or concept searched is found in the following 11 entries.
| Disputed term/author/ism | Author |
Entry |
Reference |
|---|---|---|---|
| Agreement | Buchanan | Boudreaux I 58 Agreement/Buchanan/Boudreaux/Holcombe: A market order works well when the cooperation of only a few individuals is needed for them to achieve their goals. The protective state is sufficient to ensure an environment in which people interact with each other voluntarily, for their mutual benefit. >State/Buchanan, >Market/Buchanan, >Liberalism/Buchanan. When a large group of individuals is required to accomplish some goals, such as producing the public works that Adam Smith mentioned, the productive state has a potential role to play at coordinating the actions of everyone in the large group. Buchanan uses the same benchmark of mutual agreement to evaluate the role of government. Individuals should be in agreement on the government’s actions. Is it ethical for governments to coerce people into paying taxes, or to force them to obey government regulations? Buchanan argued that if government actions are truly in the public interest, people would agree to grant the government that coercive power. Taking this concept of mutually agreeable exchanges to the large-numbers case and to the coercive actions of government was a big part of Buchanan’s lifetime research program. Boudreaux I 59 He said, “Improvement in the working of politics is measured in terms of the satisfaction of that which is desired by individuals, whatever this may be, rather than in terms of moving closer to some externally defined supra-individualistic idea” (Buchanan, 1986)(1). >Exchange, >Liberty/Buchanan. Boudreaux I 77 Agreement/Buchanan/Boudreaux/Holcombe: Problem: In reality no [social] contract exists. People living under the jurisdiction of a government are subject to that government’s mandates without necessarily having agreed to them. Even if in principle they would agree, they had no actual opportunity to express their agreement or disagreement. This fact leaves two big questions for the social contractarian. First, in what sense could people be said to be in agreement with a social contract when there is no actual agreement? Second, what can usefully be said about the terms of that contract? Anarchy: In The Limits of Liberty(2) Buchanan began his approach to answering these questions by imagining Hobbesian anarchy. The relevance of this hypothetical journey to anarchy is that people in that situation lose all social status. In an anarchic condition, there are no social or economic institutions that determine how people interact with one another. No one is a legislator, a corporate CEO, a Princeton alumnus, a factory worker, or a welfare recipient. To design institutions that create social order and a foundation for productive activity, people hypothetically bargain with each other in a situation of relative equality. Buchanan imagined individuals negotiating a social contract from Hobbesian anarchy, and he imagined the likely outcome of such a negotiation. >Thomas Hobbes, cf. >Veil of ignorance/Rawls, >John Rawls. There is uncertainty about the detailed terms of an actual renegotiated social contract, but Buchanan argues that an individual hypothetically agrees with a social contract if its terms fall within the bounds of what might reasonably be expected as a result of such a negotiation from anarchy. Buchanan built his social-contractarian framework on this foundation of hypothetical unanimous agreement reached from anarchy. He counts people as being in agreement with the social contract if they would agree under these hypothetical conditions. Taxation: We could imagine, for example, that some financially secure individuals in the real world would not agree to a highly progressive tax system that would transfer a lot of their income to people with lower incomes. But in the hypothetical state of anarchy, people would be very uncertain about their income levels once a social contract was negotiated and life commenced under it. If those individuals would agree, while in a hypothetical state of anarchy, to income transfers under the social contract, then they are in agreement with such transfers in the real world, according to Buchanan’s criterion. Cf. >Anarchism, >Market anarchism, >Agreement, >Negotiations, >Contracts, >Contract theory. Boudreaux I 78 Thought experiments/fictions/Buchanan: Such mental exercises do not actually identify specific terms of the social contract. Buchanan recognized that we cannot know which particular contractual terms all individuals in hypothetical anarchy might agree to. But reasoning in this way can give some idea of the general “appropriate” scope of government. For example, because ( …) almost everyone would agree that people should not murder each other, the social contract would certainly empower government to prosecute and punish murderers. Almost as uncontroversially, most people would agree that a majority should not be empowered, absent good reasons, to appropriate the property of a minority - and so the social contract would feature restrictions on such majoritarian actions. 1. Buchanan, James M. (1986). “The Constitution of Economic Policy.” Nobel Prize Lecture (December 8), Stockholm, Sweden. 2.Buchanan, James M. (1975). The Limits of Liberty: Between Anarchy and Leviathan. University of Chicago Press. |
EconBuchan I James M. Buchanan Politics as Public Choice Carmel, IN 2000 Boudreaux I Donald J. Boudreaux Randall G. Holcombe The Essential James Buchanan Vancouver: The Fraser Institute 2021 Boudreaux II Donald J. Boudreaux The Essential Hayek Vancouver: Fraser Institute 2014 |
| Cultural Differences | Experimental Psychology | Parisi I 117 Cultural differences/ideologies/Experimental Psychology/Wilkinson-Ryan: One of the areas where experimental psychology and law have had the greatest impact has been in the field referred to as "cultural cognition." This is essentially a body of research that takes up the question of individual differences - how responses and effects differ across individuals or groups within a population. In the seminal article in this field, Kahan, Hoffman, and Braman (2009)(1) took up the Supreme Court's "unusual invitation" to the public to view a video recording of a police offcer chasing a motorist and ultimately ramming his car into the citizen's vehicle when he refused to pull over. Although a clear majority of subjects agreed with the court's determination, there was a clear consensus among a cognizable minority that the offcer's actions were unjustified. In a group that tended to be less affluent, less white, less conservative, Parisi I 118 and less male, the view of the accident was clearly more pro-plaintiff, calling into question the court's assertion that no reasonable juror could disagree with their findings. In a similar set of findings, Conservatism: Kahan (2010)(2) found that the hierarchical worldview (one that might be shorthanded as "conservative") predicts the perception of complainant consent in acquaintance-rape cases, even when the complainant repeated verbal objections. Cultural background: Kahan and Braman (2008)(3) also found individual differences in perceptions of self-defense cases, with individuals' cultural or political commitments predicting their view of whether a battered woman or a "beleaguered commuter" was justified in using force against an assailant. Group behavior: Testing further that perceptions of legal acts is heavily influenced by group membership, Kahan et al. (2012)(4) showed subjects in an experimental study a video of a political demonstration. >Group behavior. Manipulation: Cultural cognition research has also begun to document differential effects of experimental manipulations by group. In a study of the role of cultural differences in perceptions of climate change science, Kahan et al. (2015)(5) randomly assigned participants in a survey study to read either an irrelevant technology-related article or an article about the potential for geoengineering to reduce the effects of carbon dioxide emissions and thereby stem global warming. The dependent variable was subjects' attitudes toward a second article on the science of climate change. Manipulation. Liberals: Simplifying slightly, the liberals who read the geoengineering article were essentially unmoved - they were no less likely to believe or disbelieve that climate change is happening and is caused at least in part by humans. Conservatives: Conservatives, on the other hand, were skeptical of climate change science if they did not read about geoengineering, but when they were primed with the possibility of a market-based technological solution to global warming, they were more willing to believe the science of global warming is reliable. Results: Thus, the research showed that open-mindedness toward scientific evidence depended in part on whether individuals believed that the consequences of believing the evidence Parisi I 119 would require action that conflicted with the individuals' own worldviews (e.g., for conservatives, government regulation of pollution). >Political orientation/Experimental psychology, >Decision-making/Experimental Psychology. 1. Kahan, Dan M., David A. Hoffman, and Donald Braman (2009). "Whose Eyes Are You Going to Believe? Scott v. Harris and the Perils of Cognitive Illiberalism." Harvard Law Review 122: 8-18. 2. Kahan, Dan M. (2010). "Culture, Cognition, and Consent: Who Perceives What, and Why, in Acquaintance-Rape Cases." University of Pennsylvania Law Review 158: 729-813. 3. Kahan, Dan M. and Donald Braman (2008). "The Self-Defensive Cognition of Self-Defense." American Criminal Law Review 45: 1-65. 4. Kahan, Dan M., David A. Hoffman, Donald Braman, and Danieli Evans (2012). "They Saw a Protest: Cognitive Illiberalism and the Speech—Conduct Distinction." Stanford Law Review 64:851-906. 5. Kahan, Dan M., Hank Jenkins-Smith, Tor Tarantola, Carol L. Silva, and Donald Braman (2015). "Geoengineering and Climate Change Polarization Testing a Two-Channel Model of Science Communication." ANNALS of the American Academy of Political and social Science 658: 192-222. Wilkinson-Ryan, Tess. „Experimental Psychology and the Law“. In: Parisi, Francesco (ed) (2017). The Oxford Handbook of Law and Economics. Vol 1: Methodology and Concepts. NY: Oxford University Press |
Parisi I Francesco Parisi (Ed) The Oxford Handbook of Law and Economics: Volume 1: Methodology and Concepts New York 2017 |
| Equality | Pettit | Brocker I 854 Equality/Pettit: Pettit emphasizes the primal equality of all individuals, to whose protection the political sphere and the interventions of the state must contribute.(1) "In order to be a free citizen, one must enjoy lack of control in such a spectrum of choice and on the basis of such state resources and protection that one is on an equal footing with others" (Pettit 2015 (2) and Pettit 2012 (3)). >Society, >Community, >Civil Rights, >Interventionism. It does not follow for Pettit that all individuals should be treated equally. On the contrary: unfavourable starting positions Brocker I 855 and lack of equal opportunities must be compensated as far as possible. This can also include deep interference in the unimpeded material self-development of particularly privileged citizens, i.e. making group-specific restrictions on freedom necessary. Equality does not mean individual freedom of choice in every respect. (PettitVsLiberalism.) >Liberalism, >Equal Opportunities. Pettit himself describes this pattern of reasoning as "consequentialist". The conceptualisation of the granted state's regulatory potential is measured by the consideration of the consequences it will have for the creation of the greatest possible equality for each individual.(4) >Government Regulation. 1.Philip Pettit, Republicanism. A Theory of Freedom and Government, Oxford 1997, S. 110f 2. Philip Pettit Gerechte Freiheit. Ein moralischer Kompass für eine komplexe Welt, Berlin 2015, S. 98, vgl. S. 112 3. Philip Pettit, On the People’s Terms. A Republican Theory and Model of Democracy, Cambridge 2012. S. 90 4.Pettit 1997, S. 113 Emanuel Richter, „Philip Pettit, Republicanism“, in: Manfred Brocker (Hg.) Geschichte des politischen Denkens. Das 20. Jahrhundert. Frankfurt/M. 2018 |
Pett I Ph. Pettit Just Freedom: A Moral Compass for a Complex World New York 2014 Brocker I Manfred Brocker Geschichte des politischen Denkens. Das 20. Jahrhundert Frankfurt/M. 2018 |
| Income Tax | Saez | Saez I 187 National income tax/Saez/Zucman: The basic idea is simple: the national income tax is a tax on all income, whether it derives from labor or from capital, and whether it originates from the manufacturing sector, finance, nonprofits, or any other sector of the economy. The tax does not exempt saving, which is highly concentrated among the well-off and is more effectively encouraged by government regulations (such as automatic enrollment in pension plans and financial regulation) than tax breaks. To keep administration simple, the national income tax has a single rate and offers no deductions. (...) the national income tax is certainly not meant to replace the income tax, or any other progressive tax for that matter. It is meant to supplement progressive taxation and to replace regressive taxes that impose an unfairly high burden on the American working class and middle class, chief among which are private insurance premiums - the most regressive levy. The national income tax is a true flat income tax. >Flat Tax/Saez. 1) For labor income, the national income tax would be administered and remitted by employers. All employers—whether for-profit businesses, not-for-profit organizations, or governments—would pay a tax proportional to the full Saez I 188 labor cost of all their employees. 2) (...) all businesses (...) would have to pay the national income tax on their profits. The base would be the full amount of profits with no deductions or exemptions. Businesses would depreciate their capital assets to reflect normal wear and tear, but would not be allowed to deduct any tax paid. Business profits are already measured for income tax purposes on corporate or business tax returns. 3) The national income tax would also be levied on interest income. The interest businesses pay on their loans and bonds is deducted from business profits; the corresponding interest received by lenders must be taxed. For businesses, interest received is already included in profits. This leaves only interest received by individuals and nonprofits to be added to the tax base, which does not present any administrative difficulty. Foreign dividends received by individuals and nonprofits, Saez I 189 nonprofits, as well as other income forms received from abroad, also would be liable for the tax. Tax avoidance/informal economy: The informal economy, including employees receiving wages off the books or self-employed workers paid in cash, would not be reached, and some businesses would underreport profits. According to the available estimates, these activities would reduce the base by about 7% of national income.(1) Because it’s so broad, the national income tax could raise substantial revenues with low rates. Tax competition: If the national income tax is such a great idea, why hasn’t it been proposed and implemented before? Probably because of international tax competition, since the national income tax does increase the taxation of corporate profits. However, with proper taxation of >multinationals (...) concerns about tax competition would fall away. 1. See US Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts of the United States (2019), Tables 7–14, 7–16, and 7–18. Misreported income in 2015 was $86.2 billion for wage earnings, $672 billion for unincorporated business income, and $367 billion for corporate profits. The total is $1,125 billion or 7.2% of national income in 2015. Complete details are provided in Saez and Zucman (2019c): -Emmanuel Saez, and Gabriel Zucman. “A National Income Tax.” UC Berkeley Working Paper 2019c. |
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| Manipulation | Experimental Psychology | Parisi I 118 Manipulation/Experimental Psychology/Wilkinson-Ryan: Cultural cognition research has also begun to document differential effects of experimental manipulations by group. In a study of the role of cultural differences in perceptions of climate change science, Kahan et al. (2015)(1) randomly assigned participants in a survey study to read either an irrelevant technology-related article or an article about the potential for geoengineering to reduce the effects of carbon dioxide emissions and thereby stem global warming. The dependent variable was subjects' attitudes toward a second article on the science of climate change. Liberals: Simplifying slightly, the liberals who read the geoengineering article were essentially unmoved - they were no less likely to believe or disbelieve that climate change is happening and is caused at least in part by humans. Conservatives: Conservatives, on the other hand, were skeptical of climate change science if they did not read about geoengineering, but when they were primed with the possibility of a market-based technological solution to global warming, they were more willing to believe the science of global warming is reliable. Results: Thus, the research showed that open-mindedness toward scientific evidence depended in part on whether individuals believed that the consequences of believing the evidence Parisi I 119 would require action that conflicted with the individuals' own worldviews (e.g., for conservatives, government regulation of pollution). >Political orientation/Experimental psychology, >Decision-making/Experimental Psychology, >Cultural differences/Experimental Psychology. 1. Kahan, Dan M., Hank Jenkins-Smith, Tor Tarantola, Carol L. Silva, and Donald Braman (2015). "Geoengineering and Climate Change Polarization Testing a Two-Channel Model of Science Communication." ANNALS of the American Academy of Political and social Science 658: 192-222. Wilkinson-Ryan, Tess. „Experimental Psychology and the Law“. In: Parisi, Francesco (ed) (2017). The Oxford Handbook of Law and Economics. Vol 1: Methodology and Concepts. NY: Oxford University Press |
Parisi I Francesco Parisi (Ed) The Oxford Handbook of Law and Economics: Volume 1: Methodology and Concepts New York 2017 |
| Property Rights | Coase | Kiesling I 5 Property rights/Coase/Kiesling: One important institution for economic activity is understanding what property rights are, how they are defined, and how they are enforced. Human societies have long developed concepts of what is “mine” and “not mine” (Wilson 2020)(1). That concept of having property in an item specifies what a property owner can do with that item - use it, change or improve it, loan it, lease its use to someone else, let it lie unused, give it, sell it. A property right is a right to take particular actions or make certain decisions about the use of a resource. A property rights framework reflects the activities that are and are not permissible for property owners to do with their property. Kiesling I 6 That framework affects their incentives to use the resource productively over time. For example, rent control restricts how someone uses their property, which affects their incentives. Limiting the rent owners can charge limits their revenue and thus their incentive to improve the property, which is why properties often fall into disrepair under rent control. In situations where rent control legislation is very onerous or burdensome, that legislation can even induce owners to stop renting, thereby reducing the supply of rental housing and contradicting the policymaker’s original intentions. In general, a property rights framework in which rights are defined clearly and transparently, and where rights can be enforced at reasonable cost, is an institution that creates incentives for the efficient use of resources and for efficient production, consumption, investment, and innovation. Coase’s insights on property rights sparked a new literature that further developed the concept of property rights theory and applying it to a variety of situations (see, for example, Demsetz (1967)(2), Libecap (1989)(3), and Barzel (1989)(4)). Markets/Contracs/Price: Another important implication arising from the property rights framework concerns transaction costs. Coase defined transaction costs as consisting of all costs of using markets, contracts, and the price system. Allen(5) defines transaction costs as the costs of “establishing and maintaining property rights” (1999(5): 898). Transaction cost: Transaction costs affect the distribution of property rights across all types of governance structures and organizations. Coase never defined transaction costs explicitly, relying instead on examples to illustrate how they affect contracts, incentives, and outcomes. Much of a society’s property rights framework depends on its formal legal institutions because legal definitions and enforcement of property rights are inputs into the specifics of property rights. Norms: Some aspects of property rights emerge out of more customary norms and conventions that societies form around property over time, but the bulk of Coase’s work focuses on legal institutions, the effect of the law on economic decisions, and the role of the judicial system and legal precedent in defining property rights. Importantly, Coase stressed that various forms of government regulation, including state-owned property, are alternative ways of performing the coordinating tasks of property rights and entail their own transactions costs. >Firms/Coase, >Social cost/Coase. Kiesling I 33 Production factors/Coase/Kiesling: „If factors of production are thought of as rights, it becomes easier to understand that the right to do something which has a harmful effect (such as the creation of smoke, noise, smells, etc.) is also a factor of production.… The cost of exercising a right (of using a factor of production) is always the loss which is suffered elsewhere in consequence of the exercise of that right—the inability to cross land, to park a car, to build a house, to enjoy a view, to have peace and quiet or to breathe clean air.“ Coase (1960)(6), p. 44 >Transaction costs/Coase, >Social cost/Coase. 1. Wilson, Bart J. (2020). The Property Species: Mine, Yours, and the Human Mind. Oxford University Press. Yandle, Bruce (1998). Coase, Pigou, and Environmental Rights. In Peter J. Hill and Roger E. Meiners (eds.), Who Owns the Environment? (Rowman & Littlefield). 2. Demsetz, Harold (1967). “Toward a Theory of Property Rights.” American Economic Review 57, 2: 3473.-359. 3. Libecap, Gary D. (1993). Contracting for Property Rights. Cambridge University Press. 4. Barzel, Yoram (1997). Economic Analysis of Property Rights. Cambridge University Press. 5. Allen, Douglas W. (1999). Transaction Costs. Encyclopedia of Law and Economics. 6. Coase, Ronald H. (1960). The Problem of Social Cost. Journal of Law and Economics 3: 1-44. |
Kiesling I L. Lynne Kiesling The Essential Ronald Coase Vancouver: Fraser Institute. 2021 |
| Regulatory Economics | Hilton | Henderson I 8 Regulatory economics/Peltzman/Hilton/Henderson/Globerman: Tradition: The traditional economic justification for government regulation of private sector businesses is that regulations are needed to protect consumers against business abuses such as monopoly pricing, cheating on the quality of products sold, the sale of hazardous products, and misleading consumers through false advertising claims or by failing to disclose important information such as the true annual interest rate on an automobile Ioan. >Interest rates, >Loans, >Monopoly price. Regulation: In the idealized view of regulation, the regulators are informed public-spirited people who work only to promote the social good. PeltzmanVsTradition: Peltzman and Hilton debunked this idealized view of regulatory behaviour by documenting how regulators pursue their own interests in carrying out their activities and showing that the interests of regulators are often at odds with the social interest. In particular, regulation often stifles competition, resulting in higher prices. Henderson I 9 Even when enlisting expert advice, it is extremely diffcult for regulators to form a complete and accurate picture of how specific regulations will affect the behaviour of the many individuals and organizations affected. It is impossible, for example, for regulators to forecast how new technologies and new uses of existing technologies will undermine the intent of the regulator. Hilton: Hilton noted that the regulatory experience is replete With examples of how the noncompetitive price structures imposed by regulators encouraged the use of new technologies to circumvent, and ultimately render unsustainable, existing regulatory decrees. Henderson I 10 Regulatory economics/competition/market: (…) regulators cannot extinguish the incentives of market participants to create economic gains for themselves by providing cheaper and/or more convenient goods and services for customers, and efforts by regulators to thwart the pursuit of those incentives perpetuate economic ineffciencies that make society as a whole economically poorer. In particular, many consumers pay more for the relevant goods and services than they would have paid if markets were deregulated, while established firms often earn higher profits than they would have earned in an unregulated competitive market. >Incentives, >Profit, >Markets. Henderson I 9 Regulatory economics/Hilton/Henderson/Globerman: For example, Eckert and Hilton (1972)(1) tell the Story of electric street railways, which were the main form of urban public transportation in the early 1900s. Most street railways operated one or a small number oflines that ran along main streets and covered a limited area of the City. Furthermore, in virtually every City, the street railway charged a flat 5-cent fare regardless of the distance a passenger traveled. The rigid layout of street railways and the implicit penalty the flat fee imposed on short-haul commuters encouraged the growth of private jitney services, i.e., individuals Who would use their own cars or rented cars to provide transportation services to those Who wanted to travel off the main routes covered by the street railways. They also provided for flexible capacity, as more jitneys were available during peak hours and charged rates that were responsive to demand conditions, e.g., higher rates during peak commuting hours and Iower rates during off-peak periods. Henderson I 10 In short order, a large number of privately owned automobiles were competing with street railways. The railways sought protection from municipal governments against this competition. Municipal governments saw benefits to limiting competition. One benefit was the tax revenues they could collect from the monopoly profits earned by regulated street railways that enjoyed exclusive rights to operate on specific routes. Another benefit was that they received political donations and other support from the established and relatively well-funded streetcar owners. For those reasons, they granted protection from competition. Local governments introduced regulations designed to raise the costs of jitney operators and reduce the flexibility of the service they offered. The regulations were especially punitive for short-haul jitney businesses. The result was that most jitneys were eliminated fairly quickly. Eckert and Hilton argue that allowing free entry, while ensuring that jitney operators bore the full costs of their operations, including paying their share for street repairs, would have saved society decades of unsatisfactory experience with ineffcient alternatives, including buses that operated in much the same way as street railways. Regulatory economics/competition/market: (…) regulators cannot extinguish the incentives of market participants to create economic gains for themselves by providing cheaper and/or more convenient goods and services for customers, and efforts by regulators to thwart the pursuit of those incentives perpetuate economic ineffciencies that make society as a whole economically poorer. In particular, many consumers pay more for the relevant goods and services than they would have paid if markets were deregulated, while established firms often earn higher profits than they would have earned in an unregulated competitive market. >Competition, >Markets, >Free market. 1. Eckert, Ross, and George Hilton (1972). The Jitneys. Journal of Law and Economics 15, 2: 293-325. |
Hilton I George W. Hilton John F. Due The Electric Interurban Railways in America Redwood City: Stanford University Press 2000 Henderson I David R. Henderson Steven Globerman The Essential UCLA School of Economics Vancouver: Fraser Institute. 2019 |
| Regulatory Economics | Peltzman | Henderson I 8 Regulatory economics/Peltzman/Hilton/Henderson/Globerman: Tradition: The traditional economic justification for government regulation of private sector businesses is that regulations are needed to protect consumers against business abuses such as monopoly pricing, cheating on the quality of products sold, the sale of hazardous products, and misleading consumers through false advertising claims or by failing to disclose important information such as the true annual interest rate on an automobile Ioan. >Interest rates, >Loans, >Monopoly price. Regulation: In the idealized view of regulation, the regulators are informed public-spirited people who work only to promote the social good. PeltzmanVsTradition: Peltzman and Hilton debunked this idealized view of regulatory behaviour by documenting how regulators pursue their own interests in carrying out their activities and showing that the interests of regulators are often at odds with the social interest. In particular, regulation often stifles competition, resulting in higher prices. Henderson I 9 Even when enlisting expert advice, it is extremely diffcult for regulators to form a complete and accurate picture of how specific regulations will affect the behaviour of the many individuals and organizations affected. It is impossible, for example, for regulators to forecast how new technologies and new uses of existing technologies will undermine the intent of the regulator. Hilton: Hilton noted that the regulatory experience is replete With examples of how the noncompetitive price structures imposed by regulators encouraged the use of new technologies to circumvent, and ultimately render unsustainable, existing regulatory decrees. Henderson I 10 Regulatory economics/competition/market: (…) regulators cannot extinguish the incentives of market participants to create economic gains for themselves by providing cheaper and/or more convenient goods and services for customers, and efforts by regulators to thwart the pursuit of those incentives perpetuate economic ineffciencies that make society as a whole economically poorer. In particular, many consumers pay more for the relevant goods and services than they would have paid if markets were deregulated, while established firms often earn higher profits than they would have earned in an unregulated competitive market. >Incentives, >Profit, >Markets. Henderson I 83 Regulatory economics/Peltzman/Henderson/Globerman: A key conclusion of Peltzman’s model is that the outcome of the supply and demand process is that producers need not emerge as the sole beneficiaries of the regulatory process. >Regulation/Peltzman. Costs and benefits: Rather, because the cost of organizing into a cohesive lobbying group is only one factor influencing who will obtain favourable regulatory outcomes, the distribution of benefits and costs from regulatory decisions is likely to be more diffuse than the concentrated/dispersed paradigm predicts. Henderson I 84 Example: the Canadian Radio and Television Commission (CRTC), Canada's version of the US Federal Communications Commission. The CRTC restricts foreign broadcasters from supplying Canadians with broadcast services sent directly from outside of Canada. This protects Canadian broadcasters from competition with foreigners, allowing them to charge higher prices for advertising. Cf. >Mercantilism. However, the CRTC does not allow Canadian broadcasters to capture all of the financial gains from the protection they are provided. In particular, they must produce and distribute a significant amount of "Canadian content." Broadcasters must favour Canadians who work in the film, television, and music industries, even though it would be cheaper and more profitable for Canadian broadcasters to license foreign programming, mainly from US copyright holders. >Copyright. Cross-subsidization/profits: In short, the CRTC engages in cross-subsidization. In exchange for protection from foreign competition, Canadian broadcast distributors must "share" some of the higher profits that they earn from the effective monopoly position created by the regulator With Canadian producers, performers, writers, and other contributors to domestic programing. The "losers" are Canadian consumers who pay higher prices for their subscriptions to cable and satellite distributors, and (indirectly) higher prices for products that are advertised on Canadian distribution outlets. |
Peltzman I Samuel Peltzman Political Participation and Government Regulation (History, Culture, and Life) Chicago: University of Chicago Press 1998 Henderson I David R. Henderson Steven Globerman The Essential UCLA School of Economics Vancouver: Fraser Institute. 2019 |
| Spectrum Allocation | Coase | Kiesling I 27 Spectrum Allocation/Coase/Kiesling: „Certainly, it is not clear why we should have to rely on the Federal Communications Commission rather than the ordinary pricing mechanism to decide whether a particular frequency should be used by the police, or for a radiotelephone, or for a taxi service, or for an oil company for geophysical exploration, or by a motion-picture company to keep in touch with its film stars or for a broadcasting station. Indeed, the multiplicity of these varied uses would suggest that the advantages to be derived from relying on the pricing mechanism would be especially great in this case.“ Coase (1959)(1), p. 16. Kiesling: An important policy application of Coase’s ideas on institutions, property rights, and transaction costs is the allocation of radio spectrum using spectrum license auctions. More specifically, Coase’s work has led to market-based allocation of radio spectrum rather than administrative allocation, and to the liberalization of the property rights that are conveyed in those licenses. This liberalization has enabled extensive innovation and market complexity. >Property rights/Coase, >Transation costs/Coase, >Law/Coase. Kiesling I 29 (…) Coase(1) asked if there was a feasible way to allocate the use of radio spectrum to create the most possible value out of it, which the then-current public interest hearings method did not accomplish. The policy objective should be not to minimize interference along the spectrum, but to maximize output from the spectrum, treating interference as a constraint to be managed (or something that innovation would reduce). Property right: Why not define a property right in a specific part of the spectrum for each user, and make those rights tradable? Coase here followed the suggestion of Leo Herzel (1951)(2), who proposed defining spectrum ownership rights and allocating them through auctions. Coase claimed that despite arguments to the contrary, the scarcity of spectrum does not necessitate its administrative allocation, ongoing regulation, or government ownership. >Property rights/Coase. Kiesling I 30 Coase identified the core of the spectrum allocation problem as ill-defined property rights, and drew analogies between spectrum and land: „We know from our ordinary experience that land can be allocated to land users without the need for government regulation by using the price mechanism.… If one person could use a piece of land for growing a crop, and then another person could come along and build a house on the land used for the crop, and then another could come along, tear down the house, and use the space as a parking lot, it would no doubt be accurate to describe the resulting situation as chaos. But it would be wrong to blame this on private enterprise and the competitive system. A private-enterprise system cannot function properly unless property rights are created in resources, and, when this is done, someone wishing to use a resource has to pay the owner to obtain it. Chaos disappears; and so does the government except that a legal system to define property rights and to arbitrate disputes is, of course, necessary.“ (1959(1): 14) Markets/Coase: Why use markets? Markets reveal the opportunity cost of the license and factor that opportunity cost into the decision-making of incumbent and entrant license holders. A right to use a frequency would have to be defined precisely in order to be transacted (Coase, 1959(1): 25). >Auctions/Coase. 1. Coase, Ronald H. (1959). The Federal Communications Commission. Journal of Law and Economics 2: 1-40. 2. Herzel, Leo (1951). “Public Interest” and the Market in Color Television Regulation. University of Chicago Law Review 18, 4: 802-816. |
Kiesling I L. Lynne Kiesling The Essential Ronald Coase Vancouver: Fraser Institute. 2021 |
| Spectrum Allocation | Economic Theories | Kiesling I 27 Spectrum Allocation/Economic theories/Kiesling: Radio waves are electromagnetic waves with a range of frequencies (measured in megahertz, or millions of cycles per second). The radio “spectrum” is the set of these frequencies. Different parts of the spectrum, with different wavelengths, are suitable for different uses, and have been divided accordingly - broadcast radio, short wave radio, television, mobile phones, wireless internet, the Global Positioning System, and so on. Kiesling I 28 If multiple users are too close to each other and try to use the same frequency (for example, two FM radio operators broadcasting at 93.1 megahertz), the interference between them would disrupt both broadcasts, and that frequency would not be put to its best use. Users of the radio spectrum must leave enough space between frequencies to avoid interference. Since the origins of broadcast radio in the early 20th century, new technologies have radically altered the interference problem, continually creating new opportunities for communication, but simultaneously, generating new demands that drive conflicts. Commercial uses of spectrum started around the turn of the 20th century for ship-to-ship and ship-to-shore communications. In 1912, concerns about maritime safety led to legislation requiring radio stations to have federal Department of Commerce-issued licenses. With the introduction of broadcasting in the 1920s, spectrum scarcity became a problem (Hazlett, 1998)(1). Political conflicts arose over how to govern the use of the spectrum. (Most strikingly, the Navy argued for a government monopoly under their control.) Congress passed legislation in February 1927, establishing the Federal Radio Commission (FRC). The FRC created and granted licenses according to “public interest, necessity, or convenience” (Coase, 1959(2): 14). >Spectrum allocation/Coase. Regulation: In 1934 the FRC’s regulatory jurisdiction was transferred to the new Federal Communications Commission (FCC), which to this day regulates radio, television, wire, satellite, and cable communications in the United States. Between 1927 and 1981, the FRC/FCC awarded licenses using comparative public interest hearings, a process that according to the US Congressional Budget Office “weighs the relative merits of the contending applicants” - and a process that telecommunications economist Thomas Hazlett called “socially wasteful and politically charged” (1998(1): 530). Lotteries: In 1981 the FCC switched from the hearings to using lotteries to allocate spectrum licenses, which de-politicized the process but did not ensure efficient license allocation and continued the process of wasteful rent seeking (as lottery applicants had to fill out voluminous documents to establish their “public interest” credentials). Kiesling I 29 Specific authorization: Up until the switch to the lottery system, and worried about interference, the FCC did not issue “spectrum licenses” granting permission to use a given bandwidth, but very specific authorizations that mandated the service, technology, and business model to be used. This decision greatly restricted competition among licensees; in addition, many potential competitors were denied licenses. >Administrative agencies. Cartelization/Problem: The result was a cartelization of wireless markets via government regulation. Substantial profits accrued to those who succeeded in the comparative public interest hearing process, while the radio spectrum was underused compared to its capacity. >Cartels, >Monopolies. Innovations: Innovations were thwarted as no market in spectrum existed: new applicants or networks had to apply for permission to use part of the spectrum from the FCC - and they were dependably opposed by incumbent operators and the regulators rarely granted permission. In the face of technological progress in electronics, the social burdens of these restrictions grew substantially over time. Had entrepreneurs been able to buy spectrum rights, wireless innovations bringing new products and services to market could have competed for consumers. Instead, these new value-creating opportunities were all too rarely realized. >Innovations. 1. Hazlett, Thomas W. (1990). The Rationality of U. S. Regulation of the Broadcast Spectrum. The Journal of Law and EconomicsVolume 33, Number 1 2. Coase, Ronald H. (1959). The Federal Communications Commission. Journal of Law and Economics 2: 1-40. |
Kiesling I L. Lynne Kiesling The Essential Ronald Coase Vancouver: Fraser Institute. 2021 |
| Water Pollution | Demsetz | Henderson I 23 Water Pollution/property rights/Demsetz/Henderson/Globerman: Demsetz (1967(1) ) was one of the first economists to explain how weak or attenuated property rights can lead to water pollution. Property rights: A primary function of property rights is to guide incentives to achieve a greater internalization of what economists call externalities. >Externalities, >Social cost. Henderson I 24 Externalities: When externalities are internalized, people take account of how their actions physically interfere with other people's property. To illustrate, imagine that that there is a chemical plant on one side of a body of water and a fishing lodge on the other side. Value: If the body of water creates the greatest economic value as a location for fishing resorts, the emissions externality is a source of economic ineffciency. Damage: The failure of the chemical plant to take account of the physical damage it imposes on the fishing resort results in an ineffcient use of a scarce resource, i.e., the body of water. The externality, in turn, reflects the fact that property rights to the body of water are shared in common by the chemical plant and the fishing lodge. >Property rights/Alchian. Incentives/value: (…) if operating a fishing camp is the most valuable use of the body of water, the owners of the fishing camp have an incentive to negotiate with the owners of the chemical plant to get the plant to stop or reduce its emissions. At the extreme, the owners of the fishing resort might simply buy out the owners of the chemical plant and dismantle the plant. Either way, the owners of the fishing resort are either indirectly or directly converting a property right held in common into a property right effectively held by the fishing resort. >Efficiency. Solution/Internalization/Demsetz: The outcome is that the body of water will be dedicated to its highest-valued use. Henderson I 25 Problem/internalization/costs/Demsetz: Demsetz recognized that in some circumstances, the costs of transacting may make it uneconomical to convert commonly held property into a private property right so that externalities are "internalized." As Demsetz puts it, the costs of transacting in the rights between the parties (internalization) may exceed the gains from internalization. In such cases, government regulations on how commonly held property can be used might improve economic effciency if those regulations are guided by considerations of the economic value ofthe property in its alternative uses. >Regulatory economics, >Transaction cost, >Propery rights/Alchian. 1. Demsetz, Harold (1967). Toward a Theory of Property Rights. American Economic Review, Papers and Proceedings 57, 2: 347-359. |
EconDems I Harold Demsetz Toward a theory of property rights 1967 Henderson I David R. Henderson Steven Globerman The Essential UCLA School of Economics Vancouver: Fraser Institute. 2019 |
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