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    Ghaida Abdallat
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    This paper argues that an evolutionary approach to policy-making, which emphasizes openness to change and political variety, is particularly compatible with the central tenets of classical liberalism. The chief reasons are that classical liberalism acknowledges the ubiquity of uncertainty, as well as heterogeneity in preferences and beliefs, and generally embraces gradual social and economic change that arises from accidental variation rather than deliberate, large-scale planning. In contrast, our arguments cast doubt on a different claim, namely that classical liberalism is particularly compatible with the evolutionary biological heritage of humans.
    Die Verhaltensökonomie und ihre praktischen Implikationen geraten immer stärker in den Fokus auch der deutschen Politik. Individuelle Entscheidungen sollen im Sinne eines „libertären Paternalismus“ „sanft“ beeinflusst werden. Die „Nudges“ bestehen in Standardvorgaben, Selbstbindungen und der Informationsbereitstellung. Deren Anwendung setzt allerdings die Klärung einiger Fragen voraus: Wer darf sich anmaßen, für die Wirtschaftssubjekte „kluge“ Entscheidungen zu treffen? Bei welchen Entscheidungen sind Eingriffe einer anderen Instanz begründbar? Mit welchem Zeithorizont und aufgrund welcher Wohlfahrtsüberlegungen wird eine Entscheidung als „richtig“ definiert? Welcher Rationalitätsbegriff steht hinter dem Konzept?
    In recent years, a broad literature has emerged which proposes new forms of paternalistic intervention in order to improve the quality of individual decisions, which suffer from shortcomings from the benchmark of full rationality. The new paternalism, which has developed out of empirical behavioral economics, is sometimes also denoted as ‘libertarian’, since individuals should not be coerced, but only nudged into making better decisions. Individuals retain the opportunity to deviate from the goals of the paternalist planner. This paper examines the new paternalism in the light of two criteria: consumer sovereignty and citizen sovereignty. We argue that many applications of the new paternalism collide with these two criteria.
    In explaining individual behavior in politics, economists should rely on the same motivational assumptions they use to explain behavior in the market: That is what Political Economy, understood as the application of economics to the study of political processes, is all about. In its standard variant, individuals who play the game of politics should also be considered rational and self-interested, unlike the benevolent despot of traditional welfare economics. History repeats itself with the rise of behavioral economics: Assuming cognitive biases to be present in the market, but not in politics, behavioral economists often call for government to intervene in a “benevolent” way. Recently, however, political economists have started to apply behavioral economics insights to the study of political processes, thereby re-establishing a unified methodology. This paper surveys the current state of the emerging field of “Behavioral Political Economy” and considers the scope for further research.
    Dieser Beitrag liefert einen Überblick über die politik- und wirtschaftswissenschaftliche Forschung zur Erklärung staatlichen finanzpolitischen Handelns. Dabei wird gezeigt, dass die durch den politischen Prozess erzeugten finanzpolitischen Entscheidungen sich häufig von jenen Maßnahmen unterscheiden, welche eine rein an Effizienzkriterien ausgelegte ökonomische Analyse empfehlen würde. Die Untersuchung der politik-ökonomischen Determinanten der Finanzpolitik erlaubt ein besseres Verständnis staatlichen Handelns und ermöglicht die Formulierung wissenschaftlich fundierter Reformvorschläge. Einige davon werden am Ende des Beitrags diskutiert.
    New Political Economy has something very important in common with welfare economics: its focus on static, technical efficiency criteria to judge the rationality of a social, political or economic order. This often leads theorists to perceive their objects of research as well-defined problems to which clear-cut solutions can be found and prescribed as policy proposals, addressed at the policymaker or the democratic sovereign. This perspective frequently excludes important empirical phenomena from the research agenda. Although, for example, certain well-defined informational asymmetries are frequently modeled, fundamental knowledge problems such as ignorance of the true model of the economy are usually ignored. In the present paper, this approach is criticized from a Hayekian point of view, with an emphasis on the problems of "scientism" (i.e., the inappropriate transfer of methods from the natural to the social sciences) and irremediably imperfect knowledge, troubling both the agents in the theoretical model and the theorist. Furthermore, it is argued and illustrated with two examples that an extension of Public Choice's research agenda along Hayekian lines may be fruitful, because it leads to a fresh perception even of such problems that already have been extensively researched within the traditional framework. Copyright 2002 The American Journal of Economics and Sociology.
    In contrast to the contractarian approach to constitutional economics, we follow Voigt (1999) in assuming that constitutional rules are closely connected to informal institutions and that their evolution is a matter of interest group activity and implicit re-interpretation. We add to this the assumption of theoretical uncertainty of individuals regarding the working properties of constitutional rules. Collective learning processes are considered as the third driving force of constitutional evolution, and at the same time as the source of path-dependencies which allow suboptimal constitutions to persist. Finally, it is argued that direct legislation offers more protection than a written fiscal constitution.
    This paper examines the process of economic policy-making under conditions of model uncertainty. A median voter model is introduced in which the electorate is uncertain of the policy measures available as well as their respective outcomes and opinion formation is a social process of communication and contagion. Learning from experience is also considered. It is shown that economic policy-making under uncertainty produces novel policy routines, but that a mechanism of efficiently utilising the generated knowledge is missing. Copyright Springer-Verlag Berlin/Heidelberg 2004
    Using a framework that distinguishes short-term consumer preferences, individual reflective preferences and political preferences, we discuss from a constitutional economics perspective whether individuals find it in their common constitutional interest to endow representatives and bureaucrats with the competence to impose soft paternalist policies. The focus is specifically on soft paternalist policies, because these often work with non-transparent “nudges” that are considered as manipulative in some contributions to the literature. We show that those soft paternalist policies that are manipulative indeed collide with three criteria of consumer sovereignty, reflective sovereignty, and citizen sovereignty that can be argued to represent common constitutional interest of citizens. On the other hand, we argue that the set of paternalist policies that is deemed acceptable on the constitutional level is restricted to non-manipulative instruments, and their application as government policies is limited to cases with stable and very homogenous preferences. However, we also argue that competitive markets are capable of supplying many mechanisms that allow individuals to cope with problems in their decision-making processes on a private level.
    The distribution of competencies between the different levels of a federal system may have re-markable effects on economic growth, because mainly the regions of a country contribute to na-tional economic development. Thus, a government's economic policy is reasonably shaped along regional lines. The theoretical discussion in economics focuses however on the efficiency aspects of a decentralized provision and financing of public services; rarely the argument is raised that decentralization or federalism increases growth through a higher ability of the political system to innovate and to carry out reforms. After a discussion of the theoretical arguments on federalism and growth, we address the empirical question in this paper how important the assignment of decision making powers and the design of fiscal federalism are for economic development. Fi-nally, on the basis of existing theoretical and empirical studies on economic growth and federal-ism, open questions and possible ways of answering them are presented. The authors would like to thank the German Science Foundation (DFG) for funding this project (DFG-SPP 1142).
    We discuss the idea of libertarian paternalism, which supposedly allows individuals to make better decisions, if they suffer from typical shortcomings in individual rationality, as they have been identified by behavioral economics. In particular, we discuss the normative foundations of libertarian paternalism, and decision‐making on paternalist policies in a political economy framework. It is argued that a systematic improvement of the quality of individual decision‐making through paternalist policies is not to be expected, and that serious unintended consequences may occur.
    We analyze the rise and decline of the steel and mining industries in the regions of Saarland, Lorraine und Luxemburg over a long period, from the mid-19th century to 2003. Our main focus in on the period of structural decline in these industries after the second world war. Differences in the institutional framework of these regions are exploited to analyze how the broader fiscal constitution sets incentives for governments to either obstruct or to encourage structural change in the private sector. Our main result is that fiscal autonomy of a region subjected to structural change in its private sector is associated with a relatively faster decline of employment in the sectors affected. Contrary to the political lore, fiscal transfers are not used to speed up the destruction of old sectors, but rather to stabilize incomes.
    This paper discusses soft (or libertarian) paternalism, as proposed among others by Thaler and Sunstein (2008). It is argued that soft paternalism should not be understood as an efficiency-enhancing, but as a redistributive concept. The relationship between soft paternalism and social norms is discussed in detail. In particular, it is argued that soft paternalism increases the stability of given social norms, which in turn need not be efficient, nor in the material self-interest of a majority of individuals. Soft paternalism is argued to be an essentially conservative concept of policy-making in the sense that it tends to increase the longevity of status quo social norms.
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