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Cost and Choice: An Inquiry in Economic Theory

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"As he usually does, Professor Buchanan has produced an interesting and provocative piece of work. [Cost and Choice] starts off as an essay in the history of cost theory; the central ideas of the book are traced to Davenport and Knight in the United States, and to a series of distinguished writers associated at various times with the London School of Economics. The author emerges from this discussion with what can be described as the ultimate in subjectivist cost doctrines. . . . Economists should learn the lessons offered to us in this little book—and learn them well. It can save them from serious errors."—William J. Baumol, Journal of Economic Literature

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... Zwolinski and Wertheimer ([2001] (2016)) Zwolinski & Wertheimer, and indeed Powell, believe that economic costs and value are subjective. 22 Buchanan's theory of subjective costs can be found in J. Buchanan ([1969] (1999)) and Buchanan's "Subjectivist" convictions appear throughout J. M. . Zwolinski & Powell follow Buchanan in believing that commodities' (exchange) value corresponds to individual purchasers' subjective preferences (valuations). ...
... Indeed modern consumer theory, a framework for analysing how individuals make choices, is based on a desire-fulfillment, or preference-satisfaction view of utility, and has very little in common with "Classical Utilitarianism", as conceived by Jeremy Bentham Buchanan (1999, pp. 182-183) and J. Buchanan ([1969](1999), pp. 3-9). ...
... 57-74). For Buchanan, see J. M. Buchanan (1975), J. M. Buchanan (1999, pp. 5, 41, 182, 261, & 266 -267) and J. Buchanan ([1969. For Posner, see Posner ([1986](2012), pp. 9, 31, & 80 -81). ...
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Academic defenses of sweatshops & sweatshop-labour are analysed using the history of economic thought. The economic and philosophical grounds on the basis of which philosopher Matt Zwolinski and economist Benjamin Powell defend sweatshops and justify their existence are challenged and subjected to scrutiny. Four key publications are analysed: 1) Zwolinski (2022), 2) Zwolinski (2007), 3) Powell and Zwolinski (2012), and 4) Powell (2014). Sweatshop defenders’ understanding of capitalist production and exploitation are criticized, and it is argued that their perspective on capitalist employment relations is clearly inferior to that of Marx’s.
... Zwolinski and Wertheimer ([2001] (2016)) Zwolinski & Wertheimer, and indeed Powell, believe that economic costs and value are subjective. 94 Buchanan's theory of subjective costs can be found in J. Buchanan ([1969) and Buchanan's "Subjectivist" convictions appear throughout J. M. . Zwolinski & Powell follow Buchanan in believing that commodities' (exchange) value corresponds to individual purchasers' subjective preferences (valuations). ...
... 57-74). For Buchanan, see J. M. Buchanan (1975), J. M. Buchanan (1999, pp. 5, 41, 182, 261, & 266 -267) and J. Buchanan ([1969. For Posner, see Posner ([1986](2012), pp. 9, 31, & 80 -81). ...
... See J. M.Buchanan (1999, pp. 182-183) and J.Buchanan ([1969](1999), pp. 3-9). ...
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Exploitation as a concept continues to be dismissed as a myth by many economists, philosophers and public intellectuals, both in the sense of labour exploitation, i.e., during the process of capitalist commodity production, as well as the idea of inter-state or imperialist exploitation. The concept is dismissed on the basis of its alleged connection to the so-called ‘Labour Theory of Value’, viewed by many as false or invalid. Many participants to such debates, including left-leaning Marxist/Socialist critics of capitalism, fail to recognize that the notion ‘Labour Theory of Value’ does not appear throughout the foundational texts of political economy, i.e. Adam Smith’s Wealth of Nations (1776), David Ricardo’s Principles (1817), and Karl Marx’s Capital (1867). A TSSI-consistent hermeneutic procedure is developed and applied to accurately interpret Smith, Ricardo, Marx & Sraffa’s respective theories of value. Disputes concerning the origins and authorship of ‘Labour Theory of Value’ are addressed, and confusions arising from the false attribution of Sraffa-inspired approaches are resolved.
... Zwolinski and Wertheimer ([2001] (2016)) Zwolinski & Wertheimer, and indeed Powell, believe that economic costs and value are subjective. 77 Buchanan's theory of subjective costs can be found in J. Buchanan ([1969] (1999)) and Buchanan's "Subjectivist" convictions appear throughout J. M. . Zwolinski & Powell follow Buchanan in believing that commodities' (exchange) value corresponds to individual purchasers' subjective preferences (valuations). ...
... Readers might also be interested in noting that Benicourt (2008) Buchanan (1999, pp. 182-183) and J. Buchanan ([1969](1999), pp. 3-9). ...
... 57-74). For Buchanan, see J. M. Buchanan (1975), J. M. Buchanan (1999, pp. 5, 41, 182, 261, & 266 -267) and J. Buchanan ([1969. For Posner, see Posner ([1986Posner ([ ](2012. ...
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This unpublished Masters Research Paper contains two interrelated sections; the first section uses an accurate textual reading of Smith, Ricardo, & Marx to 1) resolve the authorship dispute concerning the origins of the so-called Labour Theory of Value, and 2) clear up the confused attribution debate (`authorship kerfuffle') of Pierro Sraffa's (1898-1983) Physical Quantities framework. I then use my textual analysis to criticize contractual defenses of sweatshops, such as the ones offered by Zwolinski (2007), and Powell and Zwolinski (2012), and clear up some confusion regarding the link between `exploitation' as a concept and the so-called Labour Theory of Value. The second section builds on the first part by analysing trends in US public expenditures and critiquing redistributionist politics within the framework of an accurate understanding of Marx's value theory and capitalist production. To supplement my analysis, I examine a novel dataset on Distributional National Accounts (DINA) from the US Bureau of Economic Analysis (BEA). I also discuss the `Neoliberal' characterization of capitalist development, and tendency to divide capitalism into distinct sub-periods. Overall, I find that that previous concerns in the literature about an alleged `shrinking' of the welfare state, generally attributed to the post-WWII `neoliberalizion' of the US economy, has been overestimated, and is not borne out by empirical evidence. Suggested citation: Balaji, Ridhiman. 2022. "Should Capitalist Production be Considered Exploitative? A Contribution to Discussions on Sweatshops, Income Inequality, & The Capitalist Production Process". Concordia University.
... Kai produktyvūs ištekliai nukreipiami į vieno tikslo siekimą, visų alternatyvių jų panaudojimo būdų tenka atsisakyti. Kartu kaštai yra tai, ką priimantysis sprendimą paaukoja ar atmeta apsispręsdamas dėl pasirinkimo, kaštams esant grynai subjektyviais kiekvienoje pasirinkimo teorijoje ir objektyviais kiekvienoje teorijoje, kuri apima tikrą numatymą (Buchanan, 1969). ...
... Buchanan, Tulock, 1962). Ypač minėtina nedidelės apimties, bet svarbi jo knyga "Kaštai ir pasirinkimas: ekonomikos teorijos tyrimas" (Buchanan, 1969) (ją galima įvardyti kaip "pačią austriškiausią J. M. Buchanan'o knygą" [Boettke, 1987]), kurios indėlis į alternatyviųjų kaštų parametrų apibrėžimą dažnai iki galo neįvertinamas, bet iš tiesų ji užima svarbią vietą jo darbuose. ...
... Kaip subjektyvistas J. M. Buchanan'as atkakliai tvirtino, kad alternatyvieji kaštai egzistuoja tik "žiūrovo akyse", kaip įsivaizduotos alternatyvos, kurioms nebuvo lemta būti įgyvendintoms. Pats jis teigė, kad jo "tikslas -pasitelkus alternatyviųjų kaštų teoriją, pademonstruoti pagrindinius metodologinius skirtumus, kurie dažnai pražiūrimi, ir parodyti, kad nuoseklus šios teorijos taikymas paaiškina svarbias nesutarimų dėl politikos svarstomų problemų sritis" (Buchanan, 1969). ...
... However, in Buchanan's opinion ([1986] 1999a, p. 18) his Public Principles of Public Debt ([1958] 1999b) was not well understood by most of his colleagues because of his assumptions about the subjectivism of opportunity cost. Retrospectively, Buchanan ([1986) tells that, in order to clarify his positions, he wrote another book called Cost and Choice (Buchanan, [1969(Buchanan, [ ] 1999d. In that book, he makes evident the features that characterize his methodological individualism up to that moment: a homo economicus with subjective tastes and preferences and whose perception of reality is affected by his sensorial order, similar to that described by Hayek (1952). ...
... However, in Buchanan's opinion ([1986] 1999a, p. 18) his Public Principles of Public Debt ([1958] 1999b) was not well understood by most of his colleagues because of his assumptions about the subjectivism of opportunity cost. Retrospectively, Buchanan ([1986) tells that, in order to clarify his positions, he wrote another book called Cost and Choice (Buchanan, [1969(Buchanan, [ ] 1999d. In that book, he makes evident the features that characterize his methodological individualism up to that moment: a homo economicus with subjective tastes and preferences and whose perception of reality is affected by his sensorial order, similar to that described by Hayek (1952). ...
Article
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James M. Buchanan (1919–2013) was notable for his contributions to different fields of Economics, being awarded with the Nobel Memorial Prize in this area in 1986. His methodology is characterized by three fundamental aspects: methodological individualism, a constitutional approach, and a contractarian political philosophy. In this paper, we explore the development of these features in Buchanan’s works and contrast them with alternative classifications in these categories by scholars in other areas of knowledge. We show that Buchanan’s individualism uses a concept of homo economicus that differs from most of his peers in economics. His constitutionalism follows a specific strand that differs from other constitutionalists of political science and law, and leads to his contractarianism, which also has its particularities within political philosophy and ethics.
... Second, Shackle's model has significant implications for how alternative courses of action should be valued, a point elaborated at length by Buchanan (1969). Conventionally, the cost of any choice is the next best alternative to the chosen option. ...
... The subjective nature of cost points to an important area of conceptual overlap between entrepreneurship and ethics that emerges from an imagination-centric view of decision-making. From this perspective, even in ethical choices, which affect the wellbeing of others, there can be no comprehensive means of determining the future costs of a decision on others (Buchanan, 1969). To the subjectivist, costs are "reciprocals, or variables, to the act of choice itself" (Boettke & Candela, 2020, p. 289) because choice is "amongst the products of imagination" (Shackle, 1966, p. 758). ...
Article
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Despite the evident importance of imagination in both ethical decision-making and entrepreneurship, significant gaps remain in our understanding of its actual role in these processes. As a result, scholars have called for a deeper understanding of how imagination impacts value creation in society and how this critical human faculty might more profoundly connect our theories of ethics and business decision-making. In this paper, we attempt to fill one of these gaps by scrutinizing the underlying philosophical foundations of imagination and applying them to the challenges facing entrepreneurs attempting to create new value in an increasingly unpredictable and kaleidic world. Accordingly, we apply a view of imagination developed by the pragmatist philosopher John Dewey to the radically subjective economic philosophy of G.L.S Shackle. As a result, we develop a concept of imagination which we believe can be both significant and hopeful for research at the intersection of business ethics and new value creation.
... His inspiration overlaps with realists in political theory, referencing in particular Machiavelli and Hobbes Tullock, 1999 [1962]; Buchanan, 2000Buchanan, [1975Buchanan, ], 2001. In rejecting the allocative conception of the economic problem, Buchanan also contributes to a more realistic account of economic and political activity: one that traces back to individual behaviour and interaction (Buchanan, 1999(Buchanan, [1969). ...
... His inspiration overlaps with realists in political theory, referencing in particular Machiavelli and Hobbes Tullock, 1999 [1962]; Buchanan, 2000Buchanan, [1975Buchanan, ], 2001. In rejecting the allocative conception of the economic problem, Buchanan also contributes to a more realistic account of economic and political activity: one that traces back to individual behaviour and interaction (Buchanan, 1999(Buchanan, [1969). ...
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What sort of social institutions best represent Rawlsian commitments to free and equal citizenship and distributive justice? Many philosophers believe that the answer must be either liberal socialism or a property-owning democracy based on the radical redistribution of wealth. However, the Rawlsian case for socialism is generally made without considering two key realistic challenges to human sociability: the knowledge problem and the incentive problem. In Neoliberal Social Justice, I apply the framework of robust political economy to this question. It allows us to compare potential solutions to the problem of social justice under realistic conditions. In such scenarios, the more familiar institutions of capitalism and constitutional liberal democracy are better aligned with Rawlsian commitments than socialism. This reveals unexpected common ground between the liberalisms of the left and right.
... When choosing an option among the alternatives, the opportunity cost is the cost of the alternative that we give up when we make a certain decision, including the benefits that we could have obtained from choosing the alternative option (9). In simple terms, the opportunity cost is the benefits we stop perceiving as a result of not selecting the next best option when we have limited resources (10). Opportunity cost is a key concept in economics and has been described as the basic relationship between scarcity and choice (10). ...
... In simple terms, the opportunity cost is the benefits we stop perceiving as a result of not selecting the next best option when we have limited resources (10). Opportunity cost is a key concept in economics and has been described as the basic relationship between scarcity and choice (10). This work addresses the COVID-19 pandemic and its relationship with the notion of opportunity cost from the perspective of the health economy using the model of supply and demand for hospital bed days in intensive care units (ICUs). ...
Article
The substantial increase in demand for medical care in intensive care units (ICUs) caused by the recent appearance of coronavirus disease 2019 (COVID-19) has placed severe pressure on hospital beds. Although countries have intensified efforts to contain or delay the spread of COVID-19, they must prepare to cope with the growing demand for critical care inpatient beds or risk being overwhelmed by the pandemic. The subject of this paper is the COVID-19 pandemic and the opportunity cost from the perspective of health economics using the supply and demand model of hospital bed days in ICUs. In this context, it has been seen that there is an excess demand for hospital beds that exceeds the supply of bed days provided by the health system, generating opportunity costs for patients who cannot be admitted to ICUs because beds are not available. Policymakers must take into account the notion of opportunity cost to ensure that scarce resources are used efficiently because patients with and without COVID-19 will be competing for the same ICU resources.
... The key to understanding the causal mechanism is that cost minimization and profit maximization are flip sides of the same coin (Coase [1938(Coase [ ] 1981Buchanan [1969Buchanan [ ] 1999. In a non-profit institutional setting wherein the managers of state-owned firms are precluded from market knowledge embodied in profits and losses in their decision-making, managers likewise will be prevented from discovering how to allocate scarce capital goods to their most valued consumer uses. ...
... The key to understanding the causal mechanism is that cost minimization and profit maximization are flip sides of the same coin (Coase [1938(Coase [ ] 1981Buchanan [1969Buchanan [ ] 1999. In a non-profit institutional setting wherein the managers of state-owned firms are precluded from market knowledge embodied in profits and losses in their decision-making, managers likewise will be prevented from discovering how to allocate scarce capital goods to their most valued consumer uses. ...
Article
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What is the relationship between central planning, pervasive shortages, and soft budget constraints under socialism? In this paper, we address this question by exploring the evolution of János Kornai’s work on the operation of real-world socialism. In doing so, our goal is to reframe Kornai’s contributions to the political economy of socialism by focusing on the epistemic conditions under non-market decision making. From this perspective, we argue that the dysfunction facing socialist economies is not one based fundamentally on a misalignment of incentives in enforcing hard budget constraints and eliminating shortages. Rather, soft budget constraints are a consequence of competition between firms in a non-profit setting, utilized as a means to monetize the control over state-owned resources through the creation of pervasive shortages.
... 34). This understanding is also reflected in Buchanan's (1969) seminal work "Cost and Choice," where he notes, ...
Article
This study analyzes the effect of opportunity costs on the decision to volunteer, the extent of volunteering, and how opportunity costs are related to competing volunteering activities. Our results reveal that opportunity costs operationalized as net wage per hour had the predicted negative effect on the extent of volunteering but a positive effect on the decision to volunteer. When the individual hourly net wage of the surveyed volunteers is applied, volunteering has average opportunity costs of about 14€/h. As volunteering competes with other activities, we assigned opportunity costs to different activities such as family, hobbies, paid work, or spending time with friends. Results show that, overall, opportunity costs of volunteering are especially related to family activities and less so to paid work. This implies that volunteering activities, in general, compete with family activities rather than with paid work or other activities.
... In the late 1930s when he came back to LSE as a staff member, Coase contributed briefly to an original tradition in cost theory (Buchanan 1969;Bertrand 2015a). It is well known that the so-called marginal revolution of the 1870s incorporated the subjectivity of individual preferences in price theory (Backhouse 2008). ...
Article
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Progressives the world over cherish high hopes in the development of institutions for collective actions. Among these institutions, commons have a long history in western Europe. While a new institutional economics emerged in the 1960s, commons were not taken seriously in postwar economics before the seminal work of Elinor Ostrom in the late 1980s. How can we explain this belated integration of commons in economics? In this paper, we trace some of the origins of the neoclassical comparative institutional analysis. By advocating an institutional comparison in terms of the costs or the value of production under alternative allocations of property rights, Ronald Coase contributed to the narrow theoretical approach taken by new institutional economists. In the late 1960s, neoclassical economists who came to be interested in environmental questions dismissed commons as inefficient solutions to allocation problems. Within this narrow framework, the private enterprise system more often than not was hailed as the best alternative. © 2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
... However, they are also a consequence of the cost effects. On one hand, the costs are a consequence of the choice, and on the otherthe costs predetermine the choice [5]. Williamson [26,27] develops Transaction Cost Economics (TCE), explaining the subordination and impact of institutions at the micro level. ...
Article
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The study aims to assess the dualistic impact of the rents and transaction costs on the farmers regarding agricultural land use. The theoretical framework is based on Rent-seeking (RS) theory and the Transaction cost of economics (TCE). The review of both doctrines explains the "outflow" or "absorption" of value. The study observes the negative aspects of maximizing the functions of farmers with rents. They lead to distortions related to monopolies or unlimited market power. On the one hand, transaction costs are setting market inefficiencies due to the lack of consolidation of property rights and loss of time. On the other hand, rents can positively contribute to the mobility of other factors and, hence, the more efficient allocation of the resources. The transaction costs represent a positive effect of the risk distribution associated with the use of resources, which determines their positive role in protecting property rights. The study uses different methods, such as comparative institutional analysis, which retrospectively shows the effect of the institutional change and, more importantly, the impact of rent-seeking and transaction costs on main actors in the agricultural sector. The study aims to answer the question: rent-seeking or transaction costs are more important for agricultural activities, and how should they be reduced to maintain better agricultural land use.
... Scholars have done several theoretical and empirical studies on public service satisfaction, including techniques such as correlation analysis, regression analysis, and structural equations to study the elements that influence satisfaction [1][2][3][4][5]. After the county was disbanded and turned to a district in 2004, the Suyu district in Suqian City, Jiangsu Province, saw a quick urbanization process, which is typical of new urbanization areas. ...
Article
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The environmental basic public service is the environmental livelihood guarantee and support service provided by the government for the public. The paper evaluates basic environmental public services from the perspective of public satisfaction. The revised questionnaires are handed out in Suqian of Jiangsu Province, where 275 valid questionnaires are collected. For further analysis, the study use SPSS 22.0 to evaluate environment basic public service satisfaction, and identify the influencing factors. The results show that the level of residents’ environmental basic public service satisfaction is average. However, the residents are more satisfied with the he service of the people’s livelihood and infrastructure services than with the environmental monitoring -supervision services and information service. Environmental participation has a significant positive effect on satisfaction with environmental basic public service, while age and education level have significant negative effects on satisfaction of environmental basic public service. The study believes that important measures such as strengthening community environmental publicity and education, improving the openness of environmental information and public participation in the environment should be taken to effectively improve residents’ satisfaction with various types of environmental basic public services.
... The mathematical conception of rationality that reigned in 20 th century formal economics requires a variety of stringent assumptions, including the localized and temporal perfection and completion of knowledge and that preferences have a very particular form. In contrast, the alternative view of rationality described by Mises (1949Mises ( [2010) and Buchanan (1999) among others, and exemplified in work such as North (1990) or Ostrom (1990), overtly relaxes many of the supposedly perfect knowledge assumptions of rationality to instead identify choice procedures whilst also coping with imperfectly informed and ill-defined property rights arrangements. When rationality is understood as a mere descriptor of purposeful human choices, social outcomes are understood as the mechanisms behind institutional development, adaptation, and long-run social evolution. ...
Article
Heterodox economic approaches such as Austrian economics and market process analysis rely upon a less formalistic approach to rationality than neoclassical frameworks. We argue such looser formalism provides a unique opportunity for interdisciplinary engagement to investigating and understanding social institutions, outcomes and complex phenomenon. This introduction briefly summarizes the contents of this invited issue as effective examples of such interdisciplinarity.
... 138). This paradigm shift involved a move away from portrayals of public administration as involving a hierarchy of professionally-trained public servants with a single centre of power (Wilson 1956;Gerth and Mills 1946) towards a 'political economy' approach, inspired by the work of scholars such as Olson (1965), Tullock (1965) and Buchanan (1969), that deployed economic reasoning to analyse the behaviour of the public sector in ways that subverted traditional Wilsonian and Weberian perspectives (V. Ostrom and E. Ostrom 1971;V. ...
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This paper is a review essay of Jayme Lemke and Vlad’s Tarko’s excellent edited volume, 'Elinor Ostrom and the Bloomington School: Building a New Approach to Policy and the Social Sciences'. It summarises the contents of the volume and uses them as the basis for reflections on various aspects of the work of Elinor and Vincent Ostrom, including: their use of the work of James Buchanan, in particular the notion of distinct levels of analysis; the ontological presuppositions of the Ostroms’ work (i.e., what it presupposes about the nature of the social world); the relations between the Bloomington School and various other schools of thought, in particular behavioural economics and the new institutional economics; and the relevance of the Ostroms’ ideas for public administration and environmental policy.
... Thinking along a philosophical continuum of open versus closed orientations reminds us that we cannot add to the litany of demands placed on schools; this is a call on leaders, and society broadly, to make a choice with regards to what we truly value. Indeed, schools have operated from a fantasized position in regards to opportunity costs as new priorities are added onto the last intervention with little consideration for scarcity (Buchanan, 1969). In this fantasized setting (the modern educational policy landscape) "everything counts" equally with little regard to better alternatives that may be sacrificed. ...
Chapter
This essay proposes the need to infuse open innovation (OI) and open source (OS) principles and technologies into schools as a means of tackling many of the most pervasive challenges in education, and by extension, society at large. It is argued that the principles of OI and OS, which are rooted in innovation management and software development, respectively, may be applied to the way we conceive of and approach organizational governance structures related to schooling, particularly in regard to harnessing innovation, updating management processes, and codifying new systems of trust. Whereas OI offers a novel approach to knowledge flow and the open exchange of ideas, communities rooted in OS principles breed tangible and generative effects through peer network democratization. These emergent, digitally defined networks have been proven to maximize innovation potential, expand collaboration, and enable the propagation of highly durable systems of trust and transparency, all catalytic and essential if we are to realize a future learning economy which favors equity, distributed systems, and common goods over profit, centralized decision-making, and proprietorship. It is within this framing that we articulate the core tenets of both OI and OS translationally as a means of stimulating thinking about how core principles of “openness” and the distributed technologies they enable may help to build common ground in an ever-evolving education and information ecosystem.
... While stated prices and accounting costs are easy to measure opportunity costs, by definition, are unobservable and subjective. (Buchanan, 1999;Sowell, 1980). Indeed, Hayek identified a crucial issue in the calculation debate as whether "one authority [can] solve the economic problem of distributing limited amount of resources between a practically infinite number of competing purposes…" and because of the importance of opportunity costs "[t]he fundamental question is whether it is possible under the complex conditions of a large modern society for a central authority to carry out…" such an enterprise. ...
Article
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Twenty-five years ago Richard Epstein published Simple Rules for a Complex World, which would go on to become one of Epstein’s most influential works. This essay, prepared for a conference and symposium to celebrate the anniversary of the book, applies the insights of Simple Rules in the context of one of the most complex areas of social and economic regulation, financial regulation. The complexity of modern finance is often thought to require an equally complex regulatory structure to preserve the safety of the financial system and thus Epstein’s approach is inapplicable to this context. We argue that this argument is exactly backwards. Simplicity in the regulatory framework is essential for financial institutions to manage risk and conduct their affairs efficiently and prudently. Complexity, by contrast, begets a variety of destabilizing problems, including the likelihood of regulatory arbitrage and errors by regulators that increase risk. We argue that refashioning financial regulation around Epstein’s concept of simple rules would create a more stable and efficient financial regulatory system.
... His analysis of modern society has economic, political, fiscal, and normative-ethical dimensions. It is economic because his theory is concerned with overcoming the crisis of economics by redirecting it on the theoretical course of subjective choice (Buchanan, 1981(Buchanan, , 1999) and the will of individualistic freedom. Buchanan's analysis (1964Buchanan's analysis ( , 1975Buchanan's analysis ( , 1987 is normative and political because it aims at sharpening the critique of the state/political market and the economic/fiscal course of affairs that make a case for the Leviathan form of state. ...
Book
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Economists occupy leading positions in many different sectors including central and private banks, multinational corporations, the state and the media, as well as serving as policy consultants on everything from health to the environment and security. Power and Influence of Economists explores the interconnected relationship between power, knowledge and influence which has led economics to be both a source and beneficiary of widespread power and influence. The contributors to this book explore the complex and diverse methods and channels that economists have used to exert and expand their influence from different disciplinary and national perspectives. Four different analytical views on the role of power and economics are taken: first, the role of economic expert discourses as power devices for the formation of influential expertise; second, the logics and modalities of governmentality that produce power/knowledge apparatuses between science and society; third, economists as involved in networks between academia, politics and the media; and forth, economics considered as a social field, including questions of legitimacy and unequal relations between economists based on the detention of various capitals. The volume includes case studies on a variety of national configurations of economics, such as the US, Germany, Italy, Switzerland, Greece, Mexico and Brazil, as well as international spaces and organisations such as the IMF. This book provides innovative research perspectives for students and scholars of heterodox economics, cultural political economy, sociology of professions, network studies, and the social studies of power, discourse and knowledge.
... His analysis of modern society has economic, political, fiscal, and normative-ethical dimensions. It is economic because his theory is concerned with overcoming the crisis of economics by redirecting it on the theoretical course of subjective choice (Buchanan, 1981(Buchanan, , 1999 and the will of individualistic freedom. Buchanan's analysis (1964Buchanan's analysis ( , 1975Buchanan's analysis ( , 1987 is normative and political because it aims at sharpening the critique of the state/political market and the economic/fiscal course of affairs that make a case for the Leviathan form of state. ...
... The opportunity cost, defined as the next-highest-valued alternative use of a resource (Alchian, 1968;Buchanan, 1969;Kelly & Gupta, 2016), has been estimated from the main economic activities in the region (equation 3), such as timber extraction, agriculture, livestock and hunting. Although these activities are minor, they still have an effect in the protected forest. ...
Article
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The current study provides an estimation of the economic value of the Kutukú-Shaimi Protected Forest (KSPF) in southeastern Ecuador, of selected environmental goods and services. We estimated the economic value of carbon storage, conservation of fresh water sources, wildlife hunting and opportunity cost of foregone economic activities such as timber extraction and livestock farming. The highest economic value has been carbon storage with 69,579,743.09 US$/year, worth to be awarded by REDD+ programs. Fresh water conservation has not been as important as previously expected, with some 13,647.52 US$/year. The total estimated economic benefits including opportunity cost for KSPF yielded to be of about 70,006,752.24 US$/year.
... The social planner, however, cannot access individual values which are subjective and in the mind of the individual chooser (Buchanan, 1959(Buchanan, , 1969. "Utility is measurable, ordinally or cardinally, only to the individual decision-maker. ...
Article
How can public policy best deal with infectious disease? In answering this question, scholarship on the optimal control of infectious disease adopts the model of a benevolent social planner who maximizes social welfare. This approach, which treats the social health planner as a unitary “public health brain” standing outside of society, removes the policymaking process from economic analysis. This paper opens the black box of the social health planner by extending the tools of economics to the policymaking process itself. We explore the nature of the economic problem facing policymakers and the epistemic constraints they face in trying to solve that problem. Additionally, we analyze the incentives facing policymakers in their efforts to address infectious diseases and consider how they affect the design and implementation of public health policy. Finally, we consider how unanticipated system effects emerge due to interventions in complex systems, and how these effects can undermine well‐intentioned efforts to improve human welfare. We illustrate the various dynamics of the political economy of state responses to infectious disease by drawing on a range of examples from the COVID‐19 pandemic.
... When choosing an option among the alternatives, the opportunity cost is the cost of the alternative that we give up when we make a certain decision, including the benefits that we could have obtained from choosing the alternative option (9). In simple terms, the opportunity cost is the benefits we stop perceiving as a result of not selecting the next best option when we have limited resources (10). Opportunity cost is a key concept in economics and has been described as the basic relationship between scarcity and choice (10). ...
Article
Full-text available
The substantial increase in demand for medical care in intensive care units (ICUs) caused by the recent appearance of coronavirus disease 2019 (COVID-19) has placed severe pressure on hospital beds. Although countries have intensified efforts to contain or delay the spread of COVID-19, they must prepare to cope with the growing demand for critical care inpatient beds or risk being overwhelmed by the pandemic. The subject of this paper is the COVID-19 pandemic and the opportunity cost from the perspective of health economics using the supply and demand model of hospital bed days in ICUs. In this context, it has been seen that there is an excess demand for hospital beds that exceeds the supply of bed days provided by the health system, generating opportunity costs for patients who cannot be admitted to ICUs because beds are not available. Policymakers must take into account the notion of opportunity cost to ensure that scarce resources are used efficiently because patients with and without COVID-19 will be competing for the same ICU resources.
... Scholars might shrink remaining gaps between AE and NIE by viewing transaction costs as the by-product of choice rather than objective, unalterable, exogenously given constraints (Robbins 1934;Buchanan 1969;DiLorenzo 1990). Indeed, North's thinking evolved in this very direction over the course of his career (Candela, forthcoming). ...
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Ich möchte in dieser Arbeit die Wichtigkeit und die Grenzen des Marktliberalismus erarbeiten. Der Marktliberalismus stellt wahrscheinlich das wichtigste Erzeugnis der Schottischen Aufklarung dar. Das Prinzip freier Markte, allgemeiner noch gefasst unter dem Prinzip des Laissez-Faire, also der staatlichen Zurückhaltung zur Selbstorganisation der Gesellschaft, hat die westliche Gesellschaft tief geprägt und sollte daher ein wichtiges Forschungsfeld für den philosophischen Liberalismus bilden. Welche Herausforderungen stellen der Sozialstaat, die zunehmende Komplexität der Offenen Gesellschaft und die damit einhergehende Erstarrung westlicher Gesellschaften an den Marktliberalismus?
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This thesis investigates changes in political attitudes of two social groups-pensioners and low-income households-in two Latvian regions-the municipalities of Ikšķile and Varakļāni-that are strongly affected by an imminent administrative territorial reform program (ATR). Before conducting the field study, I expected that people's political attitudes would change for the worse, e.g., people would have a more positive opinion about illegal activities and their political participation would decrease, due to non-pecuniary costs that have not been taken into account while forming the ATR. A case study approach is used, and semi-structured in-depth interviews are conducted. Thematic inductive analysis is then performed on the primary data gathered from the interviews to observe changes in people's political attitudes across the two municipalities and two target groups. I found three emerging themes across all respondents: identity, fairness, and representation. These themes can be extrapolated as costs for people living in these municipalities and, as such, work as separate mechanisms that can change people's political attitudes.
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The neoclassical economists have long used the concept of «market failure» as a stick with which to beat up on the free enterprise system. Foremost amongst these so called «market failures» are «negative externalities.» These are defined as action that negatively affects third parties, other than via price. The key example is pollution. These dismal scientists never mention, however, the fact that government itself is the source of negative externalities itself, particularly through the socialization of risk; e.g., social security, Medicare, Medicaid and other forms of socialized medicine, unemployment insurance, welfare, etc. The present paper is devoted to explicating and elaborating upon the concept of government failure. Key words: Externality, public good, market failure, neighborhood effect, government failure, moral hazard. JEL Classification: Q5; D62; H41. Resumen: Los economistas neoclásicos han utilizado durante mucho tiempo el concepto de «fallo de mercado» como un bastón con el que golpear sobre el sistema de libre empresa. Principalmente entre los llamados «fallos de mercado» se encuentran las «externalidades negativas». Estas se definen como acciones que afectan negativamente a terceras partes por vías distintas a los precios. El ejemplo clave es la polución. Sin embargo, estos «tristes» científicos nunca mencionan el hecho de que el propio gobierno es la fuente de las propias externalidades negativas, particularmente a través de la socialización del riesgo; por ejemplo, la seguridad social, los seguros médicos estatales, los seguros de enfermedad, los seguros de desempleo, la asistencia social, etc. El presente trabajo se dedica a explicar y ampliar el concepto de fallo del gobierno. Palabras clave: Externalidad, bien público, fallo de mercado, efecto de vecindario, fallo del gobierno, riesgo moral. Clasificación JEL: Q5; D62; H41.
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This chapter reviews Wicksteed’s, Davenport’s and F Knight’s subjective theory of opportunity cost, and the ways in which this theory offered a superior explanation of the relationship between cost, price and utility to the mainstream neoclassical conception. Conventional Marshallian microeconomics regresses back to the “cost of production” theories of the classical school, by splintering the price theory into two unrelated subfields: consumer behaviour/demand explaining the “short-run” and the theory of the costs of production, explaining the “long-run”. Wicksteed, Knight and Davenport, in line with radically subjectivist views of marginalism, wanted to unify these two fields on subjectivist foundations. Wicksteed derived both consumer and producer behaviours from individual utility, and reduced the cost and supply to preferences by using the ‘total demand-stock’ analysis of price determination (instead of conventional supply-demand analysis). Davenport corrects the mistaken view by Bohm-Bawerk who admitted the Marshallian double standard of value (utility and disutility/cost), and insists that utility and scarcity together determine value, both of consumer and producer goods. The theory of entrepreneurship as forward-looking price speculation, and of costs as “objectified” entrepreneurial assessment by Knight and Davenport are contrasted with the Marshallian “real cost” theory, that leaves little room for the entrepreneur.
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Social contract theory depicts a constitutional contract as the result of a hypothetical agreement among society's members to escape a prisoners' dilemma situation. It depicts citizens as political equals agreeing to be forced into a cooperative strategy rather than a socially suboptimal strategy that gives them the highest personal payoff. Government is the organization that forces everyone to cooperate. However, citizens can never bargain as political equals. An elite few design the rules, and others are forced to comply with them. The contractarian ideology that depicts government as acting in the general public interest legitimizes the actions of government, giving those elite few who hold government power a greater ability to use it to further their own interests, often at the expense of the masses. Within the context of a prisoners' dilemma game, contractarian ideology leads to an outcome that is socially suboptimal, but beneficial for the political elite.
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For most economists at Chicago, Marshall was simply an input, the supplier of an approach to economic analysis. For Ronald Coase, however, Marshall was much more than this—a subject of fascination and, at times, almost a reverence and obsession. Trained in the late 1920s and early 1930s at the London School of Economics, where indifference and even antipathy toward Marshall was widespread, and a member of the LSE faculty from 1935 until his departure for the United States in 1951, Coase would not have ranked high on the list of those expected to become Marshall’s first biographer—a project that Coase finally abandoned only late in life—let alone one who drew on Marshall’s methodological approach to castigate both modern economics generally and certain of his (“Marshallian”) Chicago colleagues in particular. Coase’s affinity for Marshall, whom he considered both a “great economist” and a “flawed human being,” requires some explanation, clues toward which can be found both in his published writings and in the voluminous materials from his researches on Marshall now available in Coase’s archives. This paper examines Coase’s biographical work on Marshall and his discussions of Marshall’s economics for clues as to the sources of Coase’s affinity for Marshall. The evidence suggests explanations that are at once personal and professional.
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