Prelude to Political Economy A Study of the Social and Political Foundations of Economics

by Basu, Kaushik

• ISBN13: 9780199261857
• ISBN10: 0199261857
• Format: Paperback
• Copyright: 2003-04-10
• Publisher: Oxford University Press

Summary

Mainstream economics was founded on many strong assumptions. Institutions and politics were treated as irrelevant, government as exogenous, social norms as epiphenomena. As an initial gambit this was fine. But as the horizons of economic inquiry have broadened, these assumptions have becomehindrances rather than aids. If we want to understand why some economies succeed and some fail, why some governments are effective and others not, why some communities prosper while others stagnate, it is essential to view economics as embedded in politics and society. Prelude to Political Economyis a study of this embeddedness; it argues for an 'inclusive' approach to institutions and the state.Modern economics recognizes that individuals' pursuit of their own selfish ends can result in socially suboptimal outcomes -- the Prisoner's Dilemma being the stark example. It has been suggested that what we need in such an eventuality is 'third-party' intervention, which can take the form ofimposing punishment on players. Kaushik Basu objects to this method of wishing third parties out of thin air. He argues that if a third party that could impose its will on others were available, then it should have been modeled as a player to start with.The adoption of such an inclusive approach has implications for our conception of the state and the law. It means that the law cannot be construed as a factor that changes the game that citizens play. It is instead simply a set of beliefs of citizens; and, as such, it is similar to social norms.What the law does for an economy, so can social norms. The book discusses how the nature of policy advice and our conception of state power are affected by this altered view of the state and the law.As corollaries, the book addresses a variety of important social and philosophical questions, such as whether the state should guarantee freedom of speech, whether determinism is compatible with free will, and whether the free market can lead to coercion.

Author Biography

Professor of Economics and holds the C. Marks Chair at the Department of Economics, Cornell University. He has previously been Distinguished Visitor, London School of Economics (1993), Visiting Professor at the Department of Economics, Princeton University (1989-91), Member, Institute for Advanced Study, Princeton (1985-86) and Professor, Delhi School of Economics (1985-94). He is a Fellow of the Econometric Society and a recipient of the Mahalanobis Memorial Award for contributions to economics. In 1981-2 he was CORE fellow at CORE, Louvain-la-Neuve, Belgium. He has published extensively in the areas of development economics, game theory, social choice and welfare and industrial organization theory.
http://www.people.cornell.edu/pages/kb40/

Table of Contents

Preface	xi
Part I. PRELIMINARIES	1	(64)
1. Introduction	3	(8)
1.1. Incident off Grand Trunk Road	3	(2)
1.2. Positive Political Economy	5	(2)
1.3. An Overview	7	(4)
2. Games and Misdemeanors: Game Theory for the Uninitiated	11	(25)
2.1. Motivation	11	(1)
2.2. Hex	12	(4)
2.3. Normal-Form Games	16	(8)
2.4. Extensive-Form Games	24	(12)
3. Individual Rationality	36	(29)
3.1. The Concept of Rationality	36	(3)
3.2. Internal Consistency	39	(3)
3.3. Procrastination and Addiction	42	(9)
3.4. The Traveler's Dilemma	51	(6)
3.5. The E-mail Game - Almost	57	(3)
3.6. The Paradox of Cognition	60	(5)
Part II. SOCIETY	65	(42)
4. Social Norms, Culture and Beliefs	67	(40)
4.1. Of Mice and Men	67	(7)
4.2. The Bridge on Forest Home Drive	74	(3)
4.3. A Digression on "Association"	77	(9)
4.4. Equilibrium-Selection Norms	86	(3)
4.5. Hawk, Dove and Maynard's Cuckoo	89	(4)
4.6. Norms, Polyphiloprogenitive	93	(8)
4.7. Beliefs	101	(6)
Part III. THE STATE	107	(90)
5. Law and Economics	109	(23)
5.1. The Law According to Social Science	109	(2)
5.2. Law and Economics: A New Approach	111	(13)
5.3. Law and Enforcement: A Model	124	(2)
5.4. A Digression on Freedom of Speech	126	(5)
5.5. Concluding Remarks	131	(1)
6. Power and Coercion	132	(34)
6.1. Of Dyads and Triads	132	(4)
6.2. Political Power, Havel's Allegory, and McCarthyism	136	(11)
6.3. Triadic Markets and Coercion	147	(8)
6.4. A Digression on Sexual Harassment	155	(5)
6.5. On the "Man of Influence"	160	(4)
6.6. Concluding Remarks	164	(2)
7. On Advising Government	166	(16)
7.1. A Science of Advising?	166	(3)
7.2. Advising Endogenous Government	169	(4)
7.3. Cheater's Roulette	173	(6)
7.4. A Moral Conundrum	179	(3)
8. The Concept of "State"	182	(15)
8.1. Preamble	182	(4)
8.2. The Standard View and Its Brood of Fallacies	186	(3)
8.3. State as Beliefs	189	(4)
8.4. The Dane County Farmers' Market	193	(4)
Part IV. ETHICS AND JUDGMENT	197	(32)
9. Welfare and Interpersonal Comparisons	199	(11)
9.1. Preliminaries	199	(2)
9.2. If I Were You	201	(3)
9.3. Income and Welfare	204	(6)
10. Utilitarianism and Rights	210	(19)
10.1. Basic Concepts	210	(3)
10.2. Escher's Waterfall and a Critique of Utilitarianism	213	(8)
10.3. Rights and Liberty	221	(6)
10.4. Morals and Solipsism	227	(2)
Part V. CONCLUSION	229	(34)
11. Some Concluding Remarks	231	(10)
11.1. Introduction	231	(1)
11.2. The Pdomain Problem	231	(5)
11.3. Games and Reality	236	(2)
11.4. The Free Rider	238	(2)
11.5. Conclusion	240	(1)
Appendix. Notes on Methodology: Various and Sundry	241	(22)
A1. Introduction	241	(1)
A2. Knowledge and Skepticism	242	(4)
A3. Assumptions	246	(4)
A4. Hume's Law	250	(3)
A5. Methodological Individualism	253	(4)
A6. Determinism and Choice	257	(6)
References	263	(18)
Name Index	281	(4)
Subject Index	285