Normal
Class
presentations Spring
2012
Bethell presentations/summaries
Benjamin
Wood
02/13/12
FALL FROM GRACE –
CH1:
In chapter one’s
first section entitled “Fall from Grace,” Tom Bethell lays the ground work for
the whole book saying that:
·
Over 100+ years ago the institution of private property fell into
intellectual disrepute, basically meaning that private property was seen as an
institution that was ultimately not needed.
He goes on to give
evidence of this by saying that the topic of private property was not covered in
great books such as:
·
Britanica’s “Great Books of the Western World” – property was not
even listed in the 102 topics in its index as “great
ideas.”
·
“Rise and Fall of the Great Powers” – there was no attention given
to the subject.
Another shocking
find by Bethell was that between 1928-1974, almost 50 years, the supreme court
refused to see a single property zoning case.
He also points out
that early economists, like Adam Smith, hardly wrote about the subject because
at that time private property was so highly regarded that it ought not to be
talked about, which is not been the case for the last 100+
years.
THE BLESSINGS OF
PRIVATE PROPERTY – CH 1:
In his next
section of chapter one, the blessings of private property, he goes on to state
the 4 main blessings that private property gives us which
are:
1.
Liberty
2.
Justice
3.
Peace
4.
Prosperity
He also says that
the argument of this book is that private property is a necessary condition for
economic development, meaning that you must have private property. He also
states that even though that is true, it is not sufficient in our world
today.
Some evidence to
back bethells claims he makes are:
·
Leon Trotsky – “where this is no private property, individuals can
be bent to the will of the state”
·
Pope Leo XIII – “fundamental principal of socialism, is to make all
possessions public property, is to be utterly rejected because it hurts the very
people you are trying to help.”
THE LENS OF PROSPERITY – CH
1:
In this section
Bethell states that the western world has far exceeded the rest and it can be
attributable to having well-developed private
property.
In 1987, due to
many misleading statistics of the soviet union economy, one of the leading
economic textbooks at the time quotes saying “The soviet growth rate has
generally exceeded that of the US in the post WWII period as a whole.” – This is
important because it gave thought that the socialism movement could actually
work, therefore taking away private property could
work.
Only recently have
we tied that private property and rule of law, is a key element of capitalism,
and therefore prosperity.
PROPERTY AND
PROSPERITY – CH 1:
In the final
section of chapter 1, bethell writes, that property’s eclipse coincided with the
reign of the idea of progress. There was a impotant connection between the two:
throughout history people have realistically been resigned to living in the
present imperfect, or basically just making do with how things
were.
The idea of
private property was looked at as pretty radical and never really thought of
until progress came along, which was what private property needed to become san
accepted idea. They both work well together.
The Noblest Triumph by Tom Bethell
The author uses a condominium building to explain the
transformation that takes place when a communal arrangement is privatized:
efficiency is enhanced and justice itself is routinized. Assume that all units
are the same size and all owners are charged the same condo fee. No individual
meters. The utilities bill is divided equally between all unit owners. In the
consumption of energy, great opportunities for free riding occur. Such an
arrangement encourages wasteful consumption. The corrective mechanism is
separate meters for each apartment (privatization of
utilities).
Suppose that board members decide to correct this
without privatizing. First, they try exhortation. Slogans are posted “THINK OF
OTHERS! TURN OF LIGHTS WHEN NOT IN USE!” It doesn’t work so the condo board
hires “energy monitors” that knock on doors asking to turn down A/C. Then, they
are provided with apartment keys to enter when nobody answers to the knock.
However, these monitors are being bribed and wasteful consumption still exists,
so they are given full police powers and may enter any apartment at any time.
This example suggests that if private property is banished, and exhortation (or
“education”) is put in its place, both economic efficiency and justice will
prove elusive. If coercive measures are introduced, privacy must be swept
aside.
A selfish person is one who takes an unfairly large
share of some common good, thereby leaving unfairly small shares for everyone
else. But where all shares have been defined and allocated and agreed upon, this
is no longer possible. Where private property does not exist, the selfishness
will be given free rein. An arrangement that systematically tries to reward the
worst among us will not bring out the best in anyone.
In his Summa Theologica, Saint Thomas Aquinas argued
that “the act of justice is to render what is due.” In the condo, the effect of
privatizing the utilities corresponds exactly to the traditional definition of
justice. High utility bills to the squanderers of electricity, low bills to
careful users. Private property institutionalizes justice.
Justice And Distribution.
John Rawls favored nullifying “the accidents of natural
endowment and the contingencies of social circumstance as counters in quest for
political and economic advantage.” Such inequalities were underserved. The
theory of Rawls’s title suggested a group of constitutional framers placed in
the “original position” of choosing the basic design of society. They would
themselves be obliged to live in this society, but in deciding on the rules they
would remain behind a “veil of ignorance.” They could not know what their future
position in the society would be. The framers would draw up two broad
principles. First, each person would enjoy the greatest amount of liberty that
was compatible with an equal liberty for all. Second, the material goods of
society, income and wealth, were to be distributed equally unless an unequal
distribution of any or all of these goods is to the advantage of the least
favored.
Injustice and its remedy become important considerations
in societies without well-defined private property rights. The weak will be at
the mercy of the strong, and there will be many disputes that must be arbitrated
by the sovereign. If not at the mercy of their neighbors, most people will be at
the mercy of the magistrate. At best, justice will be an occasional and
haphazard thing.
In short, a private-property system is the guarantor of social justice because it establishes individual responsibility and accountability, and acts as a bulwark against power.
The Noblest Triumph
Chapter 12 Rights- And Property Rights -Garek Dunham
Section 1
· Individual rights were implicit in the British common law
· The doctrine of rights recognizes what John Locke called “the Equality of men by Nature”
· Rights may be defined as just claims
· All men created equal, and although individual men might differ greatly in the content of their character but should equal by the law
· Life, liberty and property are the basic rights and it defeats the basic rights without owning property.
· When the state comes into being, its duty is to respect and defend these rights, which at that point can be thought of as civil rights
· Thomas Hobbes thought that people transferred their rights to the state
· Subjects could do what government allowed them
· Locke assumed people were free to do those things that did not infringe upon the similar rights of others, while governments could do only what they were constitutionally authorized to do
· This created limitations on the government
· Jefferson said property rights are found in our natural wants, in the means with which we are endowed to satisfy these wants, and in the right to what we acquire by these means
· Frederic Bastiat agreed with Jefferson
· Bastiat said that it is because of Property that we have laws to protect us.
· This makes Property prior to the law
· Bentham objected property and law are born together and die together, before laws were made, there was no property; take away laws, and property ceases.
· 19th century laws protected property but many American judges tried to create competition.
Section 2 Rights without Property
· It began to seem that property did not so much contribute to our liberties as detract from them
· United States vs. Carolene Products explicitly separates economics from other rights.
· Economic Rights started to replace property rights
· Franklin D Roosevelt pg176/177
· The idea started changing that the government was benign as long as the free press existed
Section 3 Signs of Recovery
· “In a country where the sole employer is the state, opposition means death by slow starvation”
· Trotsky considered state property as a way of controlling jobs and live hood.
· The Orderly exercise off all civil rights depends on a prior acknowledgment of property rights
The
overall point that the chapter tries to persuade is that all rights hinge off of
property rights. For example if you have no right to property but for freedom of
speech then your freedom of speech would be minimized or neutralized by not
being able to own the machinery to own printers. Property Rights are essential
for society to function
Elvis
Dzafic Property in Araby chp
15
·
Arab nations
have used oil payments to hide their economic repressions for decades. For
example, the region contains an ever growing, 260 million population and it
exports outside of oil are less than Finland, which has a population of about 5
million.
·
According to
Bethel, Arab rulers and Western scholars are unable to understand the cause of
the problem. For example, Saudi Arabia’s per capita income in 1981 was $17K;
this went down to $7K in 1993.
·
During the
19th and early 20th centuries, the efforts to a
constitutional government were undermined and property rights became
nationalized. Western elites persuaded the Arab leaders to centralize their
power, which worked for the most part from the 1950s to the 1980s, but then
growth came to a quick halt.
·
A leader may
dictate property and human rights; however, property rights only transfer when
the current owner is overthrown. Overthrowing the leader is how a new leader
comes into power. Therefore, it is irrespective of a person’s wealth, he/she can
own land and become the leader of the country by just having support backing
them up in their effort to overthrow the leader and/or landowner. The region has
been described as the “Tribes with Flags” because of this type of political
arena. That political arena has also installed fear upon the wealthy leaders,
landowners, and the poorest of people within this region because at any time,
they can lose all of their property. Even with the minds of the Western elites,
no solution has been deemed possible to solve the violence in this region of the
world.
·
The only
solution found for protecting these people is Shari’a law, Islamic law, which punishes
criminals and provides a solution to the ones who have been wrongfully deprived.
The reason it is not helping is that leaders are scared to be overthrown so
giving anyone more power is increasing the risk for the leader so the land is
handled in the wishes of the state, not the people or Shari’a.
·
The magnitude of
the change has been that the Arab nations had a higher per capita individually
than the East Asian “tigers,” which includes Hong Kong, Taiwan, Singapore, and
South Korea in the 1960s, but it was less than a third and continues to decline
since 1986. It is such a mystery, the World Bank is still unsure of how the
decline is happening in the Arab region.
·
From this
empire, the Western changed their institutions, especially in individual rights,
not only in political theory, but also in law and practice, which brought
Constitutional government. This made property, human rights, and contract and
legal contracts more enforceable; in total, material prosperity
began.
·
From the
18th to the early 19th century, Economists have agreed
that the Arabs know how to conquer better than they know how to
rule.
·
Islam teaches
that all things are owned by God, or translated to Arabic as Allah, and main is
their vicegerent.
·
All property
needs to be equal among all people. These teachings have worked well in the
past, but once Western teachings were brought into this region, tyranny began
and by the 19th century, it became even more severe. Turkey and Egypt
have made some progress away from this, but they remain as the only exception to
having a slightly less, severe tyranny.
·
On the note of
business, families are more stable within their families and on the business end
by following Islamic teachings. The Western culture sees it as a problem, but it
is economically and financially beneficial.
·
A
Reagan-appointed special police force, called the Mutawa, in Saudi Arabia may
jail anyone disobeying Shari’a Law,
even a Saudi king who had a small party with liquor, airline stewards was
jailed for 18 months.
·
It lays in
disagreement what led to the decline in the Arab nations and at exactly when
among Western and Arab elites.
·
Islamic
teachings upon land owning do not allow hoarding, the phrase of “Use it or lose
it” exists. If one owner is not using land, they are deemed as hoarders, which allow someone else to
place priority over the land to cultivate the land with labor and capital. In
economic terms, it optimizes the land not to go to waste because the original
owner still owns the land, and when the second person is done, the original
owner has fertile land ready for his use and still owns the land. This restates
the point of collectivism exists, not individualism.
·
So it works
great, right? Wrong. Economics have proven that Western teachings in this region
that go against Shari’a Law have
caused corruption and turmoil in this area.
·
The British army
officer Jarvis in the 1930s poked fun at the Arabs who have a Desert that
nothing grows in and made few more points such as they only have camels and
goats to feed, which Engels, an economist, deemed him completely wrong. Note
that the Arab deserts are vast and use to be cultivated, but now remains as an
arid wasteland. In the 14th century, historian Ibn Khaldun stated
that the “Very earth there turned into something that was no longer earth.”
·
To conclude, the
population of the Arab region remains happy, even with Deserts and not much
farmland, they have cultivated these lands with the help of the camels and
goats, which Jarvis poked fun at in the 1930s, to become ever so prosperous.
Even without much private property rights and with inexpensive fencing, the
people in the Arab region do not mind. The only problem that has risen is the
goat problem where everyone wants goats to have an easier life in the desert,
especially the population that lives in the deep parts of the desert.
The
“Deserted” character of the Arab world may not be a coincidence, which is proven
with NASA satellite photographs from the 1970s that found a pentagon within the
desert that had a grass area in the size of 400 square miles. It was divided in
5 equal parts and fenced off to allow the goats to graze only one section at a
time in order to allow the grass in the other 4 sections to grow back. The
pentagon may be shared but the area around it belongs to everyone therefore
nobody
Intellectual
Property: Chapter 17 Cessilee
Stroup
·
Intellectual
Property is the most active field of property in our day.
·
Bethell
describes the changes of intellectual property rights thoughout history and how
the old rules will no longer apply.
·
Industry
Week noted in 1994 that we are living in the “Golden Age” of intellectual
property. “Never before have the owners of patents, copyrights, trademarks,
trade secrets, and other products of the mind enjoyed, so much government
protection and financial reward.”
·
Physical
property granted to individuals creates a monopoly in the use of a certain good,
because the owner can physically exclude the good from the rest of the
world.
·
The
first English patent law was issued intended to outlaw
monopolies.
·
Copyright
ownership also developed from a surprising background, which was censorship
rather than concerns for the owner’s rights.
·
Before
the invention of the printing press, copyists were the individuals who were
thought to do the useful work. The
multiplication of texts made them assessable to future generations.
·
After
the discovery of the printing press, author’s names began to appear less on
their work.
·
The
author of, In the Statue of Anne (1710), is noted as the first to be worthy of
protection.
·
Printers
had taken the liberty of printing, reprinting, and publishing books without the
authors consent. Donaldson, the author of In the Statue of Anne was the first to
land a 14 year time limit for copyright.
·
Due
to the protection that Donaldson obtained, it has been accepted that the right
to use intellectual property has a time limit, which is the main distinction
between intellectual, and physical property.
·
The
current copyright law, which was enacted in 1976, offers protection to 50 years
beyond the life of the author, and 75 years in the case of a
corporation.
·
The
protected period for patents has been 17 years from issuance in the past, but
the General Agreement on Tariffs and Trade changed the protection to 20 years
from the filing of the patent application on international trade.
·
Neither
facts nor ideas can be copyrighted, only expressions, therefore copyright is the
more restrictive grant.
·
In
order for an invention to be patented, it must be original, non-oblivious and
have economic value; therefore some patents do not grant a monopoly in the idea
itself.
·
A
defect of patents is where mechanical inventions use the laws of nature and put
them to use, technically there isn’t an invention which creates an independent
discovery.
·
When
a situation such as an independent discovery takes place, it is considered to be
a race to the patent office to file the form and the one who arrives first wins
the monopoly. The winner could have
done as much as add finishing touches to an earlier
discovery.
·
Trademarks
and trade secrets are also considered to be intellectual
property.
·
The
invention of a trademark doesn’t stop a competitor of thinking of another one;
these discoveries differentiate products which create an infinite amount of
variety.
·
A
trade secret has its economic advantage over competitors because it can be
maintained without benefits of the states enforcement. It can be preserved by
the ordinary rules of property rights, and doesn’t rely on the Patent
Office.
·
The
Coca-Cola formula was never patented, and in 1977 the company left India rather
than handing over the formula to the government.
·
A
product such as Coca-Cola that is protected by secrecy can be available to the
world without limiting the rights of others to try and copy
it.
·
(Page
261) A Coca-Cola company spokesman spoke out about an issue of another company
producing the exact same drink, using the Coca-Cola
formula.
·
He
said, “What are they going to charge for it? How are they going to distribute
it? How are they going to advertise? See what I’m driving at? We’ve spent over
100 years and untold amounts of money building the equity of that brand name.
Without our economies of scale and incredible marketing system, whoever tried to
duplicate our product would get nowhere, and they’d have to charge too
much. Why would anyone go out of
their way to buy the duplicated product, which is really just like Coca-Cola but
costs more, when they can buy the real thing anywhere in the
world?”
·
Intellectual
property is considered to be a blessing to society, and when financially
rewarded, inventions will increase and society as a whole will benefit from
that.
·
It
has never been shown that invention really does depend on patents. The printing press had no legal
protection, just as other important Industrial Revolution inventions lacked the
protection as well.
·
A
statistical study of the effect of patent protection on the development of
pharmaceutical drugs from 1950-1989 found that patents were not a “prerequisite
for inventions” However, there was a significant correlation between economic
development and invention.
·
Another
study estimated without patents, 65% of new pharmaceutical drugs in the US would
not have reached the market.
·
Intellectual
goods lack the quality of scarcity, where as private property protects the value
of scarce goods.
·
The
information content, whether it is a story line in a book or the idea in a
machine, has to be put in physical form before it can acquire value.
·
The
cost of copyright before the printing press was valued mostly in the labor that
created the new book.
·
Post
printing press, additional copies before cheaper and cheaper relative to the
original.
·
Now,
the cost of making and distributing a new book runs high, relative to the value
of the content. Authors are usually
paid 10% of the retail and surprisingly the publishers often lose money.
·
On
the other hand, the digital revolution may have changed a lot of these
factors. Once information is
digitized, the physical form diminishes, and it becomes much more difficult to
protect and to own.
·
Digital
copies multiply on a much faster rate, and the value decreases with every
additional copy.
·
High
value items can be inexpensively replicated and then will grow into low value
articles, unless there is something to prevent the fall. This is the theory
behind the Information Age. The
information economy, an economy in which the value added by intellectual goods,
such as song, films and software is higher at the margin than added by steel and
oil.
·
In
the transition from the Industrial to the Information age, we find that the
sudden rise of intellectual properly is the legal expression of this change.
Apple held their intellectual property too tight, resulting in monopoly profits,
but they also lost valuable market share.
·
The
information content has continued to find its unexpected physical
property.
·
Computer
software came with the software preinstalled, which made it unnecessary for the
software producers to concern themselves with patrolling the physical protector
that was previously needed.
Meanwhile, the price of the software decreased by a factor of
ten.
·
Cyberspace
will pose a great challenged to the intellectual’s property importance. If we really are moving into a world in
which the economic significance of the material is declining, and more
transactions take place in cyber space we will enter a world in which the old
property rules will no longer apply.
Summary of Noblest Triumph – Chapter 21
–
· It looks like as though the ruling class and the Chinese people resolved jointly to become the leading power in the world. Private property would have to be permitted, and the remarkable thing, unforeseen by westerners and political theory, was that the country began to move in this direction under a communist government. The party realized that democracy was not essential, and perhaps was an impediment, to this transformation.
· Socialism market economy: people were given the right to buy consumer goods, even an automobile or a small tractor, the people would savor the novelty of prosperity. So for the most part, they would be content to live without politics. Valuable powers were ceded to people –above all the right to work, to earn a living, to retain the fruits of their labor.
· Private property or its equivalent was first restored to the rural areas in 1978 and has moved towards a market economy with unprecedented speed, enjoying the largest tax cuts in history.
· After the communist revolution in 1949 land was allocated to farmers in recognition of support of the revolution, but never given the ownership, then in the name of the revolution the government began to take the land back, a famine in 1959-62 followed with a crash industrialization called the “great leap forward” as many as 40million people died.
· Collective farms were given the keep any surplus after meeting a production quota equivalent to a highly regressive tax; encourage people to work long hours. The land remained formally the inalienable property of the state.
· 1977 the families began to “bribe” their way out of collective chores by making deals with local cadres
· 1978 the 11 party congress reformed the china’s agriculture. It improved incentives by raising farm prices and encourage family production on the side. Production increased far more rapidly than under any other system.
· Kate Xiao Zhou’s mentioned in her book that what happened in china was a “spontaneous, unorganized, leaderless, non-ideological, apolitical movement.” The farmers were organized because all were searching for comparable opportunities and compatible niches. They shared a common enemy, the state and its operatives.
· The new policy expanded beyond farming, between 1978 and 1996 the figure of people working in farms fell from 75 % to 50%. Technology has helped transformed the landscape and better utilization of the land.
· The many firms owned by the people’s liberation army are efficient enough to sell consumer goods through Nordstrom, K-mart and Walmart. It is a hybrid production model unknown to the west.
· The problem with this model is that businessmen officials are able to use their influence to suppress competition; it is as if the head of the Food and Drug Administration could go into the cigarette making business, and then apply FDA regulations to his competitors while exempting his own company.
· In 1997 traditional state-owned companies remain employing 75 million to 100 million workers but producing a sharply declining percentage of the country’s output and absorbing billions of dollars in subsidies. The amount of these kinds of enterprises was dramatically reduced, the word “privatization” was avoided, shares were distributed and the companies were “publicly owned.”
· The dramatic changes in china in the last 30 years have demonstrated that
economic growth is not dependent on democracy or at least as we have known it in
the west.
·
· A high correlation of democracy and prosperity has long been observed by political scientist, but the direction of causation is important. Prosperity tends to bring democracy in its wake. Vote is not equal to prosperity, especially if vote is imposed by an international institution or similar aid. As sociologist Seymour Martin Lipset stated “democracy is a consequence of prosperity, not its cause”
· For westerners countries,
· Democracy is used as shorthand for a Western form of government, but
framers of
· Universal voting may be desirable for other reasons, is not likely to help secure property, or material prosperity.
· Hernando de Soto pointed out that when the correct laws are not in place in the third world, and people cannot get title to land, the construction of informal housing will take place in reverse order: furniture first, wall last.
· To a greater extent,
Tullock
presentations/summaries
Government Failure
Political Actors and the Public Interest
Public choice is a scientific analysis of government
behavior and in particular, the behavior of individuals with respect to
government.
Until the days of Adam Smith (1723–90) most social
discussion was essentially moral. Individuals were told what the morally correct
thing to do was and urged to do it. All these people were assumed to be, and
perhaps were, engaged in maximizing the public interest.
Throughout the 19th and well into the 20th century,
economists assumed that individuals are primarily concerned with their own
interest and worked out the consequences of that assumption. In contrast,
political science largely assumed that political actors are mainly concerned
with the public interest.
The
Bifurcated View of Human Behavior
Economists changed this bifurcated view of human
behavior by developing the theory of public choice, which amounts, in essence,
to transplanting the general analytical framework of economics into political
science.
When considering the behavior of any individual
politician, most people realize that the politician behaves in a self-interested
way. The politician in a democratic society makes a living by winning elections.
To quote an American aphorism: ‘‘In order to be a great senator, one must, first
of all, be a senator.’’ In other words, those people whom we elect to office are
there because they are good at being elected.
This characteristic of periodic reassessment makes them
similar in many ways to businesspeople. Just as a businessperson designs, let us
say, the latest automobile so as to attract customers, the politician selects
policies with the idea that the customer, who is the voter, will reward the
politician in the next election.
Politicians as businesspeople pursue policies that they
think the people want because they hope the people will reward them with votes.
To say that the voters actually rule under this scheme is not a bad
approximation. Nor is this, from the standpoint of democracy, particularly
undesirable.
Politics and
the Information Problem
Economists have based their predictions on the notion
that purchasers in the market are perfectly informed. Unfortunately, in the case
of politics the information problem is much worse than it is in the
market.
When voting for the president of the United States, my
vote will be one of 70 million cast and is highly unlikely to affect the final
outcome of the election. This realization can be expected to affect the
valuation that I place on my vote and the resources that I will invest to
collect information to make a ‘‘correct’’ choice.
The voters are, therefore, likely to be badly
informed.
Democratic
versus Nondemocratic Government
We have a form of government that is far from what we
would really like, but until a new and better one is invented, we had better
keep the one we have despite its shortcomings.
Leaving
Everything to the Market?
To begin, we might ask why we have government at all.
The market produces many things with remarkable efficiency, but why not have the
market take over everything?
Assuming we have complete private property, when
entering into agreements with each other, it is necessary to arrange a unanimous
agreement under which each of us put up a certain amount of money in return for
the agreement of all the others. Clearly, the bargaining costs would be immense.
The role of government, under the modern view, is to permit us to gain this type
of an advantage, to enter into this kind of an agreement— without requiring
unanimity—and hence to obtain much lower bargaining costs.
The Behavior
of Government Officials
People tend to have little confidence in politicians.
Moreover, there are problems of defining
Honesty or dishonesty. The politician who sells his
decision in Congress for votes is not obviously in better moral shape than the
politician who sells it for cash. Nevertheless, the first act is not strictly
speaking illegal.
Summary
Government officials attempt to maximize their own private interests, and in doing that they provide goods for other people. Also, the government must go through a lot of restructuring to be perfect, because right now, it isn’t.
Garek Dunham
02/24/12
ECON 385
Government Failure Chapter 2 Voting Paradoxes
Government of the Roman Republic
· Was very successful
· “auspices” was a way they made a number of important decisions
· They would evaluate a freshly slaughtered ox or the behavior of chickens and based off of that make decisions.
· In the first Punic war a roman admiral threw his chickens over board when they refused to eat. The chickens turned out to be right.
· Much of the same randomness can be exhibited in modern day voting.
Voting Paradox
|
Mr
1 |
Mr
2 |
Mr
3 |
|
a |
b |
c |
|
b |
c |
a |
|
c |
a |
b |
· At any given random order, a different winner might be decided
· This paradox is hard to observe since there are so many different candidates.
The British electoral system
· The Liberal Democratic Party would probably beat either the conservatives or labor parties in a two party vote.
Proportional Representation
· In the Netherlands and Israel parties select different candidates and of those individuals select the ones they want.
· In the US it is unlikely to gain representation of very small groups
· In this system the candidate will represent a tight collection of ideals
Single-Member Constituencies
· Most common, population is divided geographically into single constituencies.
· Most politicians are voted in by one or two systems.
· The first one is “first-past-the-post” which means the majority of votes was given to that person
· Salvador Allende in Chile was elected with 36%
· This system leads to single strong parties
· In England there would be a coalition government
The Variety of Voting Rules
· Saari says that with voters remaining constant in their voting any given outcome can be accomplished by any set of rules
· There are relative few strong arguments for democracy but that it beats the known alternatives which are worse
The Median Preference Theorem
· The idea is that between two candidates the person who is more centered will win the election
Median Preference and the Stability of Equilibrium
· This can cause mediocre candidates but it creates a lot of stability and ensures the least amount of dissatisfaction among the voters.
The Many Dimensions of Politics
· 1964 Barry Goldwater was denied the oval office because he opposed farm subsidies.
· 1972 Nixon defeated George McGovern because he was too liberal
· In 1976 Reagan opposed farm subsidies and lost the nomination but in 1980 he announced that he didn’t understand the farm problem
· There is normally no equilibrium in these situations, so parties create bundles to attract the most voters.
Coalition and Convergence
· This equilibrium is expected in a two party system
Moral Principles and Policies
· Right or good policies to not seem to affect government, except that voters favor such policies.
· Politicians need to offer the voter what they want
· They are more concerned about their own means
· The median preference theorem carries the most weight
·
Chp. 3 .Government Failure - Chapter 3,
Logrolling
Logrolling is vote trading. One
Member of Parliament or Congress, for example, will agree to vote for
legislation (a bill) that another member wants in return for his or her vote on
another issue.
Logrolling is a very common. In most
democracies it dominates the political selection process, although it is
frequently concealed from public view or its form is disguised in order to make
it more palatable to members of the public with moral precepts against such
political market activities.
Vote trading is much more open in the
American legislature than in Europe, although it certainly occurs
everywhere.
Explicit and Implicit Logrolling
In the U.S. Congress logrolling is
fairly open.
Explicit
logrolling is more visible. There is no
particular secret as to what is actually going on. People realize that the art
of legislation involves bargaining, haggling, and efforts made to sweeten
deals.
Implicit
logrolling is more complex and can be
inferred from the way the legislation is proposed. For instance, measures that
different politicians favor can simply be incorporated in one piece of
legislation and a single vote taken on the bundle.
Either explicit or implicit
logrolling occurs because most laws have differential effects on different
groups and parts of the country.
Any legislation is likely to affect
some people more than others. Changes in tax laws are a very good example of
legislation that will benefit some citizens more than
others.
Benefits and Harm from Logrolling.
Logrolling is not undesirable in all
cases.
Decisions only reach an optimal when
they are unanimous,. Unanimous votes, however, are not required for the American
voting process. There may not be a
‘best’ or ‘most efficient’ option on a vote. So, logrolling facilitates the
political process that produces the highest valued outcomes in theory. When
transaction costs are low and parties involved are perfectly informed, a
mutually beneficial agreement will occur.
There are also situations where
logrolling works to the detriment of society.
In these cases, logrolling reduces
the efficiency of government.
The result is that all of the
projects go through, including those whose net value to society is
negative. Thus logrolling partly
explains such public-sector programs as agricultural subsidies. Assuming that
the voter is very badly informed, one could readily anticipate a large random
component of further errors. Unfortunately, the situation is even worse than
that because voters are normally particularly badly informed about legislation
that affects them very little.
The Morality of Logrolling
Some people regard vote trading as
immoral. Indeed, it is sometimes prohibited, ineffectively, by law. Some
politicians consider it is possible to make logrolling moral by bundling all
these projects together in one gigantic bill.
The view that this form of logrolling
is moral ignores the procedure by which the bundling takes place. The trades
take place in committee, where members may vote against their preferences in
some items in order to get others passed, with the final outcome becoming one
big bill.
Information Problems
Most people are not as well informed
about their vote as they are about purchasing items for personal consumption.
Indeed, even well-informed people normally do not know a great deal about the
details of the political setting.
Public opinion polls have established
that the average American cannot, except near the time of the election, tell you
the name of his or her congressional
representative.
Apparently most people feel they are
moderately well informed in politics because some subjects interest
them.
Logrolling is a mechanism used to
gain support for special interest and minority
groups.
In many cases, there is a small
minority that feels strongly about the matter and a large majority that knows
little about it.
Members of Congress wishing to be
reelected will take careful account of issues and bills that strongly affect
small minorities.
Considerably less attention is given
to the issues affecting the general population because the voters are unlikely
to be strongly motivated to express their support or disfavor at the ballot
box.
Organized Lobbying
Public choice is more difficult
because of the existence of organized lobbying and pressure groups. This
practice is more visible in the United States than in the United
Kingdom.
When a relatively small number of
people are heavily affected by a collective activity, organizing is in their
interest. Individuals in the group will either benefit a good deal if the
political action is in their favor or be injured a good deal if it is against
them. Also, because there are only a few of them, organizing is relatively easy
(low transactions costs) for them.
A large number of people experiencing
a small loss are difficult to organize because each could reasonably think that
his or her contribution to the joint lobby would make little difference in the
likely success of the action. Hence, in such circumstances the individual avoids
making a contribution.
Concentrated Benefits and Diffuse Costs
Laws or regulations that have this
characteristic of diffuse costs and concentrated beneficiaries do sometimes
become law, perhaps because the effect is disguised by superficially plausible
propaganda or rationalizations developed by the pressure
group.
Lobbying and Inefficient Transfers
Groups may also provide a public
interest camouflage by convincing members of Congress that their special
legislation is in the public interest. Most of the people involved in this type
of enterprise are highly intelligent, highly motivated, and very
persuasive.
Lobbies and the Public Interest
The private-interest argument leads
to the organization of these groups, to the transfer of funds, to the protection
of jobs, and to special privileges for special-interest groups.
The public-interest arguments
normally require that the project itself be designed in such a way that the
direct transfer is hidden from the public eye.
Agricultural Protection
Current agricultural subsidies in the
United States are an immensely inefficient transfer program. Members of Congress
do not pass the type of bill that is obviously a direct transfer. This
reluctance does not mean transfers do not occur, but rather that indirect,
devious methods of making them are adopted, which are inefficient in the sense
that the recipient receives less and the taxpayer pays more than if a direct
transfer were used.
Abolishing Privileges
The result is that many projects
bring benefits that are far less than their costs.
This problem is characteristic not
only of democracy. As anyone familiar with dictatorships realizes, this problem
occurs in a somewhat different and more unpleasant form in that type of
government.
The simplest way to accomplish this
goal is to reduce the federal budget while making sure that the cuts fall
predominantly on the projects of special-interest beneficiaries.
Abolishing privileges would make
everyone better off because, although almost everyone would lose some kind of
special privilege, the cost of all of the special privileges held by others is
greater than the benefit received from any one special privilege that an
individual may have. The same is equally true of Britain and the United
States.
Concluding Comments
Unfortunately, there is a problem. A
person would gain from the abolition of these programs, although his/her gain
would be greater if all of the special privileges were eliminated except those
that benefited that person specifically. So, those reductions are rarely
successful.
Chapter 5 Bureaucracy Ericka Bardin
· In search of an apparatus that leads bureaucrats in their own interest to serve the interests of the rest of us
British and American Bureaucracies
· Differences
o American bureaucracy
§ Much bigger
· “Partly because the higher positions in the executive branch of the American government are generally held by political appointees” (53)
§ Relatively short tenure
o British bureaucracy
§ Career civil servants
§ Believe “they simply carry out the instructions of their ‘masters.’” (54)
Bureaucratic Interests
· “Bureaucrats make many decisions that will have little or no direct effect on themselves” (54)
o “Weak motives to consider these problems carefully” (54)
§ “They are interested in maximizing their own returns.” (55)
o There are no developed plans for “reorganizing government” to make bureaucracy more effective
· Tullock says corporations and governments would not achieve perfection in maximizing public interests and profits
· Private sector has much more control due to stockholders’ goal of making money and “reasonably accurate methods of measuring the contribution of high-level managers” (56)
· “The methods of achieving government goals, however, appeal not to the public interest but to the private interest.” (57)
· Can not depend on charitable instincts or tendencies “for the motivation of long-continued efficient performance.” (57)
Decentralization and Efficiency
· “Decentralization of government and transfer of many activities to a lower level of government can improve efficiency.” (57)
The Size of the Bureau
· Tullock’s general rule – “bureaucrats’ primary concern is increasing the size of their bureau because that provided a greater opportunity for promotion.” (58)
Bureaucrats versus Politicians
· “In the United States, and to a lesser extent in Britain, bureaucrats have considerably more power over the politicians who rank above them than the politicians have over them.” (60)
o “The bureaucrats themselves, in general, cannot be fired except for some egregious sin. …On the other hand, generally speaking, they can make their superiors look very foolish and sabotage their superiors’ efforts without difficulty.” (60)
§ Leaking stories to the press
Bureaucrats and Pressure Groups
· “Bureaucrats frequently form mutually beneficial alliances with pressure groups.” (61)
· Iron triangle
· Hoover and the FBI
Summary
· “Public choice scholars do not think that government is systematically engaged in maximizing the public interest.” (61)
· Bureaucrats are not bad people
o Less than optimally efficient because of the institution situation
o Can make considerable gains in terms of their theoretical masters
Different objectives than superio
Elvis
Dzafic
Ch. 7
Federalism
·
Def. Division of
gov’t between centralized functions and those programs more efficiently provided
locally.
·
Term has come to
mean the optimal layering of decentralization of existing gov’t services based
on an examination of possible economies of scale. The appropriate governmental
unit is designated based on least cost or efficiency.
Voters’
Preferences
·
This approach
recognizes that voters have diverse preferences and that what we really want is
a gov’t that is responsive to the people’s desires as well as one that provides
services efficiently. (Note: Higher the degree of diverse preferences among
voters the less likely is it that any one gov’t will please
everyone).
Degrees of
Decentralization
·
All national
gov’ts exhibit some degree of decentralization.
·
China ex:
Chinese emperor could not make personal decisions on such matters as whether a
particular small bridge should be repaired. Decentralization may take the form,
as it did in most of the world, of simply designating civil servants with
authority over various gov’t functions.
·
South Africa ex:
Prior to its constitutional change, a nominally a union of 4 states, but the
gov’ts of those states simple compromised civil servants dispatched from the
central gov’t.
·
France ex: Shift
of local power is a step into the right direction, and the increasing power of
the central gov’t through expansive policies and unfunded mandates in the US,
the wrong direction.
Basics of
Federalism
·
Not many gov’t
activities need a national policy.
Purely Local
Decisions
·
US Gov’t ex:
Decisions of federal gov’t is influenced by the state gov’t, which is influenced
by the local House of Reps. of state.
Importance of
the Popular Vote
·
US, but more in
Switzerland, direct popular votes upon local issues exist such as road
developments and new school buildings. This works better than 1st
delegating power by election to the central gov’t and then relegating that power
from the Federal gov’t to its civil servants in Tucson. (Note: One of 70 million
voting for the US Pres. Is small but 500 neighborhood occupants has more power
in the local county board of supervisors.
·
Voting with the
Feet (Resident can
choose where they live or where they will locate their business, the various
local gov’ts are put in competition with each other because for the fact that
their tax revenue depends upon how many people live or work within their
boundaries brings market considerations to bear on gov’t and provides
individuals with two important way ways to influence local gov’t decisions.
·
Responding to
Demand (Permits the
development of specialized gov’t structures and services to attract specific
types of people. The suburbs that surround large American cities often compete
by providing higher expenditure on public services in order to attract people
and businesses.
·
The Role of
Competition (Attracts
specific groups may distress socialists and others who do not favor market
processes but works well for the efficiency of gov’t in putting officials under
this pressure).
·
Marking
Comparisons Easy (Little Johnny
ex: If Little Johnny is not doing well as his friend, Edward, who lives across
the boundary in another school district, the parents are apt to know it and
complain. All of this competition gives an incentive to civil servants to
improve services because they can be fired locally; no appeal process to
Washington DC is needed.
·
Contracting Out
(This can be
done for services such as fire, prisons, police, pollution control and any other
gov’t service. Note that this does lead to local people losing jobs. Thankfully
no long-term contracts normally occur, just about 5 years for the most part.
Conclusion
·
It is a mystery
of centralized control is being replaced by local control. For some services,
central gov’t is growing more rapidly than local gov’ts.
·
We are better
off with small government units, although, a different-sized governmental unit
designed for different functions is optimal.
Not long ago,
most intellectuals thought that socialism was more efficient than democracy.
Now, the wisdom is that socialism is the opposite and we can hope for a similar
favorable change in
The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. by Hernando De Soto.
The Mystery of Capital
Diego Leal Ambriz
Capitalism stands
alone as the only feasible way to rationally organize a modern economy. As a
result Third World and former communist nations have balanced their budgets, cut
subsidies, welcomed foreign investment and dropped their tariff barriers.
However, from Russia to Venezuela, the consequences involve a lot of economic
suffering.
When these reforms
fail, westerners all too often respond not by questioning the adequacy of the
remedies, but by blaming Third World people for their lack of entrepreneurial
spirit or because of their culture.
The author refutes
this hypothesis by mentioning that these countries are packed with
entrepreneurs. The inhabitants of these countries possess talent, enthusiasm and
an astonishing ability to wring a profit out of practically nothing. They can
also grasp and use modern technology. Otherwise, American businesses would not
be struggling to control the unauthorized use of their patents abroad. Moreover,
the disparity of wealth between the West and the rest of the world is far too
great to be explained by culture alone.
But if people in
countries making the transition to capitalism are not pitiful beggars, are not
helplessly trapped in obsolete ways and are not prisoners of dysfunctional
cultures, what is it that prevents capitalism from delivering to them the same
wealth it has delivered to the West? Why does capitalism thrive only in the
West?
In this book the
author intends to demonstrate that the major stumbling block that keeps the rest
of the world from benefiting from capitalism is its inability to produce
capital. He will show that most of the poor already possess the assets they need
to make a success of capitalism. The value of the savings among the poor is
immense –forty times all the foreign aid received throughout the world since
1945.
These poor
countries have resources but they hold them in defective forms: houses built on
land whose ownership rights are not adequately recorded, unincorporated business
with undefined liability. Because the rights to these possessions are not
adequately documented, these assets cannot readily be turned into capital,
cannot be traded outside of narrow local circles where people know and trust
each other, cannot be used as collateral for a loan, and cannot be used as a
share against an investment.
In the West, by
contrast, every parcel of land, every building, every piece of equipment, or
store of inventories is represented in a property document that is the visible
sign of a vast hidden process that connects all these assets to the rest of the
economy. They can be used as collateral for credit. The single most important
source of funds for new businesses in the US is a mortgage on the entrepreneurs’
house. By this process the West injects life into assets and makes them generate
capital.
Third World and
former communist nations do not have this representational process. As a result,
most of them are undercapitalized. The enterprise of the poor are like
corporations that cannot issue shares.
The poor
inhabitants of these nations –five sixths of humanity– do have things, but they
lack the process to represent their property and create capital. They have
houses but not titles; crops but not deeds; businesses but not statutes of
incorporation. It is the unavailability of these essential representations that
explains why people who have adapted every other Western invention, from the
paper to the nuclear reactor, have not been able to produce sufficient capital
to make their domestic capitalism work.
The Five Mysteries:
The Mystery of the
Missing Information
No one has
properly documented the poorest countries’ capacity for accumulating
assets.
The Mystery of
Capital
What is capital,
how is it produced, and how is it related to money?
The Mystery of
Political Awareness
If there is so
much dead capital in the world, and in the hands of so many poor people, why
haven’t governments tried to tap into this potential
wealth?
The Missing
Lessons Of US History
What is going on
in the Third World and the former communist countries has happened before, in
Europe and North America. The most pertinent example is that of US
history.
The Mystery of
Legal Failure: Why Property Law Does Not Work Outside the
West
Most citizens
still cannot use the law to convert their savings into capital. Why this is so
and what is needed to make the law
work remains a mystery.
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