FG VWL, insbesondere Mikroökonomik
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In this note, we outline a general framework for analyzing how inequality and military spending interact in a society governed by a rent-seeking autocrat. Relying on a general equilibrium model, we show that, generally, the autocrat utilizes the military for redistribution in favor of poorer citizens. However, the dictator’s own rent-seeking activity weakens the extent of redistribution and, in the extreme, can even reverse its direction, yielding more unequal secondary distributions instead. Accordingly, the initial level of inequality also affects the impact of military spending on inequality as the former has an impact on the extent of both, the regime’s rent-seeking activity as well as redistribution. Here, our model shows that primary and secondary distributions are rather equal for extreme initial equality/inequality. For medium levels of initial inequality, redistribution is rather large and can be in favor of the poor or of the rich, depending on the extent of rent-seeking and the primary distribution. Based on these results, we highlight the importance of a society’s institutional framework for analyzing the relation of inequality and military spending.
Zwischen homo oeconomicus und homo sapiens: ein Nobelpreis für Realismus in den Verhaltensannahmen
(2018)
Greece and its creditors concluded negotiations over a third bailout by signing a Memorandum of Understanding on 19 August 2015. The dominant view among most economic policy analysts and commentators seems to be that the actions of the Greek government in the months before the deal had been erratic and lacked coordination. In this paper we argue instead that the decisions of the Greek leaders, including asking the voters to reject the earlier terms demanded by the creditors in a referendum, can be rationally explained by the logic of brinkmanship. We develop a game-theoretic model to show that the actions of the Greek government are consistent with a strategy aimed at getting a better bailout deal.
Using a framework that distinguishes short-term consumer preferences, individual reflective preferences and political preferences, we discuss from a constitutional economics perspective whether individuals find it in their common constitutional interest to endow representatives and bureaucrats with the competence to impose soft paternalist policies. The focus is specifically on soft paternalist policies, because these often work with non-transparent 'nudges' that are considered as manipulative in some contributions to the literature. We show that those soft paternalist policies that are manipulative indeed collide with three criteria of consumer sovereignty, reflective sovereignty and citizen sovereignty that can be argued to represent common constitutional interest of citizens. On the other hand, we argue that the set of paternalist policies that is deemed acceptable on the constitutional level is restricted to non-manipulative instruments, and their application as government policies is limited to cases with stable and very homogenous preferences. However, we also argue that competitive markets are capable of supplying many mechanisms that allow individuals to cope with problems in their decision-making processes on a private level.
The theoretical literature on the economics of fiscal federalism has identified several potential effects of government decentralization on economic growth. Much of the traditional literature focuses on the efficiency aspects of a decentralized provision of public services. However, decentralization may also increase growth by raising the ability of the political system to innovate and carry out reforms. On the contrary, some authors argue that decentralization increases corruption and government inefficiency. After a discussion of the theoretical arguments, we provide both a traditional survey and a meta-analysis of the empirical literature on decentralization and economic growth. Based on our survey, we identify open questions and discuss possible ways of answering them.