Polycentricity: From Polanyi to Ostrom,and Beyond

The article overviews and elaborates the concept of polycentricity, defined as a structural feature of social systems of many decision centers having limited and autonomous prerogatives and operating under an overarching set of rules. The article starts by introducing the concept as it was advanced by Michael Polanyi and developed by Elinor and Vincent Ostrom. It continues introducing possible instances of polycentricity as well as related notions, as part of an attempt to further elaborate the concept through a concept design approach that systematically applies the logic of necessary and sufficient conditions. The article concludes by arguing that the polycentricity conceptual framework is not only a robust analytical structure for the study of complex social phenomena, but is also a challenging method of drawing non‐ad hoc analogies between different types of self‐organizing complex social systems.     

More on measuring budget-related rent-seeking: A comment

We wish to thank the Israel Center for Social and Economic Progress, Jerusalem, for supporting our work on this topic.     

The iron law of democratic socialism: British and Austrian influences on the young Karl Polanyi

Abstract

A central thesis of Karl Polanyi's The great transformation concerns the tensions between capitalism and democracy: the former embodies the principle of inequality, while democracy represents that of equality. This paper explores the intellectual heritage of this thesis, in the ‘functional theory’ of G.D.H. Cole and Otto Bauer and in the writings of Eduard Bernstein. It scrutinizes Polanyi's relationship with Bernstein's ‘evolutionary socialism’ and charts his ‘double movement’ vis-à-vis Marxist philosophy: in the 1910s he reacted sharply against Marxism's deterministic excesses, but he then, in the 1920s, engaged in sympathetic dialogue with Austro-Marxist thinkers. The latter, like Bernstein, disavowed economic determinism and insisted upon the importance and autonomy of ethics. Yet they simultaneously predicted a law-like expansion of democracy from the political to the economic arena. Analysis of this contradiction provides the basis for a concluding discussion that reconsiders the deterministic threads in Polanyi's oeuvre. Whereas for some Polanyi scholars these attest to his residual attraction to Marxism, I argue that matters are more complex. While Polanyi did repudiate the more rigidly deterministic of currents in Marxist philosophy, those to which he was attracted, notably Bernstein's ‘revision’ and Austro-Marxism, incorporated a deterministic fatalism of their own, in respect of democratization. Herein lies a more convincing explanation of Polanyi's incomplete escape from a deterministic philosophy of history, as exemplified in his masterwork, The great transformation.     

The 1992, 1994 and 1996 elections: A comment and a forecast

A model of the two-way relationship between elections and the economy, previously estimated on historical data for 1916–1988, is applied to the United States elections of 1992, 1994, and 1996. The 1992 result was a surprise to the model since the economy had performed reasonably well that election year. The midterm elections of 1994 were accurately forecast. The Republicans took control of Congress not because of unusual circumstances but because of a normal midterm cycle. President Clinton's chances in 1996 look dim given the current modest growth rate and an electoral bias favoring Republican presidential candidates. But an alternative model, keyed more to the voters choosing Clinton to balance the Republican Congress, gives him a reasonable chance of reelection.     

Moral hazard in work organizations: A comment on Gaynor,Eswaran and Kotwal,and Holmström

A key question in the economics of organization is whether it is possible to induce a group of employees to produce some quota of labor desired by the director of their organization. Holmström (1982) argued that it is possible to achieve the desired result via a simple incentive scheme. The essence of the scheme is to pay the employees only if they reach the quota; if they fail, the director is allowed to take what they have produced and use it for his own compensation. In response, Eswaran and Kotwal (1984) pointed out that because the director's compensation is smaller if the employees succeed in reaching the quota than if they fail, he has an incentive to bribe an employee to shirk, thus guaranteeing that the quota is not reached. The director, in other words, is subject to moral hazard. In a recent issue of Public Choice, Gaynor (1989) criticized the Eswaran-Kotwal argument by suggesting that it is possible to design incentive schemes which eliminate the director's moral hazard problem. In this note, we defend the Eswaran-Kotwal argument, and raise further questions about the assumptions upon which Holmström's incentive scheme is based.     

Competition, expenditures and student performance in mathematics: A comment on Couch et al.

In a recent issue of this journal (August, 1993), Couch et al. find that competition, as measured by the percentage of school-age children in a county who attend private schools, increases student performance in public schools. In addition, they find that school expenditures are positive and significant, although only marginally significant, in terms of influence on student performance. This paper extends the work by Couch et al. in two ways. First, this paper defines competition so as to include the effects of other public schools as well as private schools on student performance. Second, this paper explores the simultaneity of student performance and expenditures within the model formulation. Evidence presented suggests (1) that competition, as measured by other public schools and private schools, increases student performance, and (2) that empirical studies in this area need to recognize the simultaneous relationship between student performance and expenditures.     

Non-global social contracts: A note on inefficient social institutions

This paper explores some perverse features that can emerge when social contracts are moved from a social vacuum to a setting of social interdependence. In particular we note incentives that might exist in conjunction with externality problems that yield situations in which: (1) social contracts reduce social wealth; (2) sub-global social contracts are Pareto inferior to the absence of social contracts; (3) there are no incentives for global social contracts. While previous works emphasized the benefits of contracts, this paper focuses on their costs. A conclusion reached is that perhaps justice and efficiency demand not a single global social contract but rather a rich melange of sub-global contracts with appropriate interstices of anarchy.