Financial and world economic crisis: What did economists contribute?

In this paper we deal with two questions, (1) what are the origins of the current financial crisis, and (2) what did economists contribute, or why did economists fail to provide a convincing answer for the origins of the crisis, and possible solutions to overcome it? The economics profession apparently was unaware of the looming worldwide financial and economic crisis, and significantly underestimated its global dimensions and consequences. A first and preliminary analysis is undertaken to explore reasons for these failures. We conclude by pointing to some consequences for economics as well as for economic policy.     

Are economists more selfish than other 'social' scientists?

There is considerable professional disagreement among economists about whether economists are less cooperative than non-economists. It has been argued that once an individual has been schooled in the self-interest model of individual human behavior (s)he exhibits more selfish behavior than other, ostensibly similar individuals who have not been taught to fully appreciate Homo economicus. Heretofore, the empirical debate has centered around classroom experiments designed to compare the “honesty” of undergraduate economics majors versus non economics majors. However, methodological problems have plagued these studies, leaving both sides at an impasse. We offer unique and compelling real-world evidence that suggests economists are no less cooperative than non-economists. Indeed, after comparing the incidence of “cheating” on their Association dues, we find that professional economists are significantly more honest/cooperative than professional political scientists, and especially, professional sociologists.     

Why do people vote? An experiment in rationality

The study presents the findings of an experiment conducted during the 1993 Canadian fedeal election campaign. Students in two universities were exposed to a ten-minute presentation about the rational model of voting and the ‘paradox’ that so many people vote when it is apparently irrational on a cost-benefit basis. Our data indicate that exposure to the presentation decreased turnout in the election by seven percentage points. This result contributes to the debate abut the effect of rational-choice models on real political behavior. More important, the experimental panel data permit the presentation's effect to be decomposed, and this helps explain why people do vote. In this study, turnout was reduced mainly because the presentation diminished the respondents' sense of duty, an effect that was indirect, because there was no reference in the presentation to such motives. Framing the voting act in rational-choice terms induced some students to reconsider whether they should feel obliged to vote.     

Do banking crises improve democracy?

Public Choice - We study the relationship between banking crises and the level of democracy. We use an event-study method on a sample of up to 129 countries over the period 1975–2010...     

Can Government Cope?

This article was originally presented as a paper to the National Conference of the Institute of Public Administration Australia on 1 December 2000. It considers why governments have adopted a more market-oriented approach to governance, concluding that this change in means has generally helped them to achieve their preferred courses of action. However, the principal threats to government capacity are political not technical, and the article also discusses the limitations of market-based policies in this respect.     

An economic or political Kuznets curve?

This paper examines two closely related empirical hypotheses: an economic Kuznets curve and a political Kuznets curve. We find a robust inverted-U relationship between income inequality and political development, but not one between income inequality and economic development. Exploring the cross-section aspect of the panel data, we find that the economic Kuznets curve is sensitive to different control specifications and to different functional specifications, but the political Kuznets curve is robust. Using dynamic panel data estimation, we find that the economic Kuznets curve does not hold up intertemporally while the political Kuznets curve does.     

Can Democracy Cope?

The success story of democracy over the twentieth century has given way to doubts in the twenty‐first, as democracies struggle to cope with difficult wars, mounting debts, climate change and the rise of China. This essay uses intellectual history to explain the link between long‐term democratic success and short‐term democratic failure. It distinguishes three distinct views of what can go wrong with democracy, and identifies the third (which I call ‘the confidence trap’, an idea that originates with Tocqueville) as the key to understanding our present predicament. Democratic success creates blind spots and a reluctance to tackle long‐term problems. I use this idea to explain and put in context Fukuyama's claims about the end of history, and to examine the link between democratic failure and market failure.     

Do differences in presidential economic advisers matter?

Using data on members on the Council of Economic Advisors as well as US Treasury secretaries and OMB directors from 1952 through 2005, I investigate the effect of economic advisors’ educational and employment backgrounds on the time series performance of several policy variables. Ivy League advisors appear to raise non-defense government spending, although the size of the impact differs by president. While voter preferences appear to matter for a wider variety of policy variables (changes in federal regulation and marginal tax rates), the share of Ivy League advisors is at least as important as voter preferences in explaining non-defense spending.     

Can Bureaucracy Be Beautiful?

Public administration has long been understood to be both a science and an art. In its artful aspects, public administration can also, in fact, be beautiful. At their very best, public organizations and processes have forms, designs, experiences, and languages which are beautiful and compelling. It is this beauty and its potential which draws us to public work. And, there is very great beauty in ideas of high and noble purpose and in the organizations and processes we build to achieve those ideas.     

Persuasion, slack, and traps: how can economists change the world?

Contrary to my critics, voter irrationality does not imply that economists cannot mitigate political failure. With rational voters, reform-minded economists have few viable tactics; with irrational voters reformers have more options. Rational voters can be swayed only by facts and logic; irrational voters could respond to better rhetoric. Rational voters strategically punish those who ignore their policy preferences; irrational voters use less effective disciplinary strategies that create political slack. Even with irrational voters, efficiency-enhancing reform is hard. With rational voters, however, democracy’s failure to adopt a reform is strong evidence that the reform does not enhance efficiency.     

Does economic globalization affect government spending? A meta-analysis

Public Choice - Despite extensive econometric testing, the research literature has been unable to draw firm conclusions regarding the effect of economic globalization on government spending. This...     

Is newspaper coverage of economic events politically biased?

This paper develops an econometric technique to test for political bias in news reports that controls for the underlying character of the news reported. Because of the changing availability of the number of newspapers in Nexis/Lexis, two sets of time are examined: from January 1991 to May 2004 and from January 1985 to May 2004. Our results suggest that American newspapers tend to give more positive coverage to the same economic news when Democrats are in the White House than when Republicans are; a similar though smaller effect is found for Democratic control of Congress. Our results reject the claim that “reader diversity is a powerful force toward accuracy.” When all types of news are pooled into a single analysis, our results are significant. However, the results vary greatly depending upon which types of economic data are being reported. When newspapers are examined individually the only support that Republicans appear to obtain is from the president’s home state newspapers during his term. This is true for the Houston Chronicle under both Bushes and the Los Angeles Times during the Reagan administration. Contrary to rational expectations, media coverage affects people’s perceptions of the economy.     

Political freedom, economic freedom, and income convergence: Do stages of economic development matter?

In the literature, theory and empirical evidence on the nexus of political freedom, economic freedom, and economic growth are mixed. In this paper, we test the hypothesis that the effect of political freedom on promoting economic growth is realized and detectable at later stages of social and economic development. Using panel data for a sample of 104 countries between 1970 and 2003, we find strong support for our hypothesis. While economic freedom has greater effects on income convergence in the OECD countries, political freedom clearly promotes the convergence among those OECD countries.     

Can corruption foster regulatory compliance?

The legal and economic literatures overwhelmingly support the notion that regulatory compliance is always less in the presence of corruption. This paper departs from those literatures and shows that, whenever public officials are paid fixed wages, an increase in corruption may actually foster compliance. The conditions that make this possible are laid down in a theoretical model. Empirical evidence that corroborates the theoretical findings is provided using firm-level data for 26 transition economies.     

Can We? Administrative Limits Revisited

The idea of administrative limits—in the sense of constraints or bounds on what can be achieved by the activity of administration in general and public administration in particular—is important for a proper understanding of twenty‐first‐century public administration. What are the effective limits of taxable capacity in the modern state, as debt‐ridden governments seek to reduce debt levels and budget deficits after the financial crashes and economic recession of the late 2000s? What are the limits of safety and security that can be realistically achieved by administrative structures and procedures in a so‐called risk society? What are the limits to the achievement of ambitious social engineering to improve the human lot by conventional organizations and bureaucracies? Such issues are not new. Questions of this kind have long been asked by scholars in the intersecting fields of public administration, policy studies, and political science. Nonetheless, the author argues, they address issues that are of continuing, central importance to government and society in today’s world.