Markets vs. Government when Rationality Is Unequally Bounded: Some Consequences of Cognitive Inequalities for Theory and Policy
AbstractRecognizing that human rationality has bounds that are unequal across individuals entails treating it as a special scarce resource, tied to individuals and used for deciding on its own uses. This causes a meta-mathematical difficulty to the axiomatic theories of human capital and resource allocation, and raises a new problem for comparative institutional analysis, allowing it to explain some so far little understood differences between markets and government. The policy implications strengthen the case against national planning, selective industrial policies, and government ownership of enterprises, but weaken the case against paternalism.
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Bibliographic InfoPaper provided by The Ratio Institute in its series Ratio Working Papers with number 85.
Length: 43 pages
Date of creation: 21 Mar 2006
Date of revision: 03 Sep 2006
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Rationality; meta-mathematics; institutions; markets; government;
Find related papers by JEL classification:
- A10 - General Economics and Teaching - - General Economics - - - General
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- H10 - Public Economics - - Structure and Scope of Government - - - General
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-03-25 (All new papers)
- NEP-CBE-2006-03-25 (Cognitive & Behavioural Economics)
- NEP-EVO-2006-03-25 (Evolutionary Economics)
- NEP-FIN-2006-03-25 (Finance)
- NEP-ICT-2006-03-25 (Information & Communication Technologies)
- NEP-PBE-2006-03-25 (Public Economics)
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