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The government economic agenda in a society of unequally rational individuals

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  • Pelikan, Pavel
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    Abstract

    What economic roles, if any, should government play? This is still an incompletely analyzed issue that different individuals – depending on their ideologies, rent-seeking opportunities, and analytical abilities – may answer very differently. To advance its analysis, this paper recognizes that human rationality (as empirically testable cognitive abilities) is bounded unequally across individuals, and is therefore a unique scarce resource that markets and government allocate in significantly different ways. The results conflict with ideologies of both socialism and classical liberalism, but agree with two puzzles of recent economic history and with ideological compromises in actual economic policies.

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    File URL: http://mpra.ub.uni-muenchen.de/19127/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19127.

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    Date of creation: 11 Nov 2008
    Date of revision: 06 Dec 2009
    Handle: RePEc:pra:mprapa:19127

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    Keywords: unequally bounded rationality; rationality-allocation; markets; government; economic policies;

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    1. Frey, Bruno S. & Eichenberger, Reiner, 1994. "Economic incentives transform psychological anomalies," Journal of Economic Behavior & Organization, Elsevier, vol. 23(2), pages 215-234, March.
    2. Kornai, Janos, 1986. "The Soft Budget Constraint," Kyklos, Wiley Blackwell, vol. 39(1), pages 3-30.
    3. Simon, Herbert A, 1979. "Rational Decision Making in Business Organizations," American Economic Review, American Economic Association, vol. 69(4), pages 493-513, September.
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    5. Roemer, John E., 1987. "Egalitarianism, Responsibility, and Information," Economics and Philosophy, Cambridge University Press, vol. 3(02), pages 215-244, October.
    6. Boland, Lawrence A, 1981. "On the Futility of Criticizing the Neoclassical Maximization Hypothesis," American Economic Review, American Economic Association, vol. 71(5), pages 1031-36, December.
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    8. Richard H. Thaler & Cass R. Sunstein, 2003. "Libertarian Paternalism," American Economic Review, American Economic Association, vol. 93(2), pages 175-179, May.
    9. Demsetz, Harold, 1969. "Information and Efficiency: Another Viewpoint," Journal of Law and Economics, University of Chicago Press, vol. 12(1), pages 1-22, April.
    10. Bruno Frey, 1990. "From paradoxes to social rules, or: How economics repeats itself," Constitutional Political Economy, Springer, vol. 1(2), pages 27-34, March.
    11. repec:fth:iniesr:480 is not listed on IDEAS
    12. Caplan, Bryan, 2001. "Rational Ignorance versus Rational Irrationality," Kyklos, Wiley Blackwell, vol. 54(1), pages 3-26.
    13. Pelikan, Pavel, 1997. "Allocation of Economic Competence in Teams: A Comparative Institutional Analysis," Working Paper Series 480, Research Institute of Industrial Economics.
    14. Heiner, Ronald A, 1983. "The Origin of Predictable Behavior," American Economic Review, American Economic Association, vol. 73(4), pages 560-95, September.
    15. Glaeser, Edward L., 2006. "Paternalism and Psychology," Working Paper Series rwp06-006, Harvard University, John F. Kennedy School of Government.
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