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Where are the big bills? Escaping the endogenizer’s dilemma

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  • Adam Martin

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Abstract

The continual expansion of rational choice theory to a greater range of social phenomena—from markets to politics and institutions—is a testament to its success. Each further application, however, simultaneously forecloses a potential source of inefficiency in economic systems. Abdicating efficiency considerations impairs economics’ explanatory power as much as its normative relevance. In this paper I explore the interconnected roles of subjectivism and knowledge problems in accounting for inefficiency. I conclude that the knowledge-generating properties of institutions allow for efficiency comparisons, but only in the embrace of a thoroughgoing subjectivism. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Adam Martin, 2014. "Where are the big bills? Escaping the endogenizer’s dilemma," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 27(1), pages 81-95, March.
  • Handle: RePEc:kap:revaec:v:27:y:2014:i:1:p:81-95
    DOI: 10.1007/s11138-013-0231-y
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    References listed on IDEAS

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    1. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    2. Demsetz, Harold, 1982. "Barriers to Entry," American Economic Review, American Economic Association, vol. 72(1), pages 47-57, March.
    3. Djankov, Simeon & Glaeser, Edward & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2003. "The new comparative economics," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 595-619, December.
    4. Reder, Melvin W, 1982. "Chicago Economics: Permanence and Change," Journal of Economic Literature, American Economic Association, vol. 20(1), pages 1-38, March.
    5. Adam Martin, 2009. "Critical realism and the Austrian paradox," Cambridge Journal of Economics, Oxford University Press, vol. 33(3), pages 517-530, May.
    6. Acemoglu, Daron, 2003. "Why not a political Coase theorem? Social conflict, commitment, and politics," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 620-652, December.
    7. Demsetz, Harold, 1969. "Information and Efficiency: Another Viewpoint," Journal of Law and Economics, University of Chicago Press, vol. 12(1), pages 1-22, April.
    8. Read, Daniel, 2006. "Which side are you on? The ethics of self-command," Journal of Economic Psychology, Elsevier, vol. 27(5), pages 681-693, October.
    9. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213-213.
    10. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 371-400.
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    More about this item

    Keywords

    Coase theorem; Economic efficiency; Knowledge problem; Rational choice; Subjectivism; A11; B21; B53; O12; P51;

    JEL classification:

    • A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists
    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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