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

  • Adam Martin

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    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

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    File URL: http://hdl.handle.net/10.1007/s11138-013-0231-y
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    Article provided by Springer in its journal The Review of Austrian Economics.

    Volume (Year): 27 (2014)
    Issue (Month): 1 (March)
    Pages: 81-95

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    Handle: RePEc:kap:revaec:v:27:y:2014:i:1:p:81-95
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    1. 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.
    2. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
    3. Adam Martin, 2009. "Critical realism and the Austrian paradox," Cambridge Journal of Economics, Oxford University Press, vol. 33(3), pages 517-530, May.
    4. 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.
    5. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers.
    6. Daron Acemoglu, 2002. "Why Not a Political Coase Theorem? Social Conflict, Commitment and Politics," NBER Working Papers 9377, National Bureau of Economic Research, Inc.
    7. Harold Demsetz, 1981. "Barriers to Entry," UCLA Economics Working Papers 192, UCLA Department of Economics.
    8. Reder, Melvin W, 1982. "Chicago Economics: Permanence and Change," Journal of Economic Literature, American Economic Association, vol. 20(1), pages 1-38, March.
    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. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
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