Markets vs. Government when Rationality Is Unequally Bounded: Some Consequences of Cognitive Inequalities for Theory and Policy
Recognizing 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.
|Date of creation:||21 Mar 2006|
|Date of revision:||03 Sep 2006|
|Contact details of provider:|| Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden|
Phone: 08-441 59 00
Fax: 08-441 59 29
Web page: http://www.ratio.se/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pavel Pelikan, 1993. "Ownership of firms and efficiency: The competence argument," Constitutional Political Economy, Springer, vol. 4(3), pages 349-392, September.
- North, D-C, 1997. "The Process of Economic Change," Research Paper 128, World Institute for Development Economics Research.
- Eliasson, Gunnar, 1990. "The firm as a competent team," Journal of Economic Behavior & Organization, Elsevier, vol. 13(3), pages 275-298, June.
- Pelikan, Pavel, 1989. "Evolution, economic competence, and the market for corporate control," Journal of Economic Behavior & Organization, Elsevier, vol. 12(3), pages 279-303, December.
- Sugden, Robert, 1991. "Rational Choice: A Survey of Contributions from Economics and Philosophy," Economic Journal, Royal Economic Society, vol. 101(407), pages 751-85, July.
- Nicolai J. Foss, 2001. "Bounded Rationality in the Economics of Organization Present Use and (Some) Future Possibilities," DRUID Working Papers 01-13, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
- Heiner, Ronald A, 1983. "The Origin of Predictable Behavior," American Economic Review, American Economic Association, vol. 73(4), pages 560-95, September.
- Simon, Herbert A., 1978.
"Rational Decision-Making in Business Organizations,"
Nobel Prize in Economics documents
1978-1, Nobel Prize Committee.
- Simon, Herbert A, 1979. "Rational Decision Making in Business Organizations," American Economic Review, American Economic Association, vol. 69(4), pages 493-513, September.
- Pranab Bardhan and John E. Roemer., 1991.
"Market Socialism: A Case for Rejuvenation,"
Economics Working Papers
91-175, University of California at Berkeley.
- 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.
- Edward L. Glaeser, 2005. "Paternalism and Psychology," Harvard Institute of Economic Research Working Papers 2097, Harvard - Institute of Economic Research.
- Eliasson, Gunnar, 1988. "The Firm as a Competent Team," Working Paper Series 207, Research Institute of Industrial Economics, revised Feb 1990.
- repec:hhs:iuiwop:480 is not listed on IDEAS
- Pelikan, P, 1992. "The Dynamics of Economic Systems, or How to Transform a Failed Socialist Economy," Journal of Evolutionary Economics, Springer, vol. 2(1), pages 39-63, March.
- Pelikan, Pavel, 1989. "Evolution, Economic Competence, and the Market for Corporate Control," Working Paper Series 215, Research Institute of Industrial Economics.
- Pavel Pelikan, 2003. "Bringing institutions into evolutionary economics: another view with links to changes in physical and social technologies," Journal of Evolutionary Economics, Springer, vol. 13(3), pages 237-258, August.
- Berggren, Niclas, 2003. "The Benefits of Economic Freedom: A Survey," Ratio Working Papers 4, The Ratio Institute.
- Pelikan, Pavel, 1997. "Allocation of Economic Competence in Teams: A Comparative Institutional Analysis," Working Paper Series 480, Research Institute of Industrial Economics.
- Roemer, John E., 1987. "Egalitarianism, Responsibility, and Information," Economics and Philosophy, Cambridge University Press, vol. 3(02), pages 215-244, October.
- Pelikan, Pavel, 2003. "Bringing Institutions Into Evolutionary Economics: Another View with Links to Changes in Physical and Social Technologies," Ratio Working Papers 24, The Ratio Institute.
- Sidney G. Winter, 1971. "Satisficing, Selection, and the Innovating Remnant," The Quarterly Journal of Economics, Oxford University Press, vol. 85(2), pages 237-261.
- Viktor Vanberg, 2004. "The rationality postulate in economics: its ambiguity, its deficiency and its evolutionary alternative," Journal of Economic Methodology, Taylor & Francis Journals, vol. 11(1), pages 1-29.
- Simon, Herbert A., 2000. "Barriers and bounds to Rationality," Structural Change and Economic Dynamics, Elsevier, vol. 11(1-2), pages 243-253, July.
- Richard H. Thaler & Cass R. Sunstein, 2003. "Libertarian Paternalism," American Economic Review, American Economic Association, vol. 93(2), pages 175-179, May.
- repec:hhs:iuiwop:510 is not listed on IDEAS
- Edward L. Glaeser, 2005. "Paternalism and Psychology," NBER Working Papers 11789, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:hhs:ratioi:0085. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martin Korpi)
If references are entirely missing, you can add them using this form.