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Restraining the genuine homo economicus: why the economy cannot be divorced from its governance
[Die Beschränkung des genuinen Homo Economicus: Warum wirtschaftliche Prozesse und Governancestrukturen untrennbar sind]

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  • Skaperdas, Stergios

Abstract

The Homo economicus of traditional economics is far from being completely self-interested, rational, or as individualistic as he is purported to be; he will haggle to death over price but will not take what he wants by force. Implicitly, he is assumed to behave ruthlessly within a well-defined bubble of sainthood. Based on a simple model, I first examine what occurs when this assumption is relaxed and genuine, amoral Homines economici interact. Productivity can be inversely related to compensation; a longer shadow of the future can intensify conflict; and, more competition among providers of protection reduces welfare. The patently inefficient outcomes that follow call for restraining self-interest, for finding ways to govern markets. I then review some of the different ways of creating restraints, from the traditional social contract, to the hierarchical domination of kings and lords, to modern forms of governance. Checks and balances, wider representation, the bureaucratic form of organization, and other ingredients of modern governance can partly be thought of as providing restraints to the dark side of self-interest. Though highly imperfect, these restraints are better than the alternative, which typically involves autocratic, amateurish, and corrupt rule. Then, thinking of most problems in terms of a first-best economic model is practically and scientifically misguided.

Suggested Citation

  • Skaperdas, Stergios, 2003. "Restraining the genuine homo economicus: why the economy cannot be divorced from its governance
    [Die Beschränkung des genuinen Homo Economicus: Warum wirtschaftliche Prozesse und Governancestruktur
    ," Discussion Papers, Research Unit: Market Processes and Governance SP II 2003-03, Social Science Research Center Berlin (WZB).
  • Handle: RePEc:zbw:wzbmpg:spii200303
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    References listed on IDEAS

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    Cited by:

    1. Antoine Pietri & Tarik Tazdait & Mehrdad Vahabi, 2013. "Empire Building and Price Competition," Post-Print hal-00832240, HAL.
    2. Helmut Bester & Kai A. Konrad, 2005. "Easy Targets and the Timing of Conflict," Journal of Theoretical Politics, , vol. 17(2), pages 199-215, April.
    3. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, Elsevier.
    4. Lagerlöf, Nils-Petter, 2013. "Violence and property rights," Journal of Economic Dynamics and Control, Elsevier, pages 312-328.
    5. Konrad, Kai A., 2004. "Bidding in hierarchies," European Economic Review, Elsevier, pages 1301-1308.
    6. Andzelika Lorentowicz & Dalia Marin & Alexander Raubold, 2005. "Is Human Capital Losing from Outsourcing? Evidence for Austria and Poland," CESifo Working Paper Series 1616, CESifo Group Munich.
    7. Michelle R. Garfinkel, 2003. "On the Stability of Group Formation: Managing the Conflict Within," Public Economics 0312005, EconWPA, revised 04 Mar 2004.
    8. Konrad, Kai A., 2007. "Strategy in contests: an introduction
      [Strategie in Turnieren – eine Einführung]
      ," Discussion Papers, Research Unit: Market Processes and Governance SP II 2007-01, Social Science Research Center Berlin (WZB).
    9. Leeson, Peter T. & Nowrasteh, Alex, 2011. "Was privateering plunder efficient?," Journal of Economic Behavior & Organization, Elsevier, pages 303-317.
    10. Ashish Chaturvedi, 2005. "Rigging elections with violence," Public Choice, Springer, pages 189-202.
    11. Lagerlöf, Nils-Petter & Tangerås, Thomas, 2005. "Human Capital, Rent Seeking, and a Transition from Stagnation to Growth," Working Paper Series 656, Research Institute of Industrial Economics.
    12. Edgardo Barandiarán, 2003. "Protecting Property from Stationary Bandits," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., pages 626-632.
    13. Horatiu A. Rus, 2012. "Environmental Depletion, Governance, and Conflict," Southern Economic Journal, Southern Economic Association, vol. 78(4), pages 1305-1332, April.
    14. Thomas Kittsteiner & Benny Moldovanu, 2005. "Priority Auctions and Queue Disciplines That Depend on Processing Time," Management Science, INFORMS, vol. 51(2), pages 236-248, February.
    15. Johannes Münster, 2007. "Simultaneous inter- and intra-group conflicts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 333-352.
    16. Antonis Adam & Andreas C. Drichoutis & Maria Georgoula & Pantelis Kammas, 2015. "Should I double park or should I go? The effect of political ideology on collective action problems," Working Papers 2015-2, Agricultural University of Athens, Department Of Agricultural Economics.
    17. Münster, Johannes, 2005. "Simultaneous inter- and intra-group conflicts
      [Simultane Konflikte innerhalb und zwischen Gruppen]
      ," Discussion Papers, Research Unit: Market Processes and Governance SP II 2005-08, Social Science Research Center Berlin (WZB).
    18. Münster, Johannes, 2008. "Repeated contests with asymmetric information
      [Wiederholte Wettkämpfe mit asymmetrischer Information]
      ," Discussion Papers, Research Unit: Market Processes and Governance SP II 2008-08, Social Science Research Center Berlin (WZB).
    19. Michelle R. Garfinkel, 2004. "On the Stability of Group Formation: Managing the Conflict Within," Conflict Management and Peace Science, Peace Science Society (International), pages 43-68.
    20. Antonis Adam & Andreas C. Drichoutis & Maria Georgoula & Pantelis Kammas, 2015. "Should I double park or should I go? The effect of political ideology on collective action problems," Working Papers 2015-2, Agricultural University of Athens, Department Of Agricultural Economics.

    More about this item

    Keywords

    Conflict; property rights; governance;

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H1 - Public Economics - - Structure and Scope of Government

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