On the Third Law of Demand

The Alchian and Allen theorem predicts that it will be harder to find "good" apples in the State of Washington, a prime apple-growing region, than in, say, New York City, where the addition of shipping charges makes "bad" apples comparatively more expensive. We recast the theorem as a testable proposition by explicitly taking the supply side into account and identifying plausible scenarios in which a fixed cost either has no effect on the relative prices of high and low quality grades of the same good in distant markets or, indeed, causes more of the bad apples to be shipped out.     

The utilitarian contract: A generalization of Rawls' theory of justice

In a series of major papers culminating in A Theory of Justice, John Rawls constructs an alternative to utilitarianism by developing a social contract theory of moral and political philosophy. Unfortunately, Rawls formulates the two basic principles upon which the theory rests in such a way as to restrict (unduly) the contract theory's applicability (see Section I). In this paper we present a more general discussion of the theory of justice that avoids the problems of Rawls' formulation and yet retains the important idea of justice as fairness and the contractarian approach (Section II). Later it is argued that this more general theory constitutes a bridge between the pure utilitarian theories and the social contract doctrines (Sections V and VI). The theory's advantages are demonstrated by applying it to a problem discussed by Rawls, intergenerational equity, and comparing the two solutions (Section III). Further comparisons are made and inferences drawn in the concluding three sections.Without implicating them, we would like to thank James M. Buchanan and David Lyons for comments on an earlier draft of this paper.

---

     

The Economics of the Counter-Reformation: Incumbent-Firm Reaction to Market Entry

The Catholic Church reacted to the Protestant Reformation by taking on the defensive posture of an incumbent-firm monopoly fighting to survive in the face of new competition. Contemporary firms typically respond to rival entry by rewriting their corporate charter. So did the medieval Catholic Church. But the Council of Trent failed as a reorganization plan because to keep economic rents flowing as before, it left intact the distribution of powers and property rights among the governing body of pope and cardinals—thus demonstrating that entrenched economic interests are powerful inducements to behavior, even in spiritual institutions.     

ECONOMIC REGULATION IN MERCANTILE EENGLAND: HECKSCHER REVISITED

The gradual evolution to free enterprise in England, which became quite pronounced about the time of Adam Smith, is explained in this paper in terms of institutional changes in the rent-seeking society of mercantile England. In this explanation the role of ideas and influential writers is seen as subsidiary to the role of real economic and institutional forces in producing historical outcomes. Moreover, a major feature of our rent-seeking interpretation is that the poor design and competition for control of the mercantile regulatory process unintentionally helped bring about the institutional changes which made rent seeking and economic regulation by the central government less feasible.
"a part of that force which always intends evil 4und always creates good"— Goethe, Faust.     

Explaining U.S. Federal Deficits: 1889–1998

We review and jointly test various competing theoretical and empirical models of U.S. federal deficits using annual data from 1889 to 1998. We find that tax smoothing matters and that political and interest group/distributional factors are also present in our results.     

An interest-group theory of population growth

This paper applies the interest-group theory of government to explain population growth. The main argument is that countries whose populations are more ethnically heterogeneous will tend to have higher fertility rates because there are more interest groups which compete for control of the political process of wealth redistribution. The theoretical model is supported by empirical evidence using data on 130 countries for 1980.Wangui Kimenyi helped code the data set. Remaining errors are our responsibility.