Prelude to Political Economy : A Study of the Social and Political Foundations of Economics

Mainstream economics was founded on many strong assumptions. Institutions and politics were treated as irrelevant, government as exogenous, social norms as epiphenomena. As an initial gambit this was fine. But as the horizons of economic inquiry have broadened, these assumptions have become hindrances rather than aids. If we want to understand why some economies succeed and some fail, why some governments are effective and others not, why some communities prosper while others stagnate, it is essential to view economics as embedded in politics and society. Prelude to Political Economy is a study of this embeddedness; it argues for an'inclusive'approach to institutions and the state. Modern economics recognizes that individuals'pursuit of their own selfish ends can result in socially suboptimal outcomes - the Prisoner's Dilemma being the stark example. It has been suggested that what we need in such an eventuality is'third-party'intervention, which can take the form of imposing punishment on players. Kaushik Basu objects to this method of wishing third parties out of thin air. He argues that if a third party that could impose its will on others were available, then it should have been modeled as a player to start with. The adoption of such an inclusive approach has implications for our conception of the state and the law. It means that the law cannot be construed as a factor that changes the game that citizens play. It is instead simply a set of beliefs of citizens; and, as such, it is similar to social norms. What the law does for an economy, so can social norms. The book discusses how the nature of policy advice and our conception of state power are affected by this altered view of the state and the law. As corollaries, the book addresses a variety of important social and philosophical questions, such as whether the state should guarantee freedom of speech, whether determinism is compatible with free will, and whether the free market can lead to coercion. This Volume Aims To Understand Why Some Economies Succeed And Some Fail, And Why Some Communities Prosper While Others Stagnate, So Economics Must Be Seen As Embedded In Politics And Society. It Is A Study Of This Embeddedness. This Book Seeks To Provide A Better Understanding Of The State, The Law, Social Norms, And The Role Of Policy Advise. It Subscribes To The Discipline Of Positive Political Economy, But Also Looks At The Social Situations That Lie Beyond Economics And Politics. It Is Divided Into The Five Parts. Part I Presents A Primer On Game Theory. Part Ii Raises The Argument Than An Economy Or Market Is Embedded In A Social Setting, With All Its Attendant Norms, Institutions, And Beliefs. Part Iii Explores The Idea Of The State And Laws. Part Iv Discusses Selected Topics On Welfare Economics. Part V Argues That Human Beings Do Not Use Their Rationality Calculus Over All Available Actions But Only Over A Subset Of Them. Incident Off Grand Trunk Road -- Positive Political Economy -- Games And Misdemeanors: Game Theory For The Uninitiated -- Motivation -- Hex -- Normal-form Games -- Extensive-form Games -- Individual Rationality -- The Concept Of Rationality -- Internal Consistency -- Procrastination And Addiction -- The Traveler's Dilemma -- The E-mail Game -- Almost -- The Paradox Of Cognition -- Society -- Social Norms, Culture And Beliefs -- Of Mice And Men -- The Bridge On Forest Home Drive -- A Digression On Association -- Equilibrium-selection Norms -- Hawk, Dove And Maynard's Cuckoo -- Norms, Polyphiloprogenitive -- Beliefs -- The State -- Law And Economics -- The Law According To Social Science -- Law And Economics: A New Approach -- Law And Enforcement: A Model -- A Digression On Freedom Of Speech -- Power And Coercion -- Of Dyads And Triads -- Political Power, Havel's Allegory, And Mccarthyism -- Triadic Markets And Coercion -- A Digression On Sexual Harassment -- On The Man Of Influence -- On Advising Government -- A Science Of Advising? -- Advising Endogenous Government -- Cheater's Roulette -- A Moral Conundrum -- The Concept Of State -- The Standard View And Its Brood Of Fallacies -- State As Beliefs -- The Dane County Farmers' Market -- Ethics And Judgment -- Welfare And Interpersonal Comparisons -- If I Were You ... -- Income And Welfare -- Utilitarianism And Rights -- Escher's Waterfall And A Critique Of Utilitarianism -- Rights And Liberty -- Morals And Solipsism -- The Pdomain Problem -- Games And Reality. Kaushik Basu. Includes Bibliographical References (p. [263]-279) And Indexes. Why do some economies succeed and some fail? Why do some communities prosper while others stagnate? The author argues that to understand these issues economics must be seen as embedded in politics and society, and he makes a study of this embeddedness The Grand Trunk Road is not quite as grand as it sounds, especially on the three odd hours' stretch between the towns of Bagodar and Dhanbad in eastern India.