Rasmusen Social Regulation Book, 5 September 2009

For many years, I was trying to write a book to be titled something like SOCIAL REGULATION AND ECONOMIC REGULATION . I now think I couldn't do a good job on it, but I will keep this posted in case the ideas I've written might be useful.

  • "Economic Regulation and Social Regulation". A long- standing book project, in the style of my JLS Desecration paper. ``Health, safety, morals, and the general welfare,'' are the traditional subjects of the police power of the state. When we think of government regulation, we usually think of economic regulation. This is generally efficient only for a narrow range of activities and is subject to abuse by private parties who can profit from it. Social regulation is another area of government regulation, however, and one where the presumptive efficiency of laissez faire disappears, because market imperfections are more common and capture by special interests is less profitable. This does not immediately imply that the government should engage in social engineering, because our current knowledge of social processes is primitive. It does imply that courts should be reluctant to strike down social regulation on the grounds that it is irrational. The latest draft is divided up into different files. You can see them by clicking the directory, http://rasmusen.org/social/.

    01social-intro.tex and 01social-intro.pdf

    02social-surplus.tex and 02social-surplus.pdf

    and so forth (I haven't copied all the web addresses here yet)

    The old 2000 draft is available in Ascii-Latex (*.tex) and Acrobat PDF ( Http://www.rasmusen.org/social/social.pdf).



    1. "Creating and Enforcing Norms, With Special Reference to Sanctions," (with Richard Posner), International Review of Law and Economics, 19: 369-382 (September 1999). Two central puzzles about social norms are how they are enforced and how they are created or modified. The sanctions for violation of a norm can be categorized as automatic, guilt, shame, informational, bilateral- costly, and multilateral-costly. Problems in creating and enforcing norms are related to which sanctions are employed. We use our analysis of enforcement and creation of norms to analyze the scope of feasible government action either to promote desirable norms or to repress undesirable ones. In Ascii txt and Acrobat pdf ( http://Pacioli.bus.indiana.edu/erasmuse/published/99.IRLE.norms.pdf )

    2. "The Economics of Desecration: Flag Burning and Related Activities." Journal of Legal Studies (June 1998) 27: 245-270 (lead article). When a symbol is desecrated, the desecrator obtains benefits while those who venerate the symbol incur costs. The approach to policy used in this paper is to ask whether the benefits are likely to exceed the costs. I conclude that they usually do not. Desecration is often motivated by a desire to reduce the utility of others, which generally is inefficient. Also, if desecration occurs, people have less incentive to create and maintain symbols. Symbols, like other produced goods, need property-rights protection if the outcome is to be efficient. Laws against desecration are a good way to provide this protection, given the likely failure of the Coase Theorem and the possibility of efficient breaking of the laws. In Ascii-Latex or Acrobat pdf ( http://Pacioli.bus.indiana.edu/erasmuse/published/98JLS.flag.pdf)

    3. ``Of Sex and Drugs and Rock'n Roll: Law and Economics and Social Regulation,'' Harvard Journal of Law and Public Policy 21: 71-81 (Fall 1997). Economists tend to be libertarians, because laissez faire is indeed the efficient policy in most monetized interactions, though there are well- known exceptions because of such things as poor information and externalities. Although the economic approach is also perfectly appropriate for non-monetized social interactions such as marriage or politics, the policy presumption does not follow. The reason such markets are non- monetized is that such things as poor information and externalities are the norm, not the exception. This means that laissez faire is not a safe default prescription for social regulation. In Ascii txt (21K) or Html (*.htm,32K, http://Pacioli.bus.indiana.edu/erasmuse/published/97.HJLPP.Feder.htm).

    4. Stigma and Self-Fulfilling Expectations of Criminality , Journal of Law and Economics 39: 519-544 (October 1996). In modelling crime, economists have focussed on the expected cost of government sanctions to the criminal, but private sanctions--- notably economic or social stigma--- may be just as important. In the model here, workers decide whether to commit crimes and employers decide how much to pay ex- convicts. In one equilibrium, individuals refrain from crime and economic stigma--- the wage loss from conviction--- is high. In a second, pareto- inferior equilibrium, individuals commit crimes and stigma is low, because employers realize that nonconviction does not imply noncriminality. The model may help to explain large shifts in crime, such as that between 1960 and 1980, in which decreases and increases in government sanctions seem to have asymmetric effects. In Ascii-Latex (75K) or Acrobat pdf ( 210K, http://Pacioli.bus.indiana.edu/erasmuse/published/96JLE.stigma.pdf) .

    5. ``Managerial Conservatism and Rational Information Acquisition, '' Journal of Economics and Management Strategy (Spring 1992), 1: 175-202. Conservative managerial behavior can be rational and profit-maximizing. If the valuation of innovations contains white noise and the status quo would be preferred to random innovation, then any innovation that does not appear to be substantially better than the status quo should be rejected. The more successful the firm, the higher the threshold for accepting innovation should be, and the greater the conservative bias. Other things equal, more successful firms will spend less on research, adopt fewer innovations, and be less likely to advance the industry 's best practice. In Ascii txt- Latex (76K) or Acrobat pdf ( 278K, http: //Pacioli.bus.indiana.edu/erasmuse/published/92JEMS.conservatism.pdf). Figure 1 is available in JPG.

    6. ``The Economics of Gratitude: An Objection to ``The Principle of Fairness' ''. Suppose an elf repairs my shoes at night without my consent. Am I morally obligated to pay him for the repairs? Rawls and Nozick say ``no''. Economic efficiency and the Golden Rule suggest ``yes''. In Ascii- Latex and Acrobat PDF ( Http://www.rasmusen.org/papers/elves.pdf).

    7. ``The Objectives of Sexual Harassment Law, with Application to 1998's Ellerth, Oncale, and Faragher Decisions.'' Imposing liability on a company for sexual harassment by supervisors cannot be justified as promoting equality between the sexes, protection of workers, or protection of the owners of the company. Such liability might be justified to prevent breach of contract or behavior offensive to the general public-- a "civility code". The recent Supreme Court ruling in Oncale that same-sex harassment is illegal can be justified on these grounds. The ruling in Ellerth and Faragher concerning employer liability for sexual harassment by supervisors contrary to the employer's interest is less satisfactory because the Court's rule will encourage litigation and defensive bureaucratic complexity. In Ascii and Acrobat PDF ( Http://www.rasmusen.org/papers/harass.pdf).

    8. An Economic Approach to Adultery Law,'' forthcoming, Marriage and Divorce: An Economic Perspective, edited by Anthony Dnes and Robert Rowthorn, Cambridge: Cambridge University Press. A long-term relationship such as marriage will not operate efficiently without sanctions for misconduct. One form of misconduct in marriage is adultery. Possible remedies for adultery differ in who initiates punishment, whether punishment is just a transfer or has real costs, who gets the transfer or pays the costs, whether the penalty is determine ex ante or ex post, whether spousal rights are alienable, and who is punished-the adulterous spouse, the third party, or both. Traditional penalties can be seen as different combinations of these features. Three typical penalties, criminal penalties for adultery, the tort of alienation of affections, and the self-help remedy of excuse for murder are formally modelled. The penalties are then discussed in a variety of specific applications to Indiana law past and present. In Ascii and Acrobat PDF ( Http://www.rasmusen.org/papers/01.BOOK.adultery.pdf).

    http://www.rasmusen.org/social/social.htm. Eric Rasmusen, Indiana University, Dept. of Business Economics and Public Policy, Kelley School of Business, Room 456, 1309 East Tenth Street, Bloomington, Indiana 47405-1701, (812)855-9219. [email protected] .

    Back to the Rasmusen Homepage.