This paper demonstrates that increasing returns to scale can be sustained when agents care about ... more This paper demonstrates that increasing returns to scale can be sustained when agents care about praiseworthiness of their conduct. Unlike the desire to attain approbation from external sources, the notion of praiseworthiness seems to have been neglected by contemporary economic literature. Yet the relevance of praiseworthiness as an internal motivational force was stressed by a number of classical economists. We construct an endogenous growth model in which agents derive utility not only from their consumption but also from praiseworthiness of their action. In such a setting, the motivation by praiseworthiness is able to generate positive and accelerating growth of output per labourer in steady state. The main implication of our model is that the existence of increasing returns depends critically on presence of suffi cient approbation attributed to creativity. Furthermore, the presence or the absence of these rewards may be susceptible to explain the cross-sectional differences in growth rates, growth miracles and growth disasters.
faculty-publications Part of the Economics Commons, and the Leadership Studies Commons This Book ... more faculty-publications Part of the Economics Commons, and the Leadership Studies Commons This Book Chapter is brought to you for free and open access by the Jepson School of Leadership Studies at UR Scholarship Repository. It has been accepted for inclusion in Jepson School of Leadership Studies articles, book chapters and other publications by an authorized administrator of UR Scholarship Repository. For more information, please contact
Tur• fol lowif1g statemcn~ con.stitutc a non S<:!(UilHr: 'l Arn rfrhe-r than you afc , the;n~foi:... more Tur• fol lowif1g statemcn~ con.stitutc a non S<:!(UilHr: 'l Arn rfrhe-r than you afc , the;n~foi:e lam ~upr nor to you•: or, 'l am mort: doqw .. ":llt than you an;, therefore I am mpc:rim fo you.' But tlio following oonclusions are better: •I am r~cher lhan you an.\ therefore my property is supt::riot to your~\ or. ' t am more t:loquent than you an:, thcn.:frlrt", my dul:ulion is ~llp~riur lnyours.' But you arc neither prnpcrty nor elocution. Epicrt:l\IS, Encheiridirm. para. 44 ... lht' S1uics ... havt:: the glory of being the cHrlicst thlnke1:s who grormded 1hc obligation of morals on the hroll1c1•h..-xxl, Litt' ~'•;myn1t~ia, of lh(! whole human ra.c:c.
* We thank Jane Perry for a careful reading and Roger Koppl for helping us see how an 18 th centu... more * We thank Jane Perry for a careful reading and Roger Koppl for helping us see how an 18 th century idea might be applied to address an open problem. An earlier version was presented at the 2015 Boston HES/ASSA meetings at which we received helpful comments. All the surviving mistakes are our responsibility.
Peter Schuck catalogs an overwhelming list of US government failures. He points to both structura... more Peter Schuck catalogs an overwhelming list of US government failures. He points to both structural problems (culture and institutions) and incentives. Despairing of cultural change, Schuck focuses on incentives. He relies on Charles Wolf 's theory of nonmarket failures in which “internalities” replace the heavily-studied market failure from externalities (Wolf 1979). Internalities are evidence of a discord between the public goals by which a program is defended and the private goals of its administrators. What might economists contribute? We suggest that economists have neglected internalities because they take group goals as exogenously determined and we defend an alternative tradition in which group goals are endogenously determined.(JEL A11, D72, D82)
The Oxford Handbook of Professional Economic Ethics, 2014
The collective action problem of economic experts was diagnosed acutely by Knight and Pigou in th... more The collective action problem of economic experts was diagnosed acutely by Knight and Pigou in the 1930s. The interest of economists as a group is in pursuing the public good of truth; the interest of an individual economist is in pursuing the private good of happiness. Pigou’s example is the pursuit of political influence. Deviation from truth-seeking devastates the theory of governance as objective inquiry laid out by Knight and John Rawls, as we saw in the eugenic era. We reformulate the Knight–Rawls position as truth-seeking contingent on a presupposed system. The best case for the Knight–Rawls position is transparency, where presuppositions are common knowledge. If transparency is infeasible making the nontransparency of inquiry itself transparent will serve as a second-best solution to warn third parties to make adjustments. A code of ethics can itself serve as a warning about the temptation. Pigou’s concern about nonpecuniary temptation should be added to the American Economi...
faculty-publications Part of the Economic Theory Commons This Book Chapter is brought to you for ... more faculty-publications Part of the Economic Theory Commons This Book Chapter is brought to you for free and open access by the Jepson School of Leadership Studies at UR Scholarship Repository. It has been accepted for inclusion in Jepson School of Leadership Studies articles, book chapters and other publications by an authorized administrator of UR Scholarship Repository. For more information, please contact
Does transparent leadership promote cooperative groups? We address this issue using a public good... more Does transparent leadership promote cooperative groups? We address this issue using a public goods experiment with exogenously selected leaders who are able to send non-binding contribution suggestions to the group. To investigate the effect of transparency in this setting we vary the ease with which a leader's actions are known by the group. We find leaders' suggestions encourage cooperation in all treatments, but that both leaders and their group members are more likely to follow leaders' recommendations when institutions are transparent so that non-leaders can easily see what the leader does. Consequently, transparency leads to significantly more cooperation, higher group earnings and reduced variation in contributions among group members. 1 This insight, that transparency links private motivations and social consequences, dates at least to Adam Smith's 1759 poetic statement: "If we saw ourselves in the light in which others see us, or in which they would see us if they knew all, a reformation would generally be unavoidable. We could not otherwise endure the sight." Smith (1759 III.i.93). A hundred years later, J S Mill, in an argument against the secret ballot (which he viewed as a nontransparency in the selection of leaders) argued that secrecy attenuated social motivations: "the point to be decided is, whether the social feelings connected with an act, and the sense of social duty in performing it, can be expected to be as powerful when the act is done in secret, and he can neither be admired for disinterested, nor blamed for mean and selfish conduct. But this question is answered as soon as stated." Mill (1865, p. 1214).
This paper demonstrates that increasing returns to scale can be sustained when agents care about ... more This paper demonstrates that increasing returns to scale can be sustained when agents care about praiseworthiness of their conduct. Unlike the desire to attain approbation from external sources, the notion of praiseworthiness seems to have been neglected by contemporary economic literature. Yet the relevance of praiseworthiness as an internal motivational force was stressed by a number of classical economists. We construct an endogenous growth model in which agents derive utility not only from their consumption but also from praiseworthiness of their action. In such a setting, the motivation by praiseworthiness is able to generate positive and accelerating growth of output per labourer in steady state. The main implication of our model is that the existence of increasing returns depends critically on presence of suffi cient approbation attributed to creativity. Furthermore, the presence or the absence of these rewards may be susceptible to explain the cross-sectional differences in growth rates, growth miracles and growth disasters.
Models of endogenous growth have not been able to account for the variety of empirically observed... more Models of endogenous growth have not been able to account for the variety of empirically observed distributional properties of the returns to innovation, in part, because of the limitations necessarily imposed on competition to cope with increasing returns to scale. Exponential growth, fat tails, Pareto–Levy distributed upper tails, and upper value outliers, are associated with increasing returns to scale and innovation. At the same time, properties such as bifurcated research investment strategies, bimodal returns to innovation, and Laplace distributed firm growth rates are products of competition. We build an agent-based model of endogenous technical change in which heterogeneous investments in patented knowledge and increasing returns to scale emerge these distributional properties within a competitive market. The combination of heterogeneous agents, costly information, and patents allow for a competitive landscape to persist amidst increasing returns. The ability of model to fos...
The most important thing to know about this book is that analytical egalitarianism has very littl... more The most important thing to know about this book is that analytical egalitarianism has very little to do with egalitarianism as most of us understand it. The editors use the term ''analytical egalitarianism'' for a ''theoretical system that abstracts from any inherent differences among persons'' [p. 1]. They use the term ''practical egalitarianism'' to refer to what they call the more familiar definition of ''egalitarianism'' as ''a belief in economic equality''. Obviously, one can be extremely inegalitarian in the practical sense, and still employ theoretical models that use analytical egalitarian assumptions. Analytical egalitarianism has been practiced by people with very different beliefs about practical egalitarianism. John Rawls uses the analytical egalitarian theory to argue that a just government should promote practical egalitarianism up to the point at which the incentive effects become so severe that additional redistribution is no longer advantageous to the least well-off individual. Austrian and Chicago School economists, such as F.A. Hayek, Ludwig von Mises, Frank Knight, and James Buchanan, use the analytical egalitarian theory to argue (with qualifications) that the government should not make practical egalitarianism a goal. According to the chapter by Eric Crampton and Andrew Farrant, ''Buchanan is perhaps the most important advocate in modern economics of what we might term analytical egalitarianism [which] requires that all y be modeled symmetrically, any differences in their observed behavior lying not in any supposedly intrinsic preferences or abilities y but rather in their historically contingent budget constraints.'' [p. 109] Most contemporary economists use analytical egalitarian assumptions, and efficiency criteria, to model and evaluate policies, even if many of them have little interest in practical egalitarianism. Analytical egalitarianism was equally popular with classical economists such as Adam Smith and John Stuart Mill. But there was a time when many economists dropped analytical egalitarianism and endorsed the idea of inherent superiorities and inferiorities between people and between peoples. Many even supported the eugenics movement. The chapters on the involvement of economists in the eugenics movement are among the most interesting in the book. Eugenics, which gained great popularity in the late nineteenth and early twentieth centuries, was an outgrowth of evolutionary theory, but one that rejected the central amoral Darwinian premise. There are not good and bad genes, merely genes that survive and genes that do not. Survival of the fittest is a tautology; being fit is the ability to survive. Eugenicists put a moral judgment on genes; decided that the privileged had the fittest genes; and observed that the comfort of the modern world allowed the unfit to out-breed the fit. Evolution needed help to prevent degeneration. Eugenicists advocated policies to increase the breeding by favored groups (defined in terms of class and race) and to discourage breeding and immigration by lessfavored groups.
This paper demonstrates that increasing returns to scale can be sustained when agents care about ... more This paper demonstrates that increasing returns to scale can be sustained when agents care about praiseworthiness of their conduct. Unlike the desire to attain approbation from external sources, the notion of praiseworthiness seems to have been neglected by contemporary economic literature. Yet the relevance of praiseworthiness as an internal motivational force was stressed by a number of classical economists. We construct an endogenous growth model in which agents derive utility not only from their consumption but also from praiseworthiness of their action. In such a setting, the motivation by praiseworthiness is able to generate positive and accelerating growth of output per labourer in steady state. The main implication of our model is that the existence of increasing returns depends critically on presence of suffi cient approbation attributed to creativity. Furthermore, the presence or the absence of these rewards may be susceptible to explain the cross-sectional differences in growth rates, growth miracles and growth disasters.
faculty-publications Part of the Economics Commons, and the Leadership Studies Commons This Book ... more faculty-publications Part of the Economics Commons, and the Leadership Studies Commons This Book Chapter is brought to you for free and open access by the Jepson School of Leadership Studies at UR Scholarship Repository. It has been accepted for inclusion in Jepson School of Leadership Studies articles, book chapters and other publications by an authorized administrator of UR Scholarship Repository. For more information, please contact
Tur• fol lowif1g statemcn~ con.stitutc a non S<:!(UilHr: 'l Arn rfrhe-r than you afc , the;n~foi:... more Tur• fol lowif1g statemcn~ con.stitutc a non S<:!(UilHr: 'l Arn rfrhe-r than you afc , the;n~foi:e lam ~upr nor to you•: or, 'l am mort: doqw .. ":llt than you an;, therefore I am mpc:rim fo you.' But tlio following oonclusions are better: •I am r~cher lhan you an.\ therefore my property is supt::riot to your~\ or. ' t am more t:loquent than you an:, thcn.:frlrt", my dul:ulion is ~llp~riur lnyours.' But you arc neither prnpcrty nor elocution. Epicrt:l\IS, Encheiridirm. para. 44 ... lht' S1uics ... havt:: the glory of being the cHrlicst thlnke1:s who grormded 1hc obligation of morals on the hroll1c1•h..-xxl, Litt' ~'•;myn1t~ia, of lh(! whole human ra.c:c.
* We thank Jane Perry for a careful reading and Roger Koppl for helping us see how an 18 th centu... more * We thank Jane Perry for a careful reading and Roger Koppl for helping us see how an 18 th century idea might be applied to address an open problem. An earlier version was presented at the 2015 Boston HES/ASSA meetings at which we received helpful comments. All the surviving mistakes are our responsibility.
Peter Schuck catalogs an overwhelming list of US government failures. He points to both structura... more Peter Schuck catalogs an overwhelming list of US government failures. He points to both structural problems (culture and institutions) and incentives. Despairing of cultural change, Schuck focuses on incentives. He relies on Charles Wolf 's theory of nonmarket failures in which “internalities” replace the heavily-studied market failure from externalities (Wolf 1979). Internalities are evidence of a discord between the public goals by which a program is defended and the private goals of its administrators. What might economists contribute? We suggest that economists have neglected internalities because they take group goals as exogenously determined and we defend an alternative tradition in which group goals are endogenously determined.(JEL A11, D72, D82)
The Oxford Handbook of Professional Economic Ethics, 2014
The collective action problem of economic experts was diagnosed acutely by Knight and Pigou in th... more The collective action problem of economic experts was diagnosed acutely by Knight and Pigou in the 1930s. The interest of economists as a group is in pursuing the public good of truth; the interest of an individual economist is in pursuing the private good of happiness. Pigou’s example is the pursuit of political influence. Deviation from truth-seeking devastates the theory of governance as objective inquiry laid out by Knight and John Rawls, as we saw in the eugenic era. We reformulate the Knight–Rawls position as truth-seeking contingent on a presupposed system. The best case for the Knight–Rawls position is transparency, where presuppositions are common knowledge. If transparency is infeasible making the nontransparency of inquiry itself transparent will serve as a second-best solution to warn third parties to make adjustments. A code of ethics can itself serve as a warning about the temptation. Pigou’s concern about nonpecuniary temptation should be added to the American Economi...
faculty-publications Part of the Economic Theory Commons This Book Chapter is brought to you for ... more faculty-publications Part of the Economic Theory Commons This Book Chapter is brought to you for free and open access by the Jepson School of Leadership Studies at UR Scholarship Repository. It has been accepted for inclusion in Jepson School of Leadership Studies articles, book chapters and other publications by an authorized administrator of UR Scholarship Repository. For more information, please contact
Does transparent leadership promote cooperative groups? We address this issue using a public good... more Does transparent leadership promote cooperative groups? We address this issue using a public goods experiment with exogenously selected leaders who are able to send non-binding contribution suggestions to the group. To investigate the effect of transparency in this setting we vary the ease with which a leader's actions are known by the group. We find leaders' suggestions encourage cooperation in all treatments, but that both leaders and their group members are more likely to follow leaders' recommendations when institutions are transparent so that non-leaders can easily see what the leader does. Consequently, transparency leads to significantly more cooperation, higher group earnings and reduced variation in contributions among group members. 1 This insight, that transparency links private motivations and social consequences, dates at least to Adam Smith's 1759 poetic statement: "If we saw ourselves in the light in which others see us, or in which they would see us if they knew all, a reformation would generally be unavoidable. We could not otherwise endure the sight." Smith (1759 III.i.93). A hundred years later, J S Mill, in an argument against the secret ballot (which he viewed as a nontransparency in the selection of leaders) argued that secrecy attenuated social motivations: "the point to be decided is, whether the social feelings connected with an act, and the sense of social duty in performing it, can be expected to be as powerful when the act is done in secret, and he can neither be admired for disinterested, nor blamed for mean and selfish conduct. But this question is answered as soon as stated." Mill (1865, p. 1214).
This paper demonstrates that increasing returns to scale can be sustained when agents care about ... more This paper demonstrates that increasing returns to scale can be sustained when agents care about praiseworthiness of their conduct. Unlike the desire to attain approbation from external sources, the notion of praiseworthiness seems to have been neglected by contemporary economic literature. Yet the relevance of praiseworthiness as an internal motivational force was stressed by a number of classical economists. We construct an endogenous growth model in which agents derive utility not only from their consumption but also from praiseworthiness of their action. In such a setting, the motivation by praiseworthiness is able to generate positive and accelerating growth of output per labourer in steady state. The main implication of our model is that the existence of increasing returns depends critically on presence of suffi cient approbation attributed to creativity. Furthermore, the presence or the absence of these rewards may be susceptible to explain the cross-sectional differences in growth rates, growth miracles and growth disasters.
Models of endogenous growth have not been able to account for the variety of empirically observed... more Models of endogenous growth have not been able to account for the variety of empirically observed distributional properties of the returns to innovation, in part, because of the limitations necessarily imposed on competition to cope with increasing returns to scale. Exponential growth, fat tails, Pareto–Levy distributed upper tails, and upper value outliers, are associated with increasing returns to scale and innovation. At the same time, properties such as bifurcated research investment strategies, bimodal returns to innovation, and Laplace distributed firm growth rates are products of competition. We build an agent-based model of endogenous technical change in which heterogeneous investments in patented knowledge and increasing returns to scale emerge these distributional properties within a competitive market. The combination of heterogeneous agents, costly information, and patents allow for a competitive landscape to persist amidst increasing returns. The ability of model to fos...
The most important thing to know about this book is that analytical egalitarianism has very littl... more The most important thing to know about this book is that analytical egalitarianism has very little to do with egalitarianism as most of us understand it. The editors use the term ''analytical egalitarianism'' for a ''theoretical system that abstracts from any inherent differences among persons'' [p. 1]. They use the term ''practical egalitarianism'' to refer to what they call the more familiar definition of ''egalitarianism'' as ''a belief in economic equality''. Obviously, one can be extremely inegalitarian in the practical sense, and still employ theoretical models that use analytical egalitarian assumptions. Analytical egalitarianism has been practiced by people with very different beliefs about practical egalitarianism. John Rawls uses the analytical egalitarian theory to argue that a just government should promote practical egalitarianism up to the point at which the incentive effects become so severe that additional redistribution is no longer advantageous to the least well-off individual. Austrian and Chicago School economists, such as F.A. Hayek, Ludwig von Mises, Frank Knight, and James Buchanan, use the analytical egalitarian theory to argue (with qualifications) that the government should not make practical egalitarianism a goal. According to the chapter by Eric Crampton and Andrew Farrant, ''Buchanan is perhaps the most important advocate in modern economics of what we might term analytical egalitarianism [which] requires that all y be modeled symmetrically, any differences in their observed behavior lying not in any supposedly intrinsic preferences or abilities y but rather in their historically contingent budget constraints.'' [p. 109] Most contemporary economists use analytical egalitarian assumptions, and efficiency criteria, to model and evaluate policies, even if many of them have little interest in practical egalitarianism. Analytical egalitarianism was equally popular with classical economists such as Adam Smith and John Stuart Mill. But there was a time when many economists dropped analytical egalitarianism and endorsed the idea of inherent superiorities and inferiorities between people and between peoples. Many even supported the eugenics movement. The chapters on the involvement of economists in the eugenics movement are among the most interesting in the book. Eugenics, which gained great popularity in the late nineteenth and early twentieth centuries, was an outgrowth of evolutionary theory, but one that rejected the central amoral Darwinian premise. There are not good and bad genes, merely genes that survive and genes that do not. Survival of the fittest is a tautology; being fit is the ability to survive. Eugenicists put a moral judgment on genes; decided that the privileged had the fittest genes; and observed that the comfort of the modern world allowed the unfit to out-breed the fit. Evolution needed help to prevent degeneration. Eugenicists advocated policies to increase the breeding by favored groups (defined in terms of class and race) and to discourage breeding and immigration by lessfavored groups.
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