Reiner Eichenberger

FOCJ: Competitive governments for Europe

Abstract While European integration and the four freedoms related to the movement of goods, services, labor, and capital strengthened economic competition, competition among governments has been rather muted. Thus, a future European constitution should unlash political competition by guaranteeing a fifth freedom that allows the evolution of functional, overlapping, and competing jurisdictions (FOCJ). These governmental units combine various welfare-enhancing theoretical concepts of the economic theory of federalism. FOCJ have existed (at least partially) in European history, and there are illustrative examples such as the U.S. special districts and Swiss functional, democratic, and overlapping communities.

To harmonize or to compete? That's not the question

Abstract Neoclassical public economists stress economic distortions induced by differential taxation and therefore favour harmonization; political economists focus on political distortions and therefore reject harmonization. However, policy choices on the possibility frontier between economic and political distortions tend to be biased: economic advisers, politicians and interest groups typically favour harmonization. Harmonization is, moreover, undermined by incentives to re-establish tax differences. Both activities prevent the possibility frontier from being simply a menu of choice. Popular referenda and functional, overlapping, competing jurisdictions (FOCJs) are institutions able to reduce political distortions and to shift the possibility frontier.

On the rate of return in the art market: Survey and evaluation

Abstract Existing estimates of rates of return on single art objects and whole collections are surveyed and critically evaluated. The psychic benefits from art are, in the few cases they are considered at all, derived from the difference to financial returns on other markets. This paper discusses determinants of psychic benefits and suggests rental fees and willingness to pay studies as a possible way to analyze and estimate the psychic benefits from art.

Economic incentives transform psychological anomalies

People acting in an anomalous way can do better by reducing their anomalies, and clever people and firms can profit by exploiting anomalies. Due to these reactions, anomalies and their frequency are not exogenously given (as is assumed in the ‘psychological’ and the ‘axiomatic’ approaches) but are endogenous and influenced by social processes. The here proposed ‘incentive’ approach focuses on the conditions under which, on the one hand, anomalies can be created and strengthened, and on the other, anomalies can be avoided. Public policy measures which influence the amount of resources expended on anomalies are discussed.

On the return of art investment return analyses.

We survey more than twenty studies estimating rates of return of investments in single art objects and whole collections and evaluate the various approaches to art price movements taken so far. The majority of the estimates find lower returns for investments in art objects than for investments in financial assets. However, most existing analyses are restricted to auction data and neglect transactions cost and taxation. They partly focus on mechanistic calculations and disregard the distinguishing institutional and behavioral characteristics of art markets. We look into the possibilities to capture and empirically estimate psychic returns from owning art.

Rational Moralists: The Role of Fairness in Democratic Economic Politics

In this paper, we empirically test for the influence of fairness considerations on the willingness to redistribute income in private and in democratic decisions. In contrast to standard explanations of income redistribution, our theory takes into account that prices shift decisively as we move from the sphere of private contributions to politics. At the polls, it is nearly costless to observe social norms. Therefore, we expect individuals to behave more fairly in the political sphere than in the market place. We present experimental evidence which is consistent with this hypothesis. In distributive struggles, social norms moderate the inclination of human beings to behave like ‘gangsters’.

Competition among Jurisdictions: The Idea of FOCJ

The single European economic market has been a great success. The four freedoms relating to the movement of goods, services, labour and capital have without doubt significantly increased the welfare of the citizens within the European Union. With respect to politics, including economic policy, the picture is rather different. Essentially, one institution, the European Commission and its bureaucracy, has established itself as a monopoly government for European affairs, despite its so far limited powers. This paper argues that similar welfare improvements as in economic affairs could be reached in political affairs as well, provided the European Constitution allows for, and actively supports, competition between governments at all levels. The competition between already existing governments must be preserved but in addition a future European Constitution should foster the emergence of competitive new jurisdictions best serving individual preferences. These new governmental units are called FOCJ. The acronym relates to its four major characteristics: F = functional, i.e. the new political units extend over areas defined by the tasks to be fulfilled; O = overlapping, i.e. in line with the many different tasks (functions) there are many different governmental units extending over different geographical areas; C = competing, i.e. individuals and/or communes may chose to what governmental unit they want to belong, and they have political rights to express their preferences directly via initiative and referenda; J = jurisdictions, i.e. the units established are governmental, they have enforcement power and can, in particular, raise taxes.

Should Social Scientists Care about Choice Anomalies

The behavioral anomalies found by experimental psychologists (Tversky, Kahneman, and others) relate to the individual level. They are often considered to be irrelevant by economists because competitive markets are assumed to eliminate them at the aggregate level. However, markets are only able to perform this role under very limited conditions that often do not obtain even in the near-perfect stock market. Moreover, democratic, bureaucratic, and bargaining processes may under different identifiable conditions weaken or strengthen the anomalies. At the aggregate level, institutions such as conventions and laws may arise to counteract anomalies.

The Political Economy of Corporatism in Medicine: Self-Regulation or Cartel Management?

This paper seeks to explain why delegation of regulatory authority to medical associations (“medical Corporatism”) is so prominent in health care. It argues that the interests of politicians and physicians in limiting access to medical markets rather than the interests of patients in the control of quality of medical care determines this delegation. Recent trends in physician densities, their impacts on physician incomes, and rates of return to a medical career in several industrialized countries are adduced as evidence to support this claim.

Functional, Overlapping and Competing Jurisdictions (FOCJ): A Complement and Alternative to Today's Federalism

This major Handbook addresses fiscal relations between different levels of government under the general rubric of ‘fiscal federalism’, providing a review of the latest literature as well as an invaluable guide for practitioners and policy makers seeking informed policy options. The contributors include leading lights in the field, many of whom have themselves made seminal contributions to the literature.