Tomáš Otáhal

What is the Contribution of the Theory of Redistribution Systems to the Theory of Corruption

Abstract Scholars making economic policy recommendations to resolve corruption problem use several approaches, the most dominant of which are the principal-agent and rent-seeking theories. In this paper, we argue that the principal-agent theory has problems to account for the environment in which the agents offering and accepting corruption operate, and explain the importance of agents for survival of their environment. The rent-seeking theory, on the other hand, finds it difficult to establish socially effective legislation and ways to determine the barriers to entry that motivate agents to behave corruptly. Both problems, however, are vital for solving the problem of corruption. Lacking the knowledge of the agent’s environment (system) and their significance for survival of the system, the theory cannot define incentives that would discourage the agent from acting in a corrupted way. If the rent-seeking theory does not determine the barriers to entry that motivate agents to behave corruptly, it cannot determine the proper legislation that would deter corrupt behaviour and lead to economic development. For these reasons we investigate if both problems can be explained and solved within the alternative theory of redistribution systems and its part - the theory of parallel redistribution games.

How Does Corruption in Central and Eastern Europe Hurt Economic Growth? Granger Test of Causality

The paper explains theoretical framework of how corruption hurts economic growth and reveals its application difficulties. Comparing views on corruption in terms of the problem of agency and the problem of rent-seeking we argue that corruption in general is the problem of legal setting and its enforcement and, if badly established, it does not promote economic growth. To verify the theoretical argument we present empirical Granger causality test to demonstrate that corruption precedes economic growth in Central and Eastern Europe. This means that legal setting and its enforcement rather allow for rent-seeking than promote economic growth. As a consequence we emphasize the necessity to focus on institutional framework to fight corruption and support economic growth.

Corruption, Rule of Law, and Economic Efficiency: Virginia vs. Chicago Public Choice Theories

Can corruption improve economic efficiency? Classical political economists argue that corruption undermines the rule of law (Smith 2001, chap 5). The modern Public Choice proponents argue that corruption and lobbying might influence the efficiency of the rule of law. While Chicago Public Choice scholars model how legal lobbying, which is corruption in Virginia Public Choice perspective, improves efficiency of the rule of law and thus the overall economic efficiency, the Virginia Public Choice models explain how corruption reduces efficiency of the rule of law and thus the overall economic efficiency. In this short paper, we present a brief survey distinguishing between arguments of the Chicago Public Choice and Virginia Public Choice schools on how corruption influences economic efficiency. We argue that the Virginia Public Choice explanation is more realistic because it includes the influence of bureaucratic rent-seeking.

Rent-Seeking Origins of Central Banks: The Case of the Federal Reserve System

What were the purposes for establishment of central banks? Central banks are historically relatively young organizations. Their main purposes are to regulate money supply through interest rates, regulate the banking sector and act as a lender of last resort to banking sector during the time of financial crises. Historical evidence suggests that in the second half of 19th century in the USA private clearing houses were able to provide the banking sector with similar services. In this paper, we follow such evidence and provide Public Choice explanation for establishment of central banks. On the historical example of establishment of the Federal Reserve System we show that the motivation for establishment of the Federal Reserve System might be rather political instead of economic. More precisely, we argue that the Federal Reserve System was established to allow the American Federal Government to control rent- distribution through money supply control and banking sector regulation.

Regulatory Capture in Railways Industry: A Short Survey

This paper shortly surveys theoretical and empirical literature related to regulatory capture in railway industry. In the first section, the survey summarizes the main contributions to the general theoretical framework referred to as the theory of regulation or the regulatory capture theory. Since the low elasticity of demand for railways increases the profits from regulatory capture, the railway industry is a good example of the summarized theoretical argument. To further analyze this example, the second section presents a short survey of regulatory capture in the railway industry.

The Myth of Unbundling the Railways in the Czech Republic

Does unbundling ensure efficient railway transportation? The separation of railway operators and infrastructure is supposed to ensure efficient railway transportation. However, the experience with the unbundling of the railway operation in the Czech Republic suggests that unbundling does not work. In this paper, we investigate the hypothesis that the Czech railways represent an example of a network industry which is more efficient when it is concentrated. Therefore, the unbundling of railways in the Czech Republic favors particular political interests instead of efficient operation. Our hypothesis is supported by the growth of per unit costs that indicates the inefficient operation of unbundled Czech railways. We also looked at the volume of subsidies and the productivity of labor which indicate the particular interests of politicians and the management of the Czech railways.

Corruption: A Theoretical Note

In this paper, I argue that neoclassical equilibrium models are not suitable theoretical tools for solving the corruption problem. In the first section, I set a general definition of corrupt action and I explain its nature. In the second section, I present arguments against the equilibrium state and subsequently offer suggestions for a proper theoretical approach to the problem of corruption. The last section is conclusion.

Does Economic Thought Always Reflect History? A Book Review of the Economic Clashes of the Last Hundred Years

The author reviews the book Larry H. White (2012): The Economic Clashes of the Last Hundred Years. Cambridge: Cambridge University Press, 2012.Is the book White (2012) a modern text book of history of economic thought? Kuhn (1970) argues that the scientific development is a matter of the competition between theoretical paradigms. Coase (1994) applies this argument on the development of the economic theory. White (2012) tries to illustrate this argument on the development of economic theory of the last hundred years. In my opinion this is how modern and advanced text books of history of economic thought might be written.

Podnikání a vlastnická práva: Platí co je doma, to se počítá? (Entrepreneurship and Property Rights: A Matter of 'What is at Home, Counts'?)

Czech Abstract: Tento text vysvětluje teorii podnikatelskeho objevovani v kontextu teorie vlastnických prav a zkouma, jaký druh vlastnických prav je nezbytnou podminkou pro aplikaci teto teorie.English Abstract: This paper is set to explain the theory of entrepreneurial discovery in the context of the theory of property rights and I investigate what kind of property rights are a necessary condition for the theorys appropriate application. First, the concept of the theory of entrepreneurial discovery originated by Israel M. Kirzner will be explained. Second, a model of entrepreneurial behavior will be developed based on the generalized concept of the theory of entrepreneurial discovery within neo-classical microeconomic framework. Third, the theory of property rights will be explained. Further, criticism of the neo-classical microeconomic framework will be applied to my model of entrepreneurial behavior. I found that property rights that allow entrepreneurs to make decisions about the allocation of scarce resources and the ones that allow them to receive pure profit, both represent a necessary institutional condition for entrepreneurial discovery.

Je Israel M. Kirzner institucionálním ekonomem? (Israel M. Kirzner: Institutional Economist?)

Czech Abstract: Je Israel M. Kirzner institucionalni ekonom? Přesněji řeceno, tvrdim, že teorie podnikatelskeho objevovani se stava prazdnou bez implicitniho předpokladu institucionalniho prostředi, ktere vymaha soukrome vlastnictvi.English Abstract: Is Israel M. Kirzner an institutional economist? Israel M. Kirzner (1930) is a direct successor of Ludwig von Mises (1981-1973). Ludwig von Mises contributed to the methodology of economics, calculation debate and theory of social order. He can rightly be considered an institutional economist of methodological individualism. Israel M. Kirzner has further developed it into the theory of entrepreneurial discovery. In this paper, I argue that Israel M. Kirzner, the successor of Ludwig von Mises, is an institutional economist of methodological individualism. More precisely, I argue that the theory of entrepreneurial discovery turns empty without implicit assumption of the institutional environment that enforces private property. To support my arguments, I provide explicit evidence based on Kirzner’s theoretical institutional analysis.