Tyler Cowen

An Economic Theory of Avant-Garde and Popular Art, or High and Low Culture

Artists face choices between the pecuniary benefits of selling to the market and the nonpecuniary benefits of creating to please their own tastes. We examine how changes in wages, lump-sum income, and capital-labor ratios affect the artist’s pursuit of self-satisfaction versus market sales. Using our model of labor supply, we consider the economic forces behind the high/low culture split, why some artistic media offer greater scope for the avant-garde than others, why so many artists dislike the market, and how economic growth and taxation affect the quantity and form of different kinds of art.

Law as a Public Good: The Economics of Anarchy

Various writers in the Western liberal and libertarian tradition have challenged the argument that enforcement of law and protection of property rights are public goods that must be provided by governments. Many of these writers argue explicitly for the provision of law enforcement services through private market relations.

The Scope and Limits of Preference Sovereignty

Economists use tastes as a source of information about personal welfare and judge the effects of policies upon preference satisfaction; neoclassical welfare economics is the analytical embodiment of this preference sovereignty norm. For an initial distribution of wealth, the welfare-maximizing outcome is the one that exhausts all possible gains from trade. Gains from trade are defined relative to fixed ordinal preferences. This analytical apparatus consists of both the Pareto principle, which implies that externality-free voluntary trades increase welfare, and applied costbenefit analysis, which attempts to weight costs and benefits when evaluating policies that are not Pareto improvements.

The Costs of Cooperation

Public goods production is not necessarily desirable and involves higher costs than is often recognized. Specifically, public goods production may require that a small minority of individuals can collude at the expense of others or impose strategic sanctions on non-contributors. These facilities may have negative as well as positive effects. The same conditions that support public goods production also support business cartels and racial discrimination, for instance. We examine the implications of this perspective for modern debates on economic policy, civic virtue, communitarianism, and libertarianism.

Why Only Nixon Could Go to China

Right-wing politicians sometimes can implement policies that left-wing politicians cannot, and vice versa. Contemporary wisdom has it that “only Nixon could have gone to China”. We develop a model to explain this phenomenon. A policy issue could depend on information, on which every one could potentially agree on policy, or on values, on which agreement is impossible. Politicians, who value both reelection and policy outcomes, realize the nature of the issue, whereas voters do not. Only a right-wing president can credibly signal the desirability of a left-wing course of action. The Nixon paradox can hold then if citizens vote retrospectively on the issue.

More monitoring can induce less effort

Abstract If an agents compensation decreases sharply for observed shirking rates above a critical level, shirking may increase the more information the principal has about the agent. Furthermore, monitoring decisions may be deliberately assigned to poorly informed principals. Compensation methods that disregard some information may be optimal. Signals about the agent may reduce the expected profits of the principal.

Do We Underestimate the Benefits of Cultural Competition

Economic globalization has drawn fresh attention to cultural issues. The Uruguay Round of trade negotiations debated whether there should be a protectionist “cultural exception” for television and movies, as practiced by the French, Canadians, Brazilians, South Koreans, and Chinese to varying degrees. Governments around the world subsidize culture, in part to favor one national tradition over potential competitors. More generally, cultural questions are central to broader critiques of trade and globalization (Cowen, 2002). Current analyses, however, have neglected some insights from economics. We will suggest that market competition across cultures is desirable and favors relevant notions of diversity. An underlying theme is that individuals hold unjustified prejudices—or, in economic jargon, “systematically biased beliefs”—about globalization.

The Importance Of Defining The Feasible Set

How should we define the feasible set? Even when individuals agree on facts and values, as traditionally construed, different views on feasibility may suffice to produce very different policy conclusions. Focusing on the difficulties in the feasibility concept may help us resolve some policy disagreements, or at least identify the sources of those disagreements. Feasibility is most plausibly a matter of degree rather than of kind. Normative economic reasoning therefore faces a fuzzy social budget constraint. Iterative reasoning about feasibility and desirability may help us overcome these problems.

Entrepreneurship, Austrian Economics, and the Quarrel Between Philosophy and Poetry

I consider whether entrepreneurship is a distinct category within economic theory. More generally, I consider the links between discussions of entrepreneurship and philosophic debates over the nature of the aesthetic. For instance, Kants attempt to elevate the category of the aesthetic has much in common with Kirzners attempt to elevate the concept of the entrepreneur. Shackles theory of choice refers very directly to the notion of the aesthetic. Theories of the aesthetic and theories of the entrepreneur have common strengths and weaknesses.

The Esteem Theory of Norms

When esteem is costless to supply, does it provide an effectivemeans of enforcing norms for public goods production? I examine thebasic mechanics of an enforcement-through-esteem model. Whileesteem may enforce norms to considerable degree, systematicunderenforcement remains the general result, even in very basicsettings with a minimum of transactions costs. I also examine whyesteem has positive value in equilibrium if it can be producedcostlessly (i.e., why esteem remains scarce), and what collectiveaction problems plague the supply of esteem.