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Rules vs. Discretion in Human Affairs

Rules vs. Discretion in Human Affairs. Peter J. Boettke Econ 828/Fall 2005 24 October. Main Points. Rule of Law vs. Rule of Man Law as a factor of production Binding, Predictability and thus calculability Time Inconsistency and Public Policy Long and Variable Lag

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Rules vs. Discretion in Human Affairs

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  1. Rules vs. Discretion in Human Affairs Peter J. Boettke Econ 828/Fall 2005 24 October

  2. Main Points • Rule of Law vs. Rule of Man • Law as a factor of production • Binding, Predictability and thus calculability • Time Inconsistency and Public Policy • Long and Variable Lag • Myopia and changing circumstances • Simple Rules for a Complex world • Non-predictability and changing circumstances • Law amid flux

  3. Rule of Law vs. Rule of Man • Spontaneous Order versus Rational Constructivism • Division of labor gives rise to Division of knowledge • Civilization and the growth of knowledge (p. 13-14; 37-39) • Principle vs. Expediency (55; 56-57; 65) • Law versus Legislation (72-73; 82; 85-86; 88) • L, L, & L, Vol. 1 (1973). • Freedom and the unforeseen and unpredictable • Ends independent and Abstract

  4. Time Inconsistency and Public Policy • T1≠ T2 • College tuition and Son’s values • Want an educated and responsible son, get an educated and irresponsible son in order to avoid having an uneducated and irresponsible son. • Inflation and Unemployment • Central bank and unions: central banker wants low inflation, and unions wants cost of living raises. • Taxing of windfall profits and R&D • Rules and Incentives • Destabilizing economic conditions through discretion • Long and variable lag • Reputation and Credibility • Mutual hostage taking

  5. Buchanan and Brennan • Why model political man as homoeconomicus? (p. 53-75) • Constraining knaves • Time and Temptation (p. 76-107) • Constraining ourselves to realize goals • Constitutional Opportunity • Improvements in rules which bind

  6. Simple Rules for a Complex World • In a complex world where everything is shifting (underlying and induced variables) something must be relatively stable in order to provide an anchor. • Rule of precedent in law (judge made law) • Rules of just conduct (norms and expectations)

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