Volume 57, Issue 1

Hayek spoke of the “errors of sociobiology” though he was very much a Darwinian. The reason is that he thought many of the institutions of the Gesellschaft could not be explained directly by conclusions drawn from the observations of animals: the market, money, or the law were not natural, nor were they rational. They emerged as novelties of cultural evolution, a process that is much faster than, and partially independent of, biological evolution. Modern man’s discontent with civilisation can only be explained by that unnatural character of many of its institutions. These conclusions of Hayek′s are being confirmed by the latest developments of evolutionary psychology, starting with Dawkin’s The Selfish Gene. Zusammenfassung Hayek spricht von den „Irrtümern der Sozialphilosophie“, obschon er sehr stark vom Darwinismus inspiriert wurde. Der Grund hierfür ist, daß er annahm, daß sich die Entstehung gesellschaftlicher Institutionen − Markt, Geld, Recht − nicht unmittelbar mit den Erkenntnissen aus der Tierwelt erklären lasse. Diese Institutionen sind weder rein natürlich entstanden, noch sind sie das Resultat eines rationalen Entwurfs. Sie sind das Ergebnis einer kulturellen Evolution, die einen Prozeß darstellt, der Neuerungen viel schneller hervorbringt als die biologische Evolution. Die ablehnende Haltung der Bürger heute gegenüber vielen zivilisatorischen Errungenschaften kommt folglich dadurch zustande, daß diese Institutionen weitgehend abgekoppelt von der biologischen Evolution − insofern unnatürlich − entstanden sind. Diese Schlußfolgerung Hayeks steht in Einklang mit neueren Erkenntnissen der evolutionären Psychologie, die mit Dawkins „The Selfish Gene” beginnt.

In Aristotle’s “best state” the economy is governed by political prescriptions which on their part are determined by ethical principles. Aristotle tries to his sentences on empirical experiences as far as this approach is compatible with his ethical axioms. By refusing both Plato’s idea of women’s and children’s community as well as common property for the ruling classes Aristotle is led by the idea of natural law and by empirical experiences of public good problems. However his foundation of slavery is not based on the empirically tested principle of amour but on his ethical prescription that the citizens in his best state should devote their whole time and energy to the common wealth so that their daily business has to be done by slaves. In his famous deduction on the prohibition of interest Aristotle’s ethics gains the victory over the thinker Aristotle. The analysis of the aristotelian concept shows finally that his ethics offends against general ethical principles when it excludes reality, so as the social policy of today becomes unsocial when economic laws are neglected. Yet not the whole Aristotle should be banned to the Orcus; this article rather pleads for relying not on his ethical principles as it is done until now designing institutional arrangements, but on his empirical perceptions.

The influence of liberal ideas and practice during the 19th century was significant also in Germany, but lost its power gradually due to protectionist tendencies at the end of that century. More or less monopolistic and private economic groups were admitted in the name of “laisser-faire”, and the state became ready to intervene into the market process in favour of special interests. At the same time a rather modest paternalistic system of welfare protection for the working class was introduced, which later on demonstrated a built-in tendency to expand. But the collectivist and socialist movement of the 20th century became dominant by the two World Wars and their consequences. This led to political and economic catastrophes of incredible dimensions. Therefore a return to liberal ideas was given a second chance. But a simple return to laisser-faire and mistakes of the historical liberalism were not intended. Therefore the new ideas were called “neoliberalism”. This is used by collectivists of all kinds as a catchword for everything they do not like. They define the new concept irrespective of the reforms included in the new liberal ideas. The author describes also the tactics used in this process. He then analyses some principal points used against neoliberalism and demonstrates the extent to which decisions are based on value judgements unavoidable in this liberal concept. In no event does this imply to have no convictions at all. In addition there are general requirements beyond supply and demand necessary for a liberal and humane economy. Then objections against neoliberal economic policy are discussed starting with some points put forward by Alexander Rüstow, a neoliberal himself, against the old liberalism and not relevant to neoliberalism when defined correctly as a reformed liberal concept. The author further shows that the economic policy of neoliberalism does not necessarily depend on the so-called neoclassical economic theory nor is the modern German and international economic policy generally dominated by neoliberal convictions. The modern critique against neoliberalism is - among other points - directed against stable money, limited budget deficits, wages limited by the requirement of full employment, and freedom of international exchange presented as dangerous “globalization”. The polemics against “globalization” could not be treated here in all of its details. Neoliberalism is also criticized because it only wants to admit social welfare when it is correctly financed and does not destroy self-responsibility. Public finance as well as structure and financing of social security and the conditions of the labour market are dominated by socialist policies, not only in Germany. It is absurd to make neoliberalism responsible for the deplorable result. It is shown that the adversaries of neoliberalism make practical proposals along keynesian lines without making sure that the conditions necessary for a success of these proposals are fulfilled. The author finally emphasizes that the hostile attitude of liberals and many neoliberals against the state and the public service as such must be changed if neoliberals really want to have some success.

The present article refers to the polemics which dominate the discussion of economic reforms in Germany. An attribute which is used to discredit market-oriented proposals of reform is “neoliberal”. It will be argued, that the usage of the term reveals little knowledge of the European history of ideas and even less knowledge of the workings of a market system, particularly of competition in the case of globalization. The final conclusion will be that the polemic use of the term “neoliberal” by politicians should make fall into oblivion, an economic and social policy designed to serve vested interests over decades, reflecting now the ailment of a rent-seeking society.

Inspired by an unsuccessful controversy in this yearbook about the different responsibilities of the state for its own competitive economic order and about interstate systems competition, the article is tackling the getting out of hand use of the notion of competition in current political discussions. It tries to develop a taxonomy of all the different kinds of competition under the general heading of a ranking procedure. That is quite plausible for the different kinds of competition in sports, politics and societal communities. They aim all at a ranking of the participating competitors. How that works also in the frame of economic competition is shown under the text book price competition model. The great variety of reputation competition in scientific communities, system competition and politics is in detail discussed under the different institutional preconditions. The intention of the essay is to open an analytical perspective for the general idea of a spontaneous competitive interaction in a free society.

In the context of globalization, competition policy gets an international dimension. But political property rights regarding competition policy are not clearly allocated. As soon as companies act across borders, more than one competition agency is involved. Following Douglas C. North theory of institutional change the development of institutions is influenced by different factors. Apart from changed relative prices opportunistic actors and complementarities between institutions matter. Reactions can make institutional change path dependent. This shows why on the one hand recommendations for building an international antitrust division or a competition department within the WTO are not put into practice. It also shows why, on the other hand, institutions like the International Competition Network are a step in the right direction.

Recently, C. Mantzavinos proposed a new concept for antitrust analysis drawing on theoretical developments in New Institutional Economics and Evolutionary Economics. Criticizing the policy prescriptions based on traditional microeconomics and welfare economics, Mantzavinos pleas for a rule-governed antitrust policy which mainly operates with per se rules. This paper argues that the criticism of the traditional foundations of antitrust is inadequate and that per se rules rarely work. Reality confounds the principle of per se illegality and prompted courts to use a de facto rule of reason.

Tax increases are not at all an appropriate way to solve fiscal problems. The result would be a decrease of the growth path, the motivation of the employees and employers would decline, and revenues, at least, too. A superior alternative is to strengthen the self-responsibility of the households and firms by recurring of basic ORDO-principles: Recurring on subsidiarity and self-responsibility would induce incentives for a greater willingness to perform. As a consequence growth, welfare and revenues would accelerate.

In economics the paradox has prevailed for decades that marginal cost prices are considered to be optimal but are impossible in case of natural monopolies or public goods. Using the example of TV programmes three arguments are developed in this paper: 1. Despite different practical problems the theory of natural monopolies and the theory of public goods deal with the same phenomenon of rivalry which originates from the isomorphy of the theories. The concept of “economic rivalry”, which is introduced here, and the graphic illustration of a normally shaped demand curve for the public good demonstrate an important consequence of this isomorphy: Non-rivalry in consumption leads to a natural monopoly and normal private goods can became public goods in case of subadditivities. 2. In both theories the marginal cost paradox is just an apparent contradiction which can be resolved with a microeconomic approach. 3. At present a marginal cost doctrine dominates in (media)economics which cannot be justified in the light of welfare or institutional economics.

Many artists support socialistic ideas about society opposing free market economy and entrepreneurship. However, artists themselves act as entrepreneurs when they offer their works to the art market or attempt to generate public attention in general. Thus, following Schumpeter’s model of the dynamic entrepreneur, artists are innovators. Reasons for many artists’ attitude towards free market economy can be found in a lack of selection mechanisms in art, in an ex ante selection of artists and the philosophical concept of „l’art pour l’art“.

Much attention has been devoted to the analysis of competition in the health care markets especially concerning the effects of horizontal competition between health care providers on the one hand and the effect of demand power of Health Plans on the other hand. Vertical relations between insurers and health care providers in the context of health care system concerning either competition between the actors or social rights for insured persons have not been studied extensively. Although there is no appropriate theory describing the interconnection between health care providers and insurers with regard to complying legal requirments it could be shown that a coincidence of both objectives would be possible with a adequete form of regulation. It is also clear that a strict seperation between social law and competition law is not applicable for a future health care system. In that consequence the German health care system has to change to new form of competition law for health care

At the turn of the 18th century Saint-Simon und his disciples, the Saint-Simonists, developed ideas about centrally planned and directed humane societies. These ideas are still influential and are proposed by some as guiding principles for the development of an institutional structure for a peaceful united Europe. According to the constructional interventionist ideas of the Saint-Simonists, classical liberal philosophies are the root cause of many problems in society. They therefore disapprove of liberal methods of integration which rely on competitive markets such as the one successfully employed by the German Customs Union in the 19 th century. Emanating from France, the ideas of the Saint-Simonists on integration have been disseminated in a wide range of variants. However, experiences of the 20 th century demonstrate the disastrous failure of the Saint-Simonist’ concepts of integration. So far no successful alternatives to liberal methods of integration which rely on competitive markets have been developed. Never-the-less, since the second world war, French interventions, in particular, have allowed Saint-Simonist’ ideals to influence the process of European Integration. While the dominance of liberal methods of integration via competitive markets was initially not challenged, the wide reaching possibilities for market interventions contained in the Maastricht treaties give a clear indication of the resurgence and spread of influence of Saint-Simonist ideals since the 1990s. Should these become dominant the multicultural community of the EU member countries will be at risk to suffer from increasing in political bureaucracy and the loss of competitive performance incentives and entrepreneurial freedom. The EU would thereby mutate to an institution described by Wilhelm Röpke as a “roof without a house”. This article calls for a systematic readjustment of EU policies in favour of liberal methods of integration, which should reaffirm non-discriminatory competition as the leading principle of EU integration. This aims at ensuring that the EU will remain an attractive community for its citizens in the long-term.

Reciprocity is one of the main features of the current world trade system. Other principles of the system, as anchored in the World Trade Organisation (WTO), include most favoured nation and national treatment. This contribution addresses the question as to whether a negotiating strategy based on reciprocity is in conflict with a world trade system founded on principles of equality and mutuality. Adopting a reciprocal approach allows the stronger negotiating partner to succeed in relation to its own goals and to grow - all at the cost of the weaker negotiating partner. The first part examines the various definitions of reciprocity and shows how the principle has moved through the Cordell Hull programme into the General Agreement on Tariffs and Trade (GATT) and its successor organisation, the WTO. The conclusion offered from the analysis is to the effect that reciprocity, as rooted in the WTO, cannot be justified, whether on an economic basis or on a foreign trade basis, and that it shows elements of mercantilism. The only people who support negotiations through which the thread of reciprocity flows, are politicians and diplomats. The article concludes with the proposal that the principle of reciprocity should be removed from the WTO arena.

The moral claim to fight corruption effectively requires institutional reform. Two characteristics are important. First, corruption is a betrayal of trust in a principal-agent relationship. Second, corruption is a secret crime with a generally very low probability of detection: The corrupt parties try to erect information barriers and thus make it difficult, both for the harmed principal and for law enforcement agencies, to detect their crime. However, compared with the harmed principal on the bribe-taking side, the owners of the firm on the bribe-giving side will find it relatively easy to gather the necessary information about corruption and to take effective counter-measures to prevent it. Therefore, it is of vital importance to provide firm owners with strong incentives to prevent not only bribe-taking but, in addition, to prevent bribe-giving by their employees as well. For this purpose, an indirect second-order institutional reform is needed which sets incentives for setting incentives: a policy that gives firms stimuli to engage in self-governance and to act as corporate citizens by implementing effective measures to prevent bribe-giving by their employees.

If a functional equivalent to world government exists at the beginning of the 21 st century, it is neither provided by the UN or its Security Council, nor by the triad of the IMF, the WTO, and the World Bank, but by the US and its government. If global public goods are procured at all, if the political background conditions of a free and capitalist global economy are provided, then this can be done only under American leadership, now and for some time to come. The attempts to promote democracy by military means as well as to end poverty by means of planning endanger the free global order which the Americans had established in the aftermath of World War II. The values of economic freedom and free trade and their income or wealth consequences are attractive enough that their promotion requires neither military means nor planning. Although American leadership in the world lacks democratic legitimization, it implies limited government and promotes competition between governments and thereby contributes to the preservation of free societies and economies.