Volume 63, Issue 1

This paper defends the Euro from the point of view of Austrian Economics. Following Mises and Hayek it demonstrates the Euro is acting as a proxy of the gold standard disciplining politicians and putting a limit to the growth of the welfare state.

The creation of the European Monetary Union should be a system of undistorted competition seeking to establish a single market. Contrary to this objective the ECBhas distorted the competition by its policy of qualitative and quantitative easing since May 2010. One could call it thematchmaker of distorted competition. This paper critically observes the extra-legal emergency measures, e.g.the reduction or suspension of the Eurosystem’s credit quality threshold as well as the “originate-to-Repo-operations”.

From an economic policy point of view the implementation of a financial transaction tax (FTT) is exceptionally attractive. Against the background of the present sovereign debt crisis the FTT promises absolutely necessary additional tax revenue and is supported - in contrast to other taxes - at the same time by the majority of the population. The FTT shall burden the financial sector and meets with it the supposed main causer of the financial and sovereign debt crisis. In addition, the FTT seems suitable to lower the transaction volumes on the financial markets which are responsible for high price volatilities and speculative bubbles and which endanger financial market stability all together. In this paper the different objectives and different variants of the financial transaction tax are explained first to discuss then the proposals of the European Commission for the introduction of the tax. The effects of the financial transaction tax can be analyzed with the help of the direct costs, the volume and the price effects as well as the allocation effects. In the result the effectiveness of the planned EU financial transaction tax must be questioned. The tax fulfills probably neither the fiscal character in terms of additional net tax revenues nor a steering function for the purposes of a higher financial market stability. The microeconomic and macroeconomic follow-on effects point to serious burdens for the national economies. If the economic policy is directed basically upon the realization of additional tax revenue, the implementation of a sales tax on stock market and other commercial or settlement fees appears to be the better instrument, because their follow-on effects are clearly low.

The rapid economic development and transformation of the Chinese society over the past three decades has, by a large mass of analysts, been called a “Miracle”. This paper not only addresses the shortcomings of existing interpretations but also develops a new multi-dimensional framework based on North′s theory of institutional change and Hayek′s theory of institutional evolution to explain China′s miraculous growth. Our analysis shows that both Hayekian spontaneous order and Popper′s “piecemeal social engineering” played a major role in attaining China′s miraculous growth.

Feng, Ljungwall and Guo have demonstrated how the expansion of economic freedom contributed to persistent and rapid economic growth in China. Here, four additional items are discussed. First, the extreme restrictions of economic freedom before the reforms, under Mao and during the ‘great leap forward’, led China into catastrophe. Second, China′s economic performance should not only be explained by domestic determinants, but also by external determinants, in particular the advantages of backwardness which result from economic freedom in the West. Third, China′s economic performance since the reforms remains a ‘miracle’, because the Chinese economy does so well in spite of so insecure property rights and so little rule of law. Fourth, the one child policy may be regarded as the last ‘victory’ of social planning. It forebodes major problems.

How can we describe the anthropological foundation of German Ordoliberalism and Social Market Economy? Which premises underlie its idea of man? Is such an idea of man still up-to-date? What kind of dangers does it face and which institutional precautions might be taken to counter these potential threats? These concerns are the main focus of the following essay. The paper is structured as follows: in Chapter 2, we analyze the anthropological foundations of German Ordoliberalism in general and the Kantian ‘program of liberty as autonomy’ in particular. Chapter 3 discusses potential threats to the ordoliberal idea of man. Among these threats are the re-feudalization of the economy as well as the instrumentalization of (economic) science - both topics are investigated thoroughly. Finally, chapter 4 evaluates frequently mentioned institutional precautionary measures such as Hayek′s constitutional model and Röpke′s concepts of Clercs and Nobilitas naturalis. The paper ends with some concluding remarks.

In the future, dwindling economic growth rates will leave less room for redistributive policies. At the same time, increasing challenges of a changing age structure of the population, of increasing international competition, the transition to a more sustainable economy, and the imponderables of the European integration process will have to be met. Under these conditions, what position will ordo-liberalism take towards the “social market economy” - the historical synthesis of liberal and social thought in the future? The present paper discusses what changes the two parts of the synthesis underwent in the past and how, consistent with ordo-liberal ideas, their synthesis can be maintained despite the challenges it faces in the future.

The present document analyzes the differences between economists and noneconomists with respect to the valuation of various mechanisms for the allocation of a scarce resource, as well as the isolated influence of rational choice on the fairness judgment of economists. For this purpose, we conducted a survey based on Frey et al. (1993) and Haucap and Just (2010) among more than 600 students of different fields of studies from the University of Münster. As a result, we show that there are different attitudes depending on the field of study, especially with regard to the fairness of the market mechanism. This fact could mainly be explained by self-selection effects of economists. Furthermore, this article shows that indoctrination with rational choice had almost no effect on the judgment of economists.

In this paper I examine the relationship between Pareto-optimality and group size in linear public goods games or experiments. In particular, I use the standard setting of homogeneous linear public goods experiments and apply a recently developed tool to identify all Pareto-optimal allocations in such settings. It turns out that under any conceivable circumstances, ceteris paribus, small groups have a higher Pareto-ratio (Pareto-optimal allocations over total allocations) than large groups. Hence, if Pareto-optimality of an allocation is a property that makes such allocations acceptable and maintainable, small groups will find is easier to provide Pareto-optimal amounts of a public good than large groups. This is a novel reasoning for Mancur Olson′s claim, in particular, with respect to what he has termed inclusive goods and inclusive groups.

The political role of private business companies has changed during the last decades. Companies are more and more expected to offer public workmanship that belonged to national state territory so far. This article reflects the question which consequences the distribution of responsibilities between national and private business sector has. The prolonged transfer of political tasks not only requires companies that are responsible actors and have the capability to generate public activities. The shifting of publicprivate responsibility arrangements incurs questions regarding legitimacy and the range of political task fulfillment of companies. The statement of this article is that companies not only have an regulatory responsibility in actively participate in formulating rules, but also have a systemsresponsibility for the maintenance of the functional conditions of the social system, which enables them their operative activities.

Markets are based on individual freedom and, as a consequence, on a responsible exercise of this freedom. This holds also true for corporate actors and their (corporate) responsibility.This contribution develops a conception of corporate responsibility which is effectively addressed to corporate representatives and offers them two imperatives of ethical corporate behavior as heuristics. These heuristics offer focal points for the acceptance and fulfillment of corporate responsibility. The imperatives are derived from an understanding of corporate responsibility which recognizes the maintenance of trustworthiness and thereby, the reputation for being a reliable cooperation partner, as the foundation for sustainable value creation. Behaviors - and communication - which undermine the corporation′s trustworthiness are thereby irresponsible. Based on this understanding of corporate responsibility, the concept of relevant inconsistencies is utilized to provide further clarity on the issues at hand. The concept refers to inconsistencies between the expectations held by cooperation partners (stakeholders)based on their role as trust-givers and (perceived) behaviors of the trusttaker (the corporation) which (can) lead to the trustful nature of the relationship being undermined. The qualification as ‘relevant’ is important in reference to the fact that many inconsistencies may arise in daily business which do not have grave consequences. As a result, a systematic approach to corporate responsibility requires corporations to concentrate on identifying - and insofar as possible, implementing mechanisms to avoid - relevant inconsistencies in cooperative relationships. This includes the identification and amendment of structural conditions which may lead to relevant inconsistencies materializing.

Usually the announcement of large-scale enterprises to reduce or relocate jobs causes harsh public morality debates. Hence, it is the aim of this article to discuss the respective responsibilities of individuals, enterprises and/or the state and their relation to each other. Since a true understanding of the relevant ethical categories is only possible, if their historical genesis is known a historical-genetic approach is chosen. From this perspective it is analyzed how these historical considerations fit tomodern positions in business-ethics. It turns out that the Corporate Responsible and Corporate Citizen approaches are not compatible with these historical approach.In the end from a methodical individualistic point of view it remains unexplained, why and under which conditions a private corporation should become a „quasi-public institution“ or a „Good Corporate Citizen“. In contrast, the historical-genetic approach can back up institutional economics and ethics because its′ main subject is how to implement and separate responsibilities between the engaged parties.

The article analyzes the civic engagement of companies from an economic and institutional perspective. Theoretical findings are supported by the main results of acomprehensive and representative questionnaire of companies. The authors show, why and how companies voluntarily act socially responsible although potential disadvantages within a competitive setting might arise (free rider problem). Why companies should be engaged in corporate citizenship, is theoretically explained by and derived from the evolution of values, the experience of risky situations and the repeated experience of cooperation. Furthermore, the type of company (run by owners or managers)and the company′s culture considerably influence corporate citizenship. The existing types of civic engagement are depicted by their categorization based on the theory of public goods. In addition, for the first time civic engagement has been added systematically to institutional economic analysis. Empirical research shows that in 2011 companies spent more than 11 billion euros on civic engagement. They take responsibility although other players might benefit from this without doing anything themselves (positive externalities). The theoretical and empirical results illustrate that companies exist merely to solve problems with the aim of social value creation, that they should contribute to corporate citizenship and that they actually act responsible to a large extent.

The right to water (rtw) is a major concern in current discussions about global challenges. Several NGOs, as well as international organisations, are involved in this political issue. On a scholarly level the discourse is accompanied primarily by jurisprudence reasoning the dogmatic question of social rights. Although already well established in the context of international declarations, the discussion on rtw is, in general, still awaiting a (national) implementation perspective. Hence, the question arises as to what exactly the concrete, litigable content of a rtw might be and how inevitable limits to this right might be set and justified. This article offers an institutional economics perspective on this problem of concretion. If the concern of a right to water is to be reduced in practice, it would be helpful to take overall objectives of potable water allocation seriously that might be at odds with the social concern of sufficient water supply. These competing objectives are economic efficiency, ecologic sustainability, and financial sustainability. The coordination of competing interests and requirements, including feedback effects in the long-run, may contribute to a more precise shaping of a rtw, which is still rather vague and therefore effete in practice. Thus, a rtw can hardly ever be an unconditional right. Starting from an analysis of international declarations′ calls for a rtw the category of ‘access’ can be considered the most crucial one. From an institutional economics viewpoint access can be defined as a ‘succeeding contract’ between consumer and supplier. This ‘contract’ has to comply with rtw conditions that may be set by simple acts of parliament, especially regarding various aspects of the service level. From such a perspective it becomes obvious that limitations of access are potentially functional and even desirable as other objectives of water allocation are only attainable in such a manner. This holds true particularly for limitations on access (i. e. exclusion effects) of water pricing which fulfills a number of essential functions in the allocation of potable water. Furthermore, it is analysed whether or not a rtw in Germany already might be infringed upon by pricing rules or suspension of deliveries in case of refusal of payment. Finally, the common proposition is critically reflected whether privatisation of water supply is in general at odds with the requirements of a rtw.

With the GKV-Wettbewerbsstärkungsgesetz in 2007, German public health insurance can offer insurance tariffs with a cost sharing. The insured at these cost sharing tariffs participates at the costs in the insurance case. In return, the insured profits from contribution refunds. An important result from the insurance theory says that the insurers manage to separate the good and the bad risks from each other and to solve the problem of the adverse selection by the choice of so-called separating contracts. However till now merely 1 % of the insured in Germany has chosen a cost sharing tariff instead of a tariff with full insurance. This observation could be led back on the so-called flat rate bias in insurance demand. Based on an empirical study under German insured we show that due to the flat rate bias the good risks still choose a tariff with a full insurance even though this rate is theoretically not optimal for them. Taking this into consideration, insurance companies must require higher premiums for full insurance and give more incentives for cost sharing tariffs in order to separate the good risks from the bad risks.

The currently dominant view in climate research is that mankind is endangered by climate change. As there are some different and less disquieting voices in climate research, as - even assuming the validity of the dominant view - the currently advocated means to mitigate climate change might be very costly or inefficient or incompatible with other values like human freedom, the role of wide agreement or consent in human thinking in general and in science in particular is discussed. The idea that the consent of experts can ever establish certainty about possession of the truth is rejected. Human knowledge always remains conjectural and subject to later revision. Too much closeness between the practitioners of science and politics is a threat instead of a promise. To counter this threat some social norms have to be observed and the institutional prerequisites for protecting the autonomy of science have to be established. Not only in markets, but in the sciences, too, competition is a discovery procedure. The task of science should never be an early consensus and the suppression of criticism and doubts. Instead it must remain organized scepticism and finding incompatibilities between widely accepted policy goals - even if doing so makes governance more difficult.

Wilhelm Röpke was a proponent of free trade and against any form of collectivism, but also a convinced European citizen, who could envisage Europe to become a federation like Switzerland in the distant future. In monetary policy, he was skeptical against monetary unions the member states of which must be disciplined by international law and the willingness of countries to comply with it. Against the background of Röpke′s works on european integration, this paper analyzes the economic constitution of the European Monetary Union and develops solutions for the current crisis in the Eurozone.

Freedom of competition and economic welfare have identical economic foundations. These concepts diverged, however, as they became subject of the disciplines of economics and law, of systems of philosophy or of narratives of probable or inevitable historical developments. This paper looks at some of the more influential philosophical ideas in terms of their persistent direct or indirect influence on our present understanding of competition and welfare. Particularly notable are perceived or received antinomic interpretations of competition as a condition of economic welfare, as an individual right, an instrument of economic organisation or as purpose of rules against restrictions of competition. As far as the competition law relevance is concerned the crucial issue is the uncertain causal relation of competitive or anticompetitive conduct and its welfare effects. The theoretical and practical difficulties in verifying welfare effects are overcome by treating competition as a process of coordinating decentral economic planning and freedom of competition as a governing principle of a private law society.