CHOOSING BY RULES AND INSTITUTIONS.I.ppt

7/21/2019 CHOOSING BY RULES AND INSTITUTIONS.I.ppt

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CHOOSING BY RULES AND

INSTITUTIONS: THE INSTITUTION OF

AN ECONOMIC SYSTEM AND THEINSTITUTION OF A CHURCH


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Definitions: Rules and Institutions

Reguli=fac ca o alternativa sa aiba atasate costuri:aleg sa trec

pe verde la semafor, nu pe rosu

Institutii=reguli care institutionalizeaza viata umana=costuri

de oportunitate atasate diferitelor obiective umane ( natura si

omul)=sunt costuri de oportunitate stereotipe ale celor doua

megaobiective umane (avutia absoluta si relativa)


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Institutions and Economic

Performance

istemul economic are menirea de a imbunatati

performanta economica(perspectiva

ortodo!a)"=#istem de piata si sistem centraliat

incura$eaza performanta economica" dar nuperformeaza in mod egal (e!plicatie: invidivii sunt

de inteligenta diferita)

%ele doua tipuri de sisteme sunt adoptate pentruratiuni diferite " ist de piata&focalizat pe productia

de avutie, cel centralizat pe productia de putere


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THE INSTITUTION of an ECONOMIC

SYSTEM

Sist ec suedez-economie de piata dar si o mareinterventie statala

-religie-protestantism lutheran

Sist ec chinez-mult timp un sistem centralizat( ce

asigura conservarea puterii imparatului)-pt a creste balanta de putere internationala eatrebuie sa creasca economic


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'DRD E%**+I% *-'

E%**+I% .'E+

%/ina&impotriva industrializarii

&totul era organizat pe autosuficienta: %/ina trebuie sa

fie o tara autosuficienta iar toti barbarii straini trebuie

sa se inc/ine in fata imparatului c/inez si sa plateascatribut

&religii: taoism, budism, confucianism(fara legatura cu

libertatea economica)

Religia&descriere a sistemului social terestru" Ea descrie

cele doua obiective umane


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0-D+E'1 '.PE *0 E%**+I%

.'E+

scentismul

ivelul de concentrare si disipare a divinitatii

Importanta 2ietii de poi ivelul de obedienta a autoritatilor

Puterea barbatului asupra femeii


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Componente de dogma: fiecare ne spune ceva desprePUT!" !#"T$%"

&'Tipul de ascentism-semnaleaza pozitiile de putere

monastica

Cost functionalconsum atat cat imi trebuie si cat imi asiguraperformanta viitoareConcentrarea divinitatii-un singur umnezeuun singur tata

si fii egaliegalitate in viata terestra*udismulcel mai concentrat pe putere+ivelul de transcendenta-capacitatea noastra de la dialog

cu divinitatea


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'3E %PI'1I' .'E+

.'E+ *0 +R4E' E%**+.: all

decisions are made b5 economic units and

individuals emplo5ing t/e mec/anism of perfect

competition (interpla5 of demand and suppl5)

mar6ets 7it/ perfect competition= institution

of economic i!e"t#

Ca$itaist s#stem% f"ee ma"&ets' $"i(ate

$"o$e"t#


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'3E PRI2'E 0IR+

Basic "uesof a private firm:

8" Earnings9benefits especiall5 t/e profit

o7ned b5 t/e o7ner

;" '/e o7ner /as t/e rig/t to /ire and fire


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-1I+I'ED 1II1I'. 0IR+

'/e o7ners are liable 7it/ all t/eir propert5for 7/atever damages or debts it is a 6ind offirm 7it/ ver5 /ig/ ris6" It prevailed before

8>;> t/e number of assciates is small=difficult to

get capital for t/e firm

no associate can sell its s/are 7it/out t/eot/ers? consent


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1I+I'ED 1II1I'. 0IR+

- to directl5 attract capital firms issues s/ares = small

e@ual parts of t/e total attracted capital of t/e firm"

'/ese s/ares are t/en sold to small investors

& advantage : large capitals can be attracted from smallinvestors

& management and o7ners/ip are separate"

T)e# a"e cae* co"$o"ates


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*%I1I' .'E+

'/e s5stem of central planning: all decisions

are made b5 a central decision unit or an

individual=t/e institution of an economic

dictators/ip

ocialist s5stem = s5stem of central planning

A collective or state propert5


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S+EDISH ECONOMIC SYSTEM


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03/21/15 Basic Economic Correlations,paulfudulu 14

S,e*is) Economic Mo*e

8" n outline of 7edis/ economic model

;" '/e basic macroeconomic p/ilosop/5


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Economic $e"fo"mance of S,e*is) economic

mo*e

B" Industrial sectors, beginning 7it/ 8FF: iron, timber,

c/emical pulp processing (cellulose), telep/ones

(Eri6son), steam turbines, self&ad$usting ball bearing,

d5namite (obel)

C" +ore closer t/an an5 nation in eliminating povert5

(about 8G of its population)

H" 7edis/ 7omen /ave t/e best living conditions in t/e

7orld


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An outine of S,e*is) economic mo*e

It is similar to erman, ustrian, elgium and Dutc/s5stems

It is a social mar6et s5stem: a middle 7a5 bet7een

laissez fairemar6et capitalism and commandsocialism +ar6et forces and private o7ners/ip plus /ig/

government income redistribution and a strong socialsupport s5stem (cradle to grave systemJ)

trict fiscal polic5 7it/ /ig/ marginal ta! rates


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Cutu"a Bac&-"oun*

8" t 8HFF 7eden adopted 1ut/eran c/urc/, 7/ic/ fitsperfectl5 7edis/ culture"

'/e conse@uence: c/urc/ and religious values became a good substitutefor economic institutions: people 6ept 7or6ing despite generous social7elfare and /ig/ ta!ation

;" eginning 7it/ 8>KF, t/e turning around: %/amps of sic6 (;H da5s on average) and parental leave


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Co"$o"atism

1abor&management cooperation to7ards macroeconomicstabilization

%orporatism: liberal and aut/oritarian

1iberal: t/e state /as a supporting role

ut/oritarian: establis/ed and enforced b5 state

%orporatism: based on po7er e@ualit5 (not a cessation of

struggle) and based on consensus" E!amples: 7eden and, respectivel5, ustria


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Go(e"nment .oicies /I0

'/e most e!tensive and successful reallocation program

in t/e 7orld:

government spending in DP is HG (about C8B and 7as made universal

in 8>C>

3olida5 7it/ pa5 started in 8>K>

five 7ee6s and ; da5s


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Go(e"nment .oicies /II0

+aternit5 leave started in 8>BC (t/ree mont/s)

In 8>>8 8K mont/s 7it/ >FG pa5

7edis/ 7age solidarism: e@ualizing 7ages acrosss6ills, firms and seniorit5"

E!ample: > 5ears9;F 5ears F"B< in 8>HK and F"< in 8>K8

In 8>B, unlimited sic6 leave 7it/ >FG pa5"

'/e s5stem 7as abused: in 8>KK, ;H da5s per 5ear andemplo5ee

7eden E- member: still committed to fullemplo5ment and 7elfare state


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CHINESE ECONOMIC SYSTEM


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Economic Decision +et/ods: Plan versus

+ar6et

Rea economic ife:

&Information is dissipated

&decisions are based on information


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'7o +et/ods

8"ending information to a central unit=central

planning

;"ending information to as man5 decision

units as possible=mar6et

Price collects and send information


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'/e +ar6et

8" +et/od for collecting and sending

information

;"Descover5 met/od: 3a5e6


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CHINESE ECONOMIC SYSTEM

%/aracteristics:

8"one of t/e largest population

;"one of t/e /ig/est rate of economic gro7t/


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%/inese Religion

'aoism

%onfucianism

udd/ism situation similar (to a lesser degree) to

Lapan: t/ree religions simultaneousl5

emplo5ed b5 eac/ individual


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'/e tate %onfucianism

8"against industrialization

;"against foreign trade and connections 7it/t/e 7orld


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THE INSTITUTION OF A CHURCH


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'3E EER1 P*MER +*DE1 (I)

Religious dogmas = religious values A religious

rules

Religious values: preferences for absolute 7ealt/

and relative po7er

Religious rules : opportunit5 costs for absolute

7ealt/ and relative po7er

,


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T)e Lo-ic: '/e preference for absolute 7ealt/

determines t/e level of resources emplo5ed for

t/e end of absolute 7ealt/

Economic performance: absolute 7ealt/ per

capita or DP per capita

3ig/ preference= /ig/ level

1o7 preference= lo7 level

./


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tarting form religious values

'/e inverse relations/ip bet7een t/e

preference for absolute 7ealt/ and t/e

preference for relative po7er

.&


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tarting form religious values


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tarting from religious rules:

'/e inverse relations/ip bet7een t/e suppl5 ofrelative po7er and its opportunit5 cost

'/e inverse relations/ip bet7een t/eopportunit5 cost of relative po7er and t/eopportunit5 cost of absolute 7ealt/

'/e inverse relations/ip bet7een t/eopportunit5 costs of t/e megagoods and t/epreferences for t/e megagoods

..


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tarting from religious rules


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'DRD E%**+I% '3E*R. +*DE1

'5pes of man: (8)focused on economic

activities and (;)focused on religious activities

llocation of individuals resources: (8)on

economic activities and (;)on religious

activities

ssumption: an5 religious activit5 is a 7aste


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'DRD E%**+I% '3E*R. +*DE1


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MEERI +*DE1

Eac/ religion /as an intrinsic level of

rationalism

3ig/ level of religious rationalism induces a

/ig/ level of economic rationalism= good

economic performance

1o7 level of religious rationalism induces a

lo7 level a economic rationalism= bad

economic performance


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MEERI +*DE1


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THE DIRECT CRITERIA OF CONSISTENCY

'/e direct criteria: depict t/e megagood

absolute 7ealt/ or, besides relative po7er, alsoabsolute 7ealt/:

&'/e level of pro/ibition of interest

&'/e t5pe of preference for general 7ealt/,

&'/e t5pe of asceticism

.


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THE INDIRECT CRITERIA OF

CONSISTENCY

The indirect criteria: depict onl0 the megagoodrelative po1er:

The level of concentration2dissipation of divinit0 The level of transcendence

'/e 6ind of salvation The importance of afterlife

'/e level of obedience to eart/l5 aut/orities The po1er of man over 1oman

'5pe of organization of religious activities

3/


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'3E 4ID *0 %E'I%I+

Religious asceticism: limitation of

consumption, biological pleasures to prove

association 7it/ od

3ig/er limitation means a /ig/er relative

po7er

3edonism: increase in consumption of t/e

lait5 /ig/er consumption proves more relative

po7er in relation to ot/ers


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'3E 4ID *0 %E'I%I+


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T)e e(e of concent"ation1*issi$ation of

*i(init#

+onot/eism, Pol5t/eism and ll&oul

'/e /ig/er t/e dissipation, t/e /ig/er t/e level

of relative po7er

+onot/eism=e@ualit5=lo7 preference for

relative po7er, /ig/ preference for absolute

7ealt/=/ig/ level of consistenc5


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THE RAN2ING

Relatively higher: Ludaism, Protestantism,

%at/olicism, *rt/odo!ism and Islamism

Close to zero: udd/ism

Not ranked: %onfucianism

33


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T)e Le(e of T"anscen*ence

'ranscendence suggests a significant limitation ofindividual?s po7er an individual can never becomeod" 1ac6 of transcendence opens t/e gate tointermediaries, saviours and m5sticism and allo7s a

considerable degree of eart/l5 po7er concentration

The entailed consistency ranking, listed in andescending order: Ludaism, Protestantism (Puritanism,1ut/eranism), %at/olicism, *rt/odo!ism, Islamism,udd/ism

Not ranked: %onfucianism

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T)e Le(e of T"anscen*ence


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T)e Im$o"tance of t)e Afte"ife

Its role: punis/ments and re7ards are moved a7a5

form t/is life

/ifting t/em to t/e afterlife is a measure of t/e

abilit5 to fool=level o relative po7er '/e greater t/e importance of t/e afterlife, t/e /ig/er

t/e relative po7er, t/e lo7er t/e opportunit5 cost of

relative po7er, t/e /ig/er t/e preference for relative

po7er, t/e lo7er t/e preference for absolute

7ealt/=t/e lo7er t/e consistenc5 level


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T)e im$o"tance of t)e afte"ife


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CONSISTENCY RAN2ING


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THE E3OLUTION OF CONSISTENCY

LE3EL

-nidirectional evolution of cultures

Pro and cons


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'3E E2*1-'I* *0 L-DI+


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'3E E2*1-'I* *0 %3RI'I 0I'3


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'3E E2*1-'I* *0 -DI+


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'3E E2*1-'I* *0 I1+

CHOOSING BY RULES AND INSTITUTIONS.I.ppt

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