folk economics

8/8/2019 folk economics

http://slidepdf.com/reader/full/folk-economics 1/24

)2/.(&2120,&6

3DXO+5XELQ)RON(FRQRPLFV'HSDUWPHQWRI(FRQRPLFV(PRU\8QLYHUVLW\$WODQWD*$9RLFH

)D[(PDLOSUXELQ#HPRU\HGX-(/$+.

7KHDXWKRUZRXOGOLNHWRWKDQN-RKQ+DPLOWRQ%U\DQ&DSODQ5LFKDUG6DQVLQJ SDUWLFLSDQWVDWDVHPLQDUDW'DUWPRXWKDQGWZRDQRQ\PRXVUHIHUHHVIRUKHOSIXOFRPPHQWVRQDQHDUOLHUGUDIWDQG,DQ-REOLQJIRUXVHIXOGLVFXVVLRQVRIWKHLVVXHV



)2/.(&2120,&6

$EVWUDFW)RONHFRQRPLFVLVWKHLQWXLWLYHHFRQRPLFVRIXQWUDLQHGSHUVRQV,WLV

FRQFHUQHGZLWKGLVWULEXWLRQDQGGRHVQRWDOORZIRURUXQGHUVWDQGLQFHQWLYHV)RONHFRQRPLFQRWLRQVHYROYHGLQRXUDQFHVWRUVLQFLUFXPVWDQFHVZKHUHWKHUHZDVOLWWOHLQWKHZD\RIVSHFLDOL]DWLRQGLYLVLRQRIODERUFDSLWDOLQYHVWPHQWRUHFRQRPLFJURZWK,WFDQH[SODLQWKHEHOLHIVRIQDwYHLQGLYLGXDOVUHJDUGLQJPDWWHUVVXFKDVLQWHUQDWLRQDOWUDGHODERUHFRQRPLFVODZDQGHFRQRPLFVDQGLQGXVWULDORUJDQL]DWLRQ,WLVLPSRUWDQWWKDWYRWHUVXQGHUVWDQGHFRQRPLFSULQFLSOHV(FRQRPLVWVZRXOGGRDEHWWHUMRERISHUVXDGLQJRWKHUVDQGRIWHDFKLQJLIZHSDLGH[SOLFLWDWWHQWLRQWRIRONHFRQRPLFV%HFDXVHXQWUDLQHGLQGLYLGXDOVGRQRWIXOO\XQGHUVWDQGJDLQVIURPWUDGHWUDLQLQJLQHFRQRPLFVLVOLNHO\WRLPSURYHZHOIDUHE\LQFUHDVLQJWKHQXPEHURIWUDGLQJRSSRUWXQLWLHV7KHUHLVHYLGHQFHWKDWWKLVLVLQIDFWWUXH

&RPPRQVHQVHWKHRULHVDUHSHRSOH¶VRUGLQDU\XQGHUVWDQGLQJVRIFHUWDLQERXQGHGERGLHVRILQIRUPDWLRQVXFKDVWKHVHWRILGHDVWKDWQRQVFLHQWLVWVKROGDERXWFHOHVWLDOSKHQRPHQDIRONDVWURQRP\ :HOOPDQDQG*HOPDQ«PDQ¶VLQVWLQFWV«ZHUHQRWPDGHIRUWKHNLQGVRIVXUURXQGLQJVDQGIRUWKHQXPEHUVLQZKLFKKHQRZOLYHV7KH\ZHUHDGDSWHGWROLIHLQWKHVPDOOURYLQJEDQGVRUWURRSVLQZKLFKWKHKXPDQUDFHDQGLWVLPPHGLDWHDQFHVWRUVHYROYHGGXULQJWKHIHZPLOOLRQ\HDUVZKLOHWKHELRORJLFDOFRQVWLWXWLRQRIKRPRVDSLHQVZDVEHLQJIRUPHG +D\HN

,QWURGXFWLRQ

$OWKRXJKSV\FKRORJLVWVKDYHVWXGLHG³IRONSV\FKRORJ\´³IRONSK\VLFV´DQG³IRON

ELRORJ\´DPRQJRWKHUVWKHUHKDVEHHQOHVVDWWHQWLRQSDLGWR³IRONHFRQRPLFV´±WKDWLV

WKHHFRQRPLFQRWLRQVWKDWQDwYHXQWUDLQHGLQGLYLGXDOVKDYHDQGWKHSHUFHSWLRQVRIVXFK

LQGLYLGXDOVDERXWWKHHFRQRP\7KHUHDUHVRPHVWXGLHVWKDWGRGLVFXVVOHDUQLQJRI

HFRQRPLFSULQFLSOHVDPDMRUFRPSHQGLXPLV/XQWDQG)XUQKDP)URPWKH

UHVHDUFKUHSRUWHGWKHUHDQGHOVHZKHUHLWLVSRVVLEOHWRGHULYHWKHSULQFLSOHVRIIRON

HFRQRPLFVDOWKRXJKWKHDXWKRUVGRQRWGRVR7KHNH\SRLQWLVWKLVIRONHFRQRPLFVLV

WKHHFRQRPLFVRIZHDOWKDOORFDWLRQQRWSURGXFWLRQ1DwYHSHUVRQVRUSHUVRQVXQWUDLQHG

LQHFRQRPLFVWKLQNRISULFHVDVDOORFDWLQJZHDOWKEXWQRWDVLQIOXHQFLQJDOORFDWLRQRU

There are numerous studies of opinions of citizens on particular economic issues; some of these arediscussed below. But these tend to deal with specific issues at a particular time. They do not directlyanalyze the understanding of economic principles.



SURGXFWLRQRIJRRGVDQGVHUYLFHV,QIRONHFRQRPLFVWKHDPRXQWRIDJRRGWUDGHG±

ZKHWKHULQDJJUHJDWHRUE\HDFKLQGLYLGXDO±LVIL[HGDQGLQGHSHQGHQWRISULFH

0RUHRYHUHDFKLQGLYLGXDOLVFRQFHUQHGZLWKWKHGLVWULEXWLRQRIZHDOWKDQGLQFRPHZLWK

SDUWLFXODUEXWQRWH[FOXVLYHDWWHQWLRQWRKLVKHURZQZHDOWKQRWZLWKDQ\HIILFLHQF\JDLQV

IURPHFRQRPLFDFWLYLW\7KHZRUOGRIIRONHFRQRPLFVLVD]HURVXPZRUOGDQGWKH

SULPDU\HFRQRPLFSUREOHPIRUHDFKLQGLYLGXDOLVWRPD[LPL]HKLVRUKHURZQZHDOWKLQ

WKLVZRUOG2QHRIWKHJRRGVWUDGHGLVODERUVRWKHQXPEHURIMREVLVDOVRYLHZHGDV

IL[HG7KXVLQIRONHFRQRPLFVLIRQHSHUVRQJHWVDMREVRPHRQHHOVHPXVWORVHDMRE

,GRQRWZDQWWRLPSO\WKDWSHRSOHFDQQRWOHDUQDERXWSRVLWLYHVXPLQWHUDFWLRQVRU

DERXWHIILFLHQF\7KRVHRIXVZKRWHDFKHFRQRPLFVPDNHRXUOLYLQJVE\H[DFWO\WKLVIRUP

RIWHDFKLQJ&DSODQKDVVKRZQWKDWPRUHHGXFDWHGSHUVRQVLQJHQHUDOWKLQNPRUH

OLNHHFRQRPLVWVDQGRIFRXUVHZHHFRQRPLVWVRXUVHOYHVKDYHOHDUQHGWRGRVR%XWWKH

SRLQWLVWKDWLWPXVWEHOHDUQHGLWLVQRWDQLQQDWHSLHFHRINQRZOHGJH6SHHFKLVLQQDWH

DOOKXPDQVLQQRUPDOHQYLURQPHQWVOHDUQWRVSHDN5HDGLQJPXVWEHWDXJKWLWLVQRW

LQQDWH(FRQRPLFVLVPRUHOLNHUHDGLQJWKDQOLNHVSHHFK3V\FKRORJLVWVDUHEHFRPLQJ

LQFUHDVLQJO\FRPIRUWDEOHZLWKWKHQRWLRQWKDWFHUWDLQSDWWHUQVRIXQGHUVWDQGLQJDUHLQQDWH

DQG³KDUGZLUHG´%DUNRZ&RVPLGHVDQG7RRE\3LQNHU%XVV

7KHUHLVDJRRGELWRIHYLGHQFHWKDWZHDUHKDUGZLUHGWREHYHU\JRRGDWSURWHFWLQJRXU

RZQLQWHUHVWVDQGDWGHWHFWLQJFKHDWLQJLQDQH[FKDQJHVLWXDWLRQ&RVPLGHVDQG7RRE\

%XWEHLQJDEOHWRORRNRXWIRURXURZQLQWHUHVWVLVQRWWKHVDPHDVEHLQJDEOHWR

GHWHFWVRFLDOJDLQVIURPH[FKDQJHDQGWKLVLVZKDWLVODFNLQJLQIRONHFRQRPLFV

,QWKHQH[WVHFWLRQ,SUHVHQWVRPHHYLGHQFHDERXWWKHQDWXUHRIIRONHFRQRPLFV,

WKHQSURYLGHDQHYROXWLRQDU\H[SODQDWLRQ7KHIROORZLQJWZRVHFWLRQVSUHVHQWVRPH

LPSOLFDWLRQVILUVWDQDO\WLFLPSOLFDWLRQVDQGWKHQLPSOLFDWLRQVIRUHFRQRPLVWVLQGRLQJ

HFRQRPLFV7KHILQDOVHFWLRQLVDVXPPDU\

(YLGHQFH

7KHHYLGHQFHIRUWKH]HURVXPK\SRWKHVLVLVLQGLUHFW+RZHYHUWKHUHDUHVHYHUDO

VRXUFHVRIVXFKHYLGHQFH,FLWHWKUHHVRUWVRIHYLGHQFHHYLGHQFHIURPOHDUQLQJRI

HFRQRPLFVIURPVXUYH\VRIHFRQRPLVWVDQGRWKHUVDQGIURPRWKHUVZKRKDYHH[DPLQHG

VLPLODULVVXHV



/HDUQLQJ(FRQRPLFV

7KHILUVWDQGPRVWLPSRUWDQWLVIURPWKHSV\FKRORJLFDOOLWHUDWXUHVWXG\LQJOHDUQLQJ

RIHFRQRPLFVDVVXPPDUL]HGLQ/XQWDQG)XUQKDP0RVWRIWKLVERRNFRQVLVWVRI

DUWLFOHVE\SV\FKRORJLVWVQRWHFRQRPLVWV0RVWGHDOZLWKWKHXQGHUVWDQGLQJRI

H[SHULPHQWDOVXEMHFWVRIWHQFKLOGUHQRISULFHVDQGZKDWWKHDXWKRUVGLVFXVVDV

HFRQRPLFV%XWLQQRQHRIWKHFKDSWHUVLVWKHUHDQ\UHIHUHQFHWRSULFHVRULQFRPHV

VHUYLQJDQ\VRUWRIIXQFWLRQLQGLUHFWLQJSURGXFWLRQRUDQ\VRUWRIHIILFLHQWDOORFDWLRQ

IXQFWLRQ5DWKHUHYHU\UHIHUHQFHGLVFXVVHVSULFHVDVVHUYLQJWRGLUHFWUHVRXUFHVWRZDUG

RUDZD\IURPDSDUWLFXODULQGLYLGXDOEXWZLWKQRUHIHUHQFHWRHIILFLHQF\7KLVPLJKW

PHDQWKDWWKHVXEMHFWVRIWKHVWXGLHVGLGQRWXQGHUVWDQGWKHHIILFLHQF\LPSOLFDWLRQVRI

SULFHV,WPD\DOVRPHDQWKDWWKHDXWKRUVRIWKHVWXGLHVWUDLQHGDVSV\FKRORJLVWVEXWQRW

DVHFRQRPLVWVGLGQRWIXOO\XQGHUVWDQGWKHUROHRISULFHV,ISV\FKRORJLVWVZKRVSHFLDOL]H

LQVWXG\LQJOHDUQLQJRIHFRQRPLFVGRQRWXQGHUVWDQGWKHUROHRISULFHVLQDFKLHYLQJ

HIILFLHQF\RUGLUHFWLQJUHVRXUFHVWKHQWKLVLVLWVHOIHYLGHQFHWKDWIRONHFRQRPLFVGRHVQRW

LQFOXGHVXFKDQXQGHUVWDQGLQJ,WLVLQWHUHVWLQJWKDWWKHLQGH[WRWKHERRNFRQWDLQVQR

HQWU\IRUHIILFLHQF\RUSURGXFWLYLW\RUIRUDQ\WKLQJOLNHJDLQVIURPWUDGH

0XFKRIWKHGLVFXVVLRQRI³HFRQRPLFV´GHDOVZLWKZKDWPLJKWEHWWHUEHFDOOHG

³KRPHHFRQRPLFV´±WKHDQDO\VLVRIFRQVXPSWLRQEHKDYLRUHJ3OLQHUHWDO+HUH

WKHJRDOLVWREHDZLVHFRQVXPHU±WRREWDLQWKHEHVWYDOXHIRURQHVHOILQWKHPDUNHWSODFH

'LFNLQVRQDQG(POHUGLVFXVVFKLOGUHQ¶VOHDUQLQJDERXWZHDOWKGLVWULEXWLRQ7KH\

DUJXHWKDWH[SODQDWLRQVIRUWKHGLVWULEXWLRQRIZHDOWKDUH³LGHRORJLFDO´S7KH\

LQGLFDWHWKDW³DGROHVFHQWVDQGDGXOWVH[SODLQHGZDJHGLIIHUHQWLDOVSUHGRPLQDQWO\LQWHUPV

RILQGLYLGXDOHIIRUWKRZKDUGSHRSOHZRUNHGKRZPXFKWKH\KDGVWXGLHGKRZPDQ\

TXDOLILFDWLRQVWKH\KDGREWDLQHGKRZLPSRUWDQWWKH\ZHUHWRVRFLHW\´S7KH\

LQGLFDWHWKDWFDSLWDOLVWDUJXPHQWVIRULQHTXDOLW\DUH³WKDWODUJHGLIIHUHQWLDOVDUHWKHQDWXUDO

RXWFRPHRIPDUNHWIRUFHVDQGVHUYHDVLQFHQWLYHVIRUDFKLHYHPHQW´S

$GGLWLRQDOO\³«DGXOWVZHUHPRUHOLNHO\WKDQDGROHVFHQWVWRSURYLGHH[SODQDWLRQVIRU

ZDJHGLIIHUHQWLDOVLQWHUPVRIHFRQRPLFDQGSROLWLFDOFULWHULDVXFKDVPDUNHWIRUFHVVRFLDO

Walstad (1996) is an economist, but his contribution does not deal with issues relevant for this analysis. The chapter actually deals more with what an economist would call income distribution.



YDOXHVDQGWUDGHXQLRQSUHVVXUHWKRXJKVXFKH[SODQDWLRQVDUHVWLOOOHVVFRPPRQLQ

DGXOWKRRGWKDQLQGLYLGXDOHTXLW\W\SHH[SODQDWLRQV´S

1RZKHUHLQWKHFKDSWHULVWKHUHDQ\PHQWLRQRIDOORFDWLRQEDVHGRQSURGXFWLYLW\

RUDQ\LQGLFDWLRQRISURGXFWLYLW\GLIIHUHQWLDOV7KHUHLVQRGLVFXVVLRQRIZDJHVGLUHFWLQJ

ODERUWRZDUGKLJKHUYDOXHGRFFXSDWLRQVRURIVRPHLQGLYLGXDOVEHLQJPRUHSURGXFWLYHLQ

VRPHMREVWKDQRWKHULQGLYLGXDOV7KHIODYRULVRQHRIDQH[LVWLQJDUUD\RIMREVVRPH

SD\LQJPRUHWKDQRWKHUVDQGLQGLYLGXDOVFRPSHWLQJIRUWKHVHMREV±EXWQRGLVFXVVLRQRI

ZK\WKHDUUD\H[LVWVRURIWKHEHQHILWVRIGLIIHUHQWLDOZDJHV,QGHHGWKHSKUDVLQJRIWKH

LVVXHLWVHOI±ZK\DUHWKHUHZHDOWKLQHTXDOLWLHV±LVDQH[DPSOHRI]HURVXPWKLQNLQJDQ

HFRQRPLVWZRXOGEHJLQE\DVNLQJZKDWGHWHUPLQHVZDJHVDQGWKHQSHUKDSVDVNZK\WKH\

DUHXQHTXDO6LPLODUDQDO\VHVDUHLQ'LWWPDUDQG/HLVHUDQG*DQLQ

6XUYH\V

$VHFRQGVRXUFHRIHYLGHQFHLVDQDO\VLVRIUHVSRQVHVE\HFRQRPLVWVDQGRWKHUVWR

YDULRXVVXUYH\TXHVWLRQV7KHEHVWVRXUFHLVWKH6XUYH\RI$PHULFDQVDQG(FRQRPLVWVRQ

WKH(FRQRP\6$((%OHQGRQHWDODQG&DSODQKDYHDQDO\]HG

WKHVHUHVXOWV7KHTXHVWLRQVGHDOZLWKVSHFLILFSROLF\LVVXHVDQGVRFDQQRWEHGLUHFWO\

XVHGWRPHDVXUHGLIIHUHQFHVLQXQGHUO\LQJPRGHOVRIWKHHFRQRP\%XWWKHPDMRU

GLIIHUHQFHEHWZHHQHFRQRPLVWVDQGRWKHUVLVWKDW³WKHSXEOLFLVPXFKPRUHSHVVLPLVWLF

WKDQHFRQRPLVWV´DQG³HFRQRPLVWVDUHV\VWHPDWLFDOO\PRUHRSWLPLVWLFDERXWWKHSDVW

SUHVHQWDQGIXWXUHRIWKHHFRQRP\WKDQRWKHUSHRSOHDUH´&DSODQ7KLVLVTXLWH

FRQVLVWHQWZLWKDZRUOGLQZKLFKHFRQRPLVWVXQGHUVWDQGWKHSRVVLELOLW\RISURGXFWLYLW\

LQFUHDVHVDQGHFRQRPLFJURZWKEXWWKHSXEOLFKDVDQLQWXLWLYH]HURVXPPHQWDOLW\

1HLWKHU%OHQGRQHWDOQRU&DSODQVXJJHVWWKLVH[SODQDWLRQEXWLWLVFRQVLVWHQWZLWKERWK

DQDO\VHVDQGZLWK&DSODQ¶VDUJXPHQWWKDWQRQHFRQRPLVWVVLPSO\DUHLQFRUUHFWDERXW

PDQ\LVVXHV%OHQGRQHWDODOVRSURYLGHVHYHUDOK\SRWKHVHVWRH[SODLQWKLVGLIIHUHQFHEXW

GRQRWDOORZIRUDIXQGDPHQWDOGLIIHUHQFHLQHFRQRPLFXQGHUVWDQGLQJ,QWHUHVWLQJO\WKH

RQO\TXHVWLRQLQZKLFKHFRQRPLVWVLQGLFDWHPRUHFRQFHUQWKDQGRHVWKHJHQHUDOSXEOLFLV

ZLWKUHVSHFWWRUDWHRISURGXFWLYLW\JURZWKHFRQRPLVWVDUHVLJQLILFDQWO\PRUHOLNHO\WR

Sponsored by the :DVKLQJWRQ3RVW , the Kaiser Family Foundation and Harvard University Survey,summary available online.



QDPHWKLVDVDSUREOHPWKDQLVWKHSXEOLF7KLVLVRIFRXUVHFRQVLVWHQWZLWKDZRUOGLQ

ZKLFKWKHSXEOLFGRHVQRWIRFXVRQJURZWK

2WKHU$XWKRULWLHV

6WHYHQ3LQNHUSPDNHVDQDUJXPHQWVLPLODUWRWKDWPDGHKHUH+H

DUJXHVWKDWWKHUHLVDQ³LQWXLWLYHHFRQRPLFV´DVVRFLDWHGZLWK³UHFLSURFDOH[FKDQJHLQ

ZKLFKRQHSDUW\FRQIHUVDEHQHILWRQDQRWKHUDQGLVHQWLWOHWRDQHTXLYDOHQWEHQHILWLQ

UHWXUQ´DQH[FKDQJHZKLFKLV]HURVXPLQJRRGVWKRXJKQRWLQXWLOLW\+HDOVRSRLQWV

RXWWKDWSHRSOHVKRZQRLQWXLWLYHXQGHUVWDQGLQJRI³PRGHUQSK\VLFVFRVPRORJ\

JHQHWLFVHYROXWLRQQHXURVFLHQFHHPEU\RORJ\HFRQRPLFVDQGPDWKHPDWLFV´DQGWKDW

WKHUHLVQRZD\WKDWWKHPLQGFRXOGKDYHHYROYHGVSHFLILFPRGXOHVRUWRROVWRXQGHUVWDQG

WKHVHGRPDLQV:KLOHHFRQRPLFVLVRQO\DVPDOOSDUWRIWKHPDWHULDOFRYHUHGLQWKLVERRN

DQGZKLOH3LQNHUGRHVQRWGLVFXVVHFRQRPLFVLQWKHOHYHORIGHWDLOWKDW,XVHKLVDQDO\VLV

LVTXLWHFRQVLVWHQWZLWKPLQHDOWKRXJKWKH\ZHUHGHYHORSHGLQGHSHQGHQWO\

7KLVDQDO\VLVRIGLYHUJHQFHEHWZHHQHFRQRPLVWVDQGRWKHUVLVQRWQHZ1HZFRPE

DOWKRXJKQRWUHO\LQJRQGDWDVXJJHVWVWKDWWKHUHLVDIXQGDPHQWDOGLIIHUHQFH

EHWZHHQZKDWKHFDOOV³SRSXODUSROLWLFDOHFRQRP\´DQGWKHYLHZVRIHFRQRPLVWVDQG

VXJJHVWVWKDWWKHIRUPHU³DUHQRWSHFXOLDUWRRUWLPHRUFRXQWU\WKH\DUHDSDUWRIWKH

KHULWDJHRIWKHUDFHZKLFKDFHQWXU\>QRZWZRFHQWXULHV@RIWHDFKLQJKDVQRWVXIILFHGWR

HUDGLFDWH´S$VGLVFXVVHGEHORZ+D\HNDOVRPDNHVWKLVSRLQW

(YROXWLRQDU\%DVLVRI)RON(FRQRPLFV

0RGHUQWKHRULHVRIWKHHYROXWLRQRIWKHPLQGLQGLFDWHWKDWRXUEUDLQVHYROYHGWR

VROYHSUREOHPVWKDWSHUVLVWHGLQWKH³HQYLURQPHQWRIHYROXWLRQDU\DGDSWDWLRQ´WKH(($

7KLVLVWKHSHULRGZKHQRXUDQFHVWRUVZHUHHYROYLQJWREHFRPHKXPDQ,WLVJHQHUDOO\

WKRXJKWWKDWUHODWLYHO\OLWWOHHYROXWLRQKDVRFFXUUHGVLQFHKXPDQVEHFDPHFLYLOL]HGLQ

DERXWWKHODVW\HDUVDQGVRPXFKRIRXUPHQWDODUFKLWHFWXUHLVWKRXJKWWRKDYH

HYROYHGLQKXQWHUJDWKHUHUVRFLHWLHVDQGRXUPLQGVDUHEHVWDGDSWHGWRVXFKVRFLHWLHV

)RUDPRUHGHWDLOHGGLVFXVVLRQRIWKHVHLVVXHVVHH5XELQ&KDSWHU

This argument is from the field of evolutionary psychology (Barkow et al., 1992). Evolutionary psychology is the discipline that applies principles of sociobiology to human psychology. See Laland andBrown, 2002.



0RGXODU0LQGV

7KHPLQGLVRUJDQL]HGLQWR³PRGXOHV´ZLWKHDFKPRGXOHVSHFLDOL]HGWRVROYHD

FODVVRISUREOHPVWKDWH[LVWHGLQWKH(($)RUH[DPSOHWKHUHLVDPRGXOHDVVRFLDWHG

ZLWKODQJXDJH3LQNHU7KHUHDUHDOVRPRGXOHVDVVRFLDWHGZLWKVH[DQGPDWLQJ

EHKDYLRU%XVV7KHVHPRGXOHVH[LVWIRUHVVHQWLDOO\HFRQRPL]LQJUHDVRQVLW

ZRXOGVLPSO\EHLPSRVVLEOHIRUDJHQHUDOSXUSRVHFDOFXODWRUWRVROYHWKHSUREOHPVWKDW

IDFHDKXPDQEHLQJDQGVRWKHFDOFXODWRUWKHEUDLQPXVWEHVSHFLDOL]HGLQRUGHUWR

HFRQRPL]HRQUHDVRQLQJSRZHU7KLVQRWLRQZDVILUVWDVVRFLDWHGZLWKWKHVWXG\RI

OHDUQLQJRIODQJXDJH,WZRXOGEHLPSRVVLEOHIRUDQLQIDQWWROHDUQODQJXDJHZLWKQR

KDUGZLUHGEDVLVIRUVXFKOHDUQLQJ,WZDVWKHXQGHUVWDQGLQJRIWKLVGLIILFXOW\WKDWOHG

SV\FKRORJLVWVWRVWXG\WKHPRUHJHQHUDOPRGXODUL]DWLRQRIWKHPLQG,IWKHUHLVDPRGXOH

IRUXQGHUVWDQGLQJHFRQRPLFEHKDYLRUWKHQLWVKRXOGEHDVVRFLDWHGZLWKVROYLQJSUREOHPV

LQYROYLQJHFRQRPLFFRQGLWLRQVLQWKH(($

7KHUHLVHYLGHQFHWKDWLQIDFWWKHUHLVDPRGXOHDVVRFLDWHGZLWKH[FKDQJHDQG

PRQLWRULQJRIKXPDQEHKDYLRU7RRE\DQG&RVPLGHV,QH[SHULPHQWVLQYROYLQJ

ORJLFDOUHODWLRQVKLSVVXEMHFWVGREHWWHUZKHQWKH\DUHWROGWKDWWKHLVVXHVLQWKH

H[SHULPHQWKDYHWRGRZLWKPRQLWRULQJRIFRPPLWPHQWVDQGHQIRUFLQJDJUHHPHQWVWKDQ

ZKHQWKHVDPHSUREOHPLVSUHVHQWHGDVDVLPSOHORJLFDOSX]]OH7KLVLPSOLHVWKDWZHDUH

DGDSWHGWRDYRLGEHLQJFKHDWHG+RZHYHULWVD\VQRWKLQJDERXWDQ\DELOLW\WRREVHUYH

HIILFLHQF\RUJDLQVIURPWUDGHH[FHSWWKRVHJRLQJWRRXUVHOYHV

0RELOHDQG6HGHQWDU\+XQWHU*DWKHUHUV

$QWKURSRORJLVWVGLYLGHKXPDQH[LVWHQFHLQWRWZREDVLFSHULRGV7KHNH\

GLVWLQFWLRQLVEHWZHHQ³PRELOH´DQG³VHGHQWDU\´VRFLHWLHVDOVRFDOOHG³VLPSOH´DQG

³FRPSOH[´.QDXIWRU³HJDOLWDULDQ´DQG³QRQHJDOLWDULDQ´KXQWHUJDWKHUHUVRU

IRUDJHUV.HOO\0RELOHKXQWHUJDWKHUHUVDUHDOVRFDOOHG³LPPHGLDWHUHWXUQ´

KXQWHUJDWKHUVPHDQLQJWKDW³QRVXUSOXVLVFUHDWHGDQGUHVRXUFHVHVSHFLDOO\IRRGDUH

FRQVXPHGRQDGDLO\EDVLV´.HOO\S%\IDUWKHORQJHVWSHULRGRIRXU

H[LVWHQFHDVKXPDQVZDVWKHSHULRGVSHQWDVPRELOHKXQWHUJDWKHUHUV,QWKLVSHULRG

KXPDQJURXSVZHUHVPDOOWKHUHZDVOLWWOHVRFLDOVWUXFWXUHOLWWOHIRRGVWRUDJHOLWWOH

GLYLVLRQRIODERURUVSHFLDOL]DWLRQ7KHRQO\³RFFXSDWLRQDOVSHFLDOL]DWLRQ´ZDVE\DJH

.HOO\7DEOH6XFKSHRSOHWUDYHOHGOLJKWDQGGLGQRWHQFXPEHU



WKHPVHOYHVZLWKSRVVHVVLRQV.HOO\SFLWLQJ:RRGEXUQ7KLVZDV

DOVRWKHSDWWHUQRIRXUSUHKXPDQDQFHVWRUVGXULQJWKH(($ZKHQRXUDQFHVWRUVHYROYHG

WREHFRPHKRPRVDSLHQV7KHVWXG\RIPRELOHKXQWHUJDWKHUHUVLVUHOHYDQWEHFDXVHWKLV

OLIHVW\OHDSSUR[LPDWHVWKHOLIHVW\OHLQZKLFKZHHYROYHGDQGVRZHDUHDGDSWHGWRWKLV

PRGHRIOLYLQJ7KXVLQVLJKWVLQWRWKHSHULRGRIQRPDGLFKXQWHUJDWKHUHUVZRXOGEH

UHOHYDQWIRUXQGHUVWDQGLQJWKHKDUGZLUHGSDWWHUQRIWKHPLQG

&RPSOH[KXQWHUJDWKHUHUVGLIIHULQPDQ\GLPHQVLRQVLQSDUWLFXODURFFXSDWLRQDO

VSHFLDOL]DWLRQLV³FRPPRQ´7KXVWKLVGLVWLQFWLRQZKLFK.HOO\DWWULEXWHVWRFKDQJLQJ

IURPDPRELOHWRDVHGHQWDU\OLIHVW\OHLVWKHERUGHUEHWZHHQVSHFLDOL]HGDQG

XQVSHFLDOL]HGUROHVIRULQGLYLGXDOVLQVRFLHWLHV%\WKHWLPHRIODUJHDJULFXOWXUDOVRFLHWLHV

DQGWKHEHJLQQLQJRIZULWWHQKLVWRU\VSHFLDOL]DWLRQDQGGLYLVLRQRIODERUZHUHXQLYHUVDO

DQGLPSRUWDQWDPRQJKXPDQV%XWWKLVFDPHODWHLQRXUH[LVWHQFHDVKXPDQV±SUREDEO\

WRRODWHWRKDYHOHIWDVLJQLILFDQWPDUNRQRXUHYROYHGSUHIHUHQFHVRULQWHOOHFWV

(YROXWLRQDU\(QYLURQPHQW

7KHUHDUHVHYHUDOHFRQRPLFDOO\UHOHYDQWIHDWXUHVRIWKH(($WKDWLPSDFWRQIRON

HFRQRPLFV6RFLHWLHVZHUHVPDOO±DERXWLQGLYLGXDOV7KLVPHDQVWKDW

SRVVLELOLWLHVIRUVSHFLDOL]DWLRQDQGGLYLVLRQRIODERUZHUHTXLWHOLPLWHG$GDP6PLWK¶V

DGPRQLWLRQWKDW³WKHGLYLVLRQRIODERULVOLPLWHGE\WKHH[WHQWRIWKHPDUNHW´KDVDOZD\V

EHHQWUXHDQGVPDOOVRFLHWLHVLPSO\KLJKO\OLPLWHGSRVVLELOLWLHVIRUGLYLVLRQRIODERU

:KLOHGLYLVLRQRIODERUE\JHQGHULVXQLYHUVDODPRQJKXPDQV%URZQWKHUHZDV

OLWWOHLQWKHZD\RIPRUHFRPSOH[IRUPVRIVSHFLDOL]DWLRQ

0DQ\DQWKURSRORJLVWVPDNHHVVHQWLDOO\WKHVDPHSRLQWUHJDUGLQJVSHFLDOL]DWLRQ

DPRQJPRELOHKXQWHUJDWKHUHUV:LWKUHVSHFWWRZDUIDUH.HHOH\LQGLFDWHV

WKDW³>6@RFLHWLHVZLWKRXWVSHFLDOL]DWLRQLQWKHHFRQRPLFUHDOPZHUHXQOLNHO\WRGHYHORS

VSHFLDOL]HGZDUULRUVRUXQLWV´3ULPLWLYHFRQIOLFWZDVXQRUJDQL]HGDQGZDVXVXDOO\D

VPDOOUDLGLQJSDUW\DWWDFNLQJDQLQGLYLGXDOLQWKHULYDOJURXS.HHOH\:UDQJKDP

DQG3HWHUVRQ&DUQHLURLQGLFDWHV³>)@XOOWLPHFUDIWVSHFLDOLVWV

FRPHLQWREHLQJRQO\ZKHQWKHDJJUHJDWHGHPDQGIRUWKHLUSURGXFWVKDVUHDFKHGDFHUWDLQ

WKUHVKROG´0D\QDUG6PLWKDQG6]DWKPDU\EHOLHYHWKDWGLYLVLRQRIODERU

ZDVXQFRPPRQXQWLOUHODWLYHO\UHFHQWWLPHV³3RSXODWLRQVRIDWWKHPRVWDIHZKXQGUHG

LQGLYLGXDOVZLWKOLWWOHGLYLVLRQRIODERXUH[FHSWSUREDEO\WKDWEHWZHHQWKHVH[HVKDYH



EHHQUHSODFHGE\VRFLHWLHVRIPDQ\PLOOLRQVGHSHQGHQWRQH[WHQVLYHGLYLVLRQRIODERXU´

7KLVOLPLWHGDPRXQWRIVSHFLDOL]DWLRQLVFRQVLVWHQWZLWKWKHFRQFOXVLRQRI6WLQHUHWDO

WKDW³/RZKXPDQSRSXODWLRQGHQVLWLHVGXULQJPRVWRIWKH0LGGOH3DOHROLWKLF

LPSO\WKDWJURXSVL]HVDQGVRFLDOQHWZRUNVZHUHVPDOOZKLFKFHUWDLQO\OLPLWHGWKH

QXPHULFVFRSHRILQGLYLGXDOLQWHUDFWLRQV8QGHUWKHVHFRQGLWLRQVWKHSRVVLELOLWLHVIRU

HYROXWLRQRIFRPSOH[VKDULQJDQGH[FKDQJHEHKDYLRUDVZD\VWRFRXQWHUWKHHIIHFWVRI

XQSUHGLFWDEOHUHVRXUFHVXSSOLHVZRXOGKDYHDOVREHHQTXLWHOLPLWHG´

(GJHUWRQGLVFXVVHVWKHFRQYHUVHZLWKUHVSHFWWRWKH7DVPDQLDQV7KHVH

SHRSOHDWRQHWLPHKDGDUHODWLYHO\DGYDQFHGWHFKQRORJ\GHYHORSHGEHIRUHWKHIORRGLQJRI

WKHODQGEULGJHWKDWKDGFRQQHFWHGWKHPWR$XVWUDOLD2YHUDWHQWKRXVDQG\HDUSHULRGRI

LVRODWLRQWKH\SURJUHVVLYHO\ORVWPRVWRIWKHLUWHFKQRORJ\7KLVPD\VLPSO\EHEHFDXVH

WKHVL]HRIWKHSRSXODWLRQDQGRIWKHVPDOOEDQGVZDVLQVXIILFLHQWWRVXSSRUWDQ\

VLJQLILFDQWOHYHORIGLYLVLRQRIODERU(GJHUWRQGHVFULEHVRWKHUVRFLHWLHVWKDWORVWYDULRXV

IRUPVRIWHFKQRORJ\DVDUHVXOWRILVRODWLRQRURWKHUVRXUFHVRISRSXODWLRQUHGXFWLRQ

LQFOXGLQJWKHORVVRIWKHDELOLW\WRPDNHFDQRHVDQGSRWWHU\LQSDUWVRI0HODQHVLDDQGWKH

ORVVRIWKHVNLOOVIRUPDNLQJND\DNVDPRQJRQHJURXSRI,QXLW+HDOVRGHVFULEHVORVVRI

VRFLDOFRPSOH[LW\DVVRPHSRSXODWLRQVKDYHEHFRPHVPDOOHUS

0RELOLW\PHDQWOLWWOHLQWKHZD\RIFDSLWDODFFXPXODWLRQDOOSRVVHVVLRQVKDGWREH

SRUWDEOH2XUDQFHVWRUVXVHGZRRGVWRQHRUERQHWRROVDQGSHUKDSVVRPHRWKHUVLPSOH

LPSOHPHQWVEXWDOORIWKHVHKDGWREHPRYHDEOH³7KH\WHQGWRXVHSRUWDEOHXWLOLWDULDQ

HDVLO\DFTXLUHGUHSODFHDEOHDUWLIDFWV«DQGDYRLGWKRVHZKLFKDUHIL[HGLQRQHSODFH

KHDY\HODERUDWHO\GHFRUDWHGUHTXLUHSURORQJHGPDQXIDFWXUHUHJXODUPDLQWHQDQFHMRLQW

ZRUNE\VHYHUDOSHRSOHRUDQ\FRPELQDWLRQRIWKHVH´:RRGEXUQSTXRWHG

LQ.HOO\S7KXVWKHUHZDVOLWWOHFDSLWDODQGOLWWOHYDOXHWRGHYHORSLQJDQ

DELOLW\WRXQGHUVWDQGWKHSURGXFWLYLW\RIFDSLWDO±ZKLFKPD\H[SODLQWKHLQWXLWLYHDSSHDO

RIYDULRXV³ODERUWKHRULHVRIYDOXH´WKDW0DU[LVWVDQGRWKHUVKDYHDGRSWHG

7KHUHZDVYHU\OLWWOHWHFKQRORJLFDODGYDQFH7KHSDFHRIWHFKQRORJLFDOFKDQJHLQ

SULPLWLYHVRFLHWLHVVHHPVDPD]LQJO\VORZE\FRQWHPSRUDU\VWDQGDUGV)RUH[DPSOHWKH

$FKHXOHDQKDQGD[HWUDGLWLRQODVWHGIRUPRUHWKDQRQHPLOOLRQ\HDUVLQ$IULFD$VLDDQG

Ridley (1997) argues that there was substantial specialization. But societies were too small to supportmuch specialization until much later, when humans became sedentary.



(XURSH,QWKH8SSHU3DOHROLWKLFDERXWIRUW\WKRXVDQG\HDUVDJRZKHQKRPRVDSLHQVKDG

HYROYHG³PDMRUWHFKQRORJLFDOFKDQJH´LVGHILQHGDVWDNLQJSODFHZKHQDFKDQJHLQVWRQH

WHFKQLTXHVWUDQVSLUHGRYHU³DIHZWKRXVDQG\HDUV´7KH*UDYHWWLDQWUDGLWLRQLQ(XURSH

ODVWHGIURPDERXWWZHQW\VHYHQWKRXVDQGWRDERXWWZHOYHWKRXVDQG\HDUVDJR$OOGDWD

IURP*RZOHWW7KLVVOXJJLVKUDWHRIWHFKQRORJLFDOLPSURYHPHQWPD\KDYHEHHQ

GXHWRFRPSDUDWLYHO\OHVVLQWHOOLJHQWSUHKXPDQDQFHVWRUVLQWKHHDUO\SHULRGV0RUH

UHFHQWO\LWFDQEHXQGHUVWRRGDVEHLQJGXHWRORZOHYHOVRISRSXODWLRQDQGKHQFHIHZHU

LQGLYLGXDOVWRFUHDWHQHZWHFKQRORJLHV-6LPRQ.UHPHU-RQHV

DQGSHUKDSVSRRUO\GHILQHGSURSHUW\ULJKWVLQLQQRYDWLRQV-RQHV*LYHQWKLVORZ

UDWHRIWHFKQLFDOFKDQJHDQGLQQRYDWLRQWKHUHZDVQRLQFHQWLYHWRHYROYHDPHQWDO

PHFKDQLVPIRUXQGHUVWDQGLQJRUUHZDUGLQJLQQRYDWLRQ

7KHUHZDVOLWWOHJURZWK±VROLWWOHWKDWQRLQGLYLGXDOZRXOGREVHUYHDQ\JURZWK

RYHUKLVKHUOLIHWLPH.UHPHU(DFKSHUVRQZRXOGOLYHDQGGLHLQDZRUOGRI

FRQVWDQWWHFKQRORJ\DQGLQFRPH7KXVWKHUHZDVQRLQFHQWLYHWRHYROYHDPHFKDQLVPIRU

XQGHUVWDQGLQJRUSODQQLQJIRUJURZWK,QGHHGWRWKHH[WHQWWKDWRXUDQFHVWRUVOLYHGRQ

WKH0DOWKXVLDQPDUJLQDQ\FKDQJHVLQFLUFXPVWDQFHVZHUHPRUHOLNHO\WREHKDUPIXO

WKDQEHQHILFLDOVRZHZRXOGKDYHKDGDWHQGHQF\WREHOHHU\RIFKDQJH

([FKDQJH0RQLWRULQJDQG6KLUNLQJ

7KHUHZHUHKRZHYHUSRVVLELOLWLHVIRUH[FKDQJHDQGVRDPRQLWRULQJPHFKDQLVP

WROLPLWVKLUNLQJZDVXVHIXO6RPHH[FKDQJHZRXOGEHRIVLPSOHJRRGV±RQHIRUDJHU

PD\KDYHPRUHQXWVDQRWKHUPRUHEHUULHVDQGH[FKDQJHZRXOGRFFXU$FRPPRQDQG

LPSRUWDQWIRUPRIH[FKDQJHZRXOGKDYHEHHQLQWHUWHPSRUDOH[FKDQJHRIWKHVDPHJRRGD

IRUPRIUHFLSURFDODOWUXLVP7ULYHUVWKDWLVXQUHODWHGWRVSHFLDOL]DWLRQ,I,KDYHD

VXFFHVVIXOKXQWWKLVZHHN,PD\JLYH\RXVRPHRIWKHPHDWLQH[SHFWDWLRQWKDW\RXZLOO

UHFLSURFDWHQH[WZHHN)RULQGLYLGXDOVOLYLQJRQWKHPDUJLQRIVXEVLVWHQFHVXFK

LQWHUWHPSRUDOH[FKDQJHFRXOGKDYHEHHQH[WUHPHO\LPSRUWDQWIRUVXUYLYDO.HOO\S

6KLUNLQJFRXOGKDYHEHHQLQWKHIRUPRIUHIXVDOWRSURYLGHRQH¶VVKDUHLIVXFFHVVIXO

WKH(($IRUPRIWD[HYDVLRQRUQRWVSHQGLQJVXIILFLHQWHIIRUWRQKXQWLQJSODQQLQJWR

EHQHILWIURPRWKHU¶VZRUNWKH(($IRUPRIZHOIDUHIUDXG,QVXFKDZRUOGLIVRPHRQH

KDGVXEVWDQWLDOO\PRUHWKDQRWKHUVLWPD\KDYHEHHQWKHUHVXOWRIXQZLOOLQJQHVVWRVKDUH

RUUHFLSURFDWHIRUSDVWEHQHILWVUHFHLYHG)RUDJHUVSD\FDUHIXODWWHQWLRQWRWKLVEHKDYLRU



DQGSXQLVKWKRVHZKRDUHSHUFHLYHGDVQRWVKDULQJVXIILFLHQWO\,WZRXOGKDYHEHHQ

LPSRUWDQWIRULQGLYLGXDOVWRPRQLWRUWKHWHUPVRIVXFKH[FKDQJHWRDYRLGEHLQJ

YLFWLPL]HGRUFKHDWHG

7KLVLVDZRUOGRIVWURQJUHFLSURFLW\DQGRIDIRUPRIH[FKDQJHZKLFK

DQWKURSRORJLVWVFDOO(TXDOLW\0DWFKLQJZKLFK3LQNHUFODLPVLVWKHFRUHRILQWXLWLYH

HFRQRPLFV,WLVFRQWUDVWHGZLWK0DUNHW3ULFLQJWKHV\VWHPHFRQRPLVWVVWXG\:KHQ

WKHUHLVDPLVPDWFKEHWZHHQWKHWZRV\VWHPVWKHQKRVWLOLW\DQGFRQIOLFWFDQUHVXOW$Q

H[DPSOHLVWKHDWWHQWLRQJLYHQWR:DOGIRJHODQDUWLFOHWKDWXVHG0DUNHW3ULFLQJ

PHWKRGVWRDQDO\]H&KULVWPDVJLYLQJDWUDQVDFWLRQQRUPDOO\DQDO\]HGXVLQJ(TXDOLW\

0DWFKLQJ

6KLUNLQJFRXOGDOVRKDYHRFFXUUHGWKURXJKQRWSURYLGLQJRQH¶VVKDUHLQ

FRRSHUDWLYHYHQWXUHV&RRSHUDWLRQZDVXVHIXOLQKXQWLQJELJJDPH5LGOH\DQG

DOVRLQSULPLWLYHZDUIDUH:UDQJKDPDQG3HWHUVRQ7RRE\DQG&RVPLGHV

%RWKRIWKHVHDFWLYLWLHVZHUHGDQJHURXVDQGVRWKHUHZRXOGKDYHEHHQVWURQJLQFHQWLYHV

IRUVKLUNLQJ.HOO\GHVFULEHVVXFKVKDULQJDQGLQGLFDWHVWKDWPRGHUQIRUDJHUV

VSHQGPXFKWLPHDQDO\]LQJWKHVRFLDOEHKDYLRURIDVVRFLDWHVWRPRQLWRUVXFKVKLUNLQJ

7KHPRQLWRULQJPRGXOHLGHQWLILHGE\&RVPLGHVDQG7RRE\FRXOGKDYHHYROYHGWR

PRQLWRUWKHVHDFWLYLWLHVLQDQHFRQRP\ZLWKOLWWOHVSHFLDOL]DWLRQDQGOLWWOHGLYLVLRQRI

ODERU

,QVXPZHHYROYHGLQVLWXDWLRQVRIOLWWOHVSHFLDOL]DWLRQDQGGLYLVLRQRIODERUOLWWOH

FDSLWDOORZWHFKQRORJLFDOFKDQJHDQGOLWWOHRUQRHFRQRPLFJURZWK7KHUHZDVVRPH

H[FKDQJHLQFOXGLQJLQWHUWHPSRUDOH[FKDQJHRIWKHVDPHJRRGDQGSRVVLELOLWLHVRI

VKLUNLQJ,IWKHUHZHUHZHDOWKLQHTXDOLWLHVWKH\ZHUHSUREDEO\GXHWRVKLUNLQJE\

UHIXVLQJWRVKDUH,IRXUPLQGVHYROYHGLQWKLVVLWXDWLRQWKHQFXUUHQWLQQDWHHFRQRPLF

PRGXOHVVKRXOGEHDGDSWHGWRWKLVVHWWLQJDQGWKLVDSSHDUVWREHWKHFDVH

7KHDUJXPHQWPDGHKHUHLVFRQVLVWHQWZLWKVRPHZRUNRI+D\HNHJ

+D\HNGLVFXVVHVWKHVRUWRIHYROXWLRQ,KDYHPHQWLRQHGDQGLQGLFDWHVWKDWWKRVHEHOLHIV

DQGSUHIHUHQFHVWKDWHYROYHGLQVPDOOIDFHWRIDFHVRFLHWLHVZRXOGQRWEHVXLWHGWRPRGHUQ

ODUJHVRFLHWLHV+HDOVRH[SODLQVVRPHRIWKHKRVWLOLW\WRFDSLWDOLVPLQWHUPVRIWKH

LQFRQVLVWHQF\RIWKHDWWLWXGHVQHHGHGLQDFDSLWDOLVWVRFLHW\ZLWKHYROYHGPRUDOEHOLHIV



DQGSUHIHUHQFHV)RUH[DPSOHKHDUJXHVWKDWLQRXUGD\WRGD\OLIHZHFDQQRWVDWLVI\RXU

³GHHSVHDWHGµDOWUXLVWLF¶GHVLUHVWRGRYLVLEOHJRRG´S

$OWHUQDWLYH7KHRULHV

$QDOWHUQDWLYHH[SODQDWLRQIRUWKHREVHUYDWLRQVDERXWIRONHFRQRPLFEHOLHIV

GLVFXVVHGDERYHLVWKDWWKHVHEHOLHIVDUHWKHUHVXOWRIFRPSHWLQJHFRQRPLFWKHRULHVDQG

DUHOHDUQHGE\SHUVRQVZKRDFFHSWWKHVHWKHRULHV%XWWKLVK\SRWKHVLVJHWVWKHFDXVDOLW\

H[DFWO\EDFNZDUGV7KHRULHVFRPSHWLQJZLWKQHRFODVVLFDOHFRQRPLFVDUHLQFRUUHFW

7KHQZHPXVWDVNZK\WKHVHLQFRUUHFWWKHRULHVDUHDFFHSWHG3DUWRIWKHDQVZHUPD\EH

WKDWLQVRPHFLUFXPVWDQFHVVRPHLQGLYLGXDOVKDYHDSULYDWHLQWHUHVWLQSURPRWLQJRU

DFFHSWLQJLQFRUUHFWWKHRULHVDVGLVFXVVHGLQWKHQH[WVHFWLRQ+RZHYHUWKHVWUXFWXUHRI

WKHRULHVWKDWSHRSOHGRDFFHSWLVFRQVLVWHQWZLWKIRONHFRQRPLFV7KDWLVIURPWKH

SRWHQWLDOXQLYHUVHRIVHOILQWHUHVWHGWKHRULHVRQO\DVPDOOVXEVHWDUHSROLWLFDOO\XVHIXO

DQGWKLVVXEVHWLVFRQVLVWHQWZLWKIRONHFRQRPLFEHOLHIV

2QHH[DPSOHRIDFOHDUO\LQFRUUHFWWKHRU\ZKLFKKDVEHHQVKRZQWREHLQFRUUHFWLV

0DU[LVP%XWHYHQWKRXJKWKHPRVWLPSRUWDQWVRFLDOVFLHQFHH[SHULPHQWRIWKHWZHQWLHWK

FHQWXU\FOHDUO\GHPRQVWUDWHGWKHHUURURIWKLVV\VWHPPDQ\LQWHOOLJHQWSHRSOHLQFOXGLQJ

PDQ\DFDGHPLFVDSSDUHQWO\DFFHSWWKLVWKHRU\7KHUHLVQRVXFKVRFLDOGHEDWHDERXW

SKUHQRORJ\DQLQFRUUHFWSV\FKRORJLFDOWKHRU\RUDERXWSKORJLVWRQDQLQFRUUHFWFKHPLFDO

WKHRU\2QHUHDVRQWKDW0DU[LVPEHFDPHDSURPLQHQWWKHRU\DQGFRQWLQXHVWRVXUYLYHLV

WKDWDWOHDVWVRPHRILWVWHQHWVDUHFRQVLVWHQWZLWKIRONHFRQRPLFEHOLHIV7KHVHLQFOXGH

WKHODERUWKHRU\RIYDOXHDQRWLRQFRQVLVWHQWZLWKWKHHFRQRP\RIWKH(($ZLWKOLWWOHRU

QRFDSLWDODQGDOVRWKHXQLPSRUWDQFHRILQFHQWLYHV7KHQRWLRQRIWKHFODVVVWUXJJOHLWVHOI

LVDQH[DPSOHRI]HURVXPWKLQNLQJ7KXV0DU[LVPLVDWOHDVWLQSDUWFRQVLVWHQWZLWKIRON

HFRQRPLFEHOLHIV

$QRWKHUK\SRWKHVLVLVWKDWIRONHFRQRPLFEHOLHIVDUHDSURGXFWRIFXOWXUHQRWDQ

LQQDWHSURSHUW\RIWKHPLQG%XWLIWKLVZHUHVRWKHQLWZRXOGEHUHODWLYHO\HDV\WR

XQOHDUQWKHVHEHOLHIV7KHUHLVQRUHDVRQWRH[SHFWWKDWFXOWXUDOHUURUVVKRXOGSHUVLVWIRU

RYHU\HDUVDERXWWHQKXPDQJHQHUDWLRQVWKHWLPHVLQFH$GDP6PLWKILUVWSRLQWHG

RXWWKHEHQHILWVRIDPDUNHWHFRQRP\:HKDYHHDVLO\OHDUQHGWRDGDSWWRQXPHURXVQHZ

If they are not, then I as the author and you as the reader of this paper are in the wrong business. For example, it would be in our self interest as economists to require that every transaction of over $10,000 be certified by a Ph.D. level economist, but there is little chance of such a proposal being adopted.



WHFKQRORJLHVLQPXFKVKRUWHUWLPHVZKHQWKHVHWHFKQRORJLHVGLGQRWFRQIOLFWZLWKLQQDWH

PHQWDOPRGXOHV7KRVHZKRPLJKWSUHIHUFXOWXUDOH[SODQDWLRQVDUHPDNLQJDUJXPHQWV

EDVHGRQWKHPLQGDVD³EODQNVODWH´ZLWKQRLQQDWHWHQGHQFLHVDQDUJXPHQWGHFLVLYHO\

UHMHFWHGE\PRGHUQWKHRULHVRIHYROXWLRQDU\SV\FKRORJ\3LQNHU

$QDO\WLF,PSOLFDWLRQV

7KHLPSOLFDWLRQVRIWKLVDQDO\VLVDUHWKDWIRUPDQ\HFRQRPLFSUREOHPVIRON

HFRQRPLFVZLOOJHWWKHZURQJDQVZHU0RUHRYHUWKHDQVZHUZLOOEHZURQJLQ

SUHGLFWDEOHZD\V)RONHFRQRPLFVZLOOVWUHVVWKHIL[HGVXP³GLYLVLRQRIWKHSLH´DVSHFW

RIDSUREOHPUDWKHUWKDQWKH³VL]HRIWKHSLH´LVVXHV,QRZSURYLGHVRPHH[DPSOHV

7KHVLPSOHVWH[DPSOHLVWKHWKHRU\RIGHPDQG(FRQRPLVWVKDYHDQHODERUDWH

WKHRU\FRQVWUXFWHGIURPXQGHUO\LQJXWLOLW\IXQFWLRQV%XWRQHRIWKHPRUHGLIILFXOWWDVNV

LQWHDFKLQJEDVLFHFRQRPLFVLVWRGLVDEXVHVWXGHQWVRIWKHQRWLRQRI³QHHGV´$QHHGLV

WKHHVVHQFHRIIL[HGWKLQNLQJWKHDPRXQWRIVRPHFRPPRGLW\WREHFRQVXPHGLVYLHZHG

DVEHLQJIL[HGDQGLQGHSHQGHQWRISULFHV

7KHPRVWSURPLQHQWH[DPSOHLVWKHQDwYHXQGHUVWDQGLQJRILQWHUQDWLRQDOWUDGH

:HZRXOGH[SHFWQDwYHLQGLYLGXDOVWRIRFXVRQWKHHIIHFWRIWUDGHRQMREVQRWRQ

SURGXFWLRQDQGFRQVXPSWLRQ7KLVLVRIFRXUVHZKDWZHILQG7KH6$((DVDQDO\]HGE\

&DSODQLQGLFDWHVWKDWWKHJHQHUDOSXEOLFLVPRUHOLNHO\WKDQHFRQRPLVWVWRWKLQNWKDWWUDGH

DJUHHPHQWVKDYHFRVWWKH86HFRQRP\MREVWKDWWKHUHDUHWRRPDQ\LPPLJUDQWVDQGWKDW

FRPSDQLHVDUHVHQGLQJMREVRYHUVHDV)LUPVDQGZRUNHUVLQLPSRUWFRPSHWLQJLQGXVWULHV

ZRXOGKDYHLQFHQWLYHVWRHQFRXUDJHVXFKEHOLHIVLQOREE\LQJIRUSURWHFWLRQ+RZHYHU

WKHOREE\LQJLVPDGHHDVLHUEHFDXVHRIWKHIRONHFRQRPLFEHOLHIVLQWKHIL[HGQXPEHURI

MREV7KDWLVLWLVHDVLHUWRREWDLQOHJLVODWLRQWKDWLVFRQVLVWHQWZLWKIRONHFRQRPLF

EHOLHIV1HZFRPELQGLFDWHGWKDWWKHGLVDJUHHPHQWEHWZHHQHFRQRPLVWVDQGRWKHUV

ZDVPRVWPDUNHGLQWKHFDVHRIWUDGH,QUHFHQWWLPHVHFRQRPLVWVVHHPWRKDYHPDLQO\

ZRQWKHEDWWOHRYHUWDULIIVH[FHSWIRUHVSHFLDOO\SRZHUIXOLQWHUHVWJURXSVLQWKDWWDULIIV

DUHJHQHUDOO\DWYHU\ORZOHYHOVEXWWKHTXHVWLRQVLQWKH6$((LQGLFDWHWKDWWKLVYLFWRU\LV

VWLOOIUDJLOH

Discussions of the benefits of international trade also may be made more difficult since this issue mayinvolve our innate xenophobic tendencies; see Rubin, 2002.



1DwYHODERUHFRQRPLFVDOVRIRFXVHVRQMREV7KLVLVEHFDXVHRIWKHIL[HGVL]H

YLHZVRIIRONHFRQRPLFV,IWKHQXPEHURIMREVOLNHRWKHUDVSHFWVRIWKHHFRQRP\LV

IL[HGWKHQLWLVLPSRUWDQWWRKDYHRQHRIWKHP$JDLQWKLVLVFOHDUIURPWKH6$((

6RPHRIWKHLVVXHVUHODWHGWRMREVZHUHPHQWLRQHGLQWKHGLVFXVVLRQRIWUDGH±MREVEHLQJ

VHQWRYHUVHDVH[FHVVQXPEHUVRILPPLJUDQWV,QDGGLWLRQWKHSXEOLFLVPRUHOLNHO\WKDQ

HFRQRPLVWVWRZRUU\WKDWWHFKQRORJ\LVGLVSODFLQJZRUNHUVDQGWKDWFRPSDQLHVDUH

GRZQVL]LQJWRRPXFK1HZFRPEUHIHUVWRWKHSXEOLFYLHZWKDWWKHEHQHILWVRIDQLQGXVWU\

DUHWKHMREVLQYROYHGUDWKHUWKDQWKHYDOXHRILWVRXWSXW$QDGGLWLRQDOLPSOLFDWLRQLV

WKDWVLQFHIRONHFRQRPLFVYLHZVWKHQXPEHURIMREVDVIL[HGPLQLPXPZDJHODZVDQG

ODZVPDQGDWLQJFRPSDUDEOHZRUWKZLOODSSHDUWRVHUYHRQO\WRWUDQVIHULQFRPHWKH\ZLOO

VHHPWRKDYHQRHIIHFWRQHPSOR\PHQWUDWHV$JDLQWKRVHZLWKDQLQWHUHVWLQSURPRWLQJ

VXFKODZVZLOOXVHWKHEHOLHIVRIQDwYHFLWL]HQVLQOREE\LQJIRUVXFKODZV

)RONSXEOLFILQDQFHDQDO\VHVWKHGLVWULEXWLRQRIWD[HVQRWWKHLPSOLFDWLRQVDV

LQFHQWLYHVIRUEHKDYLRU7KH6$((LQGLFDWHVWKDWWKHSXEOLFEHOLHYHVWKDWWD[HVDUHWRR

KLJKEXWDOVRWKDWEXVLQHVVJHWVWRRPDQ\WD[EUHDNVVRWKHLPSOLFDWLRQLVWKDWSHUVRQDO

WD[HVDUHWRRKLJKDQGEXVLQHVVWD[HVWRRORZ%XVLQHVVWD[HVDUHQRWSHUFHLYHGDV

HIIHFWLQJLQGLYLGXDOVDVZRXOGEHFRQVLVWHQWZLWKIRONHFRQRPLFV³6WDWLFÚHYHQXH

DQDO\VLVDVVRPHWLPHVXVHGE\JRYHUQPHQWDJHQFLHVWRSURMHFWHIIHFWVRIWD[FKDQJHVLV

EDVHGRQWKHVDPHVRUWRI]HURVXPWKLQNLQJ:LWKUHVSHFWWRSXEOLFVSHQGLQJDVRQD

VXEVLG\WKHHIIHFWZLOOEHYLHZHGDVUHGXFLQJLQGLYLGXDOFRVWVRIVRPHJRRGRUVHUYLFH

ZLWKQRLPSOLFDWLRQIRUDPRXQWGHPDQGHG7KLVLVZK\H[DQWHHVWLPDWHVRIFRVWVRI

PHGLFDOLQVXUDQFHSURJUDPVURXWLQHO\XQGHUHVWLPDWHWKHVHFRVWV

7KHUHDUHLPSOLFDWLRQVIRUODZDQGHFRQRPLFV0RGHUQ$PHULFDQSURGXFWV

OLDELOLW\DQGPHGLFDOPDOSUDFWLFHODZFDQEHVWEHXQGHUVWRRGDVLIMXURUVDQGRWKHUV

EHOLHYHWKDWWKHRQO\HIIHFWRIDMXGJPHQWLVWRUHGLVWULEXWHZHDOWKIURPEXVLQHVVHVRU

SK\VLFLDQVRUWKHLULQVXUDQFHFRPSDQLHVWRLQMXUHGFRQVXPHUVZLWKQRHIIHFWVRQ

LQYHVWPHQWSURGXFWLRQRUSULFHV0RUHJHQHUDOO\3RVQHU¶VDQDO\VLVRIWKHODZLQWHUPV

RIHFRQRPLFHIIHFWVZKLOHQRZFRPPRQSODFHZDVLQLWVWLPHUHYROXWLRQDU\3RVQHU

5XELQ/HJDODQDO\VWVWKRXJKWRISURSHUW\ODZDVDOORFDWLQJULJKWVEXW

GLGQRWFRQVLGHUWKHHIILFLHQF\LPSOLFDWLRQVRIDOWHUQDWLYHDOORFDWLRQVFKHPHVRUWKH

SRVVLELOLW\RISURSHUW\PRYLQJWRKLJKHUYDOXHGXVHV6LPLODUO\DQDO\VLVRIFRQWUDFWZDV





YLHZHGVXFFHVVWKURXJKEXVLQHVVDVUHIOHFWLQJKDUPIXOVRFLDOEHKDYLRU,IZHDOWKLQWKH

(($ZDVOLPLWHGDQGLIWKHPDLQZD\WREHZHDOWK\ZDVWRDYRLGRQH¶VUHVSRQVLELOLW\WR

VKDUHWKHQDWWLWXGHVYLHZLQJWKHZHDOWK\DVHYLOFRXOGEHSDUWRIRXUPHQWDODUFKLWHFWXUH

7KLVLVFRQVLVWHQWZLWKVRPHUHOLJLRXVEHOLHIVFRQVLGHU-HVXV¶VD\LQJWKDW³,WLVHDVLHUIRU

DFDPHOWRSDVVWKURXJKWKHH\HRIDQHHGOHWKDQIRUDULFKPDQWRHQWHUWKHNLQJGRPRI

*RG´ 0DWWKHZ$\Q5DQGGLGSRUWUD\EXVLQHVVPHQLQDIDYRUDEOHOLJKWEXWKHU

QRYHOVZKLOHDSSHDOLQJWRDVXEVHWRISHRSOHKDYHQRWEHHQPDMRUVXFFHVVHV

,PSOLFDWLRQVIRU(FRQRPLVWV

7KLVDQDO\VLVKDVLPSOLFDWLRQVIRUWKHEHKDYLRURIHFRQRPLVWV

&RVWVRI(UURUV

7KHILUVWSRLQWWRQRWHLVWKDWLWLVLPSRUWDQWWKDWHUURUVRIIRONHFRQRPLFVEH

FRUUHFWHG,WPD\EHOHVVLPSRUWDQWWRFRUUHFWHUURUVDVVRFLDWHGZLWKRWKHUGLVFLSOLQHV

VXFKDVIRONSK\VLFV)RUH[DPSOHPDQ\SHRSOHEHOLHYHWKDWVXEVWDQFHVDUH

KRPRJHQHRXVWKURXJKRXW,WLVWUXHWKDWLIVXJDUFXEHVDUHEURNHQXSWKHFRPSRQHQW

SDUWVDUHVXJDU%XWXOWLPDWHO\RQHFRPHVWRPROHFXOHVRIFDUERQK\GURJHQDQGR[\JHQ

QRWVXJDU7KLVQRWLRQLVGLIILFXOWIRUPDQ\WRJUDVS±DSSDUHQWO\LQFOXGLQJHYHQVRPH

FROOHJHFKHPLVWU\VWXGHQWV7KLVH[DPSOHLVIURP:HOOPDQDQG*HOPDQS

%XWQRWKLQJKLQJHVRQWKLVHUURU&KHPLVWVDQGRWKHUVZKRSURGXFHRUXVHVXEVWDQFHVDUH

DZDUHRIWKHUHOHYDQWSURSHUWLHV6HOGRPLIHYHUGRHVWKHDYHUDJHFRQVXPHUQHHGWR

XQGHUVWDQGWKHPROHFXODUSURSHUWLHVRIDVXEVWDQFHDQGDPLVXQGHUVWDQGLQJRIWKHVH

SURSHUWLHVKDVIHZFRVWV

)RUHFRQRPLFVDVLWDSSOLHVWRGDLO\OLIHWKHVDPHSRLQWZRXOGDSSO\$V

LQGLFDWHGDERYHKXPDQVDUHJRRGDWH[FKDQJHDQGDWPRQLWRULQJEHKDYLRURIRWKHUVWR

DYRLGEHLQJYLFWLPL]HG$V%DVWLDWKDVVDLG³HDFKPDQLVLQSUDFWLFHDQ

H[FHOOHQWHFRQRPLVWSURGXFLQJRUH[FKDQJLQJDFFRUGLQJDVKHILQGVLWPRUHDGYDQWDJHRXV

WRGRWKHRQHRIWKHRWKHU´7KLVDELOLW\WRHQJDJHLQDGYDQWDJHRXVH[FKDQJHZRXOGEH

WKHHTXLYDOHQWRIXQGHUVWDQGLQJWKHJURVVSURSHUWLHVRIDVXEVWDQFHDVLQXVLQJVXJDULQ

FRRNLQJ%XWHFRQRPLFXQGHUVWDQGLQJDOVRLQWHUDFWVZLWKSROLWLFDORXWFRPHV,QD

GHPRFUDF\YRWHUVZKRPD\KDYHPLVFRQFHSWLRQVDERXWHFRQRPLFVFDQYRWHIRU

SROLWLFLDQVZKRZLOOLPSOHPHQWHUURQHRXVDQGFRVWO\SROLFLHV,QDGLFWDWRUVKLSWKH

I want to thank an anonymous referee for drawing my attention to this statement.



GLFWDWRUKLPVHOIPD\PDNHVLPLODUHUURUV7KXVPLVXQGHUVWDQGLQJVDVVRFLDWHGZLWK

IRONHFRQRPLFVFDQKDYHLPSRUWDQWFRQVHTXHQFHVIRUHFRQRPLFSROLF\0RUHRYHUVLQFH

WKHVHHUURUVKDYHSXEOLFEXWQRWSULYDWHFRVWVWKHUHLVQRREYLRXVVHOIFRUUHFWLQJ

PHFKDQLVPWRZHHGWKHPRXW

7KHUHPD\EHDQDQDORJ\LQELRORJ\)RONELRORJ\UHVLVWVWKHQRWLRQRIHYROXWLRQ

DQGDVVXPHVWKHUHLVDQHVVHQWLDOFKDUDFWHUWRHDFKVSHFLHV:HOOPDQDQG*HOPDQ

3LQNHU7KLVPD\H[SODLQVRPHRIWKHUHVLVWDQFHWRZDUGVWHDFKLQJHYROXWLRQ

DQLVVXHWKDWSHULRGLFDOO\FURSVXSLQVFKRROERDUGSROLWLFV6LQFHWKHUHDUHUHDOFRVWV

IURPPLVLQIRUPLQJFKLOGUHQIRONELRORJ\PD\VRPHWLPHVLPSRVHEXUGHQVLQVRFLHW\

VLPLODUWRWKRVHIURPIRONHFRQRPLFV)RONELRORJ\PD\DOVREHUHVSRQVLEOHIRUWKH

XQZLOOLQJQHVVRIPDQ\WRXVH³JHQHWLFDOO\PRGLILHGÍRRGVRURWKHUSURGXFWVD

SRWHQWLDOO\FRVWO\HUURU3LQNHUS3LQNHUDUJXHVSWKDWWKHUHVKRXOGEH

KLJKSULRULW\JLYHQWRWHDFKLQJ³HFRQRPLFVHYROXWLRQDU\ELRORJ\DQGSUREDELOLW\DQG

VWDWLVWLFVLQDQ\KLJKVFKRRORUFROOHJHFXUULFXOXPÍRUHVVHQWLDOO\WKHVRUWRIUHDVRQV

GLVFXVVHGKHUH

+RZWR3HUVXDGH

7KHUHDUHDOVRLPSOLFDWLRQVIRULVWKHZD\LQZKLFKZHWU\WRFRQYLQFHQRQ

HFRQRPLVWVRIWKHZLVGRPRUGHVLUDELOLW\RIRXUSURSRVDOV%DVLFDOO\IRONHFRQRPLFV

QRWLRQVLQGLFDWHWKDWZHVKRXOGVWDUWRQHVWHSIDUWKHUEDFNLQRXUDUJXPHQWVWKDQPLJKWEH

FXVWRPDU\7KDWLVZHQHHGQRWRQO\FRQYLQFHOLVWHQHUVRUUHDGHUVWKDWDSDUWLFXODU

SURSRVDOLVHIILFLHQWZHPXVWILUVWFRQYLQFHWKHPWKDWWKHUHDUHHIILFLHQF\GLIIHUHQFHV

EHWZHHQSURSRVDOV

&RQVLGHUWD[DWLRQDVDQH[DPSOH,QIRONHFRQRPLFVGLIIHUHQWWD[SROLFLHVVHUYH

WRDOORFDWHDIL[HGEXUGHQDPRQJYDULRXVFODVVHVRIWD[SD\HUV6XFKSROLFLHVDUHDQDO\]HG

LQWHUPVRIQRWLRQVRI³IDLUQHVV´3XEOLFILQDQFHWKHRU\LQGLFDWHVWKDWGLIIHUHQWWD[UXOHV

ZLOOKDYHLPSOLFDWLRQVIRUWKHOHYHORIZRUNVDYLQJDQGLQYHVWPHQWLQWKHHFRQRP\DQG

VRPHUXOHVZLOOOHDGWRODUJHUWRWDOLQFRPHVWKDQZLOORWKHUV,IDQHFRQRPLVWLVGHEDWLQJD

QRQHFRQRPLVWRYHUWD[UXOHVRUZULWLQJDQDQDO\VLVWREHUHDGE\DQRQHFRQRPLVWDQG

It perhaps speaks well of the economics profession that few if any dictators are trained economists. Most recently in Atlanta: see Mary MacDonald, “Cobb's vote on evolution in spotlight,” $WODQWD-RXUQDODQG&RQVWLWXWLRQ, September 27, 2002. Pinker is trained as a linguist and works as an evolutionary psychologist, so his claims for the importanceof economics are not subject to criticism as being self-serving.



WKHQRQHFRQRPLVWWKLQNVRQO\LQWHUPVRIIDLUQHVVZKLOHWKHHFRQRPLVWFRQVLGHUV

HIILFLHQF\DQGLQFHQWLYHVWKHQWKHGLVFXVVLRQZLOOEHIUXLWOHVV7KHGHEDWHZLOOSURFHHG

PRUHXVHIXOO\LIWKHHFRQRPLVWILUVWFRQYLQFHVWKHQRQHFRQRPLVWWKDWUXOHVRIWD[DWLRQ

KDYHHIIHFWVEH\RQGIDLUQHVVDQGGLVWULEXWLRQDQGWKHQFRQVLGHUVWKHLPSOLFDWLRQVRI

GLIIHUHQWUXOHV

,QVRPHRIP\RZQSROLF\DQDO\VHV,KDYHFRPPLWWHGWKHVDPHHUURU,KDYH

ZULWWHQH[WHQVLYHO\DERXWWKHHIIHFWVRIGLUHFWWRFRQVXPHUDGYHUWLVLQJRISKDUPDFHXWLFDOV

HJ0DVVRQDQG5XELQ,QWKLVZRUN,KDYHGLVFXVVHGWKHHIIHFWVRIDGYHUWLVLQJ

RQLQIRUPLQJFRQVXPHUVDERXWWKHSURSHUWLHVRIH[LVWLQJGUXJV%XW,GLGQRWGLVFXVVWKH

HIIHFWVRIDGYHUWLVLQJRQFUHDWLQJLQFUHDVHGSURILWDELOLW\WKXVFDXVLQJPRUHGUXJVWREH

LQYHQWHG:KLOHWKLVSRLQWPD\EHREYLRXVWRDQHFRQRPLVWRUSROLF\DQDO\VWZKLFKLV

ZK\,GLGQRWPHQWLRQLWLWPD\QRWEHVRREYLRXVWRRWKHUVDQGVRVRPHRIWKHEHQHILWV

RIWKHSROLF\PD\KDYHEHHQPLVVHG

$QRWKHULPSOLFDWLRQLVLQWKHWHDFKLQJRIHFRQRPLFV,IZHEHJLQZLWKDQ

XQGHUVWDQGLQJRIWKHVWXGHQWV¶NQRZOHGJHRIIRONHFRQRPLFVWKHQZHPD\EHDEOHWR

WHDFKPRUHE\ILUVWDGGUHVVLQJWKHVHEHOLHIV,QWHDFKLQJGHPDQGWKLVLVGRQH:HGR

VSHQGWLPHGLVFXVVLQJWKHFRQFHSWRIQHHGVDQGWKHVORSHRIGHPDQGFXUYHV+RZHYHU

WKHEDVLFHOHPHQWRIUHVSRQVLYHQHVVWRSULFHVRQWKHVXSSO\VLGHLVRIWHQORVWLQDPD]HRI

FRVWFXUYHV$QLQWXLWLYHGLVFXVVLRQWKDWFRXQWHUVWKHLQQDWHOHDUQLQJRIWKHVWXGHQWPLJKW

EHPRUHHIIHFWLYH

(IIHFWVRI6WXG\LQJ(FRQRPLFV

$ILQDOLPSOLFDWLRQGHDOVZLWKWKHHIIHFWVRIOHDUQLQJHFRQRPLFVRQJHQHUDO

FLWL]HQVKLS7KHUHKDVEHHQDOLYHO\GHEDWHLQWKH -RXUQDORI(FRQRPLF3HUVSHFWLYHVRQ

WKLVLVVXH&DUWHUDQG,URQV)UDQN*LORYLFKDQG5HJDQ<H]HU

*ROGIDUEDQG3RSSHQ7KLVLVVXHZDVILUVWUDLVHGE\0DUZHOODQG$PHV

ZKRIRXQGWKDWILUVW\HDUJUDGXDWHVWXGHQWVLQHFRQRPLFVZHUHOHVVOLNHO\WRFRQWULEXWHWR

DSXEOLFJRRGWKDQZHUHRWKHUV&DUWHUDQG,URQVVKRZHGWKDWHFRQRPLFVVWXGHQWV

EHKDYHGGLIIHUHQWO\LQSOD\LQJWKH³XOWLPDWXPJDPH´WKDQGLGRWKHUV,QSDUWLFXODU

Pinker (2002, p. 222) also points out that it is important to consider the innate properties of the mind indesigning effective teaching mechanisms In this game, two subjects are to split a fixed sum, $10 in the Carter and Irons example. One subject, the“Proposer” proposes a division (in increments of $.50). The other, the “Responder” accepts or rejects the



HFRQRPLFVVWXGHQWVDV5HVSRQGHUVZHUHPRUHOLNHO\WRDFFHSWDVPDOOHURIIHUWKDQRWKHUV

DSRLQWWRZKLFK,UHWXUQEHORZDQGDV3URSRVHUVZHUHPRUHOLNHO\WRPDNHDVPDOOHU

RIIHUDVZHOO7KHLUDQDO\VLVVKRZHGWKDWWKLVGLIIHUHQFHZDVGXHWRVHOIVHOHFWLRQUDWKHU

WKDQWROHDUQLQJ

)UDQN*LORYLFKDQG5HJDQIRXQGWKDWHFRQRPLFVVWXGHQWVZHUHPRUH

OLNHO\WKDQRWKHUVWRGHIHFWLQDRQHVKRWSULVRQHU¶VGLOHPPD)RUQRQHFRQRPLFV

VWXGHQWVFRRSHUDWLRQLQFUHDVHVDVWKH\PRYHIURPXQGHUFODVVPHQWRXSSHUFODVVPHQEXW

WKHUHLVQRWUHQGIRUHFRQRPLFVVWXGHQWVOHDGLQJWKHPWRFRQFOXGHWKDWWKHODFNRI

FRRSHUDWLRQPD\EHGXHWRWUDLQLQJLQHFRQRPLFV7KH\SUHVHQWDGGLWLRQDOVXUYH\

HYLGHQFHLQIDYRURIWKHOHDUQLQJK\SRWKHVLV7KH\FRQFOXGHZLWKVRPHGLVFXVVLRQRI

SRVVLEOHKDUPIXOHIIHFWVRIQRQFRRSHUDWLRQ

<H]HU*ROGIDUEDQG3RSSHQFULWLFL]H)UDQN*LORYLFKDQG5HJDQ<H]HU

HWDOLQGLFDWHWKDWRQHEHQHILWIURPVWXG\LQJHFRQRPLFVLVWKDWVWXGHQWVOHDUQDERXWJDLQV

IURPYROXQWDU\H[FKDQJH³,QIDFWRXUH[SHULHQFHLQWHDFKLQJSULQFLSOHVRIHFRQRPLFVLV

WKDWPRVWVWXGHQWVHQWHUWKHFRXUVHEHOLHYLQJWKDWHYHU\PDUNHWWUDQVDFWLRQFUHDWHVD

ZLQQHUDQGDORVHU´S7KLVLVH[DFWO\WKHLPSOLFDWLRQRIIRONHFRQRPLFV7KH\

ORRNIRUKRQHVW\DPRQJHFRQRPLFVVWXGHQWVE\OHDYLQJ³ORVWÓHWWHUVFRQWDLQLQJLQ

XSSHUOHYHOHFRQRPLFVDQGLQRWKHUFODVVHVDQGILQGWKDWOHWWHUVDUHVLJQLILFDQWO\PRUH

OLNHO\WREHUHWXUQHGE\HFRQRPLFVVWXGHQWV7KH\UHSOLFDWHWKH)UDQN*LORYLFKDQG

5HJDQVXUYH\DQGILQGVWDWLVWLFDOO\LQVLJQLILFDQWUHVXOWV

,QWKHLUUHSO\)UDQN*LORYLFKDQG5HJDQDJUHHWKDWWUDLQLQJLQHFRQRPLFV

PD\PDNHVWXGHQWVXQGHUVWDQGWKDWWKHUHDUHPXWXDOJDLQVIURPWUDGH0RVWRIWKHLU

UHVSRQVHGHDOVZLWKWKHVXUYH\TXHVWLRQV+RZHYHULWLVDOVRLQWHUHVWLQJWKDW)UDQNHWDO

UHIHUWRWKH&DUWHUDQG,URQVXOWLPDWXPJDPHH[SHULPHQWVDVVKRZLQJWKDWHFRQRPLFV

VWXGHQWVDUHOHVVOLNHO\WRFRRSHUDWH7KH\DOVRDUJXHWKDWXQGHUVWDQGLQJWKHH[LVWHQFHRI

JDLQVIURPWUDGHGRHVQRWVROYHVRFLDOGLOHPPDV7KHVHDUHERWKLQFRUUHFW7KH

XOWLPDWXPJDPHH[SHULPHQWVKDYHWZRUHVXOWVHFRQRPLVWVLQWKHUROHRI3URSRVHURIIHU

VPDOOHUSD\PHQWVZKLFKGRHVWHQGWROHDGWROHVVFRRSHUDWLRQ%XWHFRQRPLVWVDV

proposal. Economic theory would suggest a proposal of “$9.50 for the Proposer, $.50 for the Responder”and an acceptance of this proposal. Most subjects as Proposers offer a more even distribution, and mostResponders reject too uneven a split. For an interesting cross-cultural analysis of this game, see Henrich etal (2001).



5HVSRQGHUVDUHZLOOLQJWRDFFHSWVPDOOHUSD\PHQWVZKLFKOHDGVWRPRUHFRRSHUDWLRQ

7KLVVHFRQGUHVXOWLVH[DFWO\FRQVLVWHQWZLWKWUDLQLQJLQHFRQRPLFVOHDGLQJWRPRUH

FRRSHUDWLRQQRWOHVV,WPHDQVWKDWHFRQRPLVWVDUHOHVVOLNHO\WREHLQYROYHGLQ

EDUJDLQLQJEUHDNGRZQVDQGXQVXFFHVVIXOQHJRWLDWLRQV7KXVDWOHDVWRQHFODVVRIVRFLDO

GLOHPPDVLVVROYHGPRUHHDVLO\DVDUHVXOWRIWUDLQLQJLQHFRQRPLFV

6XPPDU\

)RONHFRQRPLFVLVWKHLQWXLWLYHHFRQRPLFVRIQDwYHRUXQWUDLQHGSHUVRQV)RON

HFRQRPLFVFRQVLGHUVSULPDULO\DOORFDWLRQDQGGLVWULEXWLRQ,WGRHVQRWDOORZIRURU

XQGHUVWDQGUHVSRQVHVWRLQFHQWLYHV7KHSULQFLSOHVRIIRONHFRQRPLFHYROYHGZKHQRXU

DQFHVWRUVOLYHGLQHQYLURQPHQWVZLWKVPDOOVRFLHWLHVLQGLYLGXDOVDQGOLWWOHLQWKH

ZD\RIVSHFLDOL]DWLRQGLYLVLRQRIODERUFDSLWDOLQYHVWPHQWRUHFRQRPLFJURZWKDOWKRXJK

H[FKDQJHDQGVKLUNLQJDQGWKHPRQLWRULQJRIVKLUNLQJZHUHLPSRUWDQW)RUPDQ\

HFRQRPLFSUREOHPVIRONHFRQRPLFVZLOOJHWWKHZURQJDQVZHUEXWWKHGLUHFWLRQRIHUURU

LVSUHGLFWDEOH)RONHFRQRPLFVFDQKHOSXQGHUVWDQGWKHRSLQLRQVRIXQWUDLQHGLQGLYLGXDOV

UHJDUGLQJPDWWHUVVXFKDVLQWHUQDWLRQDOWUDGHODERUHFRQRPLFVODZDQGHFRQRPLFVDQG

LQGXVWULDORUJDQL]DWLRQ,WLVLPSRUWDQWWRRYHUFRPHWKHHUURUVRIIRONHFRQRPLFVEHFDXVH

YRWHUVZKREHOLHYHWKHVHHUURUVZLOOIDYRUFRXQWHUSURGXFWLYHSROLFLHV(FRQRPLVWVZRXOG

GRDEHWWHUMRERISHUVXDGLQJRWKHUVDQGRIWHDFKLQJLIZHSDLGH[SOLFLWDWWHQWLRQWRIRON

HFRQRPLFV%HFDXVHXQWUDLQHGLQGLYLGXDOVGRQRWIXOO\XQGHUVWDQGJDLQVIURPWUDGH

WUDLQLQJLQHFRQRPLFVLVOLNHO\WRLPSURYHZHOIDUHE\LQFUHDVLQJWKHQXPEHURIWUDGLQJ

RSSRUWXQLWLHV7KHUHLVHYLGHQFHIURPH[SHULPHQWVLQYROYLQJWKHXOWLPDWXPJDPHWKDW

WKLVLVLQIDFWWUXH



5()(5(1&(6

%DUNRZ-HURPH+/HGD&RVPLGHVDQG-RKQ7RRE\HGLWRUV7KH$GDSWHG0LQG 1HZ<RUN2[IRUG8QLYHUVLW\3UHVV

%DVWLDW)UHGHULF (FRQRPLF6RSKLVPV7KH)RXQGDWLRQIRU(FRQRPLF(GXFDWLRQ,QF7UDQVDQGHGE\$UWKXU*RGGDUG/LEUDU\RI(FRQRPLFVDQG/LEHUW\6HSWHPEHUKWWSZZZHFRQOLERUJOLEUDU\%DVWLDWEDV6RSKKWPO!

%OHQGRQ5REHUW--RKQ0%HQVRQ0ROO\DQQ%URGLH5LFKDUG0RULQ'UHZ($OWPDQ'DQLHO*LWWHUPDQ0DULR%URVVDUG0DWW-DPHV%ULGJLQJWKH*DS%HWZHHQWKH3XEOLFVDQG(FRQRPLVWV9LHZVRIWKH(FRQRP\7KH-RXUQDORI(FRQRPLF

3HUVSHFWLYHV

%URZQ'RQDOG( +XPDQ8QLYHUVDOV1HZ<RUN0F*UDZ+LOO

%XVV'DYLG0 (YROXWLRQDU\3V\FKRORJ\7KH1HZ6FLHQFHRIWKH0LQG %RVWRQ$OO\QDQG%DFRQ

&DSODQ%U\DQ:KDW0DNHV3HRSOH7KLQN/LNH(FRQRPLVWV"(YLGHQFHRQ(FRQRPLF&RJQLWLRQIURPWKHµ6XUYH\RI$PHULFDQVDQG(FRQRPLVWVRQWKH(FRQRP\¶ -RXUQDORI/DZDQG(FRQRPLFV

&DSODQ%U\DQ6\VWHPDWLFDOO\%LDVHG%HOLHIV$ERXW(FRQRPLFV5REXVW(YLGHQFHRI-XGJHPHQWDO$QRPDOLHVIURPWKH6XUYH\RI$PHULFDQVDQG(FRQRPLVWVRQWKH(FRQRP\ (FRQRPLF-RXUQDO

&DUQHLUR5REHUW/7KH7UDQVLWLRQIURP4XDQWLW\WR4XDOLW\$1HJOHFWHG&DXVDO0HFKDQLVPLQ$FFRXQWLQJIRU6RFLDO(YROXWLRQ 3URFHHGLQJVRIWKH1DWLRQDO $FDGHP\RI6FLHQFHV

&DUWHU-RKQ5DQG0LFKDHO',URQV$UH(FRQRPLVWV'LIIHUHQWDQG,I6R:K\"7KH-RXUQDORI(FRQRPLF3HUVSHFWLYHV

&RVPLGHV/HGDDQG-RKQ7RRE\&RJQLWLYH$GDSWDWLRQVIRU6RFLDO([FKDQJHLQ7KH$GDSWHG0LQGHGLWHGE\-HURPH+%DUNRZ/HGD&RVPLGHVDQG-RKQ7RRE\1HZ<RUN2[IRUG8QLYHUVLW\3UHVVSS

'LFNLQVRQ-XOLHDQG1LFKRODV(POHU'HYHORSLQJLGHDVDERXWWKHGLVWULEXWLRQRIZHDOWKLQ (FRQRPLF6RFLDOL]DWLRQ7KH(FRQRPLF%HOLHIVDQG%HKDYLRXUVRI

<RXQJ3HRSOHHGLWHGE\3HWHU/XQWDQG$GULDQ)XUQKDP&KHOWHQKDP8.(GZDUG(OJDUSS

'LWWPDU+HOJD$GROHVFHQWV¶HFRQRPLFEHOLHIDQGVRFLDOFODVVLQ (FRQRPLF

6RFLDOL]DWLRQ7KH(FRQRPLF%HOLHIVDQG%HKDYLRXUVRI<RXQJ3HRSOHHGLWHGE\3HWHU/XQWDQG$GULDQ)XUQKDP&KHOWHQKDP8.(GZDUG(OJDUSS

(GJHUWRQ5REHUW%6LFN6RFLHWLHV&KDOOHQJLQJWKH0\WKRI3ULPLWLYH+DUPRQ\ 1HZ<RUN)UHH3UHVV

)UDQN5REHUW+7KRPDV*LORYLFKDQG'HQQLV75HJDQ'RHV6WXG\LQJ(FRQRPLFV,QKLELW&RRSHUDWLRQ"7KH-RXUQDORI(FRQRPLF3HUVSHFWLYHV



)UDQN5REHUW+7KRPDV'*LORYLFK'HQQLV75HJDQ'R(FRQRPLVWV0DNH%DG&LWL]HQV"7KH-RXUQDORI(FRQRPLF3HUVSHFWLYHV

*RZOHWW-RKQ$-7RROV²WKH3DOHROLWKLF5HFRUGLQ7KH&DPEULGJH

(QF\FORSHGLDRI+XPDQ(YROXWLRQHGLWHGE\6WHYHQ-RQHV5REHUW0DUWLQDQG'DYLG3LOEHDP&DPEULGJH8.SS

+D\HN)$7KH)DWDO&RQFHLW &KLFDJR7KH8QLYHUVLW\RI&KLFDJR3UHVV

+HQULFK-RVHSK5REHUW%R\G6DPXHO%RZOHV&ROLQ&DPHUHU(UQVW)HKU+HUEHUW*LQWLVDQG5LFKDUG0F(OUHDWK,Q6HDUFKRI+RPR(FRQRPLFXV%HKDYLRUDO([SHULPHQWVLQ6PDOO6FDOH6RFLHWLHV $PHULFDQ(FRQRPLF5HYLHZ0D\

-REOLQJ,DQ)DXWOHVV0RQVWHUV3RVLWLYH%LDVHVLQ6HOI3HUFHSWLRQDQGWKH 1LQHWHHQWK&HQWXU\1RYHO+HURSDSHUSUHVHQWHGDWWKHPHHWLQJVRIWKH+XPDQ%HKDYLRUDQG(YROXWLRQ6RFLHW\5XWJHUV8QLYHUVLW\

-RQHV&KDUOHV,:DVDQ,QGXVWULDO5HYROXWLRQ,QHYLWDEOH"(FRQRPLF*URZWK2YHU

WKH9HU\/RQJ5XQ $GYDQFHVLQ0DFURHFRQRPLFV9RO1R$UWLFOHKWWSZZZEHSUHVVFRPEHMPDGYDQFHVYROLVVDUW

.DSORZ/RXLVDQG6WHYHQ6KDYHOO )DLUQHVVYHUVXVZHOIDUH&DPEULGJHDQG/RQGRQ+DUYDUG8QLYHUVLW\3UHVV

.HHOH\/DZUHQFH+:DU%HIRUH&LYLOL]DWLRQ1HZ<RUN2[IRUG8QLYHUVLW\3UHVV

.HOO\5REHUW/7KH)RUDJLQJ6SHFWUXP'LYHUVLW\LQ+XQWHU*DWKHUHU/LIHZD\V:DVKLQJWRQ'&6PLWKVRQLDQ,QVWLWXWLRQ3UHVV

.QDXIW%UXFH9LROHQFHDQG6RFLDOLW\LQ+XPDQ(YROXWLRQ&XUUHQW$QWKURSRORJ\LQFOXGLQJFRPPHQWVDQGUHSO\

.UHPHU0LFKDHO3RSXODWLRQ*URZWKDQG7HFKQRORJLFDO&KDQJH2QH0LOOLRQ%&WR4XDUWHUO\-RXUQDORI(FRQRPLFV

/DODQG.HYLQ1DQG*LOOLDQ5%URZQ6HQVHDQG1RQVHQVH(YROXWLRQDU\

3HUVSHFWLYHVRQ+XPDQ%HKDYLRXU1HZ<RUN2[IRUG8QLYHUVLW\3UHVV

/HLVHU'DYLGDQG0DUJDULW*DQLQ(FRQRPLFSDUWLFLSDWLRQDQGHFRQRPLFVRFLDOL]DWLRQLQ (FRQRPLF6RFLDOL]DWLRQ7KH(FRQRPLF%HOLHIVDQG%HKDYLRXUVRI

<RXQJ3HRSOHHGLWHGE\3HWHU/XQWDQG$GULDQ)XUQKDP&KHOWHQKDP8.(GZDUG(OJDU

/XQW3HWHUDQG$GULDQ)XUQKDP (FRQRPLF6RFLDOL]DWLRQ7KH(FRQRPLF%HOLHIVDQG%HKDYLRXUVRI<RXQJ3HRSOH&KHOWHQKDP8.(GZDUG(OJDU

0DUZHOO*HUDOGDQG5XWK$PHV(FRQRPLVWV)UHH5LGH'RHV$Q\RQH(OVH" -RXUQDORI3XEOLF(FRQRPLFV

0DVVRQ$OLVRQDQG3DXO+5XELQ0DWFKLQJ3UHVFULSWLRQ'UXJVDQG&RQVXPHUV7KH%HQHILWVRI'LUHFW$GYHUWLVLQJ 1HZ(QJODQG-RXUQDORI0HGLFLQH

0D\QDUG6PLWK-RKQDQG(RUV6]DWKPDU\7KH2ULJLQVRI/LIH)URPWKH%LUWKRI

/LIHWRWKH2ULJLQVRI/DQJXDJH1HZ<RUN2[IRUG8QLYHUVLW\3UHVV



3LQNHU6WHYHQ7KH/DQJXDJH,QVWLQFW 1HZ<RUN:0RUURZ

3LQNHU6WHYHQ +RZWKH0LQG:RUNV1HZ<RUN1RUWRQ

3LQNHU6WHYHQ7KH%ODQN6ODWH7KH0RGHUQ'HQLDORI+XPDQ1DWXUH1HZ<RUN9LNLQJ

3OLQHU3DWULFLD-RQDWKDQ)UHHGPDQ5RQD$EUDPRYLWFKDQG3HWHU'DUN&KLOGUHQDVFRQVXPHUVLQWKHODERUDWRU\DQGEH\RQGLQ (FRQRPLF6RFLDOL]DWLRQ7KH

(FRQRPLF%HOLHIVDQG%HKDYLRXUVRI<RXQJ3HRSOHHGLWHGE\3HWHU/XQWDQG$GULDQ)XUQKDP&KHOWHQKDP8.(GZDUG(OJDUS

3RVQHU5LFKDUG$ (FRQRPLF$QDO\VLVRI/DZ$VSHQ/DZDQG%XVLQHVV 1HZ<RUN)LIWK(GLWLRQ

1HZFRPE6LPRQ7KH3UREOHPRI(FRQRPLF(GXFDWLRQ7KH4XDUWHUO\-RXUQDORI

(FRQRPLFV

5LGOH\0DWW7KH2ULJLQVRI9LUWXH+XPDQ,QVWLQFWVDQGWKH(YROXWLRQRI

&RRSHUDWLRQ1HZ<RUN9LNLQJ3UHVV

5XELQ3DXO+:K\LVWKH&RPPRQ/DZ(IILFLHQW -RXUQDORI/HJDO6WXGLHV

5XELQ3DXO+ 'DUZLQLDQ3ROLWLFV7KH(YROXWLRQDU\2ULJLQRI)UHHGRP1HZ%UXQVZLFN1-5XWJHUV8QLYHUVLW\3UHVV

6LPRQ-XOLDQ7KH8OWLPDWH5HVRXUFH3ULQFHWRQ3ULQFHWRQ8QLYHUVLW\3UHVV

6WHLQ%HQMDPLQ7KH9LHZ)URP6XQVHW%RXOHYDUG 1HZ<RUN%DVLF%RRNV

6WLQHU0DU\&1DWDOLH'0XQUR7RGG$6XURYHOO(LWDQ7FKHUQRYDQG2IHU%DU<RVHI3DOHROLWKLF3RSXODWLRQ*URZWK3XOVHV(YLGHQFHGE\6PDOO$QLPDO

([SORLWDWLRQ6FLHQFH6HSWHPEHU6FLHQFH2QOLQHYHUVLRQ

7RRE\-RKQDQG/HGD&RVPLGHVLQSUHVV7KHHYROXWLRQRIFRDOLWLRQDODJJUHVVLRQDQGLWVFRJQLWLYHIRXQGDWLRQV,Q (YROXWLRQDU\3V\FKRORJ\)RXQGDWLRQDO3DSHUV(GLWHGE\-RKQ7RRE\DQG/HGD&RVPLGHV&DPEULGJH0,73UHVV

7ULYHUV5REHUW/7KH(YROXWLRQRI5HFLSURFDO$OWUXLVP4XDUWHUO\5HYLHZRI

%LRORJ\

:DOGIRJHO-RHO7KH'HDGZHLJKW/RVVRI&KULVWPDV7KH$PHULFDQ(FRQRPLF

5HYLHZ

:DOVWDG:LOOLDP(FRQRPLFNQRZOHGJHDQGWKHIRUPDWLRQRIHFRQRPLFRSLQLRQV

DQGDWWLWXGHVLQ (FRQRPLF6RFLDOL]DWLRQ7KH(FRQRPLF%HOLHIVDQG%HKDYLRXUVRI<RXQJ3HRSOHHGLWHGE\3HWHU/XQWDQG$GULDQ)XUQKDP&KHOWHQKDP8.(GZDUG(OJDU

:DVKLQJWRQ3RVW .DLVHU)DPLO\)RXQGDWLRQ+DUYDUG8QLYHUVLW\6XUYH\3URMHFW6XUYH\RI$PHULFDQVDQG(FRQRPLVWVRQWKH(FRQRP\6$((VXPPDU\DYDLODEOHRQOLQHDWKWWSZZZNIIRUJFRQWHQWDUFKLYHHFRQJHQKWPO



:HOOPDQ+HQU\0DQG6XVDQ$*HOPDQ.QRZOHGJH$FTXLVLWLRQLQ)RXQGDWLRQDO'RPDLQVLQ +DQGERRNRIFKLOGSV\FKRORJ\HGLWHGE\:LOOLDP'DPRQ9ROXPH&RJQLWLRQ3HUFHSWLRQDQG/DQJXDJHYROXPHHGLWHGE\'HDQQD.XKQDQG5REHUW6LHJOHU1HZ<RUN-RKQ:LOH\6RQVSS

:RRGEXUQ-+XQWHUVDQG*DWKHUHUV7RGD\DQG5HFRQVWUXFWLRQRIWKH3DVWLQ

6RYLHWDQG:HVWHUQ$QWKURSRORJ\HGLWHGE\$*HOOQHU/RQGRQ'XFNZRUWKSSTXRWHGLQ.HOO\

:UDQJKDP5LFKDUGDQG'DOH3HWHUVRQ 'HPRQLF0DOHV$SHVDQGWKH2ULJLQVRI +XPDQ9LROHQFH1HZ<RUN+RXJKWRQ0LIIOLQ

<H]HU$QWKRQ\05REHUW6*ROGIDUEDQG3DXO-3RSSHQ'RHV6WXG\LQJ(FRQRPLFV'LVFRXUDJH&RRSHUDWLRQ":DWFK:KDW:H'R1RW:KDW:H6D\2U+RZ:H3OD\7KH-RXUQDORI(FRQRPLF3HUVSHFWLYHV

Documents

folk economics