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Institutional structure and the optimal level of lying Item Type Thesis Authors Hiser, Rodney F. Download date 07/10/2021 10:06:47 Link to Item http://hdl.handle.net/11122/9530 INFORMATION TO USERS This manuscript has been reproduced from the microfilm master. UMI films the text directly from the original or copy submitted. Thus, some thesis and dissertation copies are in typewriter face, while others may be from any type of computer printer. The quality of this reproduction is dependent upon the quality of the copy submitted. Broken or indistinct print, colored or poor quality illustrations and photographs, print bleedthrough, substandard margins, and improper alignment can adversely affect reproduction. In the unlikely event that the author did not send UMI a complete manuscript and there are missing pages, these will be noted. Also, if unauthorized copyright material had to be removed, a note will indicate the deletion. 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INSTITUTIONAL STRUCTURE AND THE OPTIMAL LEVEL OF LYING A THESIS Presented to the Faculty of the University of Alaska Fairbanks in Partial Fulfillment of the Requirements for the Degree of DOCTOR OF PHILOSOPHY By Rodney F. Hiser, M. S. Fairbanks, Alaska December 1999 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. UMI Number 9961379 Copyright 2000 by Hiser, Rodney F. All rights reserved. __ ___ @ UMI UMI Microform9961379 Copyright 2000 by Bell & Howell Information and Learning Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code. Bell & Howell Information and Learning Company 300 North Zeeb Road P.O. Box 1346 Ann Arbor, Ml 48106-1346 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. INSTITUTIONAL STRUCTURE AND THE OPTIMAL LEVEL OF LYING By Rodney Fred Hiser RECOMMENDED: Advisory Committee Chair Economics .Department Head APPROVED: — Dean, School of Management Dean, Graduate School Date Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Abstract Institutional Structure and the Optimal Level of Lying Rodney Fred Hiser This study is an interdisciplinary comparative analysis of two institutional structures and their relation to lying. The author examines institutional structure through an institutional continuum with contrasting ideal-types at opposing ends. These ideal- types are the “private property order” and the “bureau.” The author models lying as a benefit-cost analysis and examines lying through a two-person model of society called the “information relation.” Using the information relation, he shows the problem of lying is an agency problem between the informer and the informee. In two separate analyses, the author evaluates the ideal-types’ tendencies to either allow or hinder lying. In the first analysis, the author identifies seven protection-from- lying strategies and compares their necessary requirements to the institutional constraints of the ideal types. In the second analysis, the author examines six social phenomena, within the institutional context of each ideal type, that affect people’s benefit-cost ratio of lying. The author concludes that there exists a positive correlation between the degree of central planning and the optimal level of lying, as seen from the point of view of each individual in society. The author argues that a movement on the continuum away from the private property order toward the bureau tends to (1) breakdown community relations, (2) provide incentive for society members to adopt value relativism, (3) change the nature of competition (4) lower society’s overall material standard of living, and (5) create a social environment of mutual self-deception. The author sees important implications in this study for the economics of information, theories of government regulation, and the sociology of science. iii Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Table of Contents Page List of Tables..........................................................................................................................vi Chapter 1. Introduction........................................................................................................... I Theories of Truth..............................................................................................3 Institutions and Optimality..............................................................................6 Methods of Lying............................................................................................ 8 Lying as a Benefit-Cost Analysis................................................................. 12 The Information Relation and the Agency Problem....................................15 Division of Labor, Particular Knowledge, and the Agency Problem 23 Social Remedies to Lying............................................................................. 25 Comparing Markets and Bureaus.................................................................29 Justification of Methodology........................................................................ 31 The Great Debate........................................................................................ 32 The Sciences in Turmoil........................................................................... 38 Disagreement in Economics...................................................................... 39 2. Protection-From-Lying Strategies...................................................................44 The Simple Strategies....................................................................................44 Reputation...................................................................................................... 48 Community..................................................................................................... 61 Ideology...........................................................................................................75 3. Lying in the Private Property Order.................................................................96 Choosing A Market Model........................................................................... 96 The Private Property Order.........................................................................104 Protection Strategy Effectiveness in the Private Property Order 120 The Simple Strategies...............................................................................121 Reputation................................................................................................. 122 Community................................................................................................ 128 iv Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Ideology.....................................................................................................138 The Benefit-Cost Ratio of Lying in the Private Property Order 147 Particular Knowledge.............................................................................. 148 Organizations........................................................................................... 149 The Free-Rider Problem.......................................................................... 155 Institutional Restrictions of Communication............... 164 Time Preference.......................................................................................172 Ethical Codes of Conduct Engendered by the Private Property Order 174 4. Lying in the Bureau......................................................................................... 180 Weber’s Model of Bureaucracy..................................................................180 Qualifying Weber’s Model of Bureaucracy..............................................185 Protection Strategy Effectiveness in the Bureau......................................201 The Simple Strategies..............................................................................202 Reputation ...................................................................................... 206 Community...............................................................................................210 Ideology.................................................................................................... 222 The Benefit-Cost Ratio of Lying in the Bureau.........................................231 Particular Knowledge..............................................................................232 Organizations...........................................................................................234 The Free-Rider