Exit and Voice

Total Page:16

File Type:pdf, Size:1020Kb

Exit and Voice Exit and Voice Papers from a Revisionist Public Choice Perspective Brad R. Taylor July 2014 A thesis submitted for the degree of Doctor of Philosophy of The Australian National University ii DECLARATION With the exception of chapters 7 and 8, I declare that this thesis is entirely my own work. Chapters 7 and 8 were co-authored with Patri Friedman. The original concepts of both papers were Friedman’s. I drafted the first versions of both papers, and revisions were made collaboratively. Brad R. Taylor July 2014 iii Table of Contents Declaration .............................................................................................................. ii Acknowledgements ............................................................................................... iv Abstract ................................................................................................................... v Chapter 1 Introduction .......................................................................................... 1 Chapter 2 Rational Irrationality as Dual Process Theory ................................ 40 Chapter 3 Exit and the Epistemic Quality of Voice ........................................... 58 Chapter 4 Strategic and Expressive Voting ........................................................ 74 Chapter 5 Children’s Rights with Endogenous Fertility ................................... 87 Chapter 6 Analytic Radicalism .......................................................................... 115 Chapter 7 Entry Barriers and Tiebout Competition (co-authored with Patri Friedman) ............................................................................................................ 121 Chapter 8 Seasteading: Competitive Governments on the Ocean (co-authored with Patri Friedman) .......................................................................................... 139 Chapter 9 Conclusion ......................................................................................... 156 References ............................................................................................................ 197 iv Acknowledgements This thesis could not have happened without the help and support of many people. My largest and most direct is to my supervisor Keith Dowding, whose open but incisive mind forced me to refine the ideas presented here and abandon many others which failed to make the cut. Keith achieved the impossible trinity of being simultaneously critical, encouraging, and practical. I am also indebted to Geoff Brennan for his advisory services. As an originator of the methodological approach I take in this thesis, having Geoff on my panel has been invaluable. I also thank Mike Miller for his brief but useful tenure on my advisory panel. I am grateful to Patri Friedman for his collaboration on chapters seven and eight, as well as for the countless words of discussion on Tiebout competition and public choice theory more generally. Will Bosworth has provided extremely useful comments on this thesis from a philosophical perspective, and our beer-fuelled discussions have both broadened and refined my thinking on epistemic rationality. Eric Crampton also deserves special mention, not only for his insightful comments on various parts of this thesis, but also for introducing me to public choice theory and encouraging my early efforts in the area. In addition, a number of others have provided valuable suggestions on various aspects of this thesis or otherwise indirectly contributed through comments and discussion, including Scott Adler, Tom W. Bell, Mhairi Cowden, Michael Dalvean, Ayre Hillman, Andrew Hindmoor, Daniel Holt, Yusaku Horiuchi, John Humphreys, Toshihiro Ihori, Christopher Kam, Andrew Klassen, Matthew Laing, Kevin Lyons, Phil Magness, Adam Masters, Trent McDonald, David Monk, Ryan Murphy, Adam Packer, Jason Potts, Ben Powell, Joe Quirk, Jeremy Shearmur, Jill Sheppard, Ed Stringham, Michael Strong, Marija Taflaga, and Evan Williams. I also thank the editors of the various journals to which I have submitted these papers and to the anonymous referees who have provided useful comments. I am also grateful to the generous financial support of The Institute for Humane Studies and the Australian taxpayer, as well as to The Seasteading Institute for allowing me to draft the initial work which would form the basis of chapters seven and eight. Finally, I would like to thank my family, Christine, Bob, Jolene, and Rosie, for their unwavering support during my many years of education and my wife Hayley for enduring the poverty, stress, and uncertainty which has accompanied graduate school and the beginning of an academic career. v Abstract This thesis by papers uses rational choice theory to consider the relative performance of individual exit and collective voice in politics, as well as the causal relationships between exit and voice as individual strategies and institutionalised means of controlling government behaviour. Following the methodological approach of Geoffrey Brennan and Alan Hamlin, the papers of this thesis are examples of ‘revisionist public choice theory,’ retaining the broad framework of rational choice while relaxing one or more of the standard assumptions generally made by economists. In particular, the papers of this thesis consider other- regarding preferences, non-instrumental preferences, dispositional choice, epistemic rationality, non-efficiency evaluative standards, and non-equilibrium dynamics. By taking a revisionist approach, I am able to steer a path between the excessive abstraction of much public choice theory and the insufficient rigour of much normative political theory. Jointly, the papers of this thesis contribute to broad debates over the relative value of exit and voice in political settings, with relevance to questions of democracy versus the market, centralism versus localism, and bureaucracy versus market-like modes of governance. Though I cover a range of diverse topics in this thesis, I generally argue for a strongly revisionist approach to political analysis which sees significant behavioural differences between individual and collective decisions while grounding all action in common motivational assumptions. vi 1 1. Introduction 1.1. Introduction When an individual is dissatisfied with a good or service they consume, an organisation to which they belong, or a jurisdiction in which they reside, they have two broad strategies of seeking improvement: exit and voice. In political contexts, individuals exercise voice when they sign a petition, protest a policy, or vote in an election. Individuals exercise exit when they choose between public providers, forgo public provision of some service and seek a private-sector alternative, or leave one jurisdiction to move to another. The contrast between exit and voice as responses to dissatisfaction is due to Hirschman (1970), though there are a number of important precursors. 1 Since the publication of Hirschman’s book, a number of political scientists, public choice scholars, and political philosophers have used the distinction and refined Hirschman’s model in various ways (Dowding, John, Mergoupis, & Van Vugt, 2000; Dowding & John, 2012, Chapter 2).2 This thesis is not a critique, extension, or refinement of Hirschman’s idea. Rather it unapologetically borrows exit and voice as analytic concepts and puts them to its own use. Most obviously, I completely ignore loyalty. Further, where Hirschman was primarily interested in the reciprocal relationship between exit and voice, my interests are often more comparative, though I will on occasion deal more directly with Hirschman’s central argument. The approach I take is grounded in the methodology of rational choice theory, though it is ‘revisionist’ in a number of respects. Conventional public choice theory generally makes a number of strong assumptions about human behaviour, and this has generated a great deal of criticism (J. Friedman, 1996; Green & Shapiro, 1994). Critics accuse rational choice theorists of making unrealistic 1 Buchanan’s (1954a) comparison of market and democratic choice and Tiebout’s (1956) model of jurisdictional exit are the most obvious examples from a rational choice perspective. While Hirschman is to my knowledge the first to investigate the casual interrelationships between exit and voice options, these earlier works made fairly explicit comparative analyses of exit and voice as individual decision making processes. 2 According to Google Scholar, Exit, Voice and Loyalty has been cited 14,414 times as of July 2014. This is a popular book by any standard. 2 assumptions and ignoring a number of causally and normatively important factors. While I am sympathetic to such criticisms in many cases, in accepting them we need not abandon rational choice theory altogether. The development of a ‘revisionist public choice theory’ (G. Brennan & Hamlin, 2008) considering the non-material incentives which motivate actors, paying careful attention to the costs of decision making and the strategies used to economise on such costs, and also connecting itself more explicitly to questions in normative political theory allows us to use economic tools such as game theory and price theory without ignoring important human motivations or taking the normative agnosticism of positive theory to mean that we cannot ‘as scientists’ connect positive results to normative concerns. Each chapter of this thesis is revisionist in its own way. While the assumptions of conventional public choice theory have
Recommended publications
  • Market Design in the Presence of Repugnancy: a Market for Children
    Shane Olaleye Market Design in the Presence of Repugnancy: A Market for Children Shane Olaleye Abstract A market-like mechanism for the allocation of children in both the primary market (market for babies) and the secondary market (adoption market) will result in greater social welfare, and hence be more efficient, than the current allocation methods used in practice, even in the face of repugnancy. Since a market for children falls under the realm of repugnant transactions, it is necessary to design a market with enough safeguards to bypass repugnancy while avoiding the excessive regulations that unnecessarily distort the supply and demand pressures of a competitive market. The goal of designing a market for children herein is two-fold: 1) By creating a feasible market for children, a set of generalizable rules and principles can be realized for designing functioning and efficient markets in the face of repugnancy and 2) The presence of a potential, credible and efficient market in the presence of this repugnancy will stimulate debate into the need for such markets in other similar areas, especially in cases creating a tradable market for organs for transplantation, wherein the absence of the transaction is often a death sentence for those who wish to, but are prevented from, participating in the market. Introduction What is a Repugnant Transaction? Why Care About It? Classical economics posits that when the marginal benefit of an action outweighs its marginal cost, a market mechanism can be implemented wherein an appropriate price emerges that balances the marginal benefit and marginal cost of the action through a suitable transaction between counterparties.
    [Show full text]
  • Baoguang Zhai Gisposter
    Mapping new FronƟers— Use Socioeconomic lenses to find the best coastal ciƟes for seasteading Introduction Seasteading means the creaon and growth of permanent, autonomous ocean communies, or “seasteads,” to promote greater compeon and innovaon in polical and social systems. Seasteads will give people the opportunity to peacefully test new ideas about how to live togeth‐ er. The most successful will become thriving floang cies—inspiring change around the world. Since the founding of the Seasteading Instute in 2008 by the partnership of Patri Friedman, grandson of renowned economist Milton Friedman, and Silicon Valley investor and philanthropist Peter Thiel, the seasteading movement has been geng more and more aenon and recogni‐ on both within the US and across the world. Therefore, it is natural for seasteaders to look around the enre oceans of the world and study the most promising locaons for seasteading communies. The country is poliƟcally and economically liberal. The first spots for seasteading City Country Seasteading Score need to be more polically liberal, otherwise the seastead faces the danger of its estate Phase 2 City selecƟon - A city needs to sasfy two standards for it to be suitable for being expropriated by the government. For a seastead to be autonomous and funcon‐ New York United States 91.41 seasteading: ing, it also requires that the countries where the seasteads are located at to have rela‐ Stockholm Sweden 86.12 vely less economic regulaon and less government and tax burdens. The city is considered to be an important node in the global economic system. It is Dublin Ireland 85.79 a crucial strategy to build a seastead as a site of Amsterdam Netherlands 85.42 The economy of the country is compeƟƟve at building innovaƟve products and ser- aracon and a showcase for new ideas and max‐ Sydney Australia 85.15 vices.
    [Show full text]
  • Market Mechanisms and Central Economic Planning
    The Thomas JeffersonCenter Foundation Market Mechanisms and Central EconomicPlanning YVfiltonPriedman The C. Warren Nutter Lectures in Political Economy The C Warren Nutter Lectures in Political Economy The G. Warren Nutter Lectures in Political Economy have been insti­ tuted to honor the memory of the late Professor Nutter, to encourage scholarly interest in the range of topics to which he devoted his career, and to provide his students and associates an additional con­ tact with each other and with the rising generation of scholars. At the time of his death in January 1979, G. Warren Nutter was director of the Thomas Jefferson Center Foundation, adjunct scholar of the American Enterprise Institute, director of AEI's James Madison Center, a member of advisory groups at both the Hoover Institution and The Citadel, and Paul Goodloe Mcintire Professor of Economics at the University of Virginia. Professor Nutter made notable contributions to price theory, the assessment of monopoly and competition, the study of the Soviet economy, and the economics of defense and foreign policy. He earned his Ph.D. degree at the University of Chicago. In 1957 he joined with James M. Buchanan to establish the Thomas Jefferson Center for Studies in Political Economy at the University of Virginia. In 1967 he established the Thomas Jefferson Center Foundation as a separate entity but with similar objectives of supporting scholarly work and graduate study in political economy and holding confer­ ences of economists from the United States and both Western and Eastern Europe. He served during the 1960s as director of the Thomas Jefferson Center and chairman of the Department of Economics at the University of Virginia and, from 1969 to 1973, as assistant secre­ tary of defense for international security affairs.
    [Show full text]
  • Brazilian Economic Development in Historical Perspective
    GOVERNMENT, MARKET AND DEVELOPMENT: BRAZILIAN ECONOMIC DEVELOPMENT IN HISTORICAL PERSPECTIVE FABIANO ABRANCHES SILVA DALTO Thesis submitted in partial fulfilment of the requirements of the University of Hertfordshire for the degree of Doctor of Philosophy The programme of research has been carried out in the Department of Statistics, Economics, Accounting & Management Science, Business School, University of Hertfordshire November 2007 1 2 Abstract In the last 30 years the World has been swept by neoliberal doctrine. Under neoliberal conceptions, freedom of the market mechanism has precedence in the process of development. Neoliberalism has had a major impact on the mindset of policymakers, on government strategies for development and on economic performance. This thesis is about the economic consequences of neoliberalism in Brazil. It approaches the problem from a historical perspective. By examining government economic strategies in Brazil from the 1930s through the 1970s it undermines a central neoliberal argument that government interventions in the economy are either inimical or irrelevant to economic development. While government failures did occur indeed, in the Brazilian case it is shown that the government performed a crucial role in this period in building key institutions that guided market forces towards industrial transformation. Since the mid-1970s, Brazil has been a laboratory for neoliberal economic policymaking. Restrictive macroeconomic policies alongside liberalised markets have been the cornerstones of policymaking. The second line of argument developed here is that neoliberalism has since constrained economic development in Brazil. During this period the country has been through several financial crises and has experienced low economic growth and unprecedented unemployment. Compared with the previous period of government-led development, neoliberal policies and institutions fall far behind in terms of overall economic performance.
    [Show full text]
  • 86-2 17-37.Pdf
    Opinions expressedil'lthe/ nomic Review do not necessarily reflect the vie management of the Federal Reserve BankofSan Francisco, or of the Board of Governors the Feder~1 Reserve System. The FedetaIReserve Bank ofSari Fraricisco's Economic Review is published quarterly by the Bank's Research and Public Information Department under the supervision of John L. Scadding, SeniorVice Presidentand Director of Research. The publication is edited by Gregory 1. Tong, with the assistance of Karen Rusk (editorial) and William Rosenthal (graphics). For free <copies ofthis and otherFederal Reserve. publications, write or phone the Public InfofIllation Department, Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco, California 94120. Phone (415) 974-3234. 2 Ramon Moreno· The traditional critique of the "real bills" doctrine argues that the price level may be unstable in a monetary regime without a central bank and a market-determined money supply. Hong Kong's experience sug­ gests this problem may not arise in a small open economy. In our century, it is generally assumed that mone­ proposed that the money supply and inflation could tary control exerted by central banks is necessary to successfully be controlled by the market, without prevent excessive money creation and to achieve central bank control ofthe monetary base, as long as price stability. More recently, in the 1970s, this banks limited their credit to "satisfy the needs of assumption is evident in policymakers' concern that trade". financial innovations have eroded monetary con­ The real bills doctrine was severely criticized on trols. In particular, the proliferation of market­ the beliefthat it could lead to instability in the price created substitutes for money not directly under the level.
    [Show full text]
  • Friedrich Von Hayek and Mechanism Design
    Rev Austrian Econ (2015) 28:247–252 DOI 10.1007/s11138-015-0310-3 Friedrich von Hayek and mechanism design Eric S. Maskin1,2 Published online: 12 April 2015 # Springer Science+Business Media New York 2015 Abstract I argue that Friedrich von Hayek anticipated some major results in the theory of mechanism design. Keywords Hayek . Mechanism design JEL Classification D82 1 Introduction Mechanism design is the engineering part of economic theory. Usually, in economics, we take economic institutions as given and try to predict the economic or social outcomes that these institutions generate. But in mechanism design, we reverse the direction. We begin by identifying the outcomes that we want. Then, we try to figure out whether some mechanism – some institution – can be constructed to deliver those outcomes. If the answer is yes, we then explore the form that such a mechanism might take. Sometimes the solution is a “standard” or “natural” mechanism - - e.g. the “market mechanism.” Sometimes it is novel or artificial. For example, the Vickrey-Clarke- Groves (Vickrey 1961; Clarke 1971; Groves 1973) mechanism can be used for obtaining an efficient allocation of public goods - - which will typically be underprovided in a standard market setting (see Samuelson 1954). Friedrich von Hayek’s work was an important precursor to the modern theory of mechanism design. Indeed, Leonid Hurwicz – the father of the subject – was directly inspired by the Planning Controversy between Hayek and Ludwig von Mises on the A version of this paper was presented at the conference “40 Years after the Nobel,” George Mason University, October 2, 2014.
    [Show full text]
  • University of Florida Thesis Or Dissertation Formatting
    BETWEEN NATIONAL ATTACHMENTS, ROOTED GLOBALISM, AND BORDERLESS UTOPIAS: SEARCHING FOR IMAGINED COMMUNITIES IN LATIN AMERICA’S BOOMING ECONOMIC RELATIONS WITH THE ARAB WORLD By KEVIN B. FUNK A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY UNIVERSITY OF FLORIDA 2016 © 2016 Kevin B. Funk To Macarena, our growing family, and the struggle for a better world ACKNOWLEDGMENTS This research project, like all products of human creation, represents the collectively harvested fruit of the efforts of many. It has benefited enormously from the participation and interventions of countless family members, friends, compañeros, students, and colleagues, only some of whom I am able to acknowledge here. In particular, I would like to recognize the direct and indirect contributions of: my dissertation chair, Ido Oren, for his incisive comments, critical disposition, and ready willingness to allow me to pursue my interests in accordance with my values, along with my other committee members—Aida Hozic, Leann Brown, Philip Williams, and Matthew Jacobs—for their guidance, support, and mentorship; Sue and Pat, for their behind-the- scenes efforts; the many teachers, ranging from Chris Warnick to Dan O'Neill, who labored doggedly to cultivate my critical faculties and challenged me to set out on my own intellectual journeys, along with the many students for whom I hope to have done the same; my fellow activists in the union movement, for their dedication, solidarity, and unwillingness to be atomized and alienated through the inhospitable and individualistic professionalization structures and practices that surround us; and Mauro Caraccioli and Sebastián Sclofsky, for their amistad, along with the former’s sunny disposition in the face of adversity and the latter’s righteous indignation over the injustices that surround us, and their collective insistence that we engage in “a ruthless criticism of everything existing” (Marx 1843a).
    [Show full text]
  • Feasibility Claims in the Debate Over Anarchy Versus the Minimal State
    LIBERTARIAN PAPERS VOL. 10, NO. 2 (2018) FEASIBILITY CLAIMS IN THE DEBATE OVER ANARCHY VERSUS THE MINIMAL STATE BRAD R. TAYLOR* 1. Introduction Feasibility is a concept often invoked but rarely defined in political argument. We hear claims such as “Your ideas are good in principle, but wouldn’t work in practice” or “Sure, but that’s never going to happen,” but the precise content of such claims is often unclear. Feasibility or practicality is obviously important and must in some sense be a hard constraint on political argument if political argument is meant to serve a practical purpose. It does not matter how good the proposed solution would be; the fact of infeasibility acts as a trump card removing any need for a balancing of feasibility against desirability. We need not entertain impossible ideas, even really good ones. The idea of feasibility as a constraint on institutions and policy has played an important role in the argument for libertarian institutions. Buchanan’s (1984) characterization of public choice theory as “politics without romance” and Munger’s (2014) gentle mocking of “unicorn governance” have been powerful responses to those putting excessive faith in the willingness and ability of government to solve social problems. It may be possible to imagine an ideal set of policies through which a wise and *Brad R. Taylor is lecturer in economics and political economy at the University of Southern Queensland. CITATION INFORMATION FOR THIS ARTICLE: Brad R. Taylor. 2018. “Feasibility Claims in the Debate over Anarchy versus the Minimal State.” Libertarian Papers. 10 (2): 277-293.
    [Show full text]
  • Consumer Durables and the Optimality of Usually Doing Nothing
    NBER WORKING PAPER SERIES CONSUMER DURABLES AND THE OPTIMALITY OF USUALLY DOING NOTHING Avner Bar-lien Alan S. Blinder Working Paper No. 2488 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 January 1988 We thank Andrew Abel, Ben Bernanke, and Sanford Grossman for useful comments, John Amer for research assistance, and the NSF for financial support. The research reported here is part of the NBER's research program in Economic Fluctuations. Any opinions expressed are those of the authors and not those of the National Bureau of Economic Research. Support from The Lynde and Harry Bradley Foundation is gratefully acknowledged. NBER Working Paper #2488 January 1988 Consumer Durables and the Optimality of Usually Doing Nothing ABSTRACT often This paper develops a simple but important point which is overlooked: It is quite possible that the best policy for a rational, optimizing agent is to do nothing for long periods of time—-even if new, relevant information becomes available. We illustrate this point using the market for durable goods. Lumpy costs in durables transactions lead consumers to choose a finite range, not just a single level, for their durables consumption. The boundaries of this range change with new information and, in general, obey the permanent income hypothesis. However, as long as the durable stock is within the chosen region, the consumer will not change her stock. Hence individuals will make durable transactions from the infrequently and their consumption can differ substantially prediction of the strict PIH. Such microeconomic behavior means that aggregate data cannot be generated by a representativeagent; explicit aggregation is required.
    [Show full text]
  • Seasteading: Institutional Innovation on the Open Ocean
    Seasteading: Institutional Innovation on the Open Ocean Patri Friedman* and Brad Taylor† December 2010 Our Mission: To further the establishment and growth of permanent, autonomous ocean communities, enabling innovation with new political and social systems. Email: [email protected] website: www.seasteading.org __________________________________________________ * Executive Director, The Seasteading Institute. [email protected] † Research Associate, The Seasteading Institute. [email protected] Seasteading: Institutional Innovation on the Open Ocean Paper presented at the Australasian Public Choice Society Conference, December 9-10, 2010, University of Canterbury, Christchurch, New Zealand Patri Friedman* and Brad Taylor† Abstract: We develop a dynamic theory of the industrial organization of government which combines the insights of public choice theory and a dynamic understanding of competition. We argue that efforts to improve policy should be focused at the root of the problem – the uncompetitive governance industry and the technological environment out of which it emerges – and suggest that the most promising way to robustly improve policy is to develop the technology to settle the ocean. 1. Introduction While most political analysis focuses on policy, public choice theorists have correctly recognized that policy emerges from the constitutional level and shifted their focus accordingly. This has not only led to new insights, but also helps focus the efforts of political activists more effectively. Constitutional political economists have argued that the only way to robustly improve policy is to improve the constitutional rules which form the incentive structure of everyday politics. While the public choice approach is a significant improvement over standard forms of political analysis and activism which focus on the policy level, it ignores the question of why we do not have better constitutions.
    [Show full text]
  • La Derecha «Alternativa» Que Agita a Estados Unidos
    Este artículo es copia fiel del publicado en la revista NUEVA SOCIEDAD No 267, enero-febrero de 2017, ISSN: 0251-3552, <www.nuso.org>. La derecha La derecha radical en Estados Unidos se encuentra en ebullición. «alternativa» El neoconservadurismo obsesionado que agita a con los «valores cristianos», el Estados Unidos mercado y la dominación del orden mundial entró en crisis, y ese lugar lo ocupa hoy parcialmente un archipiélago denominado «derecha alternativa» (Alt-Right), del cual Donald Trump funge como un verdadero caballo de Troya. Discursos sobre clases medias enfrentadas a elites mundiales y locales, junto con abundantes dosis de racismo y sexismo y desdén por la democracia, dan forma a posicionamientos contradictorios entre sí, pero eficaces para construir imaginarios y movilizar LAURA RAIM al «pueblo blanco» de la nación. onald Trump no es precisamente un intelectual, pero existen algunos Dintelectuales que piensan el trumpismo. «Primer diario académico de #trumpismo radical», el sorprendente Journal of American Greatness (JAG) fue pionero al publicar, en marzo de 2016, artículos de fondo como el titulado «Hacia un trumpismo razonable y coherente» [«Toward a Sensible, Coherent Trumpism»] u otros con títulos intrigantes tales como «Paleostraussianismo, Laura Raim: es periodista independiente, colaboradora de Le Monde diplomatique y de Regards y confundadora del sitio cultural Hors-Série. Es coautora de Casser l’euro pour sauver l’Europe (con Franck Dedieu, Benjamin Masse-Stamberger y Béatrice Mathieu, Les Liens qui Libèrent, París, 2014). Palabras claves: Alt-Right, conservadurismo, derecha, Donald Trump, Estados Unidos. Nota: la versión original de este artículo fue publicada en la revista Revue du Crieur, 10/2016, con el título «Les défenseurs du peuple blanc contre la démocratie».
    [Show full text]
  • Market Mechanisms in Conventional Economics and Islamic Economics
    Munich Personal RePEc Archive Market mechanisms in conventional economics and Islamic Economics Nashihah, Faidatun Magister Program in Islamic Economics, Postgraduate of IAIN Syeikh Nurjati Cirebon 20 March 2019 Online at https://mpra.ub.uni-muenchen.de/93190/ MPRA Paper No. 93190, posted 09 Apr 2019 12:29 UTC Market Mechanisms in Conventional Economics and Islamic Economics Faidatun Nashihah Magister Program in Islamic Economics, Postgraduate of IAIN Syeikh Nurjati Cirebon Email: [email protected] Abstract This article describes the market as a meeting place between demand and supply for the type of goods or services. In a capitalist economic system, buyers and sellers bargain with each other to determine prices that give freedom to the market and the government must not intervene which can disrupt the market balance. While the socialist economic system has a view by eliminating the role of markets and the government plays an active role in resolving and regulating all economic problems. In Islamic economics, the market is left freely or the government distorts the existence of a market mechanism. Using a comparative approach to the existing economic system in the world, this article concludes that the Islamic economic system combines market freedom and the role of government that emphasizes the principle of maslahah (goodness), which is a condition of market justice that emphasizes the fulfillment of people's needs in achieving welfare (falah). Keywords: market mechanism, capitalism, socialism, Islamic economics, falah JEL
    [Show full text]