Rules vs' Discretion in Human Affairs

1
Rules vs. Discretion in Human Affairs

• Peter J. Boettke
• Econ 828/Fall 2005
• 24 October

2
Main Points

• Rule of Law vs. Rule of Man
• Law as a factor of production
• Binding, Predictability and thus calculability
• Time Inconsistency and Public Policy
• Long and Variable Lag
• Myopia and changing circumstances
• Simple Rules for a Complex world
• Non-predictability and changing circumstances
• Law amid flux

3
Rule of Law vs. Rule of Man

• Spontaneous Order versus Rational Constructivism
• Division of labor gives rise to Division of
  knowledge
• Civilization and the growth of knowledge (p.
  13-14 37-39)
• Principle vs. Expediency (55 56-57 65)
• Law versus Legislation (72-73 82 85-86 88)
• L, L, L, Vol. 1 (1973).
• Freedom and the unforeseen and unpredictable
• Ends independent and Abstract

4
Time Inconsistency and Public Policy

• T1 ? T2
• College tuition and Sons values
• Want an educated and responsible son, get an
  educated and irresponsible son in order to avoid
  having an uneducated and irresponsible son.
• Inflation and Unemployment
• Central bank and unions central banker wants low
  inflation, and unions wants cost of living
  raises.
• Taxing of windfall profits and RD
• Rules and Incentives
• Destabilizing economic conditions through
  discretion
• Long and variable lag
• Reputation and Credibility
• Mutual hostage taking

5
Buchanan and Brennan

• Why model political man as homoeconomicus? (p.
  53-75)
• Constraining knaves
• Time and Temptation (p. 76-107)
• Constraining ourselves to realize goals
• Constitutional Opportunity
• Improvements in rules which bind

6
Simple Rules for a Complex World

• In a complex world where everything is shifting
  (underlying and induced variables) something must
  be relatively stable in order to provide an
  anchor.
• Rule of precedent in law (judge made law)
• Rules of just conduct (norms and expectations)