Roberta Herzberg - Social Coordination and Public Policy: Explorations in Theory and Practice

Series Editors

Virgil Storr and Jayme Lemke, Mercatus Center

The foundations of political economyfrom Adam Smith to the Austrian school of economics, to contemporary research in public choice and institutional analysisare sturdy and well established, but far from calcified. On the contrary, the boundaries of the research built on this foundation are ever expanding. One approach to political economy that has gained considerable traction in recent years combines the insights and methods of three distinct but related subfields within economics and political science: the Austrian, Virginia and Bloomington schools of political economy. The vision of this book series is to capitalize on the intellectual gains from the interactions between these approaches in order to both feed the growing interest in this approach and advance social scientists understanding of economy, polity, and society.

This series seeks to publish works that combine the Austrian schools insights on knowledge, the Virginia schools insights into incentives in non-market contexts, and the Bloomington schools multiple methods, real-world approach to institutional design as a powerful tool for understanding social behavior in a diversity of contexts.

Titles in the Series

Institutions and Incentives in Public Policy: An Analytical Assessment of Non-Market Decision-Making , edited by Rosolino Candela, Rosemarie Fike, and Roberta Herzberg

Economics and the Public Good: The End of Desire in Aristotles Politics and Ethics , by John Antonio Pascarella

Culture, Sociality, and Morality: New Applications of Mainline Political Economy, edited by Paul Dragos Aligica, Ginny Seung Choi, And Virgil Henry Storr

Nudging Public Policy: Examining the Benefits and Limitations of Paternalistic Public Policies , edited by Rosemarie Fike, Stefanie Haeffele, and Arielle John

Explorations in Theory and Practice

Edited by Roberta Q. Herzberg,

Gavin Roberts, and

Brianne Wolf

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Roberta Q. Herzberg, Gavin Roberts, and Brianne Wolf

A complete study of the chapters in this volume leaves a reader with a broad appreciation of the respective roles that markets, civil society, and government play in coordinating the social action we observe in that spontaneous order we call society. Several key factors tie the chapters in this volume together. First, each chapter examines how individuals move from their personal interests to social action across different arenas. Second, the chapters use the theoretical framework of mainline economics to explore these questions about individuals and social action, using the logic of Austrian economics, public choice theory, and institutional analysis to frame their questions. In this tradition, the authors are doing what James M. Buchanan (1999a) argues for in his essay What Should Economists Do? For Buchanan, economists and other social scientists should allow the explicit focus on the technical/engineering problem of scarce resource allocation, given full information about ends and means, to fade into the background. Instead, they should let exchange relationships, entrepreneurial discovery, and polycentric governance come to the forefront of social scientific analysis. Finally, the range of methods and disciplinary perspectives used by the authors suggests the benefit of multi-method approaches in examining critical questions in social science.

This volume presents a variety of theoretical and applied work related to the connections between social coordination and public policy using insights from the interrelated and interdependent Virginia, Austrian, and Bloomington Schools. In particular, this volume ranges from Emily-Chamlee Wrights Essential, Big, Simple, Capable ( EBS -Cap) theoretical framework for the scope of government action in the lead chapter and Alexander Khlers analysis of social coordination and social justice to Arthur R. Wardles unromantic scrutiny of compliance markets and Olivia Gonzalezs historical narrative of the Torpedo Factory Art Center in Alexandria, Virginia.

In this brief introductory chapter, we provide some basic foundational knowledge related to these schools of thought and their key insights, while referencing examples of these arguments from chapters in the volume associated with each school.

The Austrian School provides insights about entrepreneurs, knowledge, and the market process which facilitate social coordination. Entrepreneurs seek to earn profits by discovering inefficiencies. For example, an entrepreneur might discover a substitute to a monopolized product in a market. These discoveries and the actions they engender benefit society by bringing prices and actions more in line with the reality of scarcity when the discoveries and actions occur in the market process. However, entrepreneurs are also present in political processes, and the discoveries and actions of political entrepreneurs are less likely to align with the public interest. Often, as discussed in some chapters in this volume, political entrepreneurship leads the implementation of public policy to deviate from its original goals in favor of the common good. A primary driver of this deviation is the lack of knowledge available to policymakers, the knowledge problem, which can be taken advantage of by entrepreneurs.

Public policies or policymakers often suffer from what F. A. Hayek referred to as the knowledge problem. The problem is how to allocate resources efficiently given dispersed information among many individuals. In the public policy arena, many problems are treated as though they can be solved through planning because all of the relevant information is known. But Hayek tells us that knowledge is not given to anyone in its totality ( Hayek 1945 , 520). Instead, we ought to rely on individuals local knowledge of the particular circumstances of time and place ( Hayek 1945 , 522). The market system offers a better solution to the knowledge problem than government planning because it allows each individual to use their own knowledge in pursuit of their goals and coordinate with others who are doing the same through the price system. As Hayek (1945 , 526) puts it, Fundamentally, in a system in which the knowledge of the relevant facts is dispersed among many people, prices can act to coordinate the separate actions of different people in the same way as subjective values help the individual to coordinate the parts of his plan. The chapters in this volume explore ways in which the knowledge problem shows up in various public policy arenas and how the price system offers the most efficient solution to this problem. Hayek emphasizes the ways individuals are able to coordinate at different levels of society, especially individuals and small groups.