Welcome to my Economics Blog!
- Microeconimics VS. Macroeconomics
- Pozitive & Normative Economics
- Constitutional Economics (CE)
What Is Constitutional Economics (CE)
Constitutional Economics is a branch of economics focusing on the economic analysis of the constitutional law of a state. People often view this field of study as differing from more traditional forms of economics, because it focuses specifically on the ways the constitutional rules and economic policies of a state benefit and restrict the economic rights of its citizens.
Understanding Constitutional Economics (CE)
Constitutional Economics emerged in the 1980s as a field of economic study investigating the economic conditions as they are constructed and constrained within the framework of a state’s constitution. Constitutional economics principles are used to estimate how a country or political system will grow economically since a constitution limits what activities individuals and businesses can legally participate in. Although the term was first coined by economist Richard Mackenzie in 1982, another economist, James M. Buchanan, developed the concept and helped to establish constitutional economics as its own sub-discipline within academic economics. In 1986, Buchanan was awarded the Nobel Prize in Economics for developing “the contractual and constitutional bases for the theory of economic and political decision-making.” Because constitutional economics studies the ways legal frameworks influence and impact economic development, the field is often applied to developing countries and countries with changing political systems
The Origins of CE
Constitutional economics is usually seen as a direct descendant of public choice theory, which originates in the 19th century and concerns itself with the ways economic tools organize and influence political behavior.
One of the defining texts of public choice theory, The Calculus of Consent: Logical Foundations of Constitutional Democracy, was published in 1962 by James M. Buchanan and Gordon Tullock. Cited by Buchanan as a “politics without romance,” public choice theory investigates the economic functions and tensions between citizens, government and the persons who comprise governing bodies. For instance, public choice economists would investigate the theoretical underpinnings of the ways in which governing officials use their positions to foreground their own economic interests while simultaneously pursuing goals of public good. Principles of public choice theory are often invoked when explaining the economic decisions of governing bodies which seem in conflict with the desires of a democratic electorate, such as pork-barrel projects and the engagement of political lobbyists. In addition to Buchanan, many public choice theorists have been awarded Nobel Prizes in Economics, including George Stigler in 1982, Gary Becker in 1992, Vernon Smith in 2002 and Elinor Ostrom in 2009.
- ECONOMICS
- Public Economics
Equity (economics)
Public economics (or economics of the public sector) is the study of government policy through the lens of economic efficiency and equity. Public economics builds on the theory of welfare economics and is ultimately used as a tool to improve social welfare.
Public economics provides a framework for thinking about whether or not the government should participate in economic markets and to what extent it should do so. Microeconomic theory is utilized to assess whether the private market is likely to provide efficient outcomes in the absence of governmental interference; this study involves the analysis of government taxation and expenditures.
This subject encompasses a host of topics including market failures, externalities, and the creation and implementation of government policy.
Broad methods and topics include:
- The theory and application of public finance
- Analysis and design of public policy
- Distributional effects of taxation and government expenditures
- Analysis of market failure and government failure.
Emphasis is on analytical and scientific methods and normative-ethical analysis, as distinguished from ideology. Examples of topics covered are tax incidence, optimal taxation, and the theory of public goods.
Overview
Inequality and inequities have significantly increased in recent decades, possibly driven by the worldwide economic processes of globalisation, economic liberalisation and integration. This has led to states ‘lagging behind’ on headline goals such as the Millennium Development Goals (MDGs) and different levels of inequity between states have been argued to have played a role in the impact of the global economic crisis of 2008–2009.
Equity is based on the idea of moral equality. Equity looks at the distribution of capital, goods, and access to services throughout an economy and is often measured using tools such as the Gini index. Equity may be distinguished from economic efficiency in overall evaluation of social welfare. Although ‘equity’ has broader uses, it may be posed as a counterpart to economic inequality in yielding a “good” distribution of wealth. It has been studied in experimental economics as inequity aversion.
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