FOUR ESSAYS ON POLITICAL ECONOMY

Abstract

This dissertation uses public choice economics to analyze market and governance institutions. Chapter one focuses on the free-rider problem of aid, the collective action problem of getting people to contribute privately to charity. It compares zakat, the third pillar of Islam, with ordinary charity to show that zakat solves the collective action problem by changing the very framework of giving. Chapter two examines monetary policy, monetary institutions, and public finance through the lens of public choice. It provides a historical case of Venice’s Zecca Mint which provided the elite patricians of Venice with a stable currency, playing a role in fostering the economic success of the Republic of Venice. This chapter identifies three factors that together formed a self-enforcing monetary constitution to inhibit public currency debasement in historic Venice: (i) the assignment of public debt to patricians, (ii) the nearly uniform trade-centric focus of the patricians, and (iii) the use of turn-taking in office for mintmasters. Chapter three provides a public choice explanation for the growth in unfunded liabilities at the state and local level based on James Buchanan and Richard Wagner’s explanation for the growth of government spending under Keynesianism; that eliminating traditional balanced budget constraints enabled the intergenerational transfer of debt. By interpreting this growth in unfunded liabilities through this public-choice framework, this paper helps provide a more comprehensive public-choice explanation for the growth in unfunded pension liabilities. Transitioning from defined-benefit pensions to defined-contribution retirement accounts would help restore taxpayer constraint on the growth of these unfunded liabilities. Chapter four expands on Kirzner’s theory of entrepreneurial alertness. We develop a framework to study creative genius. We identify the conditions under which market forces will favor the performance of both functions (the entrepreneurial and the artistic) by the same person and those under which a different person performs each task. We use evidence from the historical records on the markets for paintings in the Italian Renaissance and those on the contemporary market for the visual arts.