Markets vs. Government when Rationality Is Unequally Bounded: Some Consequences of Cognitive Inequalities for Theory and Policy

Pavel Pelikan
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Pavel Pelikan: Prague University of Economics and The Ratio Institute, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden, http://www.ratio.se/pelikan

No 85, Ratio Working Papers from The Ratio Institute

Abstract: Recognizing that human rationality has bounds that are unequal across individuals entails treating it as a special scarce resource, tied to individuals and used for deciding on its own uses. This causes a meta-mathematical difficulty to the axiomatic theories of human capital and resource allocation, and raises a new problem for comparative institutional analysis, allowing it to explain some so far little understood differences between markets and government. The policy implications strengthen the case against national planning, selective industrial policies, and government ownership of enterprises, but weaken the case against paternalism.

Keywords: Rationality; meta-mathematics; institutions; markets; government (search for similar items in EconPapers)
JEL-codes: A10 D61 G10 H10 O16 P51 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2006-03-21, Revised 2006-09-03
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-fin, nep-ict and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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