Abstract
Interpreting three tales based on the words of Hume, Hobbes, and Nozick, and a letter by Vilfredo Pareto, we present a comparative analysis of household production in several societies with and without State. The community we analyse is formed by two households, which may either follow a selfish or an altruistic logic. Furthermore, unless the stateless community has a common defence against external marauders or implements protection in cases of bad weather, the household production can be stolen or damaged. The society with State is ruled by a Government that can be either partisan or bipartisan. The economic analysis of the private and public choice of this community allows us to compare the efficiency and inequality of several configurations of society, as depicted by classical political economy.
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Notes
According to Socrates, the State is an ethical institution that should educate individuals to become better citizens. For Plato the philosophers should govern the community, the warriors should defend it, and the artisans and tradesmen should produce and trade goods. In addition, philosophers and warriors should share their property with the community, to avoid conflicts of interest. Finally, according to Aristotle, the three political forms of the State are monarchy, aristocracy, and politeia. However, these political forms could degenerate and become, respectively, tyranny, oligarchy, and democracy.
An example of the lobby controlling the State is the model by Grossman and Helpman (1994), where different lobbies can bid for protection and the policy outline is supported by the contribution of these lobbies. For a review of the economic studies on the implications of a State controlled by a partisan or political party see Hibbs (1992).
Another framework to analyse the agents’ behaviour and to compare different societies with respect to the levels of public good provided and efficiency uses the I-rationality and the we-rationality paradigms (Arena and Conein 2008). The distinction between these two types of behaviour is part of the literature on individual and collective rationality and choices. See, for example, Sugden (2000) and Becchetti et al. (2010, 2013).
In order to define this concept as a new ethics, Laffont (1975) postulated that an agent assumes that the other agents will act as he does, and he maximizes his utility function under this new constraint. Harsanyi (1980) called this rational behaviour “rational commitment principle” since it requires each agent to contribute in the same way he would want others to do, regardless of whether others actually make this contribution. Sugden (1984) called it the principle of unconditional commitment, while he called the conditional commitment principle “the reciprocity principle”. Indeed, for this principle, under certain qualifications, if everyone else contributes a particular level of contribution to a public good, one must do the same.
A comparative institutional approach similar to the one in our paper can be found in Angelini et al. (2019), where different settings of society are compared in the provision of a public good and in the efficiency of the society itself
Hereafter, the superscript of a variable indicates the agent.
This tale is based on our interpretation of the concept of agency introduced by Nozick (1974).
Hereafter, derivatives of first order with respect to a variable are, indicated by a single subscript.
The adjusted utility in Levine (1998) is as follows: \(v_i=u_i+\sum _{j\ne i}\frac{a_i+\lambda a_j}{1+\lambda }u_j\), where \(u_i\) is agent i’s utility.
It is straightforward to demonstrate that when agents do not cooperate, they do not exert extra work and will fix \(\alpha ={\hat{\alpha }}=0\) and \(\beta ={\hat{\beta }}=0\).
In both cases, we assume that the State defence action is implicit and its army is financed by levying a tax on the agents’ harvest.
Making A and B contribute in the same way to the cost of the agency is not inefficient since the private agents have the same objective function.
For a selection of Pareto letters to Liberty, see Pareto (2018).
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Acknowledgements
We would like to thank the organizers of and the participants to the HEIRS 2018 Conference in Naples for their precious suggestions. We are indebted to Antonello Scorcu for his valuable comments on a previous version of this paper. We would also like to thank the two anonymous reviewers for their insightful comments.
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Angelini, F., Candela, G. & Castellani, M. Households production in State and stateless societies: three tales and one letter. Int Rev Econ 67, 31–45 (2020). https://doi.org/10.1007/s12232-019-00341-w
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DOI: https://doi.org/10.1007/s12232-019-00341-w