The Ethics and the Economics of Minimalist Government

The Ethics and the Economics of Minimalist Government

Timothy P. Roth

Because it is technically flawed and morally bankrupt, the author argues, the economist’s consequence-based, procedurally detached theory of the state has contributed to the growth of government. As part of the Kantian–Rawlsian contractarian project, this book seeks to return economics to its foundations in moral philosophy. Given the moral equivalence of persons, the greatest possible equal participation must be promoted, persons must be impartially treated and, because it is grounded in consequentialist social welfare theory (SWT), the economist’s theory of the state must be rejected. Ad hoc deployment of SWT has facilitated discriminatory rent seeking and contributed to larger government. In contrast, this book argues that equal political participation and a constitutional impartiality constraint minimize rent seeking, respect individual perceptions of the ‘public good’ and underwrite the legitimacy of government. Economists, moral philosophers and political scientists will find this book a unique contribution to the literature.

Chapter 5: The Efficiency Standard, Corruption and the Growth of Government

Timothy P. Roth

Subjects: economics and finance, public choice theory, public sector economics, politics and public policy, public choice


5. The efficiency standard, corruption and the growth of government 5.1 ‘EFFICIENCY-ENHANCING’ CORRUPTION The philosopher Roger Scruton has suggested that Jeremy Bentham’s ‘felicific calculus’ is the ‘archetype of the decision theory that is now accepted in economics’ (1994, p. 283). Whether or not this is correct, it is his criticism of consequentialism in its utilitarian form that is of immediate interest. In Scruton’s account, utilitarian morality is the morality of homo economicus – the classically rational, narrowly self-interested agent of neoclassical economic theory (Chapters 4 and 6). While he does not reject the Smithian ‘invisible hand’ and, pari passu, the notion that ‘Free transactions by profit seeking individuals [unintendedly] benefit society’, he sees these benefits as contingent upon the intervention of ‘interdictions’: ‘Cheating, fraud, theft and the like must be forbidden’ (1994, p. 283). Broadly speaking, this thinking is consistent with the view that ‘A market economy is perhaps best viewed as a network of rights and obligations based on contracts and legal requirements’ (Furubotn and Richter 1997, p. 140). To some, the claim that ethical constraints are instrumentally, even intrinsically, valuable to the functioning of market economies may seem unexceptionable. Indeed, the transaction cost economics literature is predicated, inter alia, on the idea that ‘bounded rationality and opportunism are characteristic features of the real world’ (Furubotn and Richter 1997, p. 166). It follows that ethical constraints may both reduce transaction costs and facilitate exchange in increasingly impersonal markets (Arrow 1969, p. 62). All of this...

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