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Svetozar Pejovich and Enrico Colombatto

testable implication is that non-owned assets are overused and underproduced. Suppose, in contrast, that John owns a tree. Driven by his self-interest, John seeks to maximize his returns from that assert. The issue facing the owner is 92 Transformation of the medieval community into modern society when is the best time to cut the tree and sell it to the lumberyard. The optimal time for cutting the tree depends on the relationship between the annual increment in the value of lumber in the live tree and the prevailing rate of interest from cutting the tree. As long

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Svetozar Pejovich and Enrico Colombatto

a moral system. They were apprehensive about freedom of choice, not because of any lack of interest in individual liberty but because of a fear that autonomy of individual choices in the free market does not necessarily generate morally satisfying sets of preferences. Yet the fact is that our values 37 38 Transformation of the medieval community into modern society are formed in various places, such as homes, schools, churches, the streets, our friends, the media and the like, and are merely revealed in the free market. Suppressing freedom of choice does not

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Svetozar Pejovich and Enrico Colombatto

writing after the fact by friends and foes and should be taken cautiously. The process of ratification The economic functions of the constitution 69 of the Constitution was, however, quite interesting and uncertain until the very end.2 The following three quotations from the Declaration of Independence define the vision of the Founding Fathers upon which the United States Constitution rests: We hold these truths to be self-evident tell us that the Founding Fathers adhered to the tradition of natural law. The consent of the governed means that the Founding

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Killian J. McCarthy and Tao Zhu

borrowing more expensive, and lowers the rates of investment in property, while a rise in long-term interest rates suggests a positive outlook, rising property prices, and economic growth, and this attractiveness of current investment. Finally, we observe that the average income level is positively related with property sale, and that a 1 per cent rise in the former causes a 3.5 per cent expansion in the latter. This, again, is an intuitive finding, and taken together the results of Model 1 provides evidence in support of Hypothesis 1, on the natural and familiar

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Wilfred Dolfsma

but certainly not developing countries – it is under these circumstances that the general interest of the two groups of countries conflict.10 Pooling of patents may be efficient, but it certainly also constitutes an entry barrier and is disadvantageous for smaller firms (Lanjouw and Schankermann 2004).11 Litigation costs can be so inhibitive that individual and small firm patent holders strike a deal with a large firm that filed a suit even when on legal grounds they would have a strong case; listed firms have lower filing rates (Lanjouw and Schankermann 2004

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Government Failure

Society, Markets and Rules

Wilfred Dolfsma

This highly unique book takes a fundamental look at when and how a government can fail at its core responsibility of formulating rules. Government, representing society, relates to the economy by formulating the rules within which (market) players should operate. Although market and business failure are much discussed in the economics literature, government failure is often overlooked. This book addresses this gap, exploring in detail what constitutes government failure.
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Trent J. MacDonald

costs, are ‘often extremely costly, sufficiently costly at any rate to prevent many transactions’ (Coase 1960: 15). We can therefore formulate comparable corollaries to the political-jurisdictional Coase theorem: (1) develop rules which approximate the zero transaction-cost world as closely as possible, and (2) assign property rights to agents for whom the cost of realising or resolving externalities are lowest. To these we add a third: (3) assign political authority over citizens and policy areas to jurisdictions for which the cost of realising or resolving