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Inspiring Economics

Human Motivation in Political Economy

Bruno S. Frey

Bruno S. Frey illustrates what he perceives to be the inspirational quality of economics and how this differs from the type of economics studied in many academic institutions. He introduces insights into economics from a psychological perspective, dealing with issues such as transformation of anomalies, identification in democracy and crowding effects, and focuses on intrinsic motivation and how it is undermined.
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Chapter 8: Identification in Democratic Society with Iris Bohnet

Bruno S. Frey


8. Identification in democratic society with Iris Bohnet TOWARDS A BROADER VIEW OF DEMOCRACY In economic theory, individual actions are taken to be coordinated by the market; that is, by anonymous price signals. In the economy, on the other hand, individuals are not isolated, but interact by many other means, notably by talking to one another. Communication is even more important in areas where the market does not produce efficient results. While the competition of parties for government, and the competition of pressure groups and citizens for subsidies, describes many parts of democracy well, the direct interaction of the citizens in the form of communication accounts for one specific feature of a viable democracy: it increases ‘other-regarding behaviour’. Many non-economists therefore stress the crucial role of discussion in democracy and reject the notion of ‘teledemocracy’, or ‘instant electronic voting’, which lack a ‘face-to-face’ interaction. The discourse between citizens is an essential element of a lawful state and, under suitable conditions, allows a consensus to be reached among individuals based on insight. While the notion that discourse always motivates people to transcend their own interests to seek the public good is certainly extreme, discussion has been shown to systematically influence individuals’ behaviour in instances where economists would not expect any effect. Experimental evidence demonstrates that individuals contribute much more to public goods if only they can talk to one another. However, the discussion envisaged by experimentalists, and also by philosophers, is a face-to-face interaction between individual persons,...

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