The Economics of Edwin Chadwick
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The Economics of Edwin Chadwick Incentives Matter

Incentives Matter

Robert B. Ekelund Jr and Edward O. Price III

The authors detail Sir Edwin Chadwick’s sophisticated conceptions of moral hazard, common pool problems, asymmetric information, and theory of competition, all of which differ starkly from those promulgated by Adam Smith and other classical economists. Also examined are Chadwick’s views on government versus market role in dealing with problems created by natural monopoly, and whether some or all market problems justify government regulation or alterations of property rights. The authors investigate Chadwick’s utilitarian approach to labor, business cycles, and economic growth, contrasting his modern view with those of his classical economic contemporaries.
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Chapter 5: Urban Externalities: Funeral and Burial Markets

Robert B. Ekelund Jr and Edward O. Price III

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5. Urban externalities: funeral and burial markets INTRODUCTION Traditional economic theory gives a central role to ‘economies of large scale production’ or ‘natural monopoly,’ somehow defined, as a possible rationale for government regulation. Such economies were at the root of Chadwick’s advocacy of franchise bidding for railways as shown in Chapter 4. While a separate tradition relating to other explanations for market failure always existed, that tradition swirled around philosophical theories of externalities in a Benthamite world or governmental interventions in the Pigouvian tax-bounty framework.1 In modern times, the Coasian revolution relating to social costs, and its offshoots in the works of such economists as Alchian and Demsetz (1972), Demsetz (1968; 2011), and Williamson (1979; 1985), have raised the possibility of market solutions (as opposed to government solutions) to so-called externality problems. (For example, private solutions to providing information may function when asymmetric information problems arise in private markets.) While for the most part contemporary economists have embraced a ‘comparative institutional framework’ for evaluating so-called market failures, scientific analyses evaluating particular failures often give way to political exigencies, and not to sound, sometimes even to unsound, economic logic or empirical support. Environmental externalities, treatment of endangered species, cable regulation, and legal protection of the medical and legal professions are perhaps good examples of how self-interested politicians react to particular interests. Chadwick, as we argued in Chapter 4, observed these impediments to maximum social welfare before the middle of the nineteenth century. Lacking faith in government’s ability to make positive...

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