Economic Action as Imperfect Cooperation
Chapter 10: Political economy
Chapter 8 speculated about a grand coalition of the whole society, and how it might adapt to the cost of information. We found that this hypothetical grand coalition would not be able to rely exclusively on incentive-compatible rules, but would operate as an organization, with an agent or agency of some sort to enforce an approximation to a cooperative solution for the whole society. Chapter 9 continued the speculation with a focus on what are known as macroeconomic policies. If we suggest that actual governments act as such agents, then we are paralleling the ideas of the social contract theorists in political philosophy. There are some differences. One major point of social contract theory is the normative argument that we are under a moral obligation to obey the state. The purpose of this work is not to draw conclusions about moral obligation but to understand the mixture of cooperative and non-cooperative action that we observe in the actual world. Nevertheless, the insights of the social contract theorists will be useful to us, and particularly those of the founder of the western social contract tradition, Thomas Hobbes.
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