Simple rules for a more inclusive economy
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Simple rules for a more inclusive economy Vlad Tarko1 Accepted: 30 October 2020 © Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract This paper explores some of the reasons why capitalism experiences periodic crises of legitimacy and asks whether Richard Epstein’s “simple rules” heuristic can help. The current legitimacy problem is exacerbated by the fact that we are also in a low growth situation. This means that some policy instruments that could have been used to increase legitimacy may no longer be available. The “simple rules” heuristic can help as a guide to reforms that would simultaneously address the legitimacy problem, while avoiding making the growth problem worse. Keywords Legitimacy · Inequality · Economic disruption · Growth · Rule of law · Generality norm JEL Classification D63 · K10 · K20 · P16
1 Introduction Capitalism is perpetually on the verge of a crisis of legitimacy, but every once in a while, the crisis becomes more serious. We are currently in such a state of affairs, but to understand the legitimacy crisis, we must look beyond the details of the moment and consider why this crisis is recurring. There are two main reasons: (1) The core institutions of capitalism are difficult to legitimize because they generate various unpleasant or unjust side-effects (in terms of uncertainty, social-economic disruption, income distribution and environmental failures). (2) Damaging institutions and policies (from protectionism to misguided regulatory policies and dysfunctional federalism) are relatively easy to legitimize because they appeal to commonly held moral intuitions. In this paper I’m revisiting Richard Epstein’s Simple Rules for a Complex World from the perspective of the capitalist legitimacy crisis. Epstein’s argument is about the gradual undermining of the core institutions of capitalism. He has argued that * Vlad Tarko [email protected] 1
Department of Political Economy and Moral Science, University of Arizona, Tucson, AZ, USA
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European Journal of Law and Economics
the complexity of most present-day laws is creating compliance, uncertainty and enforcement costs that far exceed the benefits. He proposed relying instead almost exclusively on “simple rules” for property, contracts and basic public goods, which would enable the operation of a high growth economy and a high diversity society. Why do we have too much legislative complexity? Epstein argued that this is only partly due to special interests, but, more importantly, it is due to misguided attempts to achieve error-free justice and due to misguided intuitions created by our experience with social norms. The pursuit of error-free justice leads us to create ever more detailed rules designed to take every possibility into account. The analogy to social norms leads us to underestimate the knowledge requirements of detailed rules, as social norms operate mainly between people with personal knowledge of one another, while laws are concerned mainly with interactions between strang
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