Evolution, Uncertainty, and the Asymptotic Efficiency of Policy

37 Pages Posted: 11 Oct 2018

See all articles by Brian C. Albrecht

Brian C. Albrecht

University of Minnesota - Twin Cities - Department of Economics; American Institute for Economic Research

Joshua R. Hendrickson

University of Mississippi; American Institute for Economic Research

Alexander William Salter

Texas Tech University - Rawls College of Business; American Institute for Economic Research

Date Written: September 19, 2018

Abstract

Politics, like any social process, involves selection mechanisms that determine whether the outcomes of the process are efficient. This paper presents a model of politics as an evolutionary process. The decisions of interest groups to enter politics determines the selected policy. Our model leads to three main results. First, the political process selects for efficient policies in the long run. This mirrors how markets select for efficient firms. We call this attribute asymptotic efficiency. Second, the bargaining of interest groups bounds the level of inefficiencies that can exist in the short run. The bound decreases when organizing interest groups becomes less costly. Finally, policies that appear inefficient in a static analysis can be efficient once economists consider the dynamic nature of political decisions. We argue that viewing the political process as a selection mechanism allows political economists to use efficiency as a tool for positive economics. In our approach, applied political economy involves looking for relevant costs that make the policy efficient. However, our approach does not rob political economists of the ability to make meaningful normative statements, but only constrains the type of statements made.

Keywords: Real Option, Political Coase Theorem, Evolution, Efficiency, Alchian

JEL Classification: D70, D72, P16

Suggested Citation

Albrecht, Brian C. and Hendrickson, Joshua R. and Salter, Alexander William, Evolution, Uncertainty, and the Asymptotic Efficiency of Policy (September 19, 2018). Available at SSRN: https://ssrn.com/abstract=3251917 or http://dx.doi.org/10.2139/ssrn.3251917

Brian C. Albrecht (Contact Author)

University of Minnesota - Twin Cities - Department of Economics ( email )

Department of Economics, University of Minnesota
Hanson Hall 4-101
Minneapolis, MN 55455
United States

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

Joshua R. Hendrickson

University of Mississippi ( email )

Oxford, MS 38677
United States

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

Alexander William Salter

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

HOME PAGE: http://awsalter.com

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
82
rank
284,086
Abstract Views
587
PlumX Metrics