Evolution, Uncertainty, and the Asymptotic Efficiency of Policy

22 Pages Posted: 11 Oct 2018 Last revised: 3 May 2022

See all articles by Brian C. Albrecht

Brian C. Albrecht

International Center for Law & Economics (ICLE); Kennesaw State University - Department of Economics and Finance

Joshua R. Hendrickson

University of Mississippi

Alexander William Salter

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

Date Written: May 2, 2022

Abstract

Politics, like any social system, involves selection mechanisms. This paper presents a model of politics as an evolutionary process. Our model yields three main results. First, the political process selects for efficient policies in the long run. We call that attribute asymptotic efficiency. Second, bargaining amongst interest groups bounds the inefficiencies that can exist in the short run. Potential inefficiency declines when organizing interest groups becomes less costly. Finally, policies that appear to be 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 criterion for positive economic analysis. 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; it 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 (May 2, 2022). AIER Sound Money Project Working Paper No. 2020-15, Free Market Institute Research Paper No. 3251917, Available at SSRN: https://ssrn.com/abstract=3251917 or http://dx.doi.org/10.2139/ssrn.3251917

Brian C. Albrecht (Contact Author)

International Center for Law & Economics (ICLE) ( email )

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Kennesaw State University - Department of Economics and Finance ( email )

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Joshua R. Hendrickson

University of Mississippi ( email )

Oxford, MS 38677
United States

Alexander William Salter

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

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American Institute for Economic Research

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