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Robust political economy (RPE) is a research program that combines insights from Austrian economics and public choice to evaluate the performance of institutions in cases of limited knowledge and limited altruism, or “worst-case scenarios.” Many critics of RPE argue that it is too narrowly focused on the bad motivations and inadequacies of social actors while smuggling in classical liberal normative commitments as part of a purported solution to these problems. This chapter takes a different tack by highlighting the ways that RPE as currently understood may not be robust against particularly bad conduct. It suggests that depending on the parameters of what constitutes a worst-case scenario, classical liberal institutions, especially a minimal state, may turn out to be less robust than some conservative or social democratic alternatives.

Agency theoretic models have been used in the past to justify the use of stock options as an effective incentive alignment mechanism to create a common fate between principals and agents. In this paper, we use behavioral theory to reach the opposite conclusion – namely, that the design characteristics of the typical stock option plan foster perverse incentives for loss‐averse agents, leading to decisions with detrimental consequences for principals. We also consider alternative stock option designs and other equity‐based executive compensation plans and argue that they may suffer from the same problems as traditional stock option plans – namely, that loss‐averse executives will try to protect the endowed value of that equity through self‐serving decisions that do not enhance shareholder wealth.

The purpose of this paper is to explore the adverse incentives at the front end of government-funded projects with concentrated benefits and no liabilities for the privileged groups. In particular, the author discusses the risk of perverse incentives of the types typically found in the development aid sector that results in counterproductive outcomes.

The paper uses a simple conceptual framework based on agency theory. A qualitative, case-based approach with purposive sampling was chosen for the empirical part of the study. Eight Norwegian projects were selected because incentive problems were to be expected, and one development aid project served as a reference case.

The paper finds that low strategic project success corresponded well with the terms of financing. There were clear indications of agency problems, in three cases to the extent that the incentives turned perverse. The paper concludes with a discussion of relevant measures to prevent the emergence of perverse incentives.

The paper contributes to an improved understanding of the incentives related to public project initiation and selection, which is an under-researched topic and generally not included in formal project governance schemes. The research should therefore be useful to scholars as well as practitioners within the field of project governance.

General economic theories of consumer demand work well in describing market behaviour with respect to most purchases and the explanation of consumer choice between competing commodities is clearly acceptable for the great majority of scarce goods. However, these theories do not easily accommodate the many non‐economic factors associated with preference formation and with the shaping of consumer attitudes and values. They also pay little or no attention to the dynamic process of choice, purchasing and consumption; in effect, they treat purchasing, consumption and satisfaction as synonyms.

States that status and prestige considerations play a significant part in shopping preferences for products, which, although they appear to have a direct utility, serve only as a means of displaying wealth and purchasing power. Examines the literature on the subject, looking at the conspicuous customer, for whom the cost of a purchase is only of real significance and not the product. Suggests, from the literature, that consumer behaviour and demand for status goods and services needs further investigation.

With product labelling has already been in vogue in the developed countries to distinguish products produced by child labour from those that are “child labour free” to influence the buyers’ choice, one might be tempted to suggest that such labels should contain more information regarding the extent to which child labour has been used in a product. But, as this chapter shows, if labels contain such information and the buyers react to this by offering increasingly lower prices for the varieties containing more child labour per unit of output, it may do more harm than helping the cause. That is, a trade sanction against child labour content of a good exported by developing countries may not be a good idea since it may, in fact, raise the incidence of child labour in those countries. This result is established in a simple general equilibrium framework where parents are altruist.

This chapter addresses commentary about constitutional law and politics in this current era of a conservative domination of the judiciary.¹ Its primary concern is the different ways in which a working majority on the Court and its judiciary of appointees by Presidents Reagan, George H. W. Bush, and George W. Bush might be conservative,² and the different ways in which domination might take place.³ The frame for the chapter is what I call an “indifference thesis” for analyzing constitutional law and politics. Stated boldly, the thesis is that there should be a commentary distinguished by an interpretive attitude that distrusts, and intentionally resists, analysis based on preconceived notions about the strengths and weaknesses of any constitutional law and politics, be it conservative or left-liberal.⁴ Perhaps, to many readers, an indifference thesis for commentary appears methodologically odd, if not politically perverse. Therefore, the first order of business is to try to make the thesis less odd and perverse by explaining its provenance and attributes.⁵

Laboratory studies of social interaction have revealed a wide range of phenomena that are difficult to explain using standard economic models. For example, people will often sacrifice their own earnings in order to be generous, cooperative, punitive, and retributive in interactions with anonymous strangers. “Behavioral” models that redefine agents’ preferences attempt to provide an account of these phenomena as reflecting a “taste for fairness” or altruism, aversion to inequality, concern about others’ beliefs, and so on. Such models either fail to account for the rich sensitivity of actions to context or in allowing for rich context-dependence, these models ultimately substitute description for explanation. Hayek’s work provides a foundation for thinking about how to explain these phenomena, by conceiving of people as both purpose-seeking (as in economic models) and rule-following. Decisions are shaped both by material interests and by a normative framework that is evoked by context and helps people decide what one ought to do in a particular situation. The implication of this approach is that rather than trying to understand heterogeneity across individuals in terms of preferences, experimenters should instead try to understand heterogeneity across contexts in terms of the rules and norms that operate in the background and guide or constrain people’s purpose-seeking tendencies. What economics needs, then, is a theory of how and why these rules and norms vary with context as they do.

This paper suggests to combine different kind of “other-regarding” preferences as an approach to fair behavior which is observed in controlled experiments. We assert that participants in two-person experiments have a good will capital which may be described by altruistic preferences. These preferences guide a large fraction of participants when they have to make distributional choices in one-stage games. We further show that in games with more than one stage the previous action of the other person may cause reciprocal feelings in addition to the altruistic preferences. A friendly (unfriedly) act of the other person may increase (decrease) the good will capital of the participants. Upon these findings, we conclude that a combination of altruism and reciprocity is able to describe the variety of behavior in several experiments despite their differing strategic context.