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The typical accounting curriculum focuses on technical knowledge, which makes it challenging to devote time toward developing other important skills, such as examining how accounting rules may impact a company’s financial statements. Recently, the accounting rules for lease transactions changed significantly, and this chapter provides an overview of an assignment used in an intermediate accounting course to engage students in a real-world application. Students had the opportunity to apply accounting rules to a publicly traded company, measure the significance of changes to generally accepted accounting principles, read financial disclosures, reinforce concepts of present value and ratio analysis, and engage in critical thinking. This type of assignment does not have to be limited to leases, and instructors could discuss any accounting rule by following a similar model, whether the rule itself is current or proposed. This would offer students context beyond textbook learning.

The Bureau of Economics in the Federal Trade Commission has a three-part role in the Agency and the strength of its functions changed over time depending on the preferences and ideology of the FTC’s leaders, developments in the field of economics, and the tenor of the times. The over-riding current role is to provide well considered, unbiased economic advice regarding antitrust and consumer protection law enforcement cases to the legal staff and the Commission. The second role, which long ago was primary, is to provide reports on investigations of various industries to the public and public officials. This role was more recently called research or “policy R&D”. A third role is to advocate for competition and markets both domestically and internationally. As a practical matter, the provision of economic advice to the FTC and to the legal staff has required that the economists wear “two hats,” helping the legal staff investigate cases and provide evidence to support law enforcement cases while also providing advice to the legal bureaus and to the Commission on which cases to pursue (thus providing “a second set of eyes” to evaluate cases). There is sometimes a tension in those functions because building a case is not the same as evaluating a case. Economists and the Bureau of Economics have provided such services to the FTC for over 100 years proving that a sub-organization can survive while playing roles that sometimes conflict. Such a life is not, however, always easy or fun.

X = multiple interpretations

Although tax relief on pensions is a controversial area of government expenditure, this is the first study of the tax effects for a real-world defined benefit pension scheme. First, we estimate the tax and national insurance contribution (NIC) effects of the scheme's change from final salary to career average revalued earnings (CARE) in 2011 on the gross and net wealth of the sponsor, government, and 16 age cohorts of members, deferred pensioners, and pensioners. Second, we measure the size of the twelve income tax and NIC payments and reliefs for new members and the sponsor, before and after the rule changes. We find the total subsidy split is roughly 40% income tax subsidy and 60% NIC subsidy. If lower tax rates in retirement and the risk premium effect of the exempt-exempt-taxed (EET) system are not viewed as a tax subsidy, the tax subsidy to members largely disappears. Any remaining subsidy drops, as a proportion of pension benefits, for high earners, as does that for NICs.

The conceptual framework of institutions proposed here is not entirely new. While it shares common features with the early institutionalists’ frameworks, it also introduces some original insights. What is new is that this framework identifies the key components of institutions and approaches as an open organic system with complex dynamics among its components rather than a static mechanism operating in a vacuum. The two additional models presented in the next section will help us better understand how these components of institutions are linked, how they interact, and how institutions are enforced. The framework brings together and builds on empirical evidence and theoretical scholarship from the different disciplines discussed in the previous and current chapters.

One important discussion comes under Knight’s heading of “Social Control.” To appreciate his argument, one has to understand that Knight’s social theory is developed within a tension between: (1) his knowledge that social control is both inevitable and necessary; and (2) his correlative desire for individual autonomy. One could add to that a hatred of social control, some of which is relevant. But what Knight dislikes is, first, selective elements of existing social control and, second, change of social control, e.g. change of the law by law, except for those changes of the law that remove the selective elements he dislikes; Knight is not opposed to all change of social control. In any event, the problem of social control is also for Knight (as it was for Vilfredo Pareto) the problems of social change and of the status of the status quo as well as of hierarchy.

Prior to the first session I was asked about my view of rent seeking, mentioned in passing in the document of mine distributed earlier. I replied that my view had three parts. First, I agreed that rent seeking, however defined, was ubiquitous. Second, I argued that rent seeking is not bad per se. Third, I argued that I found particularly disgraceful treatments of the allocation of resources to efforts to change the law as bad rent seeking. Both this person and Jim Buchanan (later in the conference) insisted that rent seeking was objectionable when it involved a transfer without a gain in efficiency, i.e. the creation of something productive. I responded that this view substituted the analyst’s definition of productive for that of the economic agent – who obviously believed that hiring a lawyer, etc. to help bring about a potential change in the law was a desirable, hence productive, use of his or her resources. I further insisted that this definition, especially when it was used in a blanket, indiscriminate way, functioned to privilege existing law and those benefiting from existing law and to deny people access to their government, and that it did so by manipulating the definition of rent seeking to give effect to selective antecedent normative premises hidden within the use of the term “productive” (in at least one discussion the term “artificial” was used). I pointed to this as a problem in the use of language. Further aspects of the terminology of rent seeking will be dealt with below.

In 2010, the National Mediation Board (NMB) decided to base Railway Labor Act representation election outcomes on a simple majority of those voting, rather than on the majority of all eligible voters, as had been required earlier. This was widely expected to make it easier for unions to win rights to recognition in the railway and airline industries. We demonstrate that investors expected that this change would favor unions, just as they earlier had expected rule changes that made voting easier (in 2002 and 2007) to be favorable to unions, affecting stock prices of railway and airline corporations. After the 2010 change in election procedure, between 77% and 91% of all eligible employees returned ballots in NMB elections, demonstrating that a significant portion of nonvoters were not opposed to union representation, but simply were unwilling or were unable to vote. We conclude that the current voting process is fairer than the old one. However, it has not resulted in a tide of union success in these representation elections. Apparently scholars, the parties themselves, and investors all over-estimated the practical consequences of changing NMB representation election procedures.