The Difficult Relationship Between Historical Ordoliberalism and Adam Smith
Ever since the global financial crisis of 2008, interpreted by some observers as a foreseeable failure of “unfettered” capitalism, the German intellectual tradition of ordoliberalism has been meeting with increased interest. Its emphasis on good government, appropriate rules and institutions makes it attractive. Welcome as this may be, however, that trend may impact the reception of the works of Adam Smith in a problematic way, since the key historical figures of ordoliberalism reject his theory vigorously, even though, from today’s perspective, their concerns and policy recommendations look very parallel to his. Their common hope is human flourishing. Just like the Scot, the broad scope of their vision encompasses society as a whole, not just the market; they are concerned with ethics, not just economics. But what, then, can solve the puzzle of this implausible rejection, by which the ordoliberals contribute to a deep-rooted prejudice against Smith? In this paper, Karen Horn takes stock of their concrete criticisms, which turn out to be based on a narrow understanding of Smith’s work. She suggests that it is religion that stands at the root of the explanation, though situational elements may also play a role. The essential contentious point seems to be what the ordoliberals take for the Scot’s naïve belief in natural harmony, the sources of which they see in his stoicism and possible deism. The deeper problem for them with Smith is the pagan flavour and the systematic normative relativism of an essentially evolutionary approach to human values.
“Warning over ‘new eurozone crisis'”
Lars P. Feld says towards BBC that he fears another European financial crisis could be brewing.
Discussionpaper: Natural Field Experiment on Collaborative Tax Evasion
Sales from businesses to consumers provide fertile ground for collaborative tax evasion. However, little is known about the phenomenon. We conduct a natural field experiment with 2,900 businesses in which we take the role of con
sumers and vary if we request an invoice for the delivery of a service. We find that 56% of businesses approach consumers with the intention to evade. The fraction is zero
in the regulated market and 72% in the unregulated market. It increases when consumers signal their willingness to collude. Consumers can save 25% of the legal price on average if they agree to evade. More…
Walter Eucken as German Anti-Keynes? New Discussionpaper
By Lars P. Feld, Ekkehard A. Köhler and Daniel Nientiedt
Germany’s approach to solving the Eurozone crisis is supposedly based on the ideas of Walter Eucken (1891–1950), the founder of ordoliberalism. In this and other contexts, Eucken’s work has been described as being in direct opposition to that of John Maynard Keynes. Our paper aims to clarify and differentiate the relationship between the two scholars by making two main points. First, we show that Eucken supported a proto-Keynesian stimulus programme at the height of the Great Depression, the so-called Lautenbach plan of 1931. Second, we critically examine Eucken’s description of ‘full employment policy’, a strategy with obvious parallels to Keynesian economic policy. Additionally, the paper maintains that when comparing Eucken and Keynes, more emphasis should be given to the fact that the former favours a rule-based rather than discretionary approach to policy-making.
Discussionpaper on James Buchanan, public debt and fiscal rules
By Lars P. Feld
James Buchanan pioneered the political economics of public debt 60 years ago. In this paper, we contrast his thinking of the burden of debt, the public choice mechanisms that lead to excessive debt and the demand for constitutional restraints on public debt with its development, its sustainability, the evidence on the political economy of debt and on the effects of institutions. It turns out that Buchanan farsightedly anticipated the problems that would emerge from excessive indebtedness in the developed world. The introduction of fiscal rules appear as a late triumph of Buchanan’s thinking. However, socialism is dead, but Leviathan lives on. Opposition to sound fiscal policies has increasingly dominated the public debates since the Great Recession.
Discussionpaper about the Swiss debt brake
The Swiss debt brake is widely appreciated as one of the most rationally designed fiscal rules in the world and was thus also discussed as blueprint in the debates about fiscal rules in Germany, the European Union member states and Israel. However, evidence that this rule really contributes to sound federal finances does not exist yet. We investigate the effectiveness of the Swiss debt brake by employing the Synthetic Control Method. We find that the introduction of this fiscal rule improved the budget balance by about 3.6 percentage points on average in a post-intervention period covering five years.
Find here the discussionpaper by Christian Pfeil and Lars P. Feld.
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Discussionpaper on the fiscal sustainability of German States
Modeling Fiscal Sustainability in Dynamic Macro-Panels with Heterogeneous Effects: Evidence From German Federal States. Discussionpaper by Lars P. Feld, Ekkehard A. Köhler and Julia Wolfinger.
Discussionpaper on the commitment to pay taxes
“Commitment to Pay Taxes: Results from Field and Laboratory Experiments”. Discussionpaper by Lars P. Feld, Bruno S. Frey, Ann-Kathrin Koessler and Benno Torgler