AIPE:CourseDescriptions the component thecourse examines structure and The politicaleconomy of in issues economy the context suchfundamental of as functions a market of policy, fiscalandmonetary capitalflows foreign and trade competition, policy, will markets. course explore The the investment, internationalfinancial and of of and as benefits challenges globalization wellas the impact government in interventionthe economy. to historical and The AmericanStudiescomponentallows students explore The the of society. course examines theories, cultural aspects American governing American the system constitutional of and structures principles government. will role Lectures focuson thestructure, andrelationship the of parties, government, wellas the roleof political of major branches the national as groups transforming public policy. in intopublic interest media and opinion
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Democracy: Principles and Practice Professor James Lengle The 'politics" componentof AIPE consistsof a comprehensive examinationof the basic principles of democracythrough a systematicexamination of the American constitution and political system. The coursebeginswith a discussionof generaltheoriesof democracyand commonlyof democraticregimes. Our attentionthen turns to an sharedcharacteristics contemporary examinationof the three major principles of the American political system:federalism, separation powers,and checksand balances, of and on their implications for policy-making, governance, stability. and In our discussionof federalism,students introducedto trendsin federal-state are relations and to the pros and consof a federalsystem. To understand principle of separation powers,we analyze sffucture,role, and the the of powersof the threemajor branches the national government:the President, of Congress, and SupremeCourt. The coursethen shifts to an examination of the intricate systemof checks and balancesin the US. We will focus on the relationships betweeninstitutions at the national level and on formal and informal powers grantedto each institution to check the power and ambition of other institutions. After concludingour examinationof political institutions,we analyzethe role of public opinion and massbehavioron domesticand foreign policy-making. We also explorethe role of mediatinginstitutions,suchaspolitical parties,interestgroups,and the media, in aggregating, interpreting, and articulating massopinion and the importance of elections for establishing popular sovereignty, accountability,responsibility,and legitimacy in democracies. The courseconcludes exploring the relationshipbetweendemocraticregimesand free by marketeconomies. The goal of the courseis to usethe American political systemas a casestudyfor important democraticconceptsand principles,suchas majority rule, the protection understanding of minority rights, the importanceof civil rights and civil liberties,the tensionbetweenequality and liberty, the nature of representation,etc. Studentswill come away from the class with a comprehensive understanding democracy, of American-style.The classand readingsalso will principles,theseprinciples can be make clear that althoughdemocracy basedon fundamental is implemented,protected,and advanced through a variety of democraticforms, institutions,and procedures, which vary amongdemocracies.Lastly, the courseattemptsto show students that thrives best when thesevariousdemocraticforms, institutions,and procedures democracy from a county's own political tradition, history, and culture. emanate
READING ASSIGNMENTS The readingfor the Politics componentof AIPE is Robert Dahl's On Democrac]'. Dahl's providesstudents with a basic overview of democracyand the relationshipbetween book democracyand marketeconomies. The final exam consistsof two essayquestions that test the students'overall masteryof the material presentedin the lectures and readings. Monday.July 31 Robert Dahl, Chapter1: "Do We Need a Guide?" RobertDahl, Chapter2: "Where and How Did DemocracyDevelop?" Robert Dahl, Chapter3: "What Lies Ahead?" Tuesday. August I RobertDahl. Chapter4: "What is Democracy?" RobertDatrl, Chapter5: "Why Democracy?" Wednesdav. August 2 Robert Dahl, Chapter6: "Why Political Equality I?" Robert Dahl. Chapter7: "Why Political Equality tr?" Thursday.August 3 Robert Dahl, Chapter8: "What Political InstitutionsDoes DemocracyRequire?" Robert Dahl, Chapter9: "Democracyon Different Scales" Friday. August 4 Robert Dahl, Chapter10: "Constitutions" Robert Datrl, Chapter11: "Partiesand Electoral Systems" Monday.August 7 RobertDatrl, Chapter12: "What Underlying ConditionsFavor Democracy?" RobertDahl, Chapter13: "Why Market CapitalismFavorsDemocracy" August 8 Tuesday. Robert Datrl, Chapter 14: "Why Market CapitalismHarms Democracy" Robert Dahl, Chapter15: "The Unfinished Journey"
Readings Hong Kong, 2006
Class 1: Public Goods, Free Riders, Commons Problems, and the Role of Government Reading Assignment: JamesBuchanan& Richard Musgrave,Public Finance& Public Choice:Two ContrastingVisions of the State(1999), pp. 63-89, lO7-137 Reading Guide: JamesBuchananwon the Nobel hize in economicsin 1986for his contributions to public choicetheory, which is essentiallythe applicationof economicreasoningto politics. Richard Musgraveis frequently mentionedas a potential Nobel winner in economicsfor his contributionsto public financetheory. This readingis takenfrom a book which is built arounda seriesof alternatinglecturesand responses the two by in economists, which they debateimportant issuesover the courseof five days.We're skipping the first day's lectures,which dealt with the two men's personalintellectual histories.(You can read an accountof the lecfuresand a summaryof Musgrave'scareer I 5.html ). at http://www.economicprincipals.com/issues/04.02. you will find them discussinga number of important In thesetwo selections, economic conceptsrelated to the role of government, including how to solve the "free rider" problem of providing public goods,how governments shouldraiserevenue,and the role of constitutions in restraining governmentsfrom infringing on liberty. (In our classin Hong Kong I'll elaborateon many of theseideasand give you a more complete explanationof them.) As you readthis material,try to answerthe following questions: 1) The two economists have quite different views of the appropriatesize and function of government.Why? What are the fundamental assumptionseach makesabouthow the world works and how do thoseassumptions influencethe two men's views? Can you think of examplesfrom your own country that supportsand undercutseachposition? 2) What are the most important problems in your country? Which approachis more likely to solve thoseproblems? 3) Why is Buchananmore skepticalaboutthe resultsof majority rule than Musgrave?Do the constraints Buchananwants to put on govemment prevent it from doing the things Musgrave wants the governmentto be able to do?
Class 2: Strucfuring Governments and Civil Societies Reading Assignment: JamesBuchanan& Richard Musgrave,Public Finance& Public Visionsof the State(1999),pp. 155-183,205-233 Choice:Two Contrasting Reading Guide:
The readingsin this sectionaddress two major issues:federalismand the role of possible.Musgraveand Buchananhave "sosial" capital in making peacefulsocieties quite different ideasaboutwhy dividing authority amongmultiple levels of government usedhere implies something is a good thing to do. (Note that federalismin the sense more than merely creatingadministrativesubdivisionsof a single counffy to make administrationof programseasier.)They alsohave very different views aboutwhat constitutesa good society.Musgrave,for example,saysthat "the market,efficient and helpful as it is, doesnot by itself constitutea moral order" (p.232) while Buchanan(pp. itself more easily in market transactionsthan in 207-208) finds that morality expresses political ones,suggesting oppositeconclusion.As you readthis, try to answerthe the following questions: l) What sortsof assumptions Buchananand Musgravemake abouthuman do nature?Which assumptions more accuratelyreflect the world as you've it? experienced 2) Think aboutthe two accountsof federalism.Are they complementary or Does your country have a federal structure? so, how well doesit contradictory? If work? If not, how might federalismwork in your country?
Things to read somedayif you liked this reading JamesBuchanan& Gordon Tullock, The Calculusof Consent(1962). The foundational work of public choicetheory. DennisC. Mueller, Public Choice III (2003). More technical,but the most thoroughand surveyof public choicetheory. accessible Richard Musgrave,The Theory of Public Finance(1959). Musgrave'sseminalwork on public financetheory; the field has grown more mathematicallycomplex andtechnically demanding, this remainsan excellentstartingpoint for graspingthe key ideas. but
Class 3: The Role of Property Rights in Economic Development Reading Assignment: Hernandode Soto,The Mystery of Capital: Why Capitalism Triumphs in the West and Fails EverywhereElse (2000), pp.l-67. This book, by the PeruvianeconomistHernandode Soto,hashad an importantimpact in his a variety of countriesaroundthe world. Thesepagesdescribe overall approachand discussa crucial issue:the role of information aboutwhat peopleown in making possible.Pay particular attentionto de Soto's distinction betweendeadand development living capital.As you read, considerthe following questions: 1) Why is it so importantto have a reliable setof information aboutwhat people own? How effective is the propertyregistry in your country?
are Are therereasons 2) What obstacles there to creatingsuch a systemin general? particular interestgroupsmight not want to seesucha registry created? that 3) De Soto identifies 6 effects of a property registry system.Are all theseequally important?Do they all occur as a result of a property regisfty or is somethingelse necessary well? as Class 4: Property & the Development of Civil Society Reading Assignment: Hernandode Soto,The Mystery of Capital: Why Capitalism Else (2000),pp. 105-151 Triumphsin the West andFailsEverywhere ,207-228. Our secondselectionfrom de Soto explainshow the United Statesdevelopedits property In systemand why Americanstoday fail to recognizethe basisfor their success. classI will discusssomespecificexamplesfrom the American West in more detail, explaining how different property systemsin different parts of the nineteenthcentury American West had very different property systemsand how thosedifferencesled to a small war in one place and peacefuldevelopment another.(If your impressions the history of the in of you may be surprisedby what actually U.S. west come from watching Westerns, happened.) Soto makesthe casethat the development the legal systemin the De of American West has importantparallelsin much of the developingworld today. As you read his account, fry to think of examplesfrom your country that would confirm or reject his theory.Also, considerthe following questions: 1) de Soto concludesthe chapterby sayingthere is a "threefold task: We must find the real social contracts on property; integrate them into the official law; and craft a political strategythat makesreform possible."(p. 151).How would you go aboutdoing thesetasksin your country?(Note: de Soto has somesuggestions in you might want to read on your the next chapter,which is not assigned which but own.) 2) ke the lessonsof the American West really generalizable other countries?Is to there somethingspecialaboutfrontier experiences that makesthoselessons unique? 3) Why is property particularly important in this story?Why not laws againstcrimes (e.g. murder,theft) or establishinggovernmentinstitutions?
Things to read someday if you liked this reading Hernandode Soto,The Other Path (1986). De Soto's first book, this provides a very detailedlook at the problemsinvolved in legal land ownershipand startinga business in Peru,reporting the resultsof a comprehensive surveyconducted de Soto's institute. by Tom Bethell, The Noblest Triumph: Propertyand Prosperitythrough the Ages (1999). Bethell gives a comprehensive tour of property rights in the Anglo-American tradition over many centuries.Very well written, a good introductionto the history of property rishts in Britain and America.
RichardPipes,Propertyand Freedom(1999). Pipesis an importanthistorian,who has focusedon Russia.In this book he compares development private property the of institutionsin Russiaand England,making the argumentthat it was the strengthof private property in England that made it possible for freedom to develop there and the weakness private property in Tsarist Russiathat madefreedom'shold more precarious. of Terry Andersonand PeterJ. Hill, The Not So Wild. Wild West: PropertvRigtrtson the Frontier (2004). A concise,readableeconomichistory of the American West, the emphasizing role of private institutionsfrom wagontrains to mining camps,by two of the most importanteconomichistory writers today.
Class 5: SpontaneousOrders & Custom Reading Assignment: Friedrich A. Hayek, Law.I-egislation & Libertv. vol. 1. Rules and Order(1973),pp. 35-93. Reading Guide Thesenext two areprobably our most challengingset of readings,so take your time andread carefully. Friedrich Hayek won the Nobel prize in economicsin 1974 (along with Gunnar Myrdal) "for their pioneering work in the theory of money and of economic fluctuations and for their penetrating analysis of the interdependence phenomena". this first selection,Hayek explainsthe In economic,social and institutional concept of a "spontaneousorder," which is critical to understandinghow markets and how rules can emerge free societiesfunction without centraldirection.He also discusses practiceswithout being planned.Both of theseare very difficult concepts from customary to graspon the first reading, so if they appearunclear, try rereading the sectionsafter a day or two. (Of course,we'll also discussthem in detail in class,so don't worry if you don't have them completelyfigured out before class.)Try to answerthe following questions basedon the readings: 1) Hayek thinks it is quite importantthat a spontaneous order's "degreeof complexity is not limited to what a human mind can master."(p. 38) Why is this so important?(Hint: look at p. 5l). Has the development computationalpower of since 1973(when this was written) madethis lessof a concern?Why or why not? 2) What are someexamplesof spontaneous ordersyou've observedin your own life? only by following 3) Hayek arguesin Chapter3 that "Freedomcan be preserved principles and is desffoyedby following expediency."What arethe consequences of this for the structure of government?Would both Buchananand Musgrave agreewith this statement Hayek's? of Class 6: Law and Legislation
Reading Assignment: Friedrich A. Hayek, Law. Irgislation & Liberty. vol. 1. Rules and Order(1973), pp. 94-144. Reading Guide In thesetwo chapters, Hayek draws a sharpdistinction betweenlaw and you understand distinction and why he thinks it is important. legislation.Make sure the As notedin the previous section,this is challengingstuff, so it may take more than one his readingto understand point. Don't give up! In Chapter5, Hayek setsout an account judges shouldbehaveto ensurethat they producelaw ratherthan legislationand of how the then describes types ofexpectationsthe legal systemcan protect (and the onesit cannot).In Chapter6, he describes evolution of legislativeinstitutions and then the critiques the attempt to use them to produce generalprinciples governing society. Try to answerthe following questionsas you read: 1) Why is it so important for Hayek that laws be "purposeindependent"and "applicable to an unknown number of future instances"? 2) Are the rules necessary solve the problemsdescribedby de Soto "law" or to "legislation"? Why? 3) What kind of institutionsproducerules that Hayek would term "law"? How would you designa Hayekianjudiciary?
Things to read somedayif you liked this reading Tom G. Palmer,F.A. Hayek: Prophetof the Modern World, (1999) http://www.cato.org/dailys/05-08-99.html very brief overview of Hayek's work. A Friedrich A. Hayek, The Useof Knowledgein Society,American EconomicReview, v. 35(4),pp. 519-30(1945). Perhaps single most important article, this describes his how marketsmakeuse of decentralized knowledgeand why plannedeconomies cannot.You can read it online at http://www.econlib.orgy'library/EssayslhykKnw 1.html Friedrich A. Hayek, The Road to Serfdom(1944). Addressed '"The socialistsof all to parties", this book set out Hayek's argumentthat cenfial planning was incompatiblewith liberty. The book was enonnouslyinfluential in the aftermathof World War II and remainsrelevanttoday. Friedrich A. Hayek, The Constitutionof Liberty (1960). This book is Hayek's first comprehensive, systematicanalysisof the institutionsnecessary a free societyand it for discusses many of the sameideasdevelopedlater in the threevolumesof Inw, Legislation and Liberty. Friedrich A. Hayek, vols. 2 and 3 of Law. lrgislation and Liberty. You've alreadyread most of volume 1, now readthe rest!
Volume 1, Number 0 (the very first issue)of the NYU Journalof Law and Libertv issuesconcerningHayek's legal theories,including articlesby Richard addressed Epstein,RichardPosner,and me. You can access papersat the ll.org/hayek.php http://www.nyuj
Readings- Hong Kong, 2006 - Part II
Class 7: Prisoner's Dilemmas & Reciprocity Reading Assignment: Matt Ridley, The Origins of Virtue: Human Instinctsand the (PenguinBooks, 1996),pp. 35-84 and Robert Axelrod, The Evolution of Cooperation (Basic Books I 984), pp. 3-24. Evolution of Cooperation Reading Guide: Matt Ridley (an editor for TheEconomistnews magazine)summarizes vast a (Chapter2), literatureon strategicbehavior.In the first portion of the Ridley reading the Ridley discusses idea that social interactionscan be "non-zerosum." That is, in some when we interactwith others,everyoneinvolved is madebetter off - thereis no instances of winner or loser.This idea is crucial to the economicunderstanding trade,so it is worth thinking through carefully to make sure you understandit. Pay particular attention to Ridley's analysisof the famouslines from Adam Smith (page45) aboutwhy bakers provide us with bread,butchersprovide us with meat,and brewersprovide us with beer. part of the Ridley reading(Chapter3), togetherwith the selection The second from Robert Axelrod (a political scientist),introducesthe Prisoner'sDilemma, a crucial gametheory devicewidely usedin economicsand political science. Axelrod conducteda for hereby famousexperimentwith strategies playing the Prisoner'sDilemma (described make Ridley), the resultsof which are still importanttoday. As you readtheseselections, why it is in eachplayer's interestto chooseto "defect" in a single sureyou understand The final round Prisoner'sDilemma game,despitethe higher rewardsfrom cooperation. portion of the Ridley readingemphasizes role reciprocity plays in encouraging the (Chapter4). After you read,try to answerthe following questions: cooperation 1) What are examplesof non-zerosum interactionsin your life? Examplesof zeroAre there more of the former or the latter?Why? sum interactions? a 2) What distinguishes Prisoner'sDilemma? How can you tell when a situationis properly thought aboutas a Prisoner'sDilemma? (Hint: think aboutwhy the game is named"Prisoner'sDilemma"). 3) Where do you observereciprocity influencing people'sbehaviorin your life? and What strengthens weakensthe impact reciprocity has?
Class 8: Trade and Enhancing and Disrupting Cooperation
Reading Assignment: Matt Ridley, The Origins of Virtue: Human Instinctsand the Evolution of Cooperation(PenguinBooks, 1996),pp. 195-210,247-265and Robert Axelrod, The Evolution of Cooperation(Basic Books 1984),pp.73-87. Reading Guide: The selectionfrom Axelrod is the accountof the remarkablecooperation between Germanand Allied (British and French)soldiersalong the WestemFront during World War I. Not only doesthis provide a fascinatingexampleof the applicationof the lessons of the materialin the previousclassbut it also illustates how cooperationcan be that their troops were cooperatingwith the disrupted.When the officers discovered they took stepsto disrupt the cooperation. enemyto minimize casualties, The first selectionfrom Ridley (Chapter 10) expandson the role of non-zerosum interactionsand discusses trade in more detail. The secondselectionfrom Ridley (Chapter13) is his attemptto distill the lessons from the earlier readings(and the we didn't read) into concretepolitical institutions.One of the sectionswe didn't chapters readwas Ridley's analysisof the role of property rights, which is similar to de Soto's view. Think aboutyour readingsfrom de Soto while you readthis final section.Try to answerthe following before class: 1) Using the examplesof policies that disruptedcooperationin World War I trench warfare, think of ways that governmentsdisrupt cooperationtoday when they do not approve of the cooperation. 2) Ridley thinks ffade accountsfor much of humanity's success improving the in lives of individuals. Is this alwaystrue? Why might governments sometimes not like trade?Recall the discussionof "purposeindependent rules" from Hayek. Do traderestrictionsmeetHayek's test for law (ratherthan legislation)? 3) What doesRidley think a world built aroundtrust looks like? Would you like to live in a country where Ridley wrote the constitution? What do you think such a constitutionwould look like? Would Hayek approveof that constitution? Why/why not? Things to read someday if you liked this reading William Poundstone, Prisoner'sDilemma (Anchor 1993).If you want to learn more aboutthe Prisoner'sDilemma and the history of its use,this is an accessible history. Robert Gibbons,GameTheory for Applied Economists(PrincetonUniversity Press, 1992).An accessible introduction to broaderideasin gametheory. JeanTirole, The Theorv of Industrial Organization(MIT Press,1988).A graduate level includes a more technical introduction to gametheory and usesa gametheoretic text that approach the economicsof industrial organization. to
Class 9: Markets and the Environment Reading Assignment: Roger Bate,Protecting English andWelsh Rivers:TheRole of the Association,inThe Common [.aw and the Environment: Anglers' Conservation Rethinkingthe StatutoryBasisfor Modern EnvironmentalLaw (RogerE. Meiners and Andrew P. Morriss, eds.)(Rowman & Littlefield, 2000),pp. 86-106;Bruce Yandle and Andrew P. Morriss, The Technologies Property Rights:ChoiceAmongAlternative of Solutionsto Tragediesof the Commons,28Ecology Law Ouarterly 123-168(2001).
Reading Guide: RogerBate's article tells how a group of English fishermenusedprivate legal actionsto cleanup British rivers. Most environmentalstoriesarebuilt around governmentefforts to force pollutersto reduceemissions. Think aboutwhy this story is different. In particular, think about the incentives and institutions that existed to make this private solution possibleand how a govemmentsolution might havebeendifferent. The secondreading,by Bruce Yandle of ClemsonUniversity and PERC and myself, examinesdifferent ways property rights can be configured to solve the "tragedy of the commons."Problemsare "fragediesof the commons"when they involve open access resources,such as fish in the seaor the air, and there are no clearly defined property In rights to thoseresources. suchcircumstances rational behavioris to use as much of the elsewill. Because conservingthe the resourceas you can; if you do not, someone resourcefor tomorrow is not an option, there is no meansto protect it. hof. Yandle and I to cataloguedifferent property rights approaches suchresources.Look closely at Figure I and make sure you understandthe differences between the different types of property. Finally, as you read thesearticles,think back to the de Soto readings.Think about possibleconnections betweende Soto's analysisof the role of propertyrights and solving problemsthroughprivate efforts. Try to answerthe following questions: environmental What are somesituationsin your life whereyou shareproperty with a 1) group (family, neighbors,etc.) Does a tragedyoccur?Why or why not? 2) Could fishermen (or some other group) in your counffy do something Associationdid in Britain to similar to what the Anglers' Conservation clean up a river? Why or why not? What institutions are necessaryto do what they did? (Hint: think aboutHayek). What kind of propertyrights (from the typology in Yandle and Morriss) 3) problemsin your country?Could shifting describethe environmental from one type to anotherhelp createa solution? resources
Things to read somedayif you liked this reading Terry L. Anderson& Don [ral, FreeMarket Environmentalism(PalgraveMacMillan 2001). The definitive treatiseon how propertyrights andprivate law principlescan solve problems. environmental
The Propertyand EnvironmentResearch Centerwebsite,www.perc.orghas lots of free, downloadablematerial on markets and the environment. Matt Ridley and Bobbi S. Low, Can Selfishness Savethe Environment?,T\e Atlarttic Monthly (Sept.1993),pp.76-86,availableat http://www.chem.brown.edu/chem12/readings/atlantic/china/selfish.htm. A good, short inffoduction to the subject. Class 10: Regulatory Competition Between States Reading Assignment: Towardsa lrvel Playing Field: RegulatingCorporateVehicles in (InternationalTrust and InvestmentOrganization,2002),pp. Transactions Cross-Border 3-44; Dirty Money and Its Global Effects (Centerfor InternationalPolicy,2003), pp. 1I 0, availableat http://www.ciponline.orey'financialfl ows/dirtymoney.pdf Reading Guide: In most countries,peoplecan "vote with their feet" if their government becomes oppressive burdensthe economywith excessive or regulations.(Somecountries,like the former East Germany,prohibit their citizensfrom leaving. Why?) Suchcompetitionis important at all levels of government.People, money, and businesses move from one can local jurisdiction more easily than they can changecountries.Economistscall this competition "Tiebout competition" and have long thought that it can play an important role in restricting governments'control of their citizens' lives and property.This competitionis perhapsthe most effective at constrainingcompetitionover financial regulations,sincemoney movesmore easily than peopleor land. In this lecturewe'll focus on competitionover financial regulation.The analysisappliesto other forms of regulationtoo, however. The first readingis a policy report commissioned an organizationof "offshore by financial centers"(such as the CaymanIslands,Bermuda,the Isle of Man, Switzerland, Lichtenstein,etc.).Thesejurisdictions have donevery well by regulatorycompetition. Cayman,for example,is the 5mlargestfinancial center(by dollar volume) andranked 1lh in GDP per capit4 an impressiveaccomplishment a 100 sq. mile island nation for with no arableland and no naturalresources and whosemajor export in 1960was thatchedrope. They are thus keen to preservea competitive international regulatory environment.Theycommissioned this report to respondto an OCED report critical of offshorejurisdictions (which is summarized this readingand listed in the "Things to in read" sectionbelow). The secondreading is an article by Raymond Baker, which makesthe argument for increasingregulationof internationalcapital flows. Baker arguesthat suchregulation is necessary stop "dirty money," the proceeds to from comrption, criminal activities,and terrorist organizations. This article is short version of his book (listed below in the '"Thingsto read" section).Baker proving is very influential in the policy debates over theseissuesand so it is importantto understand arguments. his As you read,try to answerthe following questions:
1) Who benefitsfrom internationalregulatorycompetitionin the financial industry? 2) lf this competitionwere restricted,what would governments countrieslike in the United States likely to do that they cannotdo now? be 3) AssumeBaker is correct in his assessment the flow of dirty money.Does of stoppingit requireending effective regulatorycompetitionin the financial servicessector?
Things to read somedayif you liked this reading RaymondBaker, Capitalism'sAchilles Heel: Dirw Money and How to Renewthe FreeMarket System(Wiley 2005). The full statement Baker's argument. of As Sir VasselJohnson, I SeeIt: How CaymanBecamea Leading Financial Centre(Book 2001).Johnsonservedas financial secretary Guild, during the yearsin which Cayman developedits financial industry.His accountgives an inside look at how the country developed alsohas a greatdeal of detail abouttopics like the mosquitoproblem in but andhis dinner with QueenElizabethII. Cayman (2001) OECD, Behind the CorporateVeil: Use of CorporateEntities for Illicit Purposes at http://wwwl.oecd.org/publications/e-book/210113le.pdf.OECD report The available to which TowardsaLevel Playing Fieldresponded. Barton Biggs, HedgeHogging (Wiley 2006).A highly readable(and often funny) accountof the hedge fund industry, one of the primary areasof regulatory competition. This book explainssomecomplexfinancial transactions clear English, a rare thing. in Class 11: Intellectual Property: Is it Property? How Reading Assignment: Adam Jaffe & Joshlrrner, Innovation and Its Discontents: and What to Do Our Broken PatentSystemis EndangeringInnovation and Proeress About It (PrincetonUniversity Press,2004),pp. 35-55; Tom G. Palmer,Intellectual Law and EconomicsApproach, 12 Hamline Law Review Property:A Non-Posnerian 26r-304(1989).
Reading Guide: Jaffe and Irrner give the utilitarian argumentfor intellectual property ("IP") in the first part of this reading. This is an important policy argument,make sure you Think aboutcreativepeopleyou know (or yourself)- are the it. understand Is it accurate? to incentivesfor creationprovidedby IP rights necessary motive them (or you)? They why the utilitarian argumentis not as strongas it first also describesomeof the reasons Are theseconvincing?Think aboutproductsyou useregularly: Are there seems. Where IP rights exampleswhereIP rights havebeenimportantto a product's success?
appearirrelevant?Is there somecharacteristic that distinguishes one group from the other? Tom Palmer(who works at the Cato Institute, an importantlibertarianthink tank in the U.S.) setsout the caseagainstIP in this article. He arguesagainstrecognizingIP rights on severalgrounds.First, he contendsthat there is no historical basisin AngloAmericanjurisprudencefor consideringIP to be property.This is an importantpoint even for peoplein countrieswithout British-derivedlegal systemsas someof the force in the pro-strongIP position comesfrom its claim to historical legitimacy. (After all, if strong IP helpedBritain and America get rich, surely it must be good for other culturestoo.) His secondargumentis an economicargumentagainstrecognizingIP rights. Palmer argues that scarcityplays a critical role in justifying recognitionof propertyrights and that the absence scarcityin the caseof IP thus undercutsthe justification for recognizingIP. of Third, Palmerrejectsthe utilitarian argumentfor IP (i.e. that IP rights provide an incentive to createIP). In evaluating these arguments,consider whether they are true everywhereor only in somesocieties. As you read thesepieces,try to answerthe following questions: l) Shouldyour counfy have strongIP rights? Shouldothers?Why/why not? 2) What would de Soto say aboutIP rights? 3) Jaffe and Irrner are worried that 'the perfect may be the enemy of the good' in designingIP institutions.What criteria shouldwe useto determineif IP laws arejustified? Adequate? Useful? 4) Would Palmer's solutionswork if every country adoptedthem? 5) Palmercites Friedrich Hayek in supportof his approach. Palmer'sthe Is only position on IP rights possiblethat is consistent with Hayek's analysisof law? Things to read someday if you liked this reading RichardEpstein,Intellectual Propertyfor a Technological Age (April 2006),White Paper for The Manufacturing Institute, available at http://www.nam.ore/s nam/bin.asp?ClD=20255&DID=236749&DOC=FILE.PDF I (Epsteinis the undoubtedlythe most important classicalliberal legal theorist in the world today.This papernot only summarizes the important issuesbut ably dissects all them as well.) Craig A. Nard & Andrew P. Morriss, ConstitutionalizingPatents:FromVenice to Philadelphia, Review of Law and Economics(forthcoming August 2W6) (availablesoon at http://www.bepress.com/rle/ (Prof. Nard and I surveythe history of patentinstitutions ) from the first modernpatentlaw throughthe U.S. Constitutionand arguethat the evolution of theseinstitutionsreflectsattemptsto preventdifferent forms of rentseeking.)