“Romance, Realism, and Economic Reform:” Tribute to Professor Richard Wagner

There are rare instances in one’s life where one can reflect and say that they were in the presence of greatness And it was conscious. I have a Ph.D. from Professor Richard Wagner. George Mason University course, it must have been one of those rare examples for me. His ability to explain simple but profound points in economics (for example, “Price is a set of traffic signals, not a set of marching orders” or “Magic number 2 in the market, and Magic number 3 in politics”) is a living economist from whom I have had the privilege of learning. He cannot be compared. Furthermore, if I am to learn anything from Professor Wagner, we must take part in our existing knowledge and be creative as teachers so that such knowledge can be communicated in new and effective ways. Therefore, in this reflection, to honor Professor Wagner on the occasion of his retirement, I would like to highlight from his vast scholarship one of the most important contributions he has made to the transitional political economy, and which has had a profound effect on me. Teaching and research.

One way I’ve tried to honor Professor Wagner is to take his message forward in a way that will impress students for generations to come, such as illustrating the important lessons he imparts to his profession through various examples in the classroom and associating them with certain things. Among my favorite movies. On this occasion, I will do so by adding his article “Romance, Realism, and Economic Reform” (co-author with Robert Tolison).[1] Through the lens of the 1997 science fiction film, The fifth element.

The basic lesson here is to first acknowledge that the process of economic development is fundamentally one Institutional transformation, One in particular is the removal of political and legal barriers that redirect entrepreneurs from unproductive to productive activity. However, such a transformation implies a centralized cost imposed on the existing beneficiaries of the existing system, whose benefits spread across the population. The counterintuitive policy implications for transitional political economics, which may be particularly frustrating for market-oriented policy reformers, are attempts to change the rules of the game and eliminate exclusive privileges. Through political considerations, Will only induce rent seeking, causing greater wastage of resources than if the transfer does not begin. The point here is that since political prudence is the source of exclusive advantage created by the state, political prudence cannot be the source of its extinction. Political discretion is used as an instrument to revoke legal privileges, and cannot occur without creating another legal privilege, since political considerations, by their very nature, seek to benefit one party at the expense of the other.

How is illustrated in this lesson The fifth element? The plot of the film tells the story of the discovery of a divine personality, referred to as “The Fifth Element” (hence the name of the film), which appears every 5,000 years to fight against the return of evil, depicted as a sphere at the beginning of the film. Like a great fireball. However, the knowledge of this great evil, and the return of the fifth element, is a secret passed down from generation to generation by a secret order of the priests, including the character Father Vito Cornelius in the film. Parallel to Wagner’s article is that the fifth element is the entrepreneurial market process, the big bad hall rent-seeking, and the similar “economist” Vito Cornelius who in the film tries to warn the president of the federated region not to take military action. Against the great evil (i.e. not applying political prudence). The original quote from Father Cornelius is a warning: “Evil only breeds evil, Mr. President.” Instead of heeding the advice of Father Cornelius, the President instead ordered the attack of evil, which only expanded the size of Satan’s sphere and expanded the scope of evil, much to the astonishment of the President and his military advisers. The lesson here, “Evil only breeds evil”, is similar to the one illustrated by Professor Wagner: Political prudence is itself a form of rent-seeking, since it uses political resources to try to transfer existing resources at the expense of a particular interest group. Therefore, it would only induce further rent-seeking by a particular interest group to protect itself from the removal of exclusive privileges that depend on its existence. The unintended consequences are only to expand the size and scope of the government.

Does this mean that the reformer of the classical-liberal mentality should be left to do “nothing”? Quite the opposite. At the very end of the article, Wagner argues that “the most effective tool for ‘reforming’ existing monopolies is the competitive market process itself” (Tollison and Wagner 1991, p. 69, fn. 10). The counterintuitive implication here is that monopolies have their own source of decay, as barriers to entry to protect a particular interest group from market competition create better or more lucrative opportunities to avoid services and innovate. Numerous examples to illustrate this point are the rise of Uber and Lift over the exclusive privilege created by Taxi-Cab Medallion, the adoption of ATMs to prevent banks from going to branches outside the states where they are chartered, or the pioneering of containerization. Innovate around trucking controls imposed by the Interstate Trade Commission. The list of examples is endless, but the general lesson here is that if market-based reformers want to “do something”, Wagner’s “analysis suggests that reformist activity should be directed towards resisting future distortions and not eliminating the past.” (Tollison and Wagner 1991) , p. 68). The great lesson from Professor Wagner is that the “fifth element”, the productive entrepreneur in this case, will overcome the great evil of rent-seeking, if we do not allow it to fail by political prudence, no matter how prudent the intent. May seem beneficial.

References

Tollison, Robert D. And Richard E. Wagner. (1991). “Romance, realism and economic reform.” Cyclos 44 (1), 57-70.

[1] Later, for convenience, Wagner alone will be mentioned in the article.


Rosolino Candela is a Senior Fellow of the FA Hayek Program for Advanced Study in Philosophy, Politics, and Economics, and Program Director of Academic and Student Programs at the Mercatus Center at George Mason University.

Leave a Reply

Your email address will not be published.