5IE450 – Economics of State Interventionism

Required Reading
Murray N. Rothbard: Power and Market (pp. 1057-1365) + Toward Reconstruction of Utility and Welfare Economics


The course systematically analyzes reasons and impacts of state interventions in the economy. It deals with the typology of interventions and economic justifications of arguments for interventions in the economy in the area of price and product regulation, monetary policy, government revenues and expenditures and also in the production of „public goods“. At the seminars, students read and discuss contemporary economic papers (in English) about current development in the analyzed areas, both in the field of theoretical research and real economic policy.

Purpose of the course

The purpose of the course is to specify arguments of economic science for and against state interventions as presented by various schools and approaches; analyze its foundations and systematically explore the impacts of economic policy interventions in the working of the market system.

Outline of the course

1. Methodological Foundations
Economics as a value-free science, methodology of natural and social sciences, economics vs. politics, ethics and history.
2. Theory of utility and welfare economics
Subjectivity of main economic categories, economic coordination, opportunity costs, theory of exchange, development of welfare economics.
3. Typology of state interventions
Typology of interventions and problems of analysis of their categories.
4. Price and product regulation
Varieties of cases of price and product regulations and their impacts.
5. Monopolies and cartels as market structures
Monopolies, cartels and their forms, definition and impact on the market system.
6. Antidiscriminatory laws
Theory of discrimination, private vs. public discrimination, discrimination and the labor market, price discrimination, antidiscriminatory laws and their impacts.
7. International exchange and state interventions
Trade and international trade, tariffs and other barriers of trade and their reasons and impacts.
8. Taxes as examples of a binary intervention
Theory of taxation, impacts and shift of taxation, neutral tax, canons of justice.
9. Public expenditures as a binary intervention
Public expenditures, typology and development, state ownership, problems of economic calculation, socialism.
10. Bureaucracy and its effects
Economic vs. bureaucratic management, economic and extra-economic impacts of bureaucratic management.
11. Public goods and externalities as a reason for interventions
Origin and development of public good and externalities theory from the perspective of different economic schools.
12. The state and money
Interventionism and competition and monopoly in the field of money and banking. Inflation, deflation.
13. Interventionism and the business cycle
Micro- and macroeconomic context of money and credit manipulation.

Details about seminars (incl. reading texts) can be found here.

Additional reading:

1. Economics and government
Bastiat, Frédéric: What is seen and what is not seen
Read, Leonard: I, pencil
Mises, Ludwig von: Human Action, chap. I-IV
Smith, Barry: The question of Apriorism
Dan Šťastný: “Je Methodenstreit minulostí?”
Hayek, F. A.: „Historie a politika“, Laissez-Faire, květen 1999
Šíma, Josef: Rozvíjející se rakouská tradice – od metodologického individualismu k hodnocení hospodářských politik, Bulletin ČSE, 1/99
Hoppe, Hans-Hermann: Ludwig von Mises a liberalismus, doslov ke knize Mises, Ludwig: Liberalismus

2. Utility and Welfare
Rothbard, Murray: Toward a Reconstruction of Utility and Welfare Economics in idem. The Logic of Action I: Method, Money and the Austrian School Edward Elgar, Cheltenham, UK, Lyme U.S.,1997, p. 211–254

3. Market process vs. bureaucratic management
Mises, Ludwig von: Human Action, chap. V-VII
Jeffrey M Herbener: The Pareto Rule and Welfare Economics
Oppenheimer, Franz: The State

4. Typology of state interventions
Rothbard, Murray: Power and Market, ch. 2
Mises, Ludwig von: Human Actionchap. XXVII

5. Triangular Intervention
Rothbard, Murray:Power and Market, chap. II-3
Mises, Ludwig von: Human Action, chap. XXIX, XXX
Rose, Jim: Child Labor, Family Income, and the Uruguay Round
Krugman, Paul: In praise of cheap labor
Julian Simon’s Bet With Paul Ehrlich
Texts by Julian Simon on depletion of natural resources

6. Triangular Intervention: Case 1 – International Exchange and Protectionism
Rothbard, Murray:Power and Market, chap. II-3, part d

7. Triangular Intervention: Case 2 – Antitrust Laws
Rothbard, Murray:Power and Market, chap. II-3, part k
Pascal Salin: Cartels as Efficient Productive Structures, RAE, 9-2
Thomas J. DiLorenzo: The Myth of Natural Monopoly, RAE, 9-2
Dominick T Armentano: Antitrust Reform: Predatory Practices and the Competitive Process, RAE, 3-1
Walter Block: Total Repeal of Antitrust Legislation: A Critique of Bork, Brozen, and Posner, RAE, 8-1
Donald J. Boudreaux and Thomas J. DiLorenzo: The Protectionist Roots of Antitrust, RAE, 6-2

8. Triangular Intervention: Case 3 – Antidiscrimination Laws
Farron, Steven: Prejudice is Free, but Discrimination has Costs, JLS sv.14, č. 2

9. Binary Interventions – taxation I
Rothbard, Murray:Power and Market, chap. II-4
Mises, Ludwig von: Human Action, kap. XXVIII

10. Binary Interventions – transfers
Rothbard, Murray:Power and Market, chap. II-5

11. Money
Hans-Hermann Hoppe: Banking, Nation States and International Politics

12. Public Goods and Externalities
Walter Block: Public Goods and Externalities

13. Private Production of Security?
Gustave de Molinari: Private Production of Security
Murray Rothbard’s introduction
Hans-Hermann Hoppe: The Private Production of Defense

14. Business Cycle
Josef Šíma – Trh v čase a prostoru