Individuals can rationally pursue their interests without the preferences and marginal utilities that have long taken center stage in economics. Economics without preferences lays out the microeconomics of individual behavior, markets, and welfare when agents cannot always come to judgment. Although economic theory has claimed that self-interest requires agents to form preferences, individuals can protect themselves from harm by refusing to trade options they cannot rank. Many of the anomalies uncovered by behavioral economics – from status quo bias to loss aversion – thus have a rationality design. The absence of preferences also resolves the puzzle that classical economic agents are almost never indifferent between options whereas real-world agents often are. When individuals cannot judge trade-offs, gaps appear between the marginal valuations of gains and losses. These gaps explain why market prices can be volatile and render orthodox efficiency criteria indecisive. Policymakers will no longer be able to pin down an optimal provision of public goods. Traditional schemes that try to harness preference information to compensate agents harmed by economic change will allow virtually any decision to qualify as efficient. Governments should instead spur productivity growth, the main benefit capitalism can deliver, while shielding agents from the price upheavals that result.

When agents, due to incomplete preferences, fail to have well-defined marginal valuations for goods, a great many government policies will maximize social welfare or achieve efficiency. Welfare economics then becomes useless as a practical guide to decision-making. For example, the values agents assign to increases in a public good will be discretely smaller than the values they assign to decreases. For society as a whole, a large valuation gap will form and a wide range of quantities of the public good will therefore qualify as optimal. Applied welfare economics and cost–benefit analysis bypass this obstacle by paying attention only to agents’ smallest valuations, thus slanting policymaking against public goods. The multiplicity of preferences that agents view as reasonable also neuters Pareto efficiency as a policy guide: virtually any policy change is likely to harm some of the preferences agents deem reasonable.

In this chapter, we present the major market failures and behavioural anomalies that are relevant to analyse energy and climate issues from an economic point of view. We start with a discussion on positive and negative externalities; next we discuss the public goods and common resource problem, followed by a presentation of the principal–agent and information problems, and then we provide a summary of the role of lack of competition in energy and energy-related markets. An important aspect described in this chapter is the role of behavioural anomalies, such as bounded rationality and bounded willpower. At the end of the chapter, we describe the most important energy and climate policies as well as the concept of sustainable development that should guide policy design. We also discuss issues in developing countries related to the topics discussed in the chapter.

Economics is a central science to the understanding of regulation. Regulatory economics focuses on economic concepts that are relevant in regulatory contexts. Chapter 1 introduces key concepts of economics and regulatory economics, referring to a branch of social sciences concerned with how society chooses to employ its scarce resources to produce goods and services. This chapter offers a brief discussion of economic concepts that have shaped regulation (e.g., monopoly, market failures). It also discusses behavioral economics, the commons, and principal-agent theory.

This chapter explores the relationship between natives and migrants in the territory transferred from Germany to Poland in 1945 using contemporaries’ memoirs. It shows that migration status and region of origin served as salient identity markers, structuring interpersonal relations and shaping collective action in the newly formed communities. Statistical analysis is used to demonstrate that indigenous villages and villages populated by a more homogeneous migrant population were more successful in organizing volunteer fire brigades than villages populated by migrants from different regions.

This chapter examines the reception of expellees in West Germany. I show that expellees were perceived as foreigners, despite sharing ethnicity and language with the locals. I then document expellees’ exclusion from local voluntary associations and the formation of new associations based on migration status and region of origin. I conclude by analyzing contributions to public goods provision in Bavarian municipalities. I show that the more expellees a given community received, the lower the rates at which it taxed the locals’ property and business.

This chapter introduces cases motivating the book and presents a three-step argument about the effects of forced migration on societal cooperation, state capacity, and economic development. It reviews evidence from post-WWII displacement in Poland and West Germany, discusses the applicability of the findings to other cases, and highlights the main contributions of the book.

In Chapter 4, we examine the supply of dogs to the U.S. market. We first explain two potential sources of social inefficiency in the market: information asymmetry and negative externality. We then explore the heterogeneous nature of the sources of supply. Based on organizational form, we distinguish between commercial and so-called backyard breeders. Based on the ethics of practice, we distinguish between ethical breeders who provide high-quality care and unethical breeders who do not. We relate our six resulting categories of supply, including puppy mills and shelters, to the information asymmetry, negative externality, and a third potential market failure, the public good nature of the problem of protecting dogs from cruelty. Finally, we argue that serious market failures provide justification for government intervention to increase efficiency. However, the current patchwork of regulations and lack of resources invested in enforcement allow puppy mills and black-market breeders to impose costs on others and harm dogs.

Recent years have witnessed other significant changes. For example, cash is used less and less while good manners seem to have increasingly characterized past behavior. Spending of individuals and families seem to come more and more in fixed amounts. The law of demand seems to play less of a role, while the overall budget has become more important. This means that tightening the belt can play less of a role when economic conditions worsen during recessions and inflations. The value of economic exchange now depends much more on the information contained in the exchange than on the value of the labor and material of what is exchanged. This may have implications for the welfare as distinguished from the economic value of the exchange. More recently the scarcity of rare materials and of difficult to produce inputs (such as micro transistors) may have become more important.

As scholars and activists seek to define and promote greater corporate political responsibility (CPR), they will benefit from understanding practitioner perspectives and how executives are responding to rising scrutiny of their political influences, reputational risk and pressure from employees, customers and investors to get involved in civic, political, and societal issues. This chapter draws on firsthand conversations with practitioners, including executives in government affairs; sustainability; senior leadership; and diversity, equity and inclusion, during the launch of a university-based CPR initiative. I summarize practitioner motivations, interests, barriers and challenges related to engaging in conversations about CPR, as well as committing or acting to improve CPR. Following the summary, I present implications for further research and several possible paths forward, including leveraging practitioners’ value on accountability, sustaining external calls for transparency, strengthening awareness of systems, and reframing CPR as part of a larger dialogue around society’s “social contract.”

Much has been written on the history of the Habsburg Military Frontier; much less on its legacies. Chapter 4 presents evidence for the key institutional properties of military colonialism. The two striking socioeconomic insights that emerge from the data reported in the censuses of Imperial Hungary are that land equality and communal property rights remained much more prevalent in the borderlands even decades after the abrogation of the military colony. The absence of large consolidated land holdings and of a landless rural working class, held back the modernization of agriculture and the growth of farm productivity, as well as the spread of manufacturing. Similarly, historical and modern data on access to public goods suggest that the asymmetry between regions formerly under civilian and military administrations persisted over time to the present day. We cannot attribute these results to (1) temporal intermediary treatment factors that could have affected the treatment and the control group differentially, (2) structural treatment factors that could have influenced the treatment group simply by being located in a border area, and (3) alternative mechanisms by which military colonialism affected the way the state behaved in the former military colony.

This chapter critically reviews the extant scholarship of state formation. It argues that the excessive attention to war and violence produces a confrontational interpretation of state–society relations and neglects the state's role in public goods provision vital to domestic governance. It outlines the main theme of the book, which is to bring state legitimation through public goods provision into the scholarship of state formation. It argues that a public interest-based discourse of state legitimation furnished a common normative platform for state and society to collaborate in various issues of domestic governance. This platform allowed state and society to complement each other's weakness in pursuit of good governance. It also provided a limited yet important space for political participation that could be accepted by the state authorities. Although this space was grounded in the conception of "passive rights" rather than "active rights" – that is, rights granted by the state rather than inalienable to the individual – it allowed for a growing degree and scale of political organization and activity and laid the basis for a rethinking of the role of such rights in state formation.