Contributions published at Theory of Economic Policy and Non-Market Economics (Bruno Frey)

Awards in the form of orders, decorations, prizes, and titles are ubiquitous in monarchies and republics, private organizations, not-for-profit, and profit-oriented firms. This paper argues that awards present a unique combination of different stimuli and that they are distinct and unlike other monetary and non-monetary rewards. Despite their relevance in all areas of life awards have not received much scientific attention. Employing a unique data set, we demonstrate that there are substantial differences in the intensity of usage of awards across countries. Moreover, we present results on a vignette experiment that quantifies and isolates the effects of different award characteristics such as the publicity associated with winning an award.

This article presents the results of a survey among the members of the „Verein f¨ur Socialpolitik“, the association of German speaking economists, containing questions on schools of thought, economic role models and policy issues. A probit analysis is used to identify to what extent ideological preferences or personal facts determine the respondent’s opinion. Some of the questions were already asked a quarter of a century ago so that it is possible to track the changes in view among economists. One of the most important findings is that neoclassical economics has become more strongly accepted.

A central aspect of historical research is to provide explanations for the causes and effects of events that occurred in the past, in particular the Second World War. History can be analyzed and explained from different perspectives. Two such perspectives are considered, the first being the traditional historiographic approach, in which the main emphasis is on the qualitative analysis of various kinds of historical sources and documents, and the second being what we call the financial market approach, a recent methodology for linking significant changes in historical market prices to simultaneously occurring geopolitical events. The fundamental characteristics of the two approaches are identified and compared in answering some important historical questions concerning the Second World War. The financial market approach, as reflected in the secondary market for government bonds, isnstudied for various countries. Both approaches rely heavily on interpretation – but inndifferent ways. They complement each other in a useful way.

It has often been pointed out in the literature that a symbiotic relationship exists between terrorist groups and the media. As yet, however, no formal model has been built based on this issue and only very little empirical research has been done in this field. The present contribution builds a simple game theoretic model, focussing on the strategic interactions between terrorists and the media. The model has features of a common-interest-game and results in multiple equilibria. After a discussion of the policy implications of the model, an empirical analysis is performed. Using newspaper coverage, terror incidents and terror fatalities data, it is shown that media attention and terrorism do mutually Granger cause each other, as predicted by the model. Moreover, it is explained why terror attacks tend to be “bloodier” in developing countries than in Europe and the United States.

Deterrence has been a crucial element in fighting terrorism, both in politics and in rational choice analyses of terrorism. However, there are two strategies that are superior to deterrence. The first one is to make terrorist attacks less devastating and less attractive to terrorists through decentralization. The second one is to raise the opportunity cost – rather than the material cost – for terrorists. These alternative strategies will effectively dissuade potential terrorists. It is here argued that they not only apply to society as a whole but can also usefully be applied by business enterprises.

Famous cultural monuments are often regarded as unique icons, making them an attractive target for terrorists. Despite huge military and police outlays, terrorist attacks on important monuments can hardly be avoided. We argue that an effective strategy for discouraging terrorist attacks on iconic monuments is for the government to show a firm commitment to swift reconstruction. Using a simple game-theoretic model, we demonstrate how a credible claim to rebuild any cultural monuments destroyed discourages terrorist attacks by altering the terrorists’ expectations and by increasing the government’s reputation costs if they fail to rebuild.

Watching TV is a major human activity. Because of its immediate benefits at negligible immediate marginal costs it is for many people tempting to view TV rather than to pursue more engaging activities. As a consequence, individuals with incomplete control over, and foresight into, their own behavior watch more TV than they consider optimal for themselves and their well-being is lower than what could be achieved. We find that heavy TV viewers, and in particular those with significant opportunity cost of time, report lower life satisfaction. Long TV hours are also linked to higher material aspirations and anxiety.

In the course of history a large number of politicians has been assassinated. A rationalnchoice analysis is used to distinguish the expected marginal benefits of killing, and the marginal cost of attacking a politician. The comparative analysis of various equilibria helps us to gain insights into specific historical events.nThe analysis suggests that – in addition to well-known security measures – an extension of democracy, a rule by a committee of several politicians, more decentralization via the division of power and federalism, and a strengthening of civil society significantly reduce politicians’ probability of being attacked and killed.

This paper argues that politicians are overprotected. The costs of politicalnassassination differ systematically depending on whether a private or a public point of view is taken. A politician attributes a very high (if not infinite) cost to his or her survival. The social cost of political assassination is much smaller as politicians are replaceable. Conversely, the private cost of the security measures is low fornpoliticians, its bulk – including time loss and inconvenience – is imposed on taxpayers and the general public. The extent of overprotection is larger in dictatorial than in democratic countries.

Cross-disciplinary ‘happiness research’ has made big progress in the measurementnof individual welfare. This development makes it tempting to pursue the old dream ofnmaximizing aggregate happiness as a social welfare function. However, we postulate that thenappropriate approach is not to maximize aggregate happiness in seeking to improve outcomesnby direct policy interventions. The goal of happiness research should rather be to improve thennature of the processes through which individuals can express their preferences. Individualsnshould become better able to advance their idea of the good life, both individually andncollectively.

Why so many people pay their taxes, although fines and audit probability are low, has become a central question in the tax compliance literature. A homo economicus, with a more refined motivation structure, helps us to shed light on this puzzle. This paper provides empirical evidence for the relevance of conditional cooperation, using survey data from 30 West and East European countries. We find a high correlation between perceived tax evasion and tax morale. The results remain robust after exploiting endogeneity and conducting several robustness tests. We also observe a strong positive correlation between institutional quality and tax morale.

The trends and consequences of terrorist activities are often captured by counting the number of incidents and casualties. More recently, the effects of terrorist acts on various aspects of the economy have been analyzed. These costs are surveyed and put in perspective. As economic consequences are only a part of the overall costs of terrorism, possible approaches for estimating the utility losses of the people affected are discussed. Results using the life satisfaction approach, in which individual utility is approximated by self-reported subjective well-being, suggest that people’s utility losses may far exceed the purely economic consequences.

null

null

Das vorliegende Papier schlägt eine neue Sicht auf Probleme der Corporate Governance in der Schweiz vor. Es wird analysiert, wie der Unternehmenssektor bezüglich Governance vom politischen Bereich lernen kann. Demokratien haben einzigartige Institutionen der Führung und Kontrolle von Akteuren im öffentlichen Bereich geschaffen, welche neue Einsichten für die Governance von Unternehmen geben können. Drei Bereiche werden diskutiert und konkret auf den Kontext der Schweizer Corporate Governance angewendet: Gewaltenteilung im Unternehmen, kompetitive Wahlen für Kernfunktionen in der Firma, und direkt-demokratische Beteiligungsrechte für Aktionäre.

A central aspect of historical research is to provide explanations for the causes and effects of events that occurred in the past, in particular the Second World War. History can be analyzed and explained from different perspectives. Two such perspectives are considered, the first being the traditional historiographic approach, in which the main emphasis is on the qualitative analysis of various kinds of historical sources and documents, and the second being what we call the financial market approach, a recent methodology for linking significant changes in historical market prices to simultaneously occurring geopolitical events. The fundamental characteristics of the two approaches are identified and compared in answering some important historical questions concerning the Second World War. The financial market approach, as reflected in the secondary market for government bonds, is studied for various countries. Both approaches rely heavily on interpretation – but in different ways. They complement each other in a useful way.

Matthias Benz and Bruno S. Frey critically examines the theoretical perspective that the corporations should aspire for an uniformly optimal structure of governance structure in "Towards a Constitutional Theory of Corporate Governance." They make a comparative study of the pros & cons of limited constitutional rights to shareholders under the US corporate laws with the extensive constitutional rights under the Swiss corporate laws. They advocate the democratic approach under Swiss law as a better alternative to direct approach of the US that allows shareholders to set up corporate governance according to their preferences.

Recently, the problems associated with the existing journal review process aroused discussions from seasoned management researchers, who have also made useful suggestions for improving the process. To complement these suggestions, we propose a more radical change: a manuscript should be reviewed on an "as is" basis and its fate be determined in one round of review. The as-is review process shortens the time period from submission to final acceptance, reduces the workload of editors, referees and authors, provides frank author feedback to referees, and, most important, lets authors own all of the ideas in their publications.

Awards are non-material, extrinsic compensation taking the form of orders, medals, decorations and prizes. They have been widely used in monarchies and republics, private organizations, not-for-profit and profit-oriented firms. Nevertheless, they have so far not received much attention. This paper develops empirically testable hypotheses, analysing the determinants of the supply of awards. The hypotheses refer to the possibility of using awards, the effectiveness of awards, and the capacity to maintain the scarcity value of awards. As the number of awards bestowed cannot (at least so far) be measured adequately, empirical evidence is adduced by way of illustrative examples.