The Economics of Freedom Theory, Measurement, and Policy Implications

231 Pages·2012·1.277 MB·English

by  SEBASTIANO BAVETTA, PIETRO NAVARRA

TheEconomicsofFreedom
Whatisfreedom?Canwemeasureit?Doesitaffectpolicy?Thisbookdevelops
anoriginalmeasureoffreedomcalledautonomyfreedom,consistentwithJ.S.
Mill’sviewofautonomy,andappliesittoissuesinpolicyandpoliticaldesign.
Theworkpursuesthreeaims.First,itextendsclassicalliberalismbeyondexclu-
siverelianceonnegativefreedomsoastotakeautonomousbehaviorexplicitly
intoaccount.Second,itdevelopsfirmconceptualfoundationsforanewstan-
dardinthemeasurementoffreedomthatcanbefruitfullycoupledwithexisting
gauges.Third,itshowsempiricallythatindividualpreferencesforredistribu-
tion and cross-country differences in welfare spending in Organisation for
Economic Cooperation and Development (OECD) countries are driven by
thedegreeofautonomyfreedomthatindividualsenjoy.Bymeansofaninter-
disciplinaryapproachandasophisticatedeconometricmethodology,thebook
takesanexplicitstandindefenseoffreedomandsetsthebasisforaliberalism
baseduponpeople,actions,andinstitutions.
Sebastiano Bavetta is professor of economics at the University of Palermo,
Italy,andvisitingprofessorofEconomicsandPhilosophyattheUniversityof
Pennsylvania,USA.HeisaresearchassociateattheCentreforPhilosophy
ofNaturalandSocialScience(CPNSS)attheLondonSchoolofEconomics
(UK),whereheobtainedhisPh.D.inPhilosophyofEconomics.Hehaspub-
lishedinvariousinternationaljournalsandhascoauthoredabookinItalian
(LiberalismintheAgeofConflict,2008).Hisresearchinterestsfocusonpolicy
andinstitutionaldesignandonthemeasurementoffreedomanditspolicyand
politicalimplications.Hehasextensivepoliticalandadministrativeexperience
inItalianlocalgovernmentalagencies.
PietroNavarraisprofessorofpubliceconomicsattheUniversityofMessina,
Italy,whereheisalsoDeputyVice-Chancellorinchargeofthebudget.Heis
alsovisitingprofessorattheUniversityofPennsylvania,USA,andaresearch
associateattheCentreforPhilosophyofNaturalandSocialScience(CPNSS)
at the London School of Economics (UK). He holds a Ph.D. in economics
from the University of Buckingham, UK. Professor Navarra coedited with
Ram Mudambi and Giuseppe Sobbrio Rules and Reason: Perspectives on
Constitutional Political Economy (Cambridge University Press, 2001) and
coauthored with them Rules, Choice, and Strategy: The Political Economy
ofItalianElectoralReform(2001).Hehaspublishedmorethan50articlesin
journalssuchastheJournalofInternationalBusinessStudies,PublicChoice,
European Journal of Political Economy, Oxford Bulletin of Economics and
Statistics, Economics of Governance, and Applied Economics. His research
interests embrace the measurement of freedom, the relation between polit-
ical institutions and economic reform, and the interplay between individual
empowerment,entrepreneurshipandeconomicgrowth.
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The Economics of Freedom
Theory, Measurement, and
Policy Implications
SEBASTIANO BAVETTA
UniversitàdiPalermo,Italy,andLondonSchoolofEconomicsand
PoliticalScience,UK
PIETRO NAVARRA
UniversitàdiMessina,Italy,andLondonSchoolofEconomicsand
PoliticalScience,UK
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Cambridge Books Online © Cambridge University Press, 2012
CAMBRIDGE UNIVERSITY PRESS
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Singapore,SãoPaulo,Delhi,MexicoCity
CambridgeUniversityPress
32AvenueoftheAmericas,NewYork,NY10013-2473,USA
www.cambridge.org
Informationonthistitle:www.cambridge.org/9781107017849
©SebastianoBavettaandPietroNavarra2012
Thispublicationisincopyright.Subjecttostatutoryexception
andtotheprovisionsofrelevantcollectivelicensingagreements,
noreproductionofanypartmaytakeplacewithoutthewritten
permissionofCambridgeUniversityPress.
Firstpublished2012
PrintedintheUnitedStatesofAmerica
AcatalogrecordforthispublicationisavailablefromtheBritishLibrary.
LibraryofCongressCataloginginPublicationdata
Bavetta,Sebastiano,1964–
Theeconomicsoffreedom:theory,measurement,andpolicyimplications/Sebastiano
Bavetta,PietroNavarra.
p. cm.
Includesbibliographicalreferencesandindex.
ISBN978-1-107-01784-9(hardback)
1. Economics–Politicalaspects. 2. Liberty–Economicaspects.
3. Autonomy–Economicaspects. I. Navarra,Pietro. II. Title.
HB74.P65B382012
330–dc23 2012007321
ISBN978-1-107-01784-9Hardback
Cambridge University Press has no responsibility for the persistence or accuracy of
URLs for external or third-party Internet Web sites referred to in this publication
anddoesnotguaranteethatanycontentonsuchWebsitesis,orwillremain,accurate
orappropriate.
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Toourparents
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Contents
Listoftablesandfigures page ix
Preface xiii
1 Introduction 1
1.1 Choiceandthemeasurementoffreedom 3
1.2 Unresolvedquestionsandthebook’saims 6
1.3 Anoutlineofthestudy 10
I concepts and tools
2 ChoiceandFreedom 17
2.1 Theimportanceofchoice 17
2.2 Asimplemeasureofchoice 24
2.3 Thevalueofchoice 28
2.4 Choiceandfreedom 31
2.5 Difficulties 32
3 MeasuringAutonomyFreedom 39
3.1 Ashiftinperspective 39
3.2 Choice,deliberation,andautonomy 40
3.3 Potentialpreferences 43
3.4 Measuringeccentricopportunities 46
3.5 Awareness 49
3.6 Anaxiomaticmeasureofautonomyfreedom 54
4 TheEmpiricalMeasureofAutonomyFreedom 58
4.1 Introduction 58
4.2 Options,preferences,andautonomyfreedom 60
4.3 Achievementandautonomyfreedom 62
vii
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viii Contents
4.4 Doesautonomyfreedomleadtocontrol? 65
4.5 Theautonomousperson 76
4.6 Wrappingupourresults 96
II autonomy freedom and the welfare state
5 WhyRedistribute? 101
5.1 Introduction 101
5.2 Theredistributionparadox 102
5.3 Socialmobilityandredistribution 105
5.4 Distributivejusticeandredistribution 110
5.5 Furthermotivationsforredistribution 113
5.6 Concludingremarks 121
6 AutonomyFreedomandRedistribution 122
6.1 Introduction 122
6.2 Autonomyfreedomandtasteforredistribution 124
6.3 Thedata 132
6.4 Theempiricalmethodology 138
6.5 Estimationandresults 142
6.6 Concludingremarksandpolicyimplications 149
7 AutonomyFreedomandWelfareSpending 154
7.1 Introduction 154
7.2 Incomeinequalityandwelfarespending 155
7.3 Autonomyfreedomandwelfarespending 164
7.4 Concludingremarks 173
8 Choice,Freedom,andtheGoodSociety 175
8.1 Freedomandthevalueofchoice 176
8.2 Choice,voluntariness,anddiversity 180
8.3 Thefreedoms’box 186
Bibliography 191
Index 201
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Listoftablesandfigures
tables
1.1 TheStateoftheArtontheMeasurement
ofFreedom page 7
4.1 SummaryStatisticsandCorrelationMatrix 69
4.2 AutonomyFreedomandControl:FullSample 71
4.3 AutonomyFreedomandControl:DemographicPartition 72
4.4 AutonomyFreedomandControl:PoliticalPartition 73
4.5 AutonomyFreedomandControl:ReligiousPartition 74
4.6 AutonomyFreedomandControl:Geo-economicPartition 75
4.7 AutonomyFreedomoverTime–OECD 79
4.8 AutonomyFreedomoverTime–OECD 81
4.9 PercentageofAutonomousIndividualsover
thePopulation 84
4.10 PercentageofAutonomousIndividualsoverthe
Population:PoliticalPartition 85
4.11 PercentageofAutonomousIndividualsover
thePopulation:ReligiousPartition 86
4.12 AutonomousIndividuals:WhoAreThey?–FullSample 90
4.13 AutonomousIndividuals:WhoAreThey?–
Geo-economicPartition 91
4.14 AutonomousIndividuals:WhoAreThey?–Political
Partition 94
4.15 AutonomousIndividuals:WhoAreThey?–Religious
Partition 95
6.1 SummaryStatistics 133
ix
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x Listoftablesandfigures
6.2 CorrelationMatrix 134
6.3 ConditionalLogitEstimation 143
6.4 NestedLogitEstimation 144
6.5 ConditionalLogitEstimation–RobustnessCheck 148
6.6 NestedLogitEstimation–RobustnessCheck 150
7.1 LevelsofGiniCoefficients:OECDCountries,
1980–2005 157
7.2 TrendsinIncomeInequality:OECDCountries,
1980–2005 158
7.3 PublicSocialExpenditureasaShareofGDP:OECD
Countries,1980–2005 159
7.4 PublicSocialExpenditureasaShareofGDPbyMain
SocialPolicyAreas:OECDCountries,2005 161
7.5 AutonomyFreedomandPreferencesforRedistribution 166
7.6 AutonomyFreedomandWelfareSpending:Sensitivity
Analysis 171
7.7 AutonomyFreedomandWelfareSpending 173
figures
4.1 DistributionofAutonomyFreedom–AllOECD
Countries 77
4.2 DistributionofAutonomyFreedom–OECD
Non-transitionCountries 77
4.3 DistributionofAutonomyFreedom–OECDTransition
Countries 78
5.1 IncomeandPreferencesforIncomeDifferences 106
5.2 NetGainfromRedistributionandSocialExpenditure 106
5.3 SocialMobilityandRedistribution 108
5.4 FairnessandRedistribution 113
5.5 EconomicOpennessandRedistribution 115
5.6 ReligionandRedistribution 116
5.7 ReligiousFractionalizationandRedistribution 117
5.8 EthnicFractionalizationandRedistribution 117
5.9 IndividualPreferencesforRedistributioninFormer
CommunistCountries 119
5.10 IndividualPreferencesforRedistributioninWestern
Europe 119
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