Economic Systems, Markets and Politics: An Ethical, Behavioral and Institutional Approach

Preface
Introduction
Contents
Chapter 1: Goals of Economic Policy and Weaknesses in the Approach of Economics
	1.1 Goals of Economic Policy and the Welfare Optimum
	1.2 Cultural and Institutional Factors in Economics
	1.3 Economics as a Natural Science or Behavioral Science?
	1.4 Ethics in Economic Education
	Literature
Chapter 2: The Image of Man
	2.1 The Classical View of Man: Homo Economicus
	2.2 Falsely Understood Egoism
	2.3 Conclusion and Summary
	Literature
Chapter 3: Market and Competition
	3.1 Behavior and Economic Performance
		3.1.1 Culture and Performance
		3.1.2 Economic Behavior Motivation and Performance
		3.1.3 Human Intelligence and Social Performance
		3.1.4 Distribution and Performance
	3.2 Behavior and Competition
	3.3 Competition Versus Cooperation
	3.4 Economy and Freedom - A Historical Overview
	3.5 Basic Conceptions of the Market
	3.6 How Does the Market Economic System Work?
		3.6.1 Functions of Competition
		3.6.2 A Free-Market Without Social Rules?
		3.6.3 Moral Goals and Market Economy
	Literature
Chapter 4: Economic Systems
	4.1 Theories of Justice
	4.2 Constitutional Economics
	4.3 Parts of a Market Economic System
	4.4 Institutional Economics: Elements of the Economy
	4.5 The Economic Division of Labor
	4.6 Institutional Challenges in Specific Game Situations
		4.6.1 The Ethical Prisoner Dilemma
		4.6.2 Games of the Gender Struggle Type
		4.6.3 Insurance or Trust Game
	4.7 Ethical Institutions and Organizations
	4.8 Is the State of Law Sufficient?
	4.9 Central Administration Economy (or Planned Economy)
	4.10 Russia´s Transformation into a Market Economy with a Poor Economic System
	4.11 Social Market Economy
	Literature
Chapter 5: Market Failure and Economic Policy
	5.1 Market Failure Due to External Effects
	5.2 Market Failure Due to Non-exclusion, Public Goods
	5.3 Market Failure Due to the Prisoner´s Dilemma
	5.4 Market Failure Due to Lack of Rationality
		5.4.1 Meritorious and Demeritorious Goods
		5.4.2 Risk-Averse or Risk-Taking Behavior
		5.4.3 Emotions
	5.5 Market Failures Due to Asymmetrical Information
	5.6 Market Failure Due to Transaction Costs
	5.7 Market Failure Due to Corruption
	5.8 Market Failure Due to Lack of Market Transparency
	5.9 Market Failure Due to Natural Monopolies
		5.9.1 Spatial Monopoly
		5.9.2 Natural monopoly Due to Falling Unit Costs
		5.9.3 Natural Monopoly on Internet and Software
		5.9.4 Indivisibility of the Factors of Production
	5.10 Market Failure on the Labor Market
	5.11 Conclusion of the Chapter Market Failure
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Chapter 6: Traits of the Political System
	6.1 The New Political Economy
	6.2 The Vote Maximization Model from Downs
	6.3 Interest Groups (Lobbying)
	6.4 Economic Theory of Bureaucracy
	6.5 Voting Procedure
		6.5.1 Unanimity Rule
		6.5.2 Majority Rules (Absolute or Relative, Choice of Plurality)
		6.5.3 Borda Rule
	6.6 Discourse Ethics as Basis for a Legitimate Decision Making Process
	6.7 Political Manipulations
	Literature
Chapter 7: Financial Markets After the Financial Crisis
	7.1 Behavioral Research Results and Financial Markets
		7.1.1 The Efficient Market Hypothesis
		7.1.2 Review of the Efficient Market Hypothesis
		7.1.3 The New Behavioral Finance
		7.1.4 Noise Trading Approaches
	7.2 The Financial Crisis and the Reforms to Stabilize the Financial Markets
		7.2.1 The Subprime Crisis, the Biggest Financial Crisis After 1929
		7.2.2 Some Causes of the Financial Crisis in the Light of Behavioral Theory
			7.2.2.1 Belief in the Self-Correcting Power of the Market
			7.2.2.2 Exaggerated Belief in Figures
			7.2.2.3 Missing Moral Values
			7.2.2.4 The Importance of Risk Adequate Compensation
		7.2.3 The Reforms of the International Financial Market Order
			7.2.3.1 Risk and Non-transparency in Derivatives
			7.2.3.2 Weaknesses of Risk Indicators and Pricing Methods
			7.2.3.3 Introduction of a Separation System
			7.2.3.4 The Trade-Off Between Yield and Risk and Unilaterally Constructed Incentive Schemes
			7.2.3.5 Fair Value Loan Valuation
			7.2.3.6 Conclusion
	7.3 Speculation in the International Financial Markets
		7.3.1 What Empirical Evidence Do We Have About Speculation Influencing Markets?
		7.3.2 Critique of Methodology
		7.3.3 The Logic of Speculation
		7.3.4 Price Distortions and Price Manipulation
		7.3.5 Irrationality and Bubble Creation?
		7.3.6 Conclusion
	7.4 Conclusion and Summary: International Financial Markets
	Literature
Chapter 8: Business Cycles Theory and Policy
	8.1 The Business Cycles Phenomenon
	8.2 Reasons for Economic Fluctuations from the Economic Theory and Political Economy Conclusions
		8.2.1 Dynamic Keynesian Approaches: The Hicks´s Super-Multiplier
		8.2.2 Neoliberal Versus Keynesian, a Synthesis
		8.2.3 Technical Progress: The Schumpeter Business Cycle
		8.2.4 Overinvestment Theories and Experiments
		8.2.5 Distribution Struggles to Explain Economic Fluctuations: The Goodwin Model
		8.2.6 Political Economic Cycles: The Political Economic Model of Nordhaus
		8.2.7 Monetary Policy and the Behavior of the Central Bank as a Reason for Business Cycles
			8.2.7.1 The Interest Rate Theorem of Knut Wicksell and Its Support from Behavioral Science
			8.2.7.2 The Perverse Elasticity of Credit Offers of Hayek
			8.2.7.3 The Effects on Investment Behavior of Zero Interest Rate Policy, Evidence from a Behavioral Experiment
		8.2.8 The Effects of Money Supply and Interest Rates on Stock Prices, Evidence from Two Behavioral Experiments
			8.2.8.1 Case Study: The US Monetary Policy in the Field of Tension of the Stock Market Development
			8.2.8.2 Review of Monetary Policy Objectives
		8.2.9 Shocks and Price Rigidities: The New Keynesian Macroeconomics
		8.2.10 Price Adjustment Costs and Information Asymmetries: New Keynesian Macroeconomics
		8.2.11 Adaptive Expectation in Monetarist Theories
		8.2.12 Determinants of Growth as Economic Factors: The New Growth Theory
		8.2.13 Exogenous Change of Political Variables: The New Classical Macroeconomics
	8.3 Behavioral Approaches to Business Cycles Theory
		8.3.1 Speculative Bubbles as a Business Cycle Trigger
		8.3.2 New Behavioral Finance Theory
		8.3.3 Noise Trading Approaches
	8.4 Conclusion and Summary: Determinants of the Business Cycle
	Literature
Chapter 9: Final Conclusion: Economic Systems, Markets and Politics
	Literature
Solutions to the Exercises
	To Chap. 3: The Functioning of Market and Competition
	To Chap. 6: Traits of the Political Systeme