Multisignature escrow, coupled with blockchain, enables self-enforcing contracts by allowing parties to precommit to the terms of an agreement and thereby reduce, or eliminate, their ability to commit fraud. Many mainstream financial institutions are experimenting with blockchain-related platforms that use multisignature escrow to assist in trading debt instruments and commodities. One novel implementation was the decentralized trading platform OpenBazaar, which directly connected buyers and sellers and ran on open-source software. Buyers' payments were held in escrow until either both parties agreed that a contract was fully honored or a third-party mediator sided with one party. The firm supporting the marketplace failed to monetize its investments and stopped supporting the software. Despite OpenBazaar's demise, it lives on in decentralized cryptocurrency applications, nonfungible-token marketplaces, and illicit darknet marketplaces. Studying its key features gives insights about the prospects and limitations of decentralized marketplaces and the use of smart contracts and multisignature escrow.

Human behavior lies somewhere between purely self-interested homo economicus and socially-motivated homo reciprocans . The factors that cause people to choose self-interest over costly cooperation can provide insights into human nature and are essential when designing institutions and policies that are meant to influence behavior. Alcohol consumption can shed light on the inflection point between selfish and selfless because it is commonly consumed and has global effects on the brain. The present study administered alcohol or placebo (N = 128), titrated to sex and weight, to examine its effect on cooperation in a standard task in experimental economics, the public goods game (PGG). Alcohol, compared to placebo, doubled the number of free-riders who contributed nothing to the public good and reduced average PGG contributions by 32% (p = .005). This generated 64% higher average profits in the PGG for those who consumed alcohol. The degree of intoxication, measured by blood alcohol concentration, linearly reduced PGG contributions (r = -0.18, p = .05). The reduction in cooperation was traced to a deterioration in mood and an increase in physiologic stress as measured by adrenocorticotropic hormone. Our findings indicate that moderate alcohol consumption inhibits the motivation to cooperate and that homo economicus is stressed and unhappy.

What keeps corporate managers from underperforming or disregarding shareholders interests? In contrast to most scholars and policymakers who believe legal and regulatory oversight is key, Henry Manne's Mergers and the Market for Corporate Control describes a private or entirely invisible hand mechanism for disciplining managers to work for shareholders. The more underperforming firms have depressed stock prices, the more they become targets for buyouts and restructuring with new management. Funding much of these acquisitions is the private equity industry and its use of leveraged buyouts. Such buyouts concentrate ownership in the hands of private equity managers, and the high amount of leverage they use provides strong incentives for private equity managers to implement beneficial reforms. The expansion of private equity has helped to restructure scores of underperforming firms, has benefited equity and debt investors in this alternative investment space,and has enhanced corporate governance in society. This invisible hand mechanism works well and the recent expansion of control over the private equity industry by the Securities and Exchange Industry is unwarranted.

Is the common law efficient? Neoclassical economists debate whether our inherited systems of judge-made law maximize wealth whereas Austrian economists typically adopt much different standards. The chapter reviews neoclassical and Austrian arguments about efficiency in the common law. After presenting Hayek’s views on the common law as a spontaneous order it concludes that the common law can indeed be viewed as a spontaneous order only when judges provide their services in a free and competitive system.

From the first stock markets of Amsterdam and London to the millions of credit card transactions governed by arbitration, privately produced and enforced economic regulations are more common, more effective, and more promising than commonly considered. In Private Governance, prominent economist Edward Stringham presents case-studies of the various forms of private enforcement, self-governance, or self-regulation among private groups or individuals that fill a void that government enforcement cannot. Through analytical narratives the book provides a close examination of the world's first stock markets, key elements of which were unenforceable by law; the community of Celebration, Florida, and other private communities that show how public goods can be bundled with land and provided more effectively; and the millions of credit-card transactions that occur daily and are regulated by private governance. Private Governance ultimately argues that while potential problems of private governance, such as fraud, are pervasive, so are the solutions it presents, and that much of what is orderly in the economy can be attributed to private groups and individuals.With meticulous research, Stringham demonstrates that private governance is a far more common source of order than most people realize, and that private parties have incentives to devise different mechanisms for eliminating unwanted behavior. Private Governance documents numerous examples of private order throughout history to illustrate how private governance is more resilient to internal and external pressure than is commonly believed. Stringham discusses why private governance has economic and social advantages over relying on government regulations and laws, and explores the different mechanisms that enable private governance, including sorting, reputation, assurance, and other bonding mechanisms. Challenging and rigorously-written, Private Governance will make a compelling read for those with an interest in economics, political philosophy, and the history of current Wall Street regulations. Available in OSO:

Where did stock markets come from? Stock exchanges and the rules and regulations that make stock markets possible were not invented by government but instead emerged from the market. From the world’s first major stock market in seventeenth-century Amsterdam to the world’s second and third major stock markets in the eighteenth and nineteenth centuries in London and New York, the markets developed over a long period when government officials did not understand them and refused to enforce most contracts in them. Officials viewed most of what went on in stock markets as forms of gambling and passed various prohibitions, yet brokers ignored the prohibitions and developed amazingly sophisticated contracts, including forward contracts, short sales, securitization, hypothecation, and options. Similar to the evolution of money, the stock markets grew out of a series of private choices and can be seen as a quintessential example of spontaneous market order.

Inclusionary zoning, also known as below-market housing mandates, is now in place in one-third of California cities and is spreading around the United States. Supporters of this policy advocate making housing more affordable by placing price controls on a percentage of new homes. But if almost all economists agree that price controls on housing reduce quantity and cause shortages, why do so many policymakers or voters support them? Ellickson [1981] argued that inclusionary zoning may be popular precisely because, contrary to the expressed goals of the program, it actually restricts supply and leads to higher prices. Incumbent homeowners and policymakers catering to them can benefit from restricting new supply. Using panel data and a first difference model, we test how the policy affected the price and quantity of housing in California cities between 1980, 1990, and 2000. Under various specifications we find that cities adopting below-market housing mandates end up with higher prices and fewer homes. Between 1980 and 1990, cities imposing below-market housing mandates end up with 9 percent higher prices and 8 percent fewer homes overall. Between 1990 and 2000 cities imposing below-market housing mandates end up with 20 percent higher prices and 7 percent fewer homes overall. Consistent with Ellickson's hypothesis, the program may not be about increasing die supply of housing or making it more affordable overall.

High housing prices in recent years are making it increasingly difficult for many to purchase a home. Prices have been rising all over the United States, especially in cities on the East and West Coasts. In San Francisco, for example, the median home sells for $846,500 (Said 2007, c1), which requires yearly mortgage payments of roughly $63,000 (plus yearly property taxes of $8,500).1 Not only is the median home unaffordable to most, but there is a dearth of affordable homes on the low end too. In San Francisco, a household making the median income of $86,100 can afford (using traditional lending guidelines) only 6.7 percent of existing homes (National Association of Homebuilders/Wells Fargo 2007). Households making less are all but precluded from the possibility of home ownership (Riches 2004).KeywordsHousing PricePolicy VariableAffordable HousingPrice ControlRural HousingThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Public choice economics is often referred to as the study of "politics without the romance" (Buchanan 1999). Instead of simply assuming that government agents are benevolent pursuers of the public good, public choice models them as real-life individuals who have desires and concerns of their own. From this perspective, it becomes natural to consider the possibility that any given government policy may have been created to satisfy private special interests rather than the interest of the general public (Buchanan and Tullock 1962). With its insistence on rigorous analytical tools and realistic methodology, the ascendance of public choice has simultaneously modernized research on the political process as well as engendered a healthy dose of skepticism regarding the desirability of previously accepted government functions. Curiously, the romantic, public interest notion of government retains a lingering influence in the scholarship on law. The romantic view of the law can even be found in the writings of the founders of public choice.1KeywordsLegal SystemPublic ChoiceRoyal CourtGermanic TribeNorman ConquestThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Question 1 begins by discussing an area of subjectivism where most economists agree: Is economic value subjective? This area differentiates most modern economists from classical economists and many non-economists. Question 2 probes an area where many but not all economists agree: Are costs subjective? This area differentiates many Austrian and certain neoclassical economists from orthodox neoclassical economists following Alfred Marshall’s tradition. Questions 3, 4, 5, and 6 discuss areas where even fewer still economists agree: Can we survey people’s subjective preferences? Can we measure an individual’s utility? Can we compare utility between individuals? Can we aggregate the utility of many people? For these questions one can find Austrian and neoclassical economists on both sides of the debate. Questions 7, 8, 9, and 10 look at alternative approaches to making welfare comparisons between nations that do not purport to depend on measuring subjective utility, such as looking at per capita income, migration patterns, society-wide cost-benefit analysis with dollars as the unit of measurement, and a demonstrated preference Pareto rule. Where one stands on these issues depends on how far one is willing to extend the logic of economic subjectivism. And where one stands on questions of economic subjectivism has an important influence on how one analyzes the world and what policies one recommends.

The September 2008 issue of Econ Journal Watch carried an essay about building an identity for "our" economics. It attempted to motivate a questionnaire on the matter, a questionnaire that was then sent out to 408 individuals, mostly economists. Responses were received from 42 individuals, including Bryan Caplan, Peter Boettke, David Henderson, Steven Horwitz, Deirdre McCloskey, Thomas Mayer, Robert Nelson, Edward Prescott, Colin Robinson, Richard Timberlake, Robert Tollison, and Leland Yeager. This piece is a brief introduction to the compendium of responses that is provided as an appendix.

How much of economic theory can be derived using pure logic and how much of it depends on empirical facts? In a provocative article, Hülsmann (2003) criticizes Mises and Rothbard for relying on empirical assumptions, ceteris paribus claims, and thought experiments in their analysis. Instead, Hülsmann proposes a counterfactual method that does not rely on any empirical assumptions and is said to produce universally valid claims. Upon inspection we find that many of his proposed laws are either inexact, incorrect, or must rely on subsidiary assumptions to be true. We conclude that the traditional approach of Mises and Rothbard appears to be more fruitful and true.