Instituce a odpovědnost
[[Institutions and Responsibility]]
economics and finance
paperback, 320 pp., 1. edition
published: april 2004
recommended price: 285 czk
A book of original social-economic views of Václav Klusoň. In nine chapters the author gradually analyses the concept of responsibility, its economic importance, and the impact on the development of a society. Rules restricting the influence of political power and proprietors are formulated, as well as rules leading to an increase in social responsibility of proprietors, entrepreneurs, managers, politicians, and citizens themselves. According to the author, ititutional restriction of proprietors and political power, and the growth of social responsibility might lead toward a free social system, which would be socially, economically and politically stable.
ORIGINAL CZECH WORK FROM INSTITUTIONAL ECONOMICS
The reviewed book is an updated and extended version of a study bearing the same title, published by the Josef Hlávka's Institute of National Economy in 2002, which rightly aroused a great interest of the large economic community. The book is a result of the author's longtime interest in fundamental methodological and philosophical issues of economic science. Its catalyser was undoubtedly the peripeteias of post-November development of Czech economy and society connected with pronounced underestimation of institutions, morals and great deficiency of responsibility.
Economic transformation implies a crucial reform of institutions and organizations: in their framework the reform of ownership rights and market liberalization along with appropriate economic policies are very important. But institutional and evolutionary economic theories were almost ignored in the formulation of Czech transformation strategy. Therefore it is not surprising that serious problems in the development of Czech economy and society in the nineties of the last century and at the beginning of the 21st century are attributed to the inadequate institutional environment to a large extent. After the fourteen years of "purposeful building of capitalism" in the Czech Lands we have a very strange type of capitalist society where the rights of private owners are not guaranteed reliably. It is partly due to inadequate laws, absence of legal rules in some areas and insufficient enforcement of laws, and to the inadequate institutional environment and methods of the so-called large privatization. The transformation was accompanied by significant wastage of resources (their tunnelling or destruction), and it led to a shift of informal institutions from values connected with creative efforts to values associated with a fight for the "heritage" of economy of Soviet type.
The unsatisfactory results of Czech transformation compared to initial ambitions are closely connected with deformed values or deformed morals: they resulted in a disproportionate expansion of predatory behaviour to the detriment of creative activities. It is to note that the property acquired in this way was wasted very quickly. In the nineties the Czech society became a "laboratory" of institutional economics due to a great experiment with the underestimation of institutions and ethics and subsequent separation of liberty and responsibility although we must admit that unfortunately in the "era of Enron and Parmalat" the number of such "laboratories" increases.
The author writes in an introduction to his book: "We begin to be aware of the lack of responsibility or to appreciate the value of responsibility just in the period when we are witnesses of an increasing number of cases of great lack of responsibility. In the period of transformation responsibility became a scarce good similarly like it was clean air and clean water in the twentieth century" (p. 10). Due to "moral heritage" of the society of Soviet type and as a consequence of the institutional failure of Czech transformation strategy the mostly irresponsible behaviour of owners, managers, officials and politicians on the level of state administration and self-government is embodied in the fundaments of post-November development and, in the author's opinion, exerts a detrimental influence on it. Besides a purpose-oriented analysis of crucial aspects of irresponsible behaviour the main mission of the book should provide a definition of necessary conditions of responsible behaviour.
The book consists of nine chapters including an introduction in the Chapter 1. In Chapter 2 a general theoretical definition of the notion responsibility is presented. Great attention is paid to methodological issues. The concept of responsibility is explained in the context of methodological individualism, methodological holism and institutional individualism. The notions "general good" taken as balanced relations of rights, duties and responsibility and "social responsibility" of entrepreneurs are analysed; there is an attempt to find a general solution to these problems applying the "I and you paradigm" of Amitai Ezioni, who integrates responsibility to the other people into the utility function.
Chapter 3 deals with owners' responsibility. Czech transformation was based on an implicit assumption that a private owner is always responsible while a government official is always irresponsible. It is elucidated on an example of five important transformations in the Czech history how the owners coped with them, and various types of owner's lack of responsibility are analysed. A question is asked at the end of the chapter whether private ownership can be considered a sufficient condition of responsible behaviour.
Chapter 4 tries to answer two interrelated questions. The author asks whether there are any methods of effective punishment of owners who acquired large property by their irresponsible and unfair activities and whether it is possible to prevent unfair accumulation of property in an effective way. It is demonstrated on practical examples how disputable the results of such efforts were. But he does not want to accept the Veblenian idea that a bank robber who robs several tens or hundreds of millions will be sentenced to a relatively low penalty because in the value terms he approaches social classes confessing spectacular idleness while a petty thief who steals several ten-koru-na notes must be punished in an exemplary way. Therefore he presents a project of property recourse for the owners' lack of responsibility in the final part of the chapter.
In Chapter 5 responsibility in different forms of businesses is analysed. The term "liability", which was also applied in German ordo-liberalism, is used and some possibilities of increasing the liability are discussed. It is stated in this context that the well-functioning institute of liability is a prerequisite of the effective working of market and society.
Chapter 6 deals with responsibility in management structures of large corporations. Corporations play a crucial role in advanced market economy. Their ownership and management structures are frequently very complicated and there arises an information asymmetry on many levels. The traditional approach of A. Berle and G. C. Means is described in an introductory part of the chapter, followed by arguments used by A. Alchian to criticise it. He is an important representative of new institutional economics; he considers a stock-type business with perfect divisibility and transferability of ownership rights an ideal ownership structure. The author analyses different models of management structures and tries to show how to make the principle of managers' responsibility operational according to the U.S. corporate law.
Chapter 7 is devoted to the theory of ownership rights and its approach to responsibility from the aspect of new institutional economics and public choice theory. Negative externalities are analysed in the first part. Contrary to the traditional concept that comprises only negative consequences of economic activities the problem of rent seeking in "political markets" is included. It is accentuated that rent seeking is a symptom of irresponsible behaviour of an entrepreneur who tries to substitute keen market competition for advantages that may be taken from corruptive behaviour. At the end of the chapter Coase's theorem is mentioned; perhaps too optimistic expectations are associated with it in connection with the principle of reciprocity.
In Chapter 8 institutional environment creating conditions for responsible or irresponsible behaviour is described. The relationship of responsibility and institutions is analysed; other themes are the role of formal and informal institutions, problems of the so-called social engineering, where a Utopian version and the so-called gradual version are distinguished, and the strategy of the so-called decoupled incrementa-lism connected with it. The application of these approaches to economic transformation is explained on the basis of these principles.
The last chapter contains a brief philosophical contemplation about power, property and responsibility.
The reviewed book presents a detailed analysis of problems that are of cardinal importance for successful development of the contemporary advanced democratic society and market economy. It offers a necessary catharsis and some aspects to solve crucial problems of our economy and politics. It is such an essential approach to the role of institutions, morals and responsibility in economic and social life that it should not escape the attention of economists and specialists in other social sciences, politicians and students. It can also be recommended to the public at large.
Milan Sojka, PRAGUE ECONOMIC PAPERS, 1, 2005, str. 89-91