Subrick comment and CF reply

1BACK TO THE BOG, AUSTRIAN-STYLE J. Robert Subrick Center for Institutional Reform and the Informal Sector Department of Economics University of Maryland Robert@iris.econ.umd.edu Abstract: Robust political economy begins with assumptions of self- interested planners who lack perfect information. In such a world, the social planner does not necessarily outperform the decentralized outcome. Crampton and Farrant (2005) argue that the inability to engage in economic calculation reduces the ability of social planner to extract consumer surplus. Thus, the lack of calculation improves the welfare of the median citizen which contrasts with conventional wisdom. We argue that they overstate their results. First, the calculation argument fails because of its underdevelopment, not because of the empirical record. Second, the welfare implications cannot be adequately addressed by assuming diminishing marginal utility of income or using the median welfare standard. Third, robust political economy has not developed a model that yields meaningful welfare comparisons. Thus, robust political economy remains in its early stages. Reply from Crampton and Farrant follows. JEL Codes: P0, P16, P50 Keywords: Political Economy, Calculation, Welfare Economics * We thank Christopher Coyne, Eric Crampton, and Peter Leeson for helpful comments. 1 With apologies to Gordon Tullock. Introduction The positive and ...