This chapter develops the sceptic’s conceptual framework as an alternative to the deterministic framework prevalent in economics. The proposed conceptual framework is based on the identification of two separate orders of fact, where the ex post order of facts provides a record of past events, and the ex ante order of facts relates to the structure in the economy and can serve as a guide to action. The ex ante order of facts encompasses causal and structural facts. Determinism requires some empirical regularities, grounding these in the ex post order of facts, under the assumption of the scientific vocation of the impersonal perspective according to which prediction is but explanation – of ex post facts – in the opposite direction. The free will argument used against determinism also fails to draw the distinction between ex post and ex ante facts, since its limiting itself to providing an intelligible account of past events.
This chapter discusses the nature of an economics which does not rely on the concept of a preference field, but which provides for empirical orientation by means of institutions. The notion of consistent choice that finds expression in everyday terms such as a disposition, taste, habit, fashion or custom has the form of an ex ante fact. Provided the notion is not illusory, dispositions, tastes, and so on are therefore independent of particular situations and have a certain invariance, though one would expect them to change from time to time. The proposed abstract model of a genetic explanation consists of (i) explanatory constraints serving as ex ante facts and (ii) explanatory shells for forming ex post facts. If economics is to have empirical content it needs to free itself from a paradox it finds itself in. Choices in general cannot be formulated as ex ante facts. But institutions could be so formulated, though unfortunately economists treat them mostly as ex post facts; either (i) as choices now presented as ex post facts, or (ii) end points of a historical investigation. If formulated as ex ante facts they serve as constraints, but not as constraints on behaviour, instead as constraints on possible explanations.
Economic theory might be expected to position institutions as its empirical content, but the integration of theory and institutional facts has so far not been accomplished in economics. The raison d’être of this book is the opening of a path towards the integration of theory and institutional facts, applying an analytical – rather than historical or evolutionary – approach. This requires a conceptual framework that shows how knowledge of institutions fits into our understanding of economic questions. The conceptual framework relates to the empirical content of economics, identifying two types of facts, distinguishing, for instance, between statistical data, on the one hand, and the relationship that may exist between statistical data, on the other hand. Institutions should figure as facts.
This chapter considers the role which the notion of rational action plays in equilibrium theory. An individual’s choice reveals something about his preferences to the observer and even to the choosing individual himself. The assumption that there is a most preferred combination of goods is merely the assumption that an individual acts purposefully. When we interpret behaviour as purposeful action the beliefs and preferences that are revealed may simply be ones that an individual happened to have at a particular moment, without any significance beyond that moment. When we treat the beliefs, aims and preferences of others as empirical facts, the nature of such facts differs according to whether they are elements in our intelligible accounts of the actions of others or whether they are factors that we take into account in our own actions. They feature as either ex post facts or ex ante facts. In neo-classical economics the empirical content of preferences are ex post facts that have been mistaken for ex ante facts.
A realistic economics may take as some of its empirical content the institutions of an economy. In neo-classical economics, in contradistinction, it is the choices of individuals that constitute the empirical content of theory. Institutions and choices, however, belong to two different orders of fact, according to the conceptual framework developed in this book. Choices belong to the ex post order of facts, and institutions belong to the ex ante order of facts. The former are mere records of past events, whereas the latter have to do with structure and causation. Economic theory presents preferences as if they were in the nature of ex ante facts, giving rise to choices, but in the absence of observing preferences, it infers them from the choices. Accordingly, the empirical content of economics are in the nature of ex post facts. Preferences are ex ante facts to the operating individual, but to the observing theorist, they are in the domain of ex post facts. This book shows how a confusion between ex post and ex ante facts has manifested itself in micro-economics.
In this chapter the sceptic conceptual framework will be applied to equilibrium models of comparative statics in micro-economics. The purpose is to show that equilibrium models are deterministic, with preferences functioning in the manner of a structural fact, as defined in the sceptic conceptual framework. This points to a link between equilibrium models and the sceptic conceptual framework, where ex post facts correspond to casual data and ex ante facts correspond to parametric and institutional data of the bahavioural functions of micro-economics. The ex ante order of fact has the connotation of something enduring, rather than just stochastic elements of the ex post order of fact. But while preferences may be ex ante to choices, economics use the preference field in an ex post manner, though dressed up as an ex ante fact.
This chapter traces the development of common sense notions of needs, tastes and preferences into the concept of an ordinal preference field, and tries to show that it is extremely unlikely that an ordinal preference field can be both consistent over time and comprehensive and that the concept is likely to be based on a confusion between different logical forms of empirical fact. While preferences are portrayed as ex ante facts in the rational choice model, the actual empirical content are not preferences but are the actual choices made by individuals. What we know about choices are records of past events. Preference fields are inferred from choices, but we can then not use the inferred preferences to explain choice, for that would be explaining what has already been assumed. Preferences, though portrayed as structural facts, are nonetheless nothing other than ex post facts are dressed up as ex ante facts.
We use public choice theory to examine the calculus of the Russian aggression against Ukraine. We hypothesize that Putin’s regime acts as a tinpot dictatorship, using political loyalty and repression to stay in office. During Putin’s first two-term presidency, an improvement in Russia’s economic performance increased the supply of political loyalty and resulted in a slow fall in political repression. The global financial crisis deteriorated Russians’ living standards between Putin’s second and third terms in office. The deterioration in the country’s economic performance unambiguously resulted in a fall in the supply of loyalty and increased repression. Consistent with our hypothesis, we argue that Putin’s regime pursued military conquest to increase the aggregate supply of political loyalty.
With this article, I present a public choice perspective on Russia’s war on Ukraine. I criticise the realist view according to which Russia’s security concerns, defined by President Putin, prompted the conflict. I argue that realism offers a deficient analytic framework to the extent that it disregards the political and economic structure of Russia and, generally speaking, how the political economy of each case study shapes preferences, strategies and intra-elite relations, which feed into foreign policy formation. Russia is a government-controlled economy and society; a key property of Russia’s political economy is the dependency of key socio-economic actors and groups on the regime’s survival. This landscape pre-empts the expression of genuine feedback and dissent from society, and explains why Putin’s decision has faced very little disagreement and resistance. Given the previously close economic ties between Russia and Ukraine, this article also challenges capitalist peace theory for its blanket assertion that dense economic relations would provide a strong disincentive for countries to resort to war. Instead of talking about capitalism generically, we can discern varieties of capitalism, as they condition state–society relations differently. In Russia, the value that key socio-economic elites assign to their relationship with Putin outweighs the costs they are experiencing from the conflict and the external sanctions. Developing a public choice perspective in the study of international relations focuses on the preferences and strategies of the leadership and of domestic elite-level actors within the aggressor state, and invites attention to the power asymmetries that characterise their relationship.
The October Revolution in Russia is better understood in light of Gordon Tullock’s by-product theory of revolution. This approach entails a focus on private costs and benefits rather than on public goods. It is shown that in terms of economic development, fiscal stability, and income distribution, that is, public goods, conditions in late-tsarist Russia were improving, not deteriorating, as the revolution approached. We reinterpret the impact of the many political concessions that followed the earlier Russian Revolution of 1905 and conclude that they had ultimately increased, rather than decreased, the probability of revolution. Finally, we show that various forms of foreign intervention (financial, military, and philosophical) made the unlikely Lenin the ultimate victor in the outcome of the Russian Revolution.