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Campus Now

Early Spring Issue (Apr. 2013)

A WASEDA Miscellany

Robert Ferenc VESZTEG

Some thoughts on rules

Robert Ferenc VESZTEG
Associate Professor, Faculty of Political Science and Economics

The Nobel-laureate James Tobin once claimed that incentives is the single word that sums up whateconomics is all about. As an economist, I believe in incentives and the importance of providing the correctones, and this is exactly what I teach in my classes on game theory and on the economics of information.At the same time, I am also aware of the risks that trying to provide too many incentives can entail, even ifthey are meant to be the correct ones. It is not only so because I also teach experimental economics, but mypersonal experience seems to suggest likewise.

The country in which I was born almost four decades ago in Central Europe was imposing numerous strictrules on its citizens’ actions. Those rules did not only govern economic and social transactions, but were alsomeant to apply to one’s private life and even thoughts. Let us give the benefit of the doubt to the inventors,as for my purpose here it suffices to recall the disaster they originated by trying to hold perfect control. Thedisaster lies not in that they failed in achieving the clearly impossible, that is to specify a complete set ofrules without internal contradictions and in benefit of the public interest, but that the very subjects to thoserules learnt how to bend them. People learnt to ignore the official rules and grew resourceful in finding thebackdoors. Now, while the wave of economic and political change of 1989 swept away the system with itsrulers and rules, Hungary has been unable to change its people’s mindset which has arguably been hinderingits development for more than 20 years now.

The country in which I earned my graduate degree almost a decade ago in Western Europe was operatingwith much fewer rules. The freedom it was offering was a refreshing experience as most problems couldbe solved with the help of face-to-face communication on an individual basis. Nevertheless, it also createdunexpected troubles when the very same question had different correct answers on different days dependingon the person on duty. And occasionally it was a terribly wasteful system because everybody felt entitled toa personalized treatment and solution to her problem. Spain is today one of Europe’s troubled countries withno light at the end of the tunnel, under the burden of severe corruption which seems to be widely expandedin the political elite, it has been affecting professional sports and has reached even the royal family.

The country in which I live and work now has uncountable rules and a system that makes it impossibleto bend or ignore them. Yet, Japan gives the background to an exciting innovative project which I amparticipating in: the creation and management of an English based degree program in Political Science andEconomics at Waseda University. We are in a privileged and crucial situation, because we get to set theincentives. Our task is to find the golden middle way between too few and too many rules. While the lattermight look tempting, we should be careful not to overwrite students’ intrinsic motivation and common sense.In the classroom, I tend to rely on students’ curiosity and sense of responsibility as much as possible (and afew specific rules take care of the rest). In other words, I prefer being a professor who teaches students tobeing a policeman or salesman taking care of his clients with the help of complex contracts. I am glad andthankful that I have found supporting partners, both colleagues and students, at Waseda in this endeavor. Ihope that our efforts will be rewarded with success and that we can efficiently work together on these termsfor a long time to come.

(If you have not heard about our program yet, do not hesitate to approach our office, faculty or students formore information. If you are a student, you may want to have a firsthand experience by registering for ourcourses and earning credits.)