Research Projects

Many behaviours and actions of individual states have implications for the economic activity, prosperity, and growth of other states. The department analyses areas of action where such effects are of particular importance.

Scientifically, the aim is to explain and predict observable actions and their outcomes at the international level from the logic of individual states' objectives, and to explore the relationship between institutional circumstances, the actions chosen and their outcomes.

The guarantee of property rights and the possibility of legally enforcing contractual claims are among the most significant achievements of modern states. The advantages of such rule-of-law institutions are always evident where property rights are not defined or are insufficiently defined.

Prominent examples are political or military domestic or international conflicts, individuals or corporations fighting for their interests in court, and, above all, the conflict of interest groups against each other. Underlying these and some other interactions in other contexts is a unifying pattern that is explored in abstract analytic terms, empirically, and in laboratory and field experiments in what is known as ‘contest theory’ (also ‘theory of all-pay auctions’).

On the one hand, the game-theoretical structures underlying the individual situations have structural similarities, but they often differ in details, and this can have significant implications for what happens in the conflict situation. From the perspective of economic conflict research, it is important to better understand the course of such conflicts as a function of institutional circumstances. This also contributes to an overarching goal of understanding the emergence and internal stability of political systems and institutions.

The results and analytical tools developed within economic conflict research make essential explanatory contributions to the understanding of competitive situations in very different areas already mentioned.

A recent and important concrete object of research in this context is the interstate conflict between great powers. Insofar as this conflict is fought out by diplomatic and military means, there is a hardly manageable amount of scientific theories, empirical findings and other insights that extend into political science and, in particular, the subdisciplines of international relations and military strategy.

When considering the conflict between the United States and China, which has been burgeoning for several years, however, economic contexts play an increasingly important role alongside these classic aspects. It has long been known that economic strength ultimately translates into military strength. It is less obvious, however, that economic policymaking in the form of trade policy, innovation policy, industrial policy, financial market policy, etc., can be used directly as instruments of these conflicts. The term "geo-economics" has been coined for this purpose, corresponding to the older term geopolitics.

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A central issue in public finance is the relationship between the individual and the state. In this context, methodological individualistic economics assumes that the action-bearing actors of the visual world are always single individuals, equipped with a set of options for action and choices with which they align their actions with their goals and preferences. In interaction with their fellow human beings, the actions of individuals often have consequences not only for the agent himself, but for other individuals and groups of individuals within a group or state structure.

This individualistic concept of a community does not give the state and its institutions an identity or personality of their own. State institutions are merely institutional frameworks with no will or goals of action of their own. They are themselves a construct that results from the possibilities of action and interests of those who work in and for state institutions. Their actions thus give rise to "the state", which also has steering effects for private individual action.

An essential element of such state institutions is that citizens delegate decision-making power to other agents – in a representative democracy, for example, to elected persons or persons indirectly legitimized by elected representatives. This delegation relationship is one of the most interesting and important objects of research in Public Economics. Positive research questions include understanding how possible institutional designs of this "delegation contract" affect delegates' incentives. They are extensively researched in Public Choice/Political Economy. This research also has normative elements: It assesses how delegates' decision-making behaviour feeds back to the welfare of citizens of the state. Economics is based on the principle that the outcome of action is evaluated on the basis of a scale that is determined by the citizen in question's own standard of judgement.

Good government action is thus defined in such a way that the individual goals and preferences of the citizens of the state are achieved as far as possible through this action.

The delegation context leads to one of the core questions of Public Economics: How far should the delegation of individual decision-making rights to political or bureaucratic bodies go? Among other things, this raises the tension between the decision-making autonomy of the citizen and the paternalistic behaviour of politics or bureaucracy vis-à-vis the citizen. This tension is one of the oldest questions of Public Economics and is also reflected in the most recent research questions of the department. In this context, the department first explores the different attitudes of individual citizens towards the desired role of the state in these decision-making issues. Since these attitudes are presumably not intrinsic in their ultimate causes, the question of the causes of these attitudes suggests itself: Why do which individuals desire to make important decisions themselves that affect their own well-being, and why do other individuals desire to delegate these decisions to a state government?

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