Texas Tech University

Rawls Research Spotlight: The Desire for Constraints within Economics and Politics

Salter’s research is at the nexus of politics and economics and how each affects the other.

Jacob Gordon | April 23, 2024

Story Spotlights

  • The High Middle Ages can help us understand the institutional antecedents of where today's good governance comes from.
  • Monetary policy should be conducted according to strict rules rather than the discretion of central bankers.
  • Distributism can be explored as both a research program and a blueprint for political-economic reform.
  • Countries with weak or corrupt economies could look to dollarization to curb inflationary finance and reckless spending.

Alexander Salter, Georgie G. Snyder Associate Professor of Economics at the Jerry S. Rawls College of Business, sees himself as a political economist and his research as a sandbox full of possibilities.

“For me, the really interesting questions about governance are how communities organize themselves to solve collective action problems,” said Salter. “Economists have a saying: show me the incentives, and I'll show you the outcome.”

Salter's research centers on the economic rules or constraints a government has to work within.

Consider a professional athlete. An NBA player works on their body and abilities given that sport's rules and style of play. However, if that player were to compete in a different sport, say cross-country skiing or swimming, their body and abilities would look vastly different. The sport's rules dictate how that person develops as an athlete.

Within his research, Salter looks to the past and present to show how governments and economic systems were established and have evolved. This throughline is best demonstrated within four works that Salter and various collaborators have published in the past few years.

The High Middle Ages Are Key to Understanding Our World Today

In “The Medieval Constitution of Liberty: Political Foundations of Liberalism in the West,” Salter and co-author Andrew T. Young, professor of economics at Rawls College, trace the roots of many of today's institutions to the High Middle Ages (1000-1300).  

“It's really a book against the Whig interpretation of history,” said Salter. “There's this idea that we were all just barbarians and gradually progressing towards enlightenment. Our ancestors were people just like us, so we shouldn't be quick to assume, just because somebody lived in the year 1200, that they don't have anything to teach us about economics.”

Throughout the book, Salter and Young provide a historical account of how constitutional order evolved over several centuries, culminating with their theory of polycentric sovereignty: bargains between political property rights holders – those who have political authority – within the constitutional order can lead to improvements in governance.

The Importance of Rules and Monetary Policy

In “Money and the Rule of Law,” Salter and his co-authors focus on the first principles of monetary policy.

“The essential issues about monetary policy are not actually as technical as economists make them sound,” said Salter. “We're talking about first principles – how the money supply is governed and how the central bank works – and ultimately, those are the proper domain of every citizen in a republic.”

The authors argue for general and predictable rules, hoping that these rules will strengthen the foundation for economic growth and prosperity.

According to Salter, this book can provide insight into how governments can avoid significant inflation, like what the U.S. and many other countries have experienced over the past three years.

Distributism for Economic Reform

Public trust in federal institutions has neared record lows over the last two years. Many people and scholars wonder what caused this distrust and, more importantly, how to mend that distrust.

Salter's book, “The Political Economy of Distributism,” explores the political economy of common-good capitalism as a potential answer for reform. Distributism essentially connects human flourishing with widely dispersed property ownership.

To make this argument, Salter specifically looks at distributism and Catholic social teaching. Salter examines how the Catholic intellectual tradition has remained relevant to public affairs.

“I'm not Catholic myself, but I find the intellectual system very interesting,” he said. “People want to make sure there's a wide diffusion of ownership throughout the economy to make sure that everybody can earn a living.”

Salter hopes the book encourages readers to really explore what values we assign or expect markets to satisfy.

A Modern-Day Reform in Latin America

Salter and his co-authors demonstrate what one modern-day economic policy reform looks like with “Can Dollarization Constrain A Populist Leader? The Case of Rafael Correa in Ecuador.” In the article, the authors examine Ecuador's efforts to adopt the United States dollar as its currency and the restrictions the move placed on government officials.

“We looked at Ecuador not because the government wanted to [dollarize],” said Salter, “but because the private sector wanted to. People on their own just said, 'Our domestic currency is so bad, we're just going to use the dollar,' and it became so prevalent that the government of Ecuador had to put up with it.”

Ecuador's efforts to dollarize are not necessarily a vote of confidence in the U.S. Federal Reserve, but a recognition that importing Fed policy is better than producing monetary policy domestically.

“If a country loses the ability to print money, that takes a lot of nasty options away from politicians,” said Salter. “It forces a certain amount of discipline on the politicians. All of a sudden, their budget constraints are binding.”

Across all of Salter's research, constraints and rules are paramount.

“All of these texts are about institutions,” said Salter. “Generally, the idea of institutions means something very specific. It's a human-devised constraint that makes our behavior more intelligible and predictable.”

Read more of alexander salter's work