ABSTRACT
We are making some progress at identifying the principles of social-democratic political economy. Putting into practice a preference for institutional arrangements conducive to the reduction of inequality and the elimination of poverty was seen to encounter two problems. The first is insufficient knowledge about the outcomes of our choices in the context of the choices of others in a complex society; the second is free-riding. In a stable community, the problem of free-riding takes the form of an Iterated Prisoners' Dilemma, in which members rationally search out appropriate institutional shields against such free-riding. And once the problem of insufficient knowledge is also cast as as a form of free-riding, that of rational ignorance, it too can be incorporated into rational-choice based new institutionalist analysis. Such an analysis, it was proposed, adds a crucial missing element to our understanding of institutional arrangements leading to egalitarian outcomes.
