The Politics of Externalities: Neo-Liberalism, Rising Powers and Property Rights
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Shopping Externalities and Self-Fulfilling Unemployment Fluctuations
NBER WORKING PAPER SERIES SHOPPING EXTERNALITIES AND SELF-FULFILLING UNEMPLOYMENT FLUCTUATIONS Greg Kaplan Guido Menzio Working Paper 18777 http://www.nber.org/papers/w18777 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 February 2013 We thank the Kielts-Nielsen Data Center at the University of Chicago Booth School of Business for providing access to the Kielts-Nielsen Consumer Panel Dataset. We thank the editor, Harald Uhlig, and three anonymous referees for insightful and detailed suggestions that helped us revising the paper. We are also grateful to Mark Aguiar, Jim Albrecht, Michele Boldrin, Russ Cooper, Ben Eden, Chris Edmond, Roger Farmer, Veronica Guerrieri, Bob Hall, Erik Hurst, Martin Schneider, Venky Venkateswaran, Susan Vroman, Steve Williamson and Randy Wright for many useful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer- reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2013 by Greg Kaplan and Guido Menzio. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Shopping Externalities and Self-Fulfilling Unemployment Fluctuations Greg Kaplan and Guido Menzio NBER Working Paper No. 18777 February 2013, Revised October 2013 JEL No. D11,D21,D43,E32 ABSTRACT We propose a novel theory of self-fulfilling unemployment fluctuations. According to this theory, a firm hiring an additional worker creates positive external effects on other firms, as a worker has more income to spend and less time to search for low prices when he is employed than when he is unemployed. -
The Social Costs of Regulation and Lack of Competition in Sweden: a Summary
This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: The Welfare State in Transition: Reforming the Swedish Model Volume Author/Editor: Richard B. Freeman, Robert Topel, and Birgitta Swedenborg, editors Volume Publisher: University of Chicago Press Volume ISBN: 0-226-26178-6 Volume URL: http://www.nber.org/books/free97-1 Publication Date: January 1997 Chapter Title: The Social Costs of Regulation and Lack of Competition in Sweden: A Summary Chapter Author: Stefan Folster, Sam Peltzman Chapter URL: http://www.nber.org/chapters/c6526 Chapter pages in book: (p. 315 - 352) 8 The Social Costs of Regulation and Lack of Competition in Sweden: A Summary Stefan Folster and Sam Peltzman 8.1 Introduction Sweden is a “high-price’’ country. This seems evident to the casual visitor, and it is confirmed by more systematic evidence. For example, table 8.1 shows that, even after the 20 percent depreciation of the krona in 1992, Swedish con- sumer prices remain higher than in most developed countries. Moreover, avail- able data indicate that Sweden’s high-price status goes back at least to the late 1960s (Lipsey and Swedenborg 1993), a period encompassing considerable exchange rate fluctuations. These high prices cannot be entirely explained by Sweden’s income level (see fig. 8.1) or by its high indirect taxes (Lipsey and Swedenborg 1993). In this paper, we will try to assess the contribution of Swedish competition and regulatory policy to these high prices. To an outsider, especially an American conditioned by that country’s anti- trust laws, Swedish policy on competition has been remarkably lax. -
On Significance of Transaction Costs in Institutional Economics
ON SIGNIFICANCE OF TRANSACTION COSTS IN INSTITUTIONAL ECONOMICS Cosmin Marinescu∗ Institutions and institutional arrangements cannot “work” by themselves, meaning without necessary efforts – considered costs in economics - for preserving and improving them. Legal institutions and rule of law are based on systemic efforts needed to apply the ethical rule, actions that mean, in their turn, certain costs. These efforts that facilitate social cooperation process represent, for many economists, the costs of economic system functioning. In nowadays institutional economics, these costs of economic system functioning are called “transaction costs”. This paper aims to offer a critical point of view on significance of transaction costs in institutional economics. Institutions, human action and transaction costs In the institutional approach of Douglass North, Nobel laureate in 1993, the theory of institutions “is constructed from a theory of human behavior combined with a theory of the costs of transacting” (North, 1990:27). By combining these theories, one can understand why institutions exist and what role they play in the functioning of society. North also mentions that if you add the theory of production, one can analyze the institutions implication over the economic performance. With no intention to underestimate the role of social institutions in the reduction of uncertainty, I will try to emphasize the irrelevance of transaction costs criteria, as objective sources of valuation of the institutions efficiency. Also, I will emphasize the implications of institutions utilitarian approach over the economic science and public debates on politics. The economics of transaction costs begin with “The Nature of Firm”, the famous article of Ronald Coase from 19371. -
Learning Externalities and Economic Growth
Learning Externalities and Economic Growth Alejandro M. Rodriguez∗ August 2004 ∗I would like to thank Profesor Robert E. Lucas for motivating me to write this paper and for his helpful comments. Profesor Alvarez also provided some useful insights. Please send comments to [email protected]. All errors are mine. ABSTRACT It is a well known fact that not all countries develop at the same time. The industrial revolution began over 200 years ago in England and has been spreading over the world ever since. In their paper Barriers to Riches, Parente and Prescott notice that countries that enter the industrial stage later on grow faster than what the early starters did. I present a simple model with learning externalities that generates this kind of behavior. I follow Lucas (1998) and solve the optimization problem of the representative agent under the assumption that the external effect is given by the world leader’s human capital. 70 60 50 40 30 20 Number of years to double income 10 0 1820 1840 1860 1880 1900 1920 1940 1960 1980 Year income reached 2,000 (1990 U.S. $) Fig. 1. Growth patterns from Parente and Prescott 1. Introduction In Barriers to Riches, Parente and Prescott observe that ”Countries reaching a given level of income at a later date typically double that level in a shorter time ” To support this conclusion they present Figure 1 Figure 1 shows the year in which a country reached the per capita income level of 2,000 of 1990 U.S. dollars and the number of years it took that country to double its per capita income to 4,000 of 1990 U.S. -
From Liberalisms to Enlightenment's Wake
JOURNAL OF IBERTARIAN TUDIES S L S JL VOLUME 21, NO. 3 (FALL 2007): 79–114 GRAY’S PROGRESS: FROM LIBERALISMS TO ENLIGHTENMENT’S WAKE JEREMY SHEARMUR The progress of that darkness . from its first approach to the period of greatest obscuration. William Robertson, History of the Reign of Charles the Fifth I HAVE KNOWN JOHN Gray for quite a few years, and have long admired his work. We were among the (very few) political theorists in the U.K. who, in the early 1970s, had an interest in the work of Hayek, and more generally in issues relating to classical liberalism. During the 1980s, he emerged as the most powerful and effective theorist of classical liberalism in the U.K., notably through his re- interpretations of John Stuart Mill in Mill on Liberty (1983a), his Hayek and Liberty (1984), and his overview and critical assessment of the lib- eral tradition, Liberalism (1986). We had, over the years, various dis- cussions about Hayek and liberalism—as Gray mentions in his Hayek on Liberty—and in that connection we shared many intellectual con- cerns; notably, with problems about how classical liberalism related to particular traditional cultures, and about the value of lives that did not involve autonomy in any significant sense. Our discussions about these and related matters were occasional, and typically by telephone or at Liberty Fund conferences. In the course of one of these conversations, I suggested to Gray that he might consider col- lecting some of his essays on liberalism into a volume, as he kindly JEREMY SHEARMUR is Reader in Philosophy at the Australian National University. -
Three Dimensions of Classical Utilitarian Economic Thought ––Bentham, J.S
July 2012 Three Dimensions of Classical Utilitarian Economic Thought ––Bentham, J.S. Mill, and Sidgwick–– Daisuke Nakai∗ 1. Utilitarianism in the History of Economic Ideas Utilitarianism is a many-sided conception, in which we can discern various aspects: hedonistic, consequentialistic, aggregation or maximization-oriented, and so forth.1 While we see its impact in several academic fields, such as ethics, economics, and political philosophy, it is often dragged out as a problematic or negative idea. Aside from its essential and imperative nature, one reason might be in the fact that utilitarianism has been only vaguely understood, and has been given different roles, “on the one hand as a theory of personal morality, and on the other as a theory of public choice, or of the criteria applicable to public policy” (Sen and Williams 1982, 1-2). In this context, if we turn our eyes on economics, we can find intimate but subtle connections with utilitarian ideas. In 1938, Samuelson described the formulation of utility analysis in economic theory since Jevons, Menger, and Walras, and the controversies following upon it, as follows: First, there has been a steady tendency toward the removal of moral, utilitarian, welfare connotations from the concept. Secondly, there has been a progressive movement toward the rejection of hedonistic, introspective, psychological elements. These tendencies are evidenced by the names suggested to replace utility and satisfaction––ophélimité, desirability, wantability, etc. (Samuelson 1938) Thus, Samuelson felt the need of “squeezing out of the utility analysis its empirical implications”. In any case, it is somewhat unusual for economists to regard themselves as utilitarians, even if their theories are relying on utility analysis. -
Mill's "Very Simple Principle": Liberty, Utilitarianism And
MILL'S "VERY SIMPLE PRINCIPLE": LIBERTY, UTILITARIANISM AND SOCIALISM MICHAEL GRENFELL submitted for degree of Ph.D. London School of Economics and Political Science UMI Number: U048607 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Dissertation Publishing UMI U048607 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 I H^S £ S F 6SI6 ABSTRACT OF THESIS MILL'S "VERY SIMPLE PRINCIPLE'*: LIBERTY. UTILITARIANISM AND SOCIALISM 1 The thesis aims to examine the political consequences of applying J.S. Mill's "very simple principle" of liberty in practice: whether the result would be free-market liberalism or socialism, and to what extent a society governed in accordance with the principle would be free. 2 Contrary to Mill's claims for the principle, it fails to provide a clear or coherent answer to this "practical question". This is largely because of three essential ambiguities in Mill's formulation of the principle, examined in turn in the three chapters of the thesis. 3 First, Mill is ambivalent about whether liberty is to be promoted for its intrinsic value, or because it is instrumental to the achievement of other objectives, principally the utilitarian objective of "general welfare". -
Market Failure Guide
Market failure guide A guide to categorising market failures for government policy development and evaluation industry.nsw.gov.au Published by NSW Department of Industry PUB17/509 Market failure guide—A guide to categorising market failures for government policy development and evaluation An external academic review of this guide was undertaken by prominent economists in November 2016 This guide is consistent with ‘NSW Treasury (2017) NSW Government Guide to Cost-Benefit Analysis, TPP 17-03, Policy and Guidelines Paper’ First published December 2017 More information Program Evaluation Unit [email protected] www.industry.nsw.gov.au © State of New South Wales through Department of Industry, 2017. This publication is copyright. You may download, display, print and reproduce this material provided that the wording is reproduced exactly, the source is acknowledged, and the copyright, update address and disclaimer notice are retained. To copy, adapt, publish, distribute or commercialise any of this publication you will need to seek permission from the Department of Industry. Disclaimer: The information contained in this publication is based on knowledge and understanding at the time of writing July 2017. However, because of advances in knowledge, users are reminded of the need to ensure that the information upon which they rely is up to date and to check the currency of the information with the appropriate officer of the Department of Industry or the user’s independent advisor. Market failure guide Contents Executive summary -
POEC 301 Syllabus
Jon Bakija Jim Mahon Schapiro 330 Schapiro 337 office: x2325 office: x2236 Office hours: Office hours: Tu 1:30-3:30 W 10-noon and by app’t. and by app’t [email protected] [email protected] POLITICAL ECONOMY 250 ECONOMIC LIBERALISM AND ITS CRITICS Fall 2015 Economic liberalism holds that society is better off if people enjoy economic freedom. Its critics point to what they believe this position ignores or what it wrongly assumes, and hence, how it would make bad policy. This course explores the relationship between politics and economics by surveying influential works of political economy. Its first part examines major thinkers in relation to the historical development of capitalism in Western Europe and the United States: the classical liberalism of Adam Smith, Karl Marx's revolutionary socialism, and the reformist ideas of John Stuart Mill and John Maynard Keynes. The second part considers mid-20th-century writers who revise and critique economic liberalism from a variety of perspectives, including Friedrich Hayek, Milton Friedman, Ronald Coase, Arthur Okun, and Albert O. Hirschman. The third part surveys significant recent contributions relevant to the themes of the course, with applications to current public policy issues, including topics such as: power relations and autonomy in the workplace; asymmetric information and social insurance; economic inequality and distributive justice; equality of opportunity; the economics of health care; positional goods and the moral foundations of capitalism; intergenerational equity and climate change; economic nationalism and new trade theory; behavioral economics; finance and financial crises; and rent-seeking. The combination of the historical focus of the early part of the course with discussion of modern policy issues and debates in the latter part of the course permits you to appreciate the ongoing dialogue between classical and contemporary views of political economy. -
Business History: a Lantern on the Stearn
Business History: a lantern on the stern? Decio Zylbersztajn 1 Caroline Gonçalves2 Abstract: How can the economics of organization evolve to be useful as an approach to business history? The answer depends on its capacity to handle the diversity, origin, and evolution of particular institutional arrangements observed in particular industries. The ad hoc and purely descriptive approach to the behavior and evolution of specific enterprises, industries, and business practices runs the risk of tautological explanations, which is the main reason to choose some theoretical support for the analysis. This is what motivates this work: first, to contribute to smooth the interface between the vaguely-defined field of business history and the yet-to-be-consolidated field of economics of organization; and second, to contribute to the discussion of the micro-dimensionality of firms from a historical perspective, with a focus on uncertainty. Key-words: business history, history and economic organization 1 Professor of Economics of Organization at the School of Economics, Business and Accounting, University of São Paulo. Email: [email protected] 2 PhD candidate at the School of of Economics, Business and Accounting, University of São Paulo. Email: [email protected] 1 Business History: a lantern on the stern? 1. Introduction For a newcomer to the field of business history, it is somewhat difficult to decide from which door to enter the arena. After some reflection, the visitor makes his choice, only to perceive that the different doors all lead to the same internal garden, although cultivated in very different shapes and inhabited by distinct species. The incentives that direct our attention towards this field are threefold: First, the literature in the Economics of Organization that addresses the institutional arrangements observed in particular industries and seeks to explain the origins, diversity and pattern of changes frequently recalls some historical perspective. -
1 Tales and Woes of High Frequency Trading: an Introduction
1 Tales and Woes of High Frequency Trading: an Introduction Rene´ A. Carmona1 Bendheim Center for Finance Department of Operations Research & Financial Engineering, Princeton University, Princeton, NJ 08544, USA email: [email protected] 1.1 Introduction 1.1.1 Standard Assumptions in Finance One of the basic assumptions of the early mathematical theory of financial markets is the absence of friction and consequently, the fact that securities have one price (law of one price), and that they can be sold and bought at this price in any desired quantity. This form of infinite liquidity implies that the sizes and the frequencies of the transactions have no impact on the prices at which the transactions take place. This lack of price impact is often justified by limiting the scope of these models to the behavior of so-called small investors. While this restriction can exonerate the models of the lack of price impact, it cannot justify the side effect of infinite liquidity. As demonstrated by the recent financial crisis, the existence of a quoted price is not enough for transactions to be possible, and to actually occur. Financial agents willing to sell and buy will have to agree on a price level, a quantity, and a specific timing for the transaction to take place. The above claims should be understood as a zealous invitation to the study of market microstructure. This invitation does not imply that frictions have not been studied mathematically. Indeed, transaction costs (at least proportional transaction costs) have not been included in mathematical models for almost twenty years, and many attempts have been made to extend Merton’s theory of optimal portfolio choice in order to capture their impact. -
Social Insurance: Connecting Theory to Data
CHAPTER 3 Social Insurance: Connecting Theory to Data Raj Chetty*,† and Amy Finkelstein†,‡ *Harvard University †NBER ‡MIT Contents 1. Introduction 112 2. Motivations for Social Insurance 114 2.1. Adverse Selection: Review of the Basic Theory 115 2.1.1. A Stylized Model 116 2.1.2. The Textbook Case 118 2.1.3. Departures from the Textbook Environment: Loads and Preference Heterogeneity 123 2.2. Empirical Evidence on Selection 127 2.2.1. Testing for Selection 128 2.2.2. Evidence on Selection 131 2.2.3. Welfare Consequences 134 2.2.4. Directions for Future Work 139 2.3. Other Motivations 140 3. Design of Public Insurance Programs 143 3.1. Optimal Benefit Level in a Static Model 145 3.2. Sufficient Statistics Implementation 148 3.2.1. Consumption Smoothing 148 3.2.2. Liquidity vs. Moral Hazard 157 3.2.3. Reservation Wages 159 3.3. Generalizing the Static Model 163 3.3.1. Dynamics: Endogenous Savings and Borrowing Constraints 163 3.3.2. Externalities on Private Insurers 168 3.3.3. Externalities on Government Budgets 170 3.3.4. Other Externalities 172 3.3.5. Imperfect Optimization 174 3.4. Other Dimensions of Policy 176 3.4.1. Liquidity Provision and Mandated Savings Accounts 176 3.4.2. Imperfect Takeup 178 3.4.3. Path of Benefits 180 4. Challenges for Future Work 182 Acknowledgments 186 References 186 Handbook of Public Economics, Volume 5 © 2013 Elsevier B.V. ISSN 1573-4420, http://dx.doi.org/10.1016/B978-0-444-53759-1.00003-0 All rights reserved.