DOCSLIB.ORG

Much Ado About Pigou Sions Go Down and Gdp Goes Up

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Much Ado About Pigou Sions Go Down and Gdp Goes Up BRIEFLYNOTED a better place — unwanted carbon emis- Much Ado about Pigou sions go down and gdp goes up. Identifying a true social problem and BY BRUCE YANDLE designing an efficient Pigouvian tax to Clemson University address it are challenging exercises. But it is even more challenging to get politi- conomists, policy analysts, and ing the George W. Bush administration, cians to adopt such a tax and bureau- politicians often rattle the has become so dedicated to the idea of crats to implement it correctly. That is bones of brilliant economists imposing a tax on gasoline for social something Pigou understood, but the E long passed when making a purposes that he has organized a Pigou people who use his name today may not. case for a favorite policy or legislative Society that scores of economists and action. John Maynard Keynes has again others have joined. As Mankiw and oth- Bank Tax Consider President Obama’s become a popular icon for justifying ers see it, a properly designed gasoline newly proposed tax on banks. Last Jan- deficit spending in the face of severe reces- sion. There are other days when Joseph Schumpeter’s name and “creative destruc- tion” surface to justify marketplace tough love. We hear references to Friedrich von Hayek and his notions about property rights, common law, and spontaneous order when the market process is being defended. And of course, Milton Fried- man is brought forth when education and monetary policy are discussed. The latest long-dead economist to enthrall bloggers, policy wonks, and entrepreneurial analysts is Arthur Cecil Pigou, whose authority is now being used to justify a blizzard of taxes and other actions proposed to serve the pub- lic interest. It is Pigou who suggested that a tax be placed on activities that generate negative externalities in order to make beneficiaries of the activity con- sider its full cost. In November 2009, John Cassidy had this to say in a Wall Street Journal essay: Today Mr. Pigou’s intellectual legacy is being rediscovered, and, unlike those of Messrs. Keynes and Friedman, it enjoys KEVIN TUMA bipartisan appeal. Leading Republican- tax can compensate for social costs asso- uary 14, the president announced that a leaning economists such as Greg ciated with driving automobiles. Those Financial Crisis Responsibility Fee Mankiw and Gary Becker have joined costs relate to traffic congestion, pollu- should be imposed on non-deposit lia- Democrats such as Paul Krugman and tion, climate change, and secure delivery bilities held by U.S. banks with $50 bil- Amartya Sen in recommending a Pigov- of crude oil and refined product. lion or more in assets. The fee would take ian approach to policy. Much of Presi- dent Barack Obama’s agenda — finan- When adopted in its ideal form, a effect June 30, 2010, and operate for 12 cial regulation, cap and trade, health Pigouvian tax that brings beneficial years, during which time analysts calcu- care reform — is an application of Mr. adjustments to unaccounted-for harms late it would generate $117 billion in rev- Pigou’s principles. Whether the presi- can also bring a collateral benefit: in a enues, equal to the expected shortfall of dent knows it or not, he is a Pigovian. perfect policy world, other burdensome payments from all tarp recipients. Greg Mankiw, who was chairman of taxes can be reduced. For example, prop- In announcing the plan, Obama put the Council of Economic Advisers dur- erly calibrated taxes on carbon emissions populist red meat on the table when he can become a substitute for taxes on said: Bruce Yandle is Professor of Economics Emeritus at labor that yield a shortfall of gross Clemson University, Distinguished Adjunct Professor My commitment is to recover every at the Mercatus Center at George Mason University, domestic product. When taken together, single dime the American people are and senior fellow at PERC. the two actions happily make the world owed. And my determination to 2 REGULATION S P R I N G 2 0 1 0 BriefNote.2:BriefNote.2lo 3/3/10 4:28 PM Page 3 achieve this goal is only heightened The bag tax was justified as an environ- ing rooms, expenses for the provision of when I see reports of massive profits mental tax, one that would reduce the artificial light, and in many other ways.” and obscene bonuses at the very firms careless use and disposal of bags and pro- Air pollution was just one example. who owe their continued existence to vide funding to clean up the Anacostia Pigou saw social cost problems every- the American people — who have not River. Patrick Gleason of Americans for where, or so it seems. There were too been made whole, and who continue to face real hardship in this recession. Tax Reform described the matter thus: many cars forming traffic congestion, That’s why I’m proposing a Financial “Washingtonians heading out in search excessive alcohol consumption that Crisis Responsibility Fee to be of VitaminWater and bacon to cure their damaged innocent people, too many imposed on major financial firms New Year’s morning hangovers will be vehicles wearing out highways, and too until the American people are fully greeted by a new Pigouvian tax at the much work done by women in factories, compensated for the extraordinary checkout.” In his extended comments, which, in his view, imposed unrecog- assistance they provided to Wall Street. Gleason suggested that the revenue would nized costs on their children. In a radio address after the announce- just be used to form another slush fund On the other side of the coin, Pigou ment, the president suggested another for political purposes, that it was more called for subsidies, or what he called reason for the fee, a reason that should about revenue than the environment. bounties, to expand activities that pro- make modern-day Pigouvians duced dispersed benefits that very happy: did not generate money in the Thebankfeeexplanationtransformed Only the largest financial till of the producer. These firms with more than $50 fromataxtoraiserevenue,toataxonsin, included planting forests that billion in assets will be improved the environment, affected, not community toaPigouviantax. operating lighthouses that banks. And the bigger the guided nonpaying shippers, firm — and the more debt it and providing street lights holds — the larger the fee. Because we Today, there is much ado about that reduced crime. Based on strictly the- are not only going to recover our Pigou. To cite a few more instances of oretical grounds, which is to say without money and help close our deficits; we are going to attack some of the bank- this, there are non-returnable bottle the benefit of field work or data analysis, ing practices that led to the crisis. taxes to fight litter, snack and soda taxes Pigou found a host of situations where to fight obesity, carbon and nitrogen markets simply led to faulty outcomes. Taking in all this, the Economist maga- oxide taxes in Scandinavia to fight glob- He concluded: zine commented: “But politics is not the al warming, and petrol taxes across No “invisible hand” can be relied on to only motive. Hitting the giants address- Europe and the United Kingdom. All are produce a good arrangement of the es a genuine concern about banks whose justified in part as Pigouvian taxes that whole from a combination of separate size poses systemic dangers.” Chiming happily and harmlessly nudge human treatments of the parts. It is therefore in and hitting the nail on the head, Seek- behavior in the right direction. necessary that an authority of wider ing Alpha writer Kindred Winecoff heard reach should intervene to tackle the collective problems of beauty, of air and the rattle of Pigou’s bones and said: Pigouvian Solution Pigou was a Cam- light, as those other collective problems bridge University don who had studied This is essentially a tax on risk, of gas and water have been tackled. because it targets leverage ratios. In under the great economist Alfred Mar- terms of economic theory, or even shall, held the university’s leading eco- He then proposed: social justice, this makes some sense. nomics chair, and strongly supported It is, however, possible for the State, if Think of it as a Pigouvian tax: moral John Maynard Keynes. Pigou was a it so chooses, to remove the divergence hazard exists for firms with an explicit prodigious writer and contributed to in any field by “extraordinary encour- government guarantee, so this tax multiple strands of economic thought, agements” or “extraordinary restraints” could help bring private and social but his reputation was earned for pro- upon investments in that field. The costs in line. In other words, it could most obvious forms which these help banks internalize the social costs posing the use of taxes to reduce activi- encouragements and restraints may of their actions. ties that impose externalities — costs not assume are, of course, those of boun- taken into account by those who earn ties and taxes. In a matter of a few days, the bank fee their profits from the cost-generating explanation transformed from a tax for activities. In short, government taxes and sub- generating revenue, to a tax for reducing Writing in 1920, Pigou offered air sidies are a required constraint on mar- sin, to a Pigouvian tax that would make pollution as an example of unaccount- kets to bring balance between costs and the world better off. ed-for costs and spoke in terms of diver- benefits when there are spillovers not Interestingly enough, the proposed gences between private and social prod- accounted for by private actors. But the bank tax arrived just a few weeks after uct: “Smoke in large cities imposes a taxes have to be carefully calibrated so shoppers in Washington, DC were hit heavy uncharged loss on the communi- that the tax paid at the margin is just with a new five-cent tax on paper and plas- ty, in injury to buildings, vegetation, equal to the cost imposed.
Load more

Recommended publications
  • AC Pigou and the Birth of Welfare Economics
    David Campbell, Lancaster University Law School Ian Kumekawa, The First Serious Optimist: AC Pigou and the Birth of Welfare Economics, Princeton NJ: Princeton University Press, 2017, pp x, 332, hbk, isbn 978-0-691-16348-2, £27.95 In 1920, the year in which his most important work, The Economics of Welfare, appeared, Arthur Cecil Pigou (1877-1959), Professor of Political Economy in the University of Cambridge (1908-43), arguably was the most influential economist in the world. Leaving aside his important service to the teaching of economics and his being what would now be called a public intellectual, Pigou made important theoretical contributions to a wide range of topics. But it is on his formulation of the economics of piecemeal intervention, and in particular of the concept of the externality as a rationale of such intervention, that his contemporary significance, and interest to the readers of this journal, rests. Economists had, of course, been concerned with social problems prior to Pigou – his predecessors in the ‘Cambridge School’ of economics, Henry Sidgwick (20) and Alfred Marshall (29), were prominent in this regard - and previously had reasoned on the basis of something like the externality – Adam Smith certainly did so. But it was Pigou who placed all this on a unified theoretical basis, which, in part because of the influence of his usage, is now known as welfare economics. The terms in which Pigou formulated the externality, of a divergence between the private and social net products of an investment, has fallen into desuetude, and not only is none of the modern terminology of welfare economics – social welfare function, social cost, market failure, public goods, indeed the externality itself – due to Pigou, but those economics were developed in ways which often treated his specific approach as obsolete (163-64, 199).
    [Show full text]
  • Lodz Economics Working Papers
    L odz E conomic s W orking P apers ALFRED MARSHALL’S PUZZLES. BETWEEN ECONOMICS AS A POSITIVE SCIENCE AND ECONOMIC CHIVALRY Joanna Dzionek-Kozłowska 5/2015 Joanna Dzionek-Kozłowska Faculty of Economics and Sociology, University of Lodz Institute of Economics, Department of History of Economic Thought and Economic History email: [email protected] Alfred Marshall’s Puzzles. Between Economics as a Positive Science and Economic Chivalry Abstract: Alfred Marshall’s approach to economics hides a paradox. On one hand, the ‘father’ of neoclassical economics strongly favoured conducting economics as a positive science. However, the fact that Marshall was such a consistent and determined advocate of this ideal of economic research is puzzling for at least two reasons. Firstly, even a quick glance at his publications allows to notice that his texts are sated with moral teachings. What is more, in referring to the problems of economic policy he not only took into account ethical aspects, but also frequently gave pre-eminence to ethical arguments over conclusions stemming from research grounded solely on the theory of economics. The paper aims to explain the paradox and argues that the complexity of Marshall’s approach arises from his attempts to combine two approaches pointed by Amartya Sen of binding economics and ethics over the centuries: ‘the ethics-related tradition’ with ‘the engineering approach’. JEL Codes: B31, M14 Keywords: Alfred Marshall, positive economics, normative economics, ethics and economics, economic chivalry 1 Introduction Marshall’s approach to economics hides a paradox. On one hand, the ‘father’ of neoclassical economics, who usually shunned explicit statements on the methodological issues, favoured in a straightforward way conducting economics as a positive science.
    [Show full text]
  • “Exceptional and Unimportant”? Externalities, Competitive Equilibrium, and the Myth of a Pigovian Tradition
    “Exceptional and Unimportant”? Externalities, Competitive Equilibrium, and the Myth of a Pigovian Tradition Steven G. Medema* Version 2.3 January 2019 Forthcoming, History of Political Economy * University Distinguished Professor of Economics, University of Colorado Denver. Email: [email protected]. The author has benefitted greatly from comments on earlier drafts of this paper provided by Roger Backhouse, Nathalie Berta, Ross Emmett, Kenji Fujii, Kerry Krutilla, Alain Marciano, Norikazu Takami, participants in the CHOPE workshop at Duke University, the editor, and two anonymous referees. The financial support provided by the National Endowment for the Humanities, the Earhart Foundation, the Institute for New Economic Thinking, and the University of Colorado Denver is gratefully acknowledged. “Exceptional and Unimportant”? Externalities, Competitive Equilibrium, and the Myth of a Pigovian Tradition I. Introduction Economists typically locate the origins of the theory of externalities in A.C. Pigou’s The Economics of Welfare (1920), where Pigou suggested that activities which generate uncompensated benefits or costs—e.g., pollution, lighthouses, scientific research— represent instances of market failure requiring government corrective action.1 According to this history, Pigou’s effort gave rise to an unbroken Pigovian tradition in externality theory that continues to exert a substantial presence in the literature to this day, even with the stiff criticisms of it laid down by Ronald Coase (1960) and others beginning in the 1960s.2 This paper challenges that view. It demonstrates that, in the aftermath of the publication of The Economics of Welfare, economists paid almost no attention to externalities. On the rare occasions when externalities were mentioned, it was in the context of whether a competitive equilibrium could produce an efficient allocation of resources and to note that externalities were an impediment to the attainment of the optimum.
    [Show full text]
  • The Future of Economics in a Lakatos–Bourdieu Framework
    Munich Personal RePEc Archive The Future of Economics in a Lakatos–Bourdieu Framework. Heise, Arne University of Hamburg 2014 Online at https://mpra.ub.uni-muenchen.de/80024/ MPRA Paper No. 80024, posted 05 Jul 2017 05:42 UTC The Future of Economics in a Lakatos-Bourdieu framework Prof. Arne Heise University of Hamburg Dep. of Socioeconomics VMP 9 D-20146 Hamburg [email protected] Abstract The global financial crisis has clearly been a matter of great consternation for the busi- ness-as-usual faction of mainstream economics. Will the World Financial Crisis turn out to be that ‘experimentum crucis’ which triggered a scientific revolution? In this paper, we seek to assess the likelihood of a paradigm shift towards heterodox approaches and a more pluralist setting in economics emerging from the academic establishment in the U.S. – that is, from the dominant center of knowledge production in the economic disci- pline. This will be done by building the analysis on a combined Lakatosian framework of ‘battle of research programmes’ and a Bourdieuian framework of ‘power struggle’ within the academic field and highlighting the likelihood of two main proponents of the mainstream elite to become the promulgator of change? Keywords: Paradigm, heterodox economics, scientific revolution JEL codes: A 11, E 11, E 12 1 1. The Keynesian Revolution and Pragmatic Pluralism – A Fruitful Competition Between Theories or a Crisis in Economics? John Maynard Keynes concludes ‘The General Theory of Employment, Interest, and Money’ (1936: 383-84) with the following, now-famous words: „At the present moment people are unusually expectant of a more funda- mental diagnosis; more particularly ready to receive it; eager to try it out, if it should be even possible.
    [Show full text]
  • Systemic Financial Crises: How to Fund Resolution?
    1 Sebastian Schich and Byoung-Hwan Kim are Principal Administrator and Financial Markets Analyst, respectively, in the Financial Affairs Division of the OECD‘s Directorate for Financial and Enterprise Affairs. This article is part of the Committee on Financial Markets‘ (CMF) work produced in the context of its Strategic Response to the Financial Crisis. Earlier versions of the article were discussed by the CMF at its meetings in April and October 2010; the present article takes into account these discussions as well as written comments received subsequently. The article was first released in December 2010. All remaining errors are those of the authors. This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein are those of the authors and do not necessarily reflect the official views of the Organisation or of the governments of its member countries. OECD JOURNAL: FINANCIAL MARKET TRENDS – VOLUME 2010 ISSUE 2 © OECD 2010 1 EXECUTIVE SUMMARY ―The financial sector needs to provide a fair contribution to the resolution of the recent systemic crisis, especially where financial institutions have benefitted from government support during the financial crisis‖. This basic principle was broadly supported by delegates at the CMF discussion on how to raise revenues in order to fund systemic crisis resolution. Views on how to achieve that goal differed, however. Thus, the CMF discussion was illustrative of the broader ongoing debate regarding mechanisms for enhancing financial stability, which has been taking place in international forums, including in particular the FSB and the G20. Several different types of financial-sector taxes or levies have been proposed or implemented, many of which could be interpreted as measures to fund systemic crisis resolution ex post (i.e.
    [Show full text]
  • The Political Economy of Green Taxation in OECD Countries
    European Journal of Law and Economics, 15: 203–218, 2003 c 2003 Kluwer Academic Publishers. Manufactured in The Netherlands. The Political Economy of Green Taxation in OECD Countries CRISTINA E. CIOCIRLAN [email protected] Pennsylvania State University, Harrisburg, USA BRUCE YANDLE [email protected] Clemson University, Clemson, SC, USA; Bozeman, Montana, USA Abstract This paper addresses the role of politics in environmental policymaking in OECD countries. The public interest theory of regulation assumes that politicians pursue the public good and employ economically efficient instruments such as Pigouvian taxes to discourage polluting activities. Alternative theories of regulation, however, explain more realistically the environmental policymaking process. The theory developed in this paper argues that the goals of raising revenue and industry competitiveness overwhelm the goal of improving environmental quality when politicians set green taxes. This theory is empirically tested with a political economy model using data on OECD countries. The results suggest that policymakers do not set taxes with a specific concern for the environment, but to generate revenues. The model also demonstrates the concavity of the revenue function with respect to emissions; taxes are raised up to an optimal point beyond which raising them would discourage emissions, and thus revenues. Harmful behavior is not discouraged through the imposition of the taxes, since less healthy populations are taxed less. Emissions generated by industries that are exempted from taxation are offset by the industries that are taxed. When polluting products constitute a high share of the exported products, revenues from environmentally related taxes drop. These results help explaining the lack of environmental orientation of green taxes in the OECD countries.
    [Show full text]
  • Economics and Ethics of the Welfare State
    The Third Welfare Policy Seminar Economics and Ethics of the Welfare State (held on March 8, 1999, Tokyo) Review of Population and Social Policy, No. 8, 1999, 119–138. Welfare Economics and the Welfare State* Kotaro SUZUMURA** The complicated analyses which economists endeavour to carry through are not mere gymnastic. They are instruments for the bettering of human life. The misery and squalor that surround us, the injurious luxury of some wealthy families, the terrible uncertainty overshadowing many families of the poor—these are evils too plain to be ignored. By the knowledge that our science seeks it is possible that they may be restrained. Out of the darkness light! To search for it is the task, to find it perhaps the prize, which the “dismal science of Political Economy” offers to those who face its discipline. — Arthur Cecil Pigou*** 1. Introduction The time is now ripe for re-examining the concept of the welfare state with a view to searching for a common understanding on the agenda and ethical foundations of the welfare state in a contemporary society. The time is also ripe for re-orienting welfare economics with a view to renovating this discipline so that it can contribute actively to the enhancement of human well-being in general, and to the design and implementation of fully-fledged welfare state policies in particular. The necessity and urgency of such a re-examination and re- orientation seem all too clear for at least two reasons. First, ever since the publication of Amartya Sen’s epoch-making synthesis of social choice theory in 1970 and John Rawls’s monumental edifice in moral and political philosophy in 1971, the concept of well-being has been enriched substantially, liberating us from the narrow cage of utilitarian sum of individual utilities, and enabling us to accommodate such basic considerations as liberty, * Paper presented at the Third Welfare Policy Seminar on the Economics and Ethics of the Welfare State held at the United Nations University in Tokyo on March 8, 1999.
    [Show full text]
  • 1 the Nobel Prize in Economics Turns 50 Allen R. Sanderson1 and John
    The Nobel Prize in Economics Turns 50 Allen R. Sanderson1 and John J. Siegfried2 Abstract The first Sveriges Riksbank Prizes in Economic Sciences in Memory of Alfred Nobel, were awarded in 1969, 50 years ago. In this essay we provide the historical origins of this sixth “Nobel” field, background information on the recipients, their nationalities, educational backgrounds, institutional affiliations, and collaborations with their esteemed colleagues. We describe the contributions of a sample of laureates to economics and the social and political world around them. We also address – and speculate – on both some of their could-have-been contemporaries who were not chosen, as well as directions the field of economics and its practitioners are possibly headed in the years ahead, and thus where future laureates may be found. JEL Codes: A1, B3 1 University of Chicago, Chicago, IL, USA 2Vanderbilt University, Nashville, TN, USA Corresponding Author: Allen Sanderson, Department of Economics, University of Chicago, 1126 East 59th Street, Chicago, IL 60637, USA Email: [email protected] 1 Introduction: The 1895 will of Swedish scientist Alfred Nobel specified that his estate be used to create annual awards in five categories – physics, chemistry, physiology or medicine, literature, and peace – to recognize individuals whose contributions have conferred “the greatest benefit on mankind.” Nobel Prizes in these five fields were first awarded in 1901.1 In 1968, Sweden’s central bank, to celebrate its 300th anniversary and also to champion its independence from the Swedish government and tout the scientific nature of its work, made a donation to the Nobel Foundation to establish a sixth Prize, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.2 The first “economics Nobel” Prizes, selected by the Royal Swedish Academy of Sciences were awarded in 1969 (to Ragnar Frisch and Jan Tinbergen, from Norway and the Netherlands, respectively).
    [Show full text]
  • A Philosophical Analysis of the Concept of an Externality in Economic Theory and Policy
    A PHILOSOPHICAL ANALYSIS OF THE CONCEPT OF AN EXTERNALITY IN ECONOMIC THEORY AND POLICY by REBECCA LIVERNOIS B.A., University of Guelph, 2011 M.A., University of British Columbia, 2013 A DISSERTATION SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY in THE FACULTY OF GRADUATE AND POSTDOCTORAL STUDIES (Philosophy) THE UNIVERSITY OF BRITISH COLUMBIA (Vancouver) August 2019 © Rebecca Livernois, 2019 The following individuals certify that they have read, and recommend to the Faculty of Graduate and Postdoctoral Studies for acceptance, the dissertation entitled: A Philosophical Analysis of the Concept of an Externality in Economic Theory and Policy submitted in partial fulfillment of the requirements by Rebecca Livernois for the degree of Doctor of Philosophy in Philosophy Examining Committee: Margaret Schabas, Philosophy Supervisor John Beatty, Philosophy Supervisory Committee Member Alison Wylie, Philosophy Supervisory Committee Member Matt Bedke, Philosophy University EXaminer Brian Copeland, Economics University EXaminer David Schmidtz, Philosophy External EXaminer ii ABSTRACT Economists generally understand externalities as unpriced spillover effects. The paradigmatic case is pollution because it is unpriced and affects agents external to the market choices that lead to its production. One solution to an externality is to set a tax on the unpriced activity at the value of the externality in equilibrium. The concept of an externality, however, is notoriously difficult to precisely define and there is a notable absence of consensus among economists. In this dissertation, I offer an analysis of the contemporary treatment of externalities in economic theory and arrive at the following definition: Externalities arise when unpriced activities generate untapped gains from exchange that are associated with untapped welfare gains.
    [Show full text]
  • A.C. Pigou and the 'Marshallian' Thought Style
    A.C. PIGOU AND THE ‘MARSHALLIAN’ THOUGHT STYLE A STUDY IN THE PHILOSOPHY AND MATHEMATICS UNDERLYING CAMBRIDGE ECONOMICS Karen Lovejoy Knight PALGRAVE STUDIES IN THE HISTORY OF ECONOMIC THOUGHT Palgrave Studies in the History of Economic Thought Series Editors Avi J. Cohen Department of Economics York University and University of Toronto Toronto, ON, Canada G.C. Harcourt School of Economics University of New South Wales Sydney, NSW, Australia Peter Kriesler School of Economics University of New South Wales Sydney, NSW, Australia Jan Toporowski Economics Department SOAS, University of London London, UK Palgrave Studies in the History of Economic Thought publishes contri- butions by leading scholars, illuminating key events, theories and indi- viduals that have had a lasting impact on the development of modern-day economics. The topics covered include the development of economies, institutions and theories. More information about this series at http://www.palgrave.com/gp/series/14585 Karen Lovejoy Knight A.C. Pigou and the ‘Marshallian’ Thought Style A Study in the Philosophy and Mathematics Underlying Cambridge Economics Karen Lovejoy Knight Independent Scholar Duncraig, WA, Australia Palgrave Studies in the History of Economic Thought ISBN 978-3-030-01017-1 ISBN 978-3-030-01018-8 (eBook) https://doi.org/10.1007/978-3-030-01018-8 Library of Congress Control Number: 2018959362 © The Editor(s) (if applicable) and The Author(s) 2018 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and trans- mission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed.
    [Show full text]
  • The Distribution of Income and Wealth in the Works of Major Economists
    The Distribution of Income and Wealth in the Works of Major Economists (Paper given at the workshop “Wealth Inequality: Theory and Empirical Data”, Österreichische Nationalbank, 20th June 2013, Vienna) Heinz D. Kurz Department of Economics and Graz Schumpeter Centre University of Graz (Austria) [email protected] Contents 1. The Greeks (Plato and Aristotle) 2. The Classical economists (Adam Smith and Ricardo) 3. The Utilitarians (J.S. Mill, F.Y. Edgeworth, A.C. Pigou) 4. The Marginalists 5. Empirical studies and income (and wealth) inequality metrics 6. Skilled-based technical progress 7. Economic policies and income and wealth distribution 8. Concluding question 1. The Greeks Plato (427-347 BC) • Despises profit seeking because great riches are said to spoil the character • Interest taking is considered improper (“usury”) • Since great wealth involves political power, it may lead to tyranny • A redistribution of wealth ought to prevent this Aristotle (384-322 BC) • “Chrematistics” is illicit: the accumulation of money for its own sake is “unnatural”, because it is unbounded, and thus incompatible with the “good life” • All interest is usury, because its source of acquisition is money, which is barren: money cannot have offsprings • Similarly the scholastics (Thomas Aquinus) 2. The Classical economists Adam Smith (1723-1790) • Property incomes (profits, interest and rents) are “deductions from the produce of labour” • … but a potentially virtuous circle may emerge (not motives matter, but effects): profit seeking – capital accumulation – deepening of the division of labour – increase in productivity and incomes, especially profits – etc. • The “science of the legislator” is to help to establish institutions and policies that support a regime of “natural liberty” characterised by “equality, freedom and justice” “Invisible hand” • Contention: “Adam Smith claimed that nothing more than selfishness is necessary to achieve optimal social outcomes” (Schotter, 1985: 2) – UTTERLY WRONG.
    [Show full text]
  • Transportation Planning and Traffic Flow Models
    Transportation Planning and Traffic Flow Models Sven Maerivoet∗ and Bart De Moor† Department of Electrical Engineering ESAT-SCD (SISTA) Phone: +32 (0) 16 32 17 09 Fax: +32 (0) 16 32 19 70 URL: http://www.esat.kuleuven.be/scd Katholieke Universiteit Leuven Kasteelpark Arenberg 10, 3001 Leuven, Belgium (Dated: February 2, 2008) Abstract 1.3.2 Approaches to activity-based modelling 10 1.3.3 Towards elaborate agent-based simulations 11 In this paper, we focus on the different traffic flow models 1.4 Transportationeconomics. 12 that exist in literature. Due to our frequently encountered 1.4.1 Theeconomicalsetting . 13 confusion among traffic engineers and policy makers, this 1.4.2 Towardsroadpricingpolicies . 14 paper goes into more detail about transportation planning 2 Traffic flow propagation models 16 models on the one hand, and traffic flow models on the other hand. The former deal with households that make 2.1 Macroscopictrafficflowmodels . 17 certain decisions which lead to transportation and the use 2.1.1 Thecontinuumapproach . 17 of infrastructure, as opposed to the latter which explic- 2.1.2 Thefirst-orderLWRmodel. 18 itly describe the physical propagation of traffic flows in a 2.1.3 Analytical solutions of the LWR model 18 road network. Our goal is not to give a full account (as 2.1.4 Numerical solutions of the LWR model 20 that would be a dissertation of its own, given the broad- 2.1.5 FlavoursoftheLWRmodel . 22 ness of the field), but rather to impose upon the reader a 2.1.6 Higher-ordermodels . 23 thorough feeling for the differences between transporta- 2.1.7 Critiqueson higher-ordermodels 24 tion planningand traffic flow models.
    [Show full text]