sustainability as a fair bequest an evaluation challenge abstract in contrast to conventional approaches the conceptualisation of sustainability as fair bequest makes it possible to consider a finite time horizon valuation is necessary to determine whether the bequest package that is passed on from one generation to the next is fair acknowledging the merits as well as the limitations of economic price theory this paper differentiates between three classes of valuables the essential the useful and the unique it is argued that a fair bequest package should contain items from each of the classes because the three classes are incommensurable fairness of the bequest cannot be expressed by a single figure like a non declining total value of the package we then discuss which methods are appropriate for describing a bequest package with respect to its fairness

shaping beliefs in experimental markets for expert services guilt aversion and the impact of promises and money burning options in a credence goods game with an expert and a consumer we study experimentally the impact of two devices that are predicted to induce consumer friendly behavior if the expert has a propensity to feel guilty when he believes that he violates the consumer s payoff expectations i an opportunity for the expert to make a non binding promise and ii an opportunity for the consumer to burn money in belief based guilt aversion theory the first opportunity shapes an expert s behavior if an appropriate promise is made and if it is expected to be believed by the consumer by contrast the second opportunity might change behavior even though this option is never used along the predicted path experimental results confirm the behavioral relevance of i but fail to confirm ii

an experimental study of truth telling in a sender receiver game a recent experimental study of cai and wang 2005 on strategic information transmission reveals that subjects tend to transmit more information than predicted by the standard equilibrium analysis to evidence that this overcommunication phenomenon can be explained in terms of a tension between normative social behavior and incentives for lying we show in a simple sender receiver game that subjects incurring in costs to punish liars tell the truth more often than predicted by the logit agent quantal response equilibria whereas subjects that do not punish liars after receiving a deceptive message play on the aggregate equilibrium strategies thus we can partition the subject pool into two groups one group of subjects with preferences for truth telling and one taking into account only material incentives

a valuation formula for ldc debt a large gap may lie between the amount of debt relief that is nominally granted to a debtor and that which is actually given up by the creditors to help put that gap in perspective the author proposes a valuation formula that provides i the price at which a buy back of the debt on the secondary market is advantageous to the country ii the value to creditors of having the flows of payment guaranteed against factors that hinder a country in servicing its debt and iii the degree of tradeoff between growth of payments and levels of payments the author argues that it is not good business for a country to announce its intention to buy back debt because doing so immediately raises the price the value of guarantees the author argues cannot exceed 25 percent of the market price of the debt typically they re worth only about 10 percent as for the degree of tradeoff the author s formula finds that 1 percent additional growth rate is worth a 15 percent increase in the flows of payments an assessment of the mexican debt relief agreement reached in 1990 is also offered

evasive lying in strategic communication abstract information asymmetries in economic transactions are omnipresent and a regular source of fraudulent behavior in a theoretical and an experimental analysis of a sender receiver game we investigate whether sanctions for lying induce more truth telling the novel aspect in our model is that senders may not only choose between truth telling and explicit lying but may also engage in evasive lying by credibly pretending not to know while we find that sanctions promote truth telling when senders cannot engage in evasive lying this is no longer true when evasive lying is possible then explicit lying is largely substituted by evasive lying which completely eliminates the otherwise positive effect of sanctions on the rate of truth telling as outlined in our model the necessary prerequisite for such an erosion effect is that evasive lying is perceived as sufficiently less psychologically costly than direct lying evidence from our experimental data and a survey conducted with additional participants indicate that the shift towards evasion can indeed be attributed to lower psychological costs overall our results clearly demonstrate the limitations of sanctioning lying to counteract the exploitation of informational asymmetries and may explain the empirical evidence from the finance industry that sanctions for financial misconduct eventually appear to be not very effective

evolutionary theories in environmental and resource economics approaches and applications recent advances in evolutionary theory have important implications for environmental economics a short overview is offered of evolutionarythinking in economics subsequently major concepts and approaches inevolutionary biology and evolutionary economics are presented andcompared attention is devoted among others to darwinian selection punctuated equilibrium sorting mechanisms lamarckian evolution coevolution and self organization basic features of evolution such assustained change irreversible change unpredictability qualitativechange and disequilibrium are examined it is argued that there are anumber of fundamental differences as well as similarities betweenbiological and economic evolution next some general implications ofevolutionary thinking for environmental economics are outlined this isfollowed by a more detailed examination of potential uses ofevolutionary theories in specific areas of environmental economics including sustainability and long run development theories technologyand environment ecosystem management and resilience spatial evolutionand environmental processes and design of environmental policy

systemic crises in hierarchical ecological economies human beings are both the slaves and the masters of the ecosystems in which they live this paper examines the interrelationship be tween economic decision making hierarchies and ecological hierarchies conditions under which dis continuous changes can occur are presented both for top down and bottom up causes appropriate institutional arrangements for minimizing ecological disruption are analyzed and depend on the nature of the relationship between the economic and eco logical hierarchies in some cases this will involve self managed economic units operating at the ap propriate level of the ecological hierarchy jel q20

a complex systems approach to the value of ecological resources a theory of value sits at the core of every school of economic thought and directs the allocation of resources to competing uses ecological resources complicate the modem neoclassical approach to determining value due to their complex nature considerable non market values and the difficulty in assigning property rights application of the market model through economic valuation only provides analytical solutions based on virtual markets and neither the demand nor supply side techniques of valuation can adequately consider the complex set of biophysical and ecological relations that lead to the provision of ecosystem goods and services this paper sets out a conceptual framework for a complex systems approach to the value of ecological resources this approach is based on there being both an intrinsic quality of ecological resources and a subjective evaluation by the consumer both elements are necessary for economic value this conceptual framework points the way towards a theory of value that incorporates both elements so has implications for principles by which ecological resources can be allocated c 2005 elsevier b v all rights reserved

negative externalities and welfare improving preference changes when the over consumption of open access resources and congestible public goods generate negative externalities and social welfare losses many individuals and environmental advocacy organizations offer as an alternative nongovernmental solution the adoption of new ecology sustaining preferences this paper shows that exogenously inducing a change in preferences and the adoption of new externality internalizing preferences which increase an individual s marginal rate of substitution between a private good and a good whose consumption imposes external costs on others not only reduces the aggregate output of the negative externality but also produces an economic state that is socially superior to the initial state because it is based on both the initial and new preferences the social superiority welfare criterion makes possible meaningful welfare comparisons of economic states generated by preference changes a computational general equilibrium model is then used to simulate preference changes and to calculate the resulting allocative and welfare effects the computer simulations reveal that important factors in the attainment of a socially superior state include i the particular characteristics of an individual s negative externality reaction function ii the magnitude of the preference change and iii the number of individuals changing preferences

environmental externalities in traditional agriculture and the impact of trade liberalization the case of ghana abstract this paper provides a framework for the evaluation of trade policies that explicitly considers the effects of such policies on the environmental resources biomass in doing this we estimate the effects of biomass as a factor of agricultural production and test the hypothesis that farmers efficiently exploit biomass a resource held in common property the main findings are i biomass is an important factor of production in ghanian agriculture ii the biomass resource is exploited beyond the socially optimal level iii a deepening of trade liberalization is likely to induce further losses of biomass and deforestation and iv national income is likely to fall in response to further trade liberalization

resource use institutions and sustainability a tale of two pacific island cultures this paper examines two pacific island cultures easter island and tikopia and the relationship between natural resource systems human made capital population growth and institutional change easter island followed a preindustrial society pattern of overshoot and collapse however tikopia evolved cultural practices leading to zero population growth and sustainable resource use using a modified lotka volterra predator prey model we find 1 investment in human made capital does not necessarily eliminate the boom and bust cycles of economic activity and population observed in many past societies and 2 institutional adaptation and resource conservation can be critical in achieving population stability

does poverty negate the impact of social norms on cheating abstract cheating such as corruption and tax evasion is prevalent in the developing world therefore many interventions have been undertaken to reduce cheating in developing countries although some field evidence shows that poverty is correlated with cheating the causal effect of poverty on cheating in the field and the effectiveness of interventions for financially constrained people remain an open question we present results from a lab in the field experiment with low income rice farmers in thailand n 568 in which we first investigate the causal effect of poverty on cheating and second test whether poverty affects the effectiveness of a social norm intervention to reduce cheating we show poverty itself does not affect willingness to cheat however although a social norm reminder intervention reduced cheating when the population was richer after harvest it had no effect when the population was poorer before harvest our results suggest that the timing of interventions to change behavior might matter

economics and sustainability balancing trade offs and imperatives the concept of sustainability has been increasingly invoked in scholarly and public policy debates discussion has been hampered however by uncertainty and lack of uniformity in the meaning of sustainability this paper seeks to identify some common ground among economists ecologists and environmen tal ethicists two issues seem salient require ments for intergenerational and the defi nition of social capital to be provided to future generations a concept of safe minimum standard which has received at least some recognition in the ecology philosophy and eco nomics literatures may provide the beginnings of a common ground for debate about sus tainability jel q2

on the life cycle metaphor where ecology and economics diverge abstract there is an attractive analogy between nature and industry based on the similarity of natural functions and certain industrial activities for instance animals ingest eat and digest food finally there are metabolic wastes firms are analogous to organisms in several respects insofar as they consume material resources process digest them and produce output products and excrete wastes firms like organisms also compete with each other for resources curiously enough one of the apparent differences between natural and man made systems is actually not one like the industrial system the natural system does not recycle everything however there are at least four real and important differences between the biosphere ecology and the technosphere economy first there is no primary producer in the economic system analogous to what photosynthesizers play in the biosphere inputs to the economy are mostly natural resources capital services and labor second in the economic system output is a heterogeneous mix of manufactured products and services labor in economics is an input but not an output the economic system recycles much less than the ecological system but utilizes a far greater suite of elements in the biosphere there are no products as such growth is tantamount to accumulation of embodied solar exergy in the form of cellulose sugars lipids and proteins the biosphere produces only wastes and more of itself plus dead matter third in the biosphere there are no markets there is no medium of exchange like money and there is nothing analogous to paid labor exchanges are involuntary i e by predation parasitism or theft fourth evolution in nature is driven by differentiation by random mutations of the genome and darwinian selection based on reproductive success in economics differentiation is based on discovery invention and innovation by intelligent economic agents and selection is based on competition at the individual or firm level either way the economic system is not closely analogous to an ecosystem attempts to use ecological concepts in an economic context are often misleading and unjustified the paper discusses the implications of the eco eco mismatch for resource accounting and life cycle analysis

ecological thresholds a survey abstract the existence of ecological discontinuities and thresholds has been recognised by ecological economics as a key feature to take into account in the study of environment economy interactions this paper reviews some theoretical developments and empirical studies dealing with ecological phenomena involving non linear dynamics the literature about this issue reveals that there is abundant evidence of discontinuities and threshold effects as the consequence of human perturbations on ecological systems however due to the complexities involved the predictive capacity of ecology is limited and large uncertainties still remain

on the intergenerational allocation of natural resources it is known hartwick and others that under standard assumptions a society that invests in reproducible capital the competitive rents on its current extraction of exhaustible resources will enjoy a consumption stream constant in time it is shown here that this result can be interpreted as saying that an appropriately defined stock of capital including the initial endowment of resources is being maintained intact and that consumption can be interpreted as the interest on that patrimony this seems like a useful rule of thumb for policy

the 1990 mexico and venezuela recapture clauses an application of average price options abstract the paper prices contingent contracts and options written on average prices and uses the methodology to value the recapture clauses in the 1990 mexican and venezuelan debt restructuring agreements it is shown that the current values of the recapture clauses are less than one quarter of the maximum contractually possible and are a concave function of the standard deviation of the oil price the paper also points out that the benefits of recapture clauses are not only an increased degree of risksharing between countries and creditors but also a decrease in the likelihood of the debtor to default and an increased incentive to invest and adjust

strategic information revelation we analyze the problem in which agents have non public information and are to play an asymmetric information game the agents may reveal some or all of their information to other agents prior to playing this game revelation is via exogenously specified certifiable statements the equilibria resulting from various revelation strategies are used to determine equilibrium revelation of information sufficient conditions are provided for complete revelation of all private information a number of examples are provided illustrating when revelation will or will not occur in commonly analyzed games many economic problems are characterized by the presence of both strategic behaviour on the part of individuals and by asymmetric information models encompassing both of these characteristics have been used successfully to examine questions in many fields usually using the concept of bayesian nash equilibrium as the solution concept typically the agents information is given exogenously and is fixed throughout the analysis modelling the information structure as static is appropriate for some problems but not for all in particular situations that are inherently dynamic most economic encounters allow for some interchange between the agents before the outcome is settled irrevocably in such circumstances it is possible that at least one or more of the agents possessing non public information may be able to reveal part or all of his information to one or all of the other agents in the economy during the course of their contact to the extent that such a communication is believed by the other agents the priors of the other agents will change and we will have what is in essence a new asymmetric information game new in

theories of behavior in principal agent relationships with hidden action abstract in a laboratory experiment we investigate behavior in a principal agent situation with moral hazard we evaluate the predictive success of two theories one is the standard agency theory which assumes that the agent will accept any contract offer that satisfies his participation constraint typically requiring zero expected utility the other is the fair offer theory suggested by keser and willinger 2000 principals principles when agents actions are hidden international journal of industrial organization 18 1 163 185 which requires that the principal provide full insurance against losses to the agent and leave him a share of at most 50 of the generated surplus the treatment variable of our experiment is the cost of effort as effort costs increase expected net surplus of a contract decreases we observe that fair offer theory generally predicts observed contract offers better than standard agency theory however the predictive success of the fair offer theory decreases while the one of standard agency theory increases with decreasing expected net surplus

critical natural capital revisited ecological resilience and sustainable development abstract the maintenance of critical natural capital is an important objective of sustainable development critical natural capital represents a multidimensional concept as it mirrors the different frameworks of various scientific disciplines and social groups in valuing nature this article revisits the concept of critical natural capital and examines its relation to the concept of ecological resilience i propose that ecological resilience can help a great deal in specifying the ecological criticality of specific renewable parts of the natural capital more specifically i suggest that the degree of ecological resilience is inversely related to the degree of threat ecosystems are prone to the concept of ecological resilience may complement other measures such as integrity or vulnerability in estimating the degree of threat specific ecosystems are exposed to the empirical estimates of ecological resilience add a further criterion in order to build a comprehensive and clear conception of critical natural capital

globalization local ecosystems and the rural poor summary in this paper we draw upon models from ecology and new institutional economics to examine the various mechanisms through which globalization can lead to loss in resilience of ecosystems and thus increase the vulnerability of poor people who depend on it to illustrate ecological dynamics we examine a semi arid savanna ecosystem that is characterized by nonlinearities and multiple steady states we discuss how traditional knowledge and institutions affect resource use patterns and resilience of such an ecosystem in the absence of trade then we examine the effects of trade liberalization and international technology transfers on institutional and ecological dynamics and consequently on poverty

spatial externalities in agriculture empirical analysis statistical identification and policy implications summary spatial externalities can affect economic welfare and landscape pattern by linking farm returns on adjoining parcels of land while policy can be informed by research that documents spatial externalities statistically quantifying the presence of externalities from landscape pattern is insufficient for policy guidance unless the underlying cause of the externality can be identified as positive or negative this article provides a springboard for empirical research by examining the underlying structure social environmental interactions and statistical identification strategies for the analysis and the quantification of agricultural spatial externalities that are derived from observations of landscape change the potential for original policy treatments of agricultural spatial externalities in development and environment outcomes is highlighted

institutions and economic growth an historical introduction abstract in this essay the interdependence of political and economic institutions is examined against premises in neoclassical theories of economies which maintain that population and savings are the principal determinants of economic growth that institutions matter in the development of economies is the difference in assumptions i examine i look at the institutional frameworks that preceded adoption of the united states constitution and the northwest ordinance in early america i then trace the precedents of these american institutions to the evolution of common law in england where interests unconcerned with the crown coalesced to form competing political units i then contrast england s institutional development with the comparatively centralized enforcement mechanisms of spain to examine the hypothesis that institutional differences produce economic consequences

national accounts and environmental resources in the paper optimal growth theory is used to derive the appropriate definition of the net national product concept when there are environmental resources and environmental damage to take into account the basic conclusions are that conventional defined np should be corrected by deducting environmental damage and adding the value of the net change of all resources

measuring lying aversion abstract we introduce a new method for measuring the decision to lie in experiments in the game the decision to lie increases own payment independent of the counterpart s decision but potentially at a cost for the counterpart we identify at the individual level the decision to lie and measure how individuals react to different incentives to lie furthermore we investigate how lying behavior changes over time our method allows us to classify people into types including those who never lie those who always lie and those who react to incentives to lie we suggest this method as a useful instrument for examining factors that influence the decision to lie

towards an ecological economics of sustainability abstract persistent disagreement both as to the interpretation to be given to sustainability and as to the relation between ecological and economic sustainability has hindered the development of an ecological economics of sustainable resource use this paper identifies the main concepts of sustainability deriving from the two disciplines in order to explore the difference implied by an ecological approach to the problem it is argued that present economic and ecological approaches are largely disjoint and that they address basically different phenomena by combining the efficiency requirements of what is usually thought of as economic sustainability with the stability requirements of an ecological approach it is shown that an intertemporally efficient allocation of resources that satisfies the conditions for constant levels of consumption is not necessary to assure ecological sustainability ecological sustainability requires that the allocation of economic resources should not result in the instability of the economy environment system as a whole

valuing environmental functions tropical wetlands recent studies have suggested that tropical wetland systems may have a crucial economic role to play in development the following paper provides an overview of these benefits using the general framework of cost benefit analysis as the methodological approach to assessing wetland values an analysis of trade offs between conserving or converting tropical wetlands demonstrates that taking into account the opportunity cost of wetland loss leads to a lower level of conversion than would otherwise be the case finally the paper discusses the extensions and limitations of the production function approach as applied to valuing nonmarketed wetland benefits

optimal diversity increasing returns versus recombinant innovation abstract choices regarding diversity play an important role in economics and innovation management but often remain implicit once made explicit the objectives of efficiency and diversity are usually posed as in conflict as efficiency relates positively and diversity negatively to various increasing returns to scale in markets such a perspective however neglects the benefits of diversity in terms of realizing system improvements through recombinant innovation or spillovers the latter implies a contribution of diversity to long term efficiency dominant economic approaches that address diversity such as option value and real options theories regard benefits of diversity as exogenous this paper proposes a simple model of variable endogenous diversity to analyse the optimal balance between increasing returns to scale and recombinant innovation it is discussed under which conditions one of four solutions is optimal complete specialization regardless of which option complete specialization in one specific option symmetric diversity perfect balance and asymmetric diversity the results give rise to a number of policy insights

valuation of tropical rainforests philosophical and practical issues in the use of contingent valuation abstract this paper explores the possibility of using a large scale multi country contingent valuation study for making decisions concerning global resources in the specific context of valuing a large set of tropical rainforests before considering the practical issues involved in implementing such a study the paper addresses philosophical issues related to the use of contingent valuation including the role of passive use motives such as altruism and the role of information the implications of empirically based criticisms which argue that contingent valuation results are unreliable are also considered the main portion of the paper sketches the practical difficulties likely to be encountered in actually implementing a large contingent valuation study in multiple countries which seeks to value a common set of tropical rainforests some key study design choices are discussed

a valuation model for developing country debt with endogenous rescheduling creditors have little recourse if a sovereign state repudiates debt obligations they can however threaten to impose penalties if such action occurs which results in deadweight losses to the system as a whole a preferred alternative for both borrower and lender is to reconstruct debt obligations reschedulings are a device that creditors can use to restructure the incentives faced by borrowers such that repudiation is never a rational action this article develops a numerical method of valuing the option to reschedule the model shows why fees are preferred to higher interest spreads during a rescheduling exerise why maturities get shorter prior to a debt crisis but are lengthened in a rescheduling and why little has been done to attempt to seize the assets of countries that have not repaid any interest or principal for extended periods of time the model shows that lenders are willing to commit greater amounts if reschedulings are possible than if they are not and that precommitment to provide additional funds at rescheduling can raise the market value of existing debt and should not be construed as concessions by commercial lenders alternately the model can be used to improve systems for ranking country creditworthiness to assess the degree of adjustment requried to spark resumption of spontaneous lending or to estimate how much interest rates would have to fall to restore a country s creditworthiness

sovereign liquidity crises the strategic case for a payments standstill is sovereign borrowing so different from corporate debt that there is no need for bankruptcy style procedures to protect debtors with the waiver of immunity sovereign debtors who already face severe disruption from short term creditors grabbing their currency reserves are also exposed to litigious creditors trying to seize what assets they can in a race of the vultures shielding sovereign debtors from inter creditor conflict by authorised standstills on payments doubt less runs some risk of debtor s moral hazard but the lack of an orderly procedure for resolving sovereign liquidity crises means that the imf is de facto forced to bail out countries in trouble this leads to both debtor and creditor moral hazard as investors lend without monitoring knowing that their investments are essentially guaranteed the strategic case for legalising standstills is to rescue the international financial system from this time consistent trap

problems in valuing the benefits of biodiversity protection this paper considers two problems in valuing the benefits of biodiversity protection these are firstly that preferences for biodiversity protection may be lexicographic rather than utilitarian the more individuals for whom this is true the less is cost benefit analysis validated as a means of decision making for biodiversity protection since lexicographic preferences are incompatible with the kaldor hicks compensation test secondly people may be poorly informed about the meaning of biodiversity complicating the use of contingent valuation as a means of measuring preservation benefits this paper first discusses the meaning of biodiversity and trends in diversity over time we offer some empirical evidence with regard to lexicographic preferences consider the implications of having poorly informed consumers and then report the results of a contingent valuation study of biodiversity protection with varying levels of information we find that willingness to pay for biodiversity protection increases with the level of information provided

strategic transmission of costly information it is ofren the case that an individual s decision is at least partly based on information received from another and when the agents payoffs depend on both the former s decision and on the latter s information there is an incentive for the informed individual to attempt to bias the decision maker s decision in his or her favor by strategically manipulating the information transmitted in a seminal paper crawford and sobel 1982 hereafter c s study such strategic information transmission in the context of an abstract sender receiver game variants of the crawford and sobel model have been applied widely and as the application varies so often does the interpretation of type in some cases type refers to a preference parameter given by nature as for example in bargaining theory e g farrell and gibbons 1989 matthews 1989 whereas in other settings for instance legislative decision making or expert testimony type refers to more or less technical information concerning how decisions map into final consequences and as such is acquired information e g gilligan and krehbiel 1987 milgrom and roberts 1986 when the information has to be acquired it is natural to suppose the acquisition is costly for otherwise there is no reason why such information is asymmetrically distributed so long as the receiver can observe surely or at least accurately infer whether the sender is informed and so long as messages are cheap talk there is no issue here for strategic information transmission save whether to become informed at all however there are many circumstances when it is inappropri ate to assume the receiver has such knowledge one possibility is that a receiver may know that a sender has some relevant informa tion but be uncertain of the quality of this information a second perhaps more important possibility is that a receiver is unable to tell whether a potential sender is uninformed inter alia this problem constitutes the rationale for ignorance of the law being inadmissible as a legal defense were it admissible then informed miscreants would mimic uninformed transgressors leads voters to be skeptical of politicians claiming ignorance of illegal arms deals and makes the sec sensitive to problems in distinguishing insider trading from legitimate good judgement so there is an intrinsic asymmetry in that it is generally possible for say senders to verify possession of at least some information but it is typically prohibitively difficult to verify any lack of knowledge

evolutionary policies for sustainable development adaptive flexibility and risk minimising abstract an evolutionary perspective on policies to foster sustainable development is presented it is argued that policies suggested by the traditional economic theory of environmental policy can stimulate unsustainable socio economic structures and patterns in addition they are unable to remove undesired locked in systems and technologies drawing on evolutionary thinking characterised by diversity selection innovation path dependence and bounded rationality an alternative partly complementary theory of environmental policy is suggested specific attention is given to the role of strategies that are aimed at increasing diversity and adaptive flexibility and at reducing risk

principals principles when agents actions are hidden abstract we examine the behavior of subjects in a simple principal agent game with hidden action while subjects in the role of agents tend to choose the actions which maximize their expected profits subjects in the role of principals offer contracts which differ from the theoretical predictions we identify three principles of contract design 1 the agent s remuneration for the better outcome is at least as high as the remuneration for the worse outcome 2 the agent must not risk making a loss 3 the net profit of the agent should not be higher than the net profit of the principal

trust law sustainability and responsible action abstract the problem of managing for sustainability is marked by the need to make decisions on behalf of others and by the uncertainties that attend such decisions however the economic literature on sustainability has paid scant attention to how decisions on behalf of others might differ from decisions on behalf of oneself and when risk has been modeled explicitly the expected utility hypothesis has generally been used a generation acts sustainably if the expected value of the next generation s utility is not less than the present s this paper investigates how we think about responsibly acting on another s behalf by looking to the united states law of trusts because in important respects the current generation views its responsibility to the future as a trust relationship trust law illuminates responsible decision making under both risk and uncertainty even under conditions of risk more conservative action than would be suggested by the expected utility hypothesis is warranted because it emphasizes preservation of trust principal and disavows profit maximization trust doctrine indicates that special caution should be exercised in conditions of uncertainty finally resource economic concepts of strong sustainability the precautionary principle and the safe minimum standard of conservation are interpreted according to trust principles

alternative approaches to economic environmental interactions abstract the key questions raised by recent developments in resource and environmental economics have been what useful economic functions does the environment provide and how are these functions affected by the process of economic environmental interaction this paper distinguishes between two different formal approaches to answering these questions the more conventional approach which is concerned with the optimal allocation of economically valuable exhaustible resources and an alternative analysis that considers the trade off between on the one hand environmental quality and on the other resource depletion and waste generation by the economic process to illustrate and extend the latter approach a model is constructed to show how this trade off might lead to continuously declining environmental quality and a future ecological constraint society must therefore optimally allocate output between consumption and services to improve the environment and choose between increased capital accumulation and environmental degradation although strict application of such a model may be limited it has wider implications for the role of technological change and the value of the environment in any system experiencing deteriorating environmental quality

incentives and cheating abstract we study how cheating behavior is affected by incentives after replicating the finding in the cheating game literature that lying does not increase with incentives we show that this insensitivity is not a characteristic of the intrinsic lying cost but rather a result of concern about being exposed as a liar in a modified mind game in which this concern is eliminated we find that people lie more and in particular lie more when the incentives to do so increase thus our results show that for many participants the decision to lie follows a simple cost benefit analysis they compare the intrinsic cost of lying with the incentives to lie once the incentives are higher than the cost they switch from telling the truth to lying

the new institutional economics and development theory a brief critical assessment abstract in this paper we discuss strengths and weaknesses of transaction cost and imperfect information approaches to the economic theory of institutions particularly with reference to problems relevant to economic development

historical roots for ecological economics biophysical versus allocative approaches abstract a number of economists today are aware that the results of their science are more or less at variance with concrete fact and are alive to the necessity of perfecting it they go wrong rather in their choice of means to that end they try obstinately to get from their science alone the materials they know are needed for a closer approximation to fact whereas they should resort to other sciences and go into them thoroughly not just incidentally for their bearing on the given economic problem until economic science is much farther advanced economic principles are less important to the economists than the reciprocal bearings of the results of economics and the results of the other social sciences many economists are paying no attention to such interrelations for mastery of them is a long and fatiguing task requiring an extensive knowledge of facts whereas anyone with a little imagination a pen and a few reams of paper can relieve himself of a chat on principles pareto 1935 para 2022

resilience weather and dynamic adjustments in agroecosystems the case of wheat yield in england the paper presents an investigation of agroecosystem dynamics with an application to wheat yield data in england over the period 1885 2012 the analysis relies on a threshold quantile autoregressive model the model allows for lag effects to vary across quantiles of the distribution as well as with the values taken by the lagged variables the analysis documents the dynamics and persistence of yield adjustments to shocks the estimates indicate the presence of dynamic instability in the lower quantile of the distribution the analysis shows that after controlling for the role of technological trend wheat yield exhibits resilience to adverse weather shocks

guilt in games a clear conscience is a good pillow why does this old proverb contain an insight the emotion of guilt holds a key psychologists report that the prototypical cause of guilt would be the infliction of harm loss or distress on a relationship partner roy baumeister arlene m stillwell and todd f heatherton 1994 245 june price tangney 1995 moreover guilt is unpleasant and may affect behavior to render the associated pangs counterfactual baumeister stillwell and heatherton state if people feel guilt for hurting their partners and for failing to live up to their expectations they will alter their behavior to avoid guilt in ways that seem likely to maintain and strengthen the relationship avoided guilt is the down of the sound sleeper s bolster how can guilt be modeled how are human interaction and economic outcomes influenced we offer a formal approach for providing answers start with an extensive game form which associates a monetary outcome with each end node say that player i lets player j down if as a result of i s choice of strategy j gets a lower monetary payoff than j expected to get before play started player i s guilt may depend on how much he lets j down player i s guilt may also depend on how much j believes i believes he lets j down we develop techniques to analyze equilibria when players are motivated in part by a desire to avoid guilt the intellectual home for our exercise is what has been called psychological game theory this framework originally developed by john geanakoplos david pearce and ennio stacchetti 1989 and recently extended by battigalli and dufwenberg 2005 henceforth b d allows players utilities to depend on beliefs about choices states of nature

sustainability constraints versus optimality versus intertemporal concern and axioms versus data sustainable sustained or survivable development are defined here as distinct sustainability constraints on intertemporal distribution in a context which ignores uncertainty environmental and intratemporal concerns such constraints are neither self contradictory nor redundant for they can conflict with maximizing the present value of utility optimality nor inferior since the axioms underlying optimality are ethically arbitrary and refuted by empirical psychological data axiomatic arguments may clarify but cannot resolve debates about intertemporal concerns data suggest that sustainability constraints are not respected and that intertemporal welfare functions containing a preference for sustained improvement may better reflect what bodies politic mean by sustainability

strategic communication with lying costs i study a model of strategic communication between an uninformed receiver and an informed but upwardly biased sender the sender bears a cost of lying or more broadly of misrepresenting his private information the main results show that inflated language naturally arises in this environment where the sender almost always claims to be of a higher type than he would with complete information regardless of the intensity of lying cost there is incomplete separation with some pooling on the highest messages the degree of language inflation and how much information is revealed depend upon the intensity of lying cost the analysis delivers a framework to span a class of cheap talk and verifiable disclosure games unifying the polar predictions they make under large conflicts of interest i use the model to discuss how the degree of manipulability of information can affect the trade off between delegation and communication copyright 2009 wiley blackwell

the conditions for achieving environmentally sustainable development this paper is interested in the narrower interpretation the relationship between environmental quality and sustainable economic activity the latter is interpreted as that level of economic activity which leaves the environmental quality level intact with the policy objective corresponding to this notion being the maximization of net benefits of economic development subject to maintaining the services and quality of natural resources over time 3

the paretian liberal paradox and ecological economics abstract two of the most basic considerations in collective choice are the pareto principle and some minimal protection of individual rights in his impossibility theorem sen 1970 shows that there is a potential inconsistency between preference sovereignty as expressed by the pareto condition and the protection of minimal rights a liberal or liberty condition the paretian liberal paradox plp and the extensive debate surrounding it prompts serious reconsideration of the traditional welfare economics approach the critique of welfarism made by the plp is of central importance for environmental issues given pervasive externalities missing markets uncertainty and potential irreversibilities making collective choice decisions on these issues may require using explicit non utility information and restricting individual preference sovereignty we explore the implications of the plp for long term environmental policy and the transdisciplinary field of ecological economics as a simple pedagogical device relying on sparse principles the plp stimulates an increased awareness of the potential conflict between preferences and rights recognition of the plp focuses attention on what counts as admissible information in collective choice rules for example consideration of the plp illuminates differences in the informational requirements of alternative sustainability concepts

limits to substitution and irreversibility in production and consumption a neoclassical interpretation of ecological economics abstract there are many methodological approaches within ecological economics one of the principal modes of analysis is a modified version of the standard neoclassical model this paper examines the parallels which emerge between the ideas of some ecological economists concerning production and the ideas of others concerning consumption when these ideas are interpreted in the neoclassical paradigm it is well known that ecological economics is characterized by arguments concerning limits to substitution between inputs energy natural capital etc vs manufactured capital labor etc in production and the implications these have for sustainability however various authors have also expressed concerns regarding limits to substitution in consumption either between environmental assets and other goods or between basic needs commodities and other goods though the specific reasons for non substitution are different in the production and consumption cases the underlying theme is that individual commodities and other inputs have unique physical or other properties which make them poor substitutes ideas about irreversibility in production and economic development are also prominent in ecological economics likewise many authors have argued for similar irreversibilities in consumption behavior in analogy to the term technological change i coin the term preferential change to describe these phenomena the linking themes in this case are that the economy environment system is evolutionary in character and that external effects intended and unintended consequences of actions or processes imposed on other parties or resources are all pervasive

the aversion to lying abstract we experimentally investigate the effect of cheap talk in a bargaining game with one sided asymmetric information a seller has private information about her skill and is provided an opportunity to communicate this information to a buyer through a written message four different treatments are compared one without communication one with free form communication and two treatments with pre specified communication in the form of promises of varying strength our results suggest that individuals have an aversion towards lying about private information and that the aversion to lying increases with the size of the lie and the strength of the promise freely formulated messages lead to the fewest lies and the most efficient outcomes