global warming and hyperbolic discounting the use of a constant discount rate to study long lived environmental problems such as global warming has two disadvantages the prescribed policy is sensitive to the discount rate and with moderate discount rates large future damages have almost no effect on current decisions time consistent quasi hyperbolic discounting alleviates both of these modeling problems and is a plausible description of how people think about the future we analyze the time consistent markov perfect equilibrium in a general model with a stock pollutant the solution to the linear quadratic specialization illustrates the role of hyperbolic discounting in a model of global warming

interregional redistribution and budget institutions under asymmetric information empirical evidence from the u s and the european union suggests that regions which contribute to interregional redistribution face weaker borrowing constraints than regions which benefit from interregional redistribution this paper presents an argument in favor of such differentiated budget institutions it develops a two period model of a federation consisting of two types of regions the federal government redistributes from one type of regions contributors to the other type recipients it is shown that a fiscal constitution with lax budget rules for contributors and strict budget rules for recipients solves the self selection problem the federal government faces in the presence of asymmetric information regarding exogenous characteristics of the regions

artificial adaptive agents in economic theory economic analysis has largely avoided questions about the way in which economic agents make choices when confronted by a perpetually novel and evolving world as a result there are outstanding questions of great interest to economics in areas ranging from technological innovation to strategic learning in games this is so despite the importance of the questions because standard tools and formal models are ill tuned for answering such questions however recent advances in computer based modeling techniques and in the subdiscipline of artificial intelligence called machine learning offer new possibilities artificial adaptive agents aaa can be defined and can be tested in a wide variety of artificial worlds that evolve over extended periods of time the resulting complex adaptive systems can be examined both computationally and analytically offering new ways of experimenting with and theorizing about adaptive economic agents many economic systems can be classified as complex adaptive systems such a system is complex in a special sense i it consists of a network of interacting agents processes elements ii it exhibits a dynamic aggregate behavior that emerges from the individual activities of the agents and iii its aggregate behavior can be described without a detailed knowledge of the behavior of the individual agents an agent in such a system is adaptive if it satisfies an additional pair of criteria the actions of the agent in its environment can be assigned a value performance utility payoff fitness or the like and the agent behaves so as to increase this value over time a complex adaptive system then is a complex system containing adaptive agents networked so that the environment of each adaptive agent includes other agents in the system complex adaptive systems usually operate far from a global optimum or attractor such systems exhibit many levels of aggregation organization and interaction each level having its own time scale and characteristic behavior any given level can usually be described in terms of local niches that can be exploited by particular adaptations the niches are various so it is rare that any given agent can exploit all of them as rare as finding a universal competitor in a tropical forest moreover niches are continually created by new adaptations it is because of this ongoing evolution of the niches and the perpetual novelty that results that the system operates far from any global attractor improvements are always possible and indeed occur regularly the everexpanding range of technologies and products in an economy or the everimproving strategies in a game like chess provide familiar examples adaptive systems may settle down temporarily at a local optimum where performance is good in a comparative sense but they are usually uninteresting if they remain at that optimum for an extended period a theory of complex adaptive systems based on aaa makes possible the development of well defined yet flexible models that exhibit emergent behavior such models can capture a wide range of economic phenomena precisely even though the development of a general mathematical theory of complex adaptive systems is still in its early stages the aaa models complement current theoretical directions they are

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

institutional quality and capital inflows theory and evidence abstract this paper analyzes both theoretically and empirically the link between capital inflows and the quality of economic institutions to this purpose we construct a small open economy model of the soft budget constraint syndrome wherein persistently cheap funding from abroad i raises the prevalence of extractive projects and ii expands their support by the benevolent government ex post while the government may in principle limit the prevalence of extractive projects ex ante the incentives to do so is limited when foreign borrowing is cheap using a large sample of countries and controlling for reverse causality and omitted variable bias we confirm empirically that capital inflows are followed by a decline in the quality of domestic economic institutions our model and empirical analysis help explain the divergence between southern european countries spain portugal italy and greece and the rest of oecd countries since the mid 1990s

rational choice a survey of contributions from economics and philosophy this paper looks at the philosophical foundations of rational choice theory it is argued that l savage s expected utility axioms cannot be defended as requirements of instrumental rationality in part because of their implications for the description of consequences then it is argued that common knowledge of rationality does not imply that rational game players must be in nash equilibrium and for some games is an incoherent concept finally the suggestion that rational choice theory is self defeating is examined in relation to coordination games where the theory cannot explain the role of salience and the concept of resolute choice copyright 1991 by royal economic society

measuring global poverty why ppp methods matter abstract we present theory and evidence to suggest that in the context of analyzing global poverty the eks approach to estimating purchasing power parities yields more appropriate international comparison of real incomes than the geary khamis approach our analysis of the 1996 and 2005 international comparison project data confirms that the geary khamis approach substantially overstates the relative incomes of the world s poorest nations and this leads to misleading comparisons of poverty across regions and over time the eks index of real income is much closer to being a true index of economic welfare and is therefore preferred for assessment of global poverty

love hate and murder commitment devices in violent relationships many violent relationships are characterized by a high degree of cyclicality women who are the victims of domestic violence often leave and return multiple times to explain this we develop a model of time inconsistent preferences in the context of domestic violence this time inconsistency generates a demand for commitment we present supporting evidence that women in violent relationships display time inconsistent preferences by examining their demand for commitment devices we find that no drop policies which compel the prosecutor to continue with prosecution even if the victim expresses a desire to drop the charges result in an increase in reporting no drop policies also result in a decrease in the number of men murdered by intimates suggesting that some women in violent relationships move away from an extreme type of commitment device when a less costly one is offered

monetary fiscal policy interactions and commitment versus discretion in a monetary union abstract we consider monetary fiscal policy interactions in a monetary union if monetary and fiscal authorities have different ideal output and inflation targets the nash equilibrium output or inflation or both are beyond the ideal points of all authorities leadership of either authority is better fiscal discretion entirely negates the advantage of monetary commitment the optimal monetary rule is equivalent to discretionary leadership of monetary over fiscal policy agreement about ideal output and inflation creates a monetary fiscal symbiosis yielding the ideal point despite disagreement about the relative weights of the two objectives for any order of moves without fiscal co ordination and without monetary commitment

thorstein veblen and post darwinian economics thorstein veblen is noted for his view that economics should be an evolutionary science however although the term evolutionary has been adopted in general terms by subsequent institutional economists there has been remarkably little detailed exploration informed by biology of what veblen meant by an evolutionary science and the character of the post darwinian economics that he attempted to build this essay explores the reasons for veblen s attachment to darwinism informed by developments in biology itself and identifies some distinctive and enduring features of veblen s evolutionary theory copyright 1992 by oxford university press

overturning mundell fiscal policy in a monetary union central to ongoing debates over the desirability of monetary unions is a supposed trade off outlined by mundell 1961 a monetary union reduces transactions costs but renders stabilization policy less effective if shocks across countries are sufficiently correlated then according to this argument delegating monetary policy to a single central bank is not very costly and a monetary union is desirable this paper explores this argument in a setting with both monetary and fiscal policies in an economy with monetary policy alone we confirm the presence of the trade off and find that indeed a monetary union will not be welfare improving if the correlation of national shocks is too low however fiscal interventions by national governments combined with a central bank that has the ability to commit to monetary policy overturn these results in equilibrium such a monetary union will be welfare improving for any correlation of shocks

alternative measures of output in global economic environmental models purchasing power parity or market exchange rates the study examines the question of the use of purchasing power parity versus market exchange rates in constructing global economic models it compares three approaches mer accounts world price ppp accounts and superlative ppp accounts it concludes that the best approach is to use superlative ppp accounts this approach uses cross sectional ppp measures for relative incomes and outputs and relies on national accounts price and quantity indexes for time series extrapolations under ideal circumstances this approach will provide accurate and consistent cross sections and time series this approach will require relatively little change in model structure from ones using mer accounts the main concern would be to ensure that behavioral and reduced form relationships in the models have been correctly estimated

reconsidering the moral hazard risk avoidance tradeoff the received model for optimal demand side cost sharing trades off moral hazard and risk avoidance this model appears to lie behind recent increases in initial cost sharing such as those embodied in health savings accounts and health reimbursement accounts at the same time there is evidence that lower cost sharing for certain drugs can reduce future total health care costs and or improve future health and this may be true of other medical services as well to the degree that individuals remain in the same common insurance pool lower cost sharing that induces increases in certain services that reduce total costs including future costs represents a classic case for a subsidy and will minimize an employer s labor costs even if total costs increase the value of a change in health could increase more in that case such a subsidy is consistent with recent work in behavioral economics for those with self control problems

why are services cheaper in the poor countries in their important work on international comparisons of national incomes and of comparative price structure kravis heston and summers i982 p 8 have noted that services are much cheaper in the relative price structure of a typical poor country than in that of a rich country this phenonomen has been documented now fairly systematically by the data gathered under their guiding hand of the united nations international comparison icp which covers 34 countries table i reproduced from their work i982 and fig i based on rows 3 and ii 13 indeed show this tendencyfor the relationship between relative service prices and real per capita gdp in this kravis heston summers 34 country 6 group sample the tendency is strongly evident except for the intermediate groups iii and iv

empirical and public choice evidence for hyperbolic social discount rates and the implications for intergenerational discounting the derivation of the correct discount rate for intergenerational projects in cost benefit analysis is particularly contentious public choice has resulted in lower discretionary exponential discount rates for many intergenerational projects in britain and the usa this is shown to be strong indirect evidence that the true social discount rate may be a hyperbolic rather than an exponential function there is also empirical evidence for this hypothesis the hyperbolic nature of discounting is also a standard finding in the behavioural sciences for intergenerational time frames hyperbolic discount rates should be employed together with exponential discount rates in cost benefit sensitivity analyses

veblen s evolutionary programme a promise unfulfilled this article examines in detail the way in which veblen attempted to give theoretical expression to the programme for an evolutionary economics that he outlined in methodological terms in his 1898 essay why is economics not an evolutionary science veblen s conception of darwinian methodological principles led him to attempt to develop a theory of institutional evolution that was purely causal in nature this theory was never satisfactorily developed by veblen at base his theory was one of new technology changing economic conditions and new economic conditions leading to new ways of thinking and to new institutions through a non intentional process of habituation those who attempted to follow veblen such as hoxie and mitchell found difficulties with the key aspects of this theory and both men came to abandon it institutionalism in the interwar period is devoid of attempts to develop veblen s theory and veblen s programme remained a promise unfulfilled

politics institutions and fiscal performance in a federal system an analysis of the argentine provinces abstract we posit that the fiscal behavior of argentine provinces is determined by a common pool game at two levels within each province and across political units in the latter game the national government has a greater incentive than the provincial governments to internalize the negative externality of fiscal imprudence given relatively strong party discipline the president is able to induce governors from his party to internalize a portion of the externality to a greater extent than opposition governors in argentina party matters for fiscal behavior but it does so for reasons different from those identified in studies of oecd countries

procrastination and obedience in this lecture i shall focus on situations involving repeated decisions with time inconsistent behavior although each choice may be close to maximizing and therefore result in only small losses the cumulative effect of a series of repeated errors may be quite large thus in my examples decision makers are quite close to the intelligent well informed individuals usually assumed in economic analysis but cumulatively they make seriously wrong decisions that do not occur in standard textbook economics this lecture discusses and illustrates several pathological modes of individual and group behavior procrastination in decision making undue obedience to authority membership of seemingly normal individuals in deviant cult groups and escalation of commitment to courses of action that are clearly unwise in each case individuals choose a series of current actions without fully appreciating how those actions will affect future perceptions and behavior the standard assumption of rational forwardlooking utility maximizing is violated the nonindependence of errors in decision making in the series of decisions can be explained with the concept from cognitive psychology of undue salience or vividness for example present benefits and costs may have undue salience relative to future costs

grand corruption instead of commitment reconsidering time inconsistency of monetary policy abstract this paper suggests that inflation may be affected differently by grand corruption compared to its positive nexus with petty corruption in an extended barro and gordon 1983a model grand corruption may serve as a quasi commitment device a cheating expropriating government may actually deter a monetary authority from cheating reneging furthermore rogoff s 1985 conservative central banker has an unambiguously beneficial effect she reduces the inflationary bias even more while also rendering fiscal policy more effective the model nests the standard fiscal monetary interaction logic with and without expropriation as well as the diametrical symbiosis result obtained by dixit and lambertini 2003a

the source of optimality in action it is well known that the nature of the information set and the axioms of rational choice are critical in determining the type of ranking on which agents are held to act in economic theory this paper argues that the concept of the optimising agent is also sensitive to the conception of the relation between a ranking of options facing an agent and concrete action what is termed the realisation process three conceptions of the realisation process are examined which are seen to lead to three quite distinct views on the role of agency the enabling conditions under which the concept of the optimising agent may be legitimately applied and the resulting domain of application of optimisation

the behavioral life cycle hypothesis self control mental accounting and framing are incorporated in a behavioral enrichment of the life cycle theory of saving called the behavioral life cycle blc hypothesis the key assumption of the blc theory is that households treat components of their wealth as nonfungible even in the absence of credit rationing specifically wealth is assumed to be divided into three mental accounts current income current assets and future income the temptation to spend is assumed to be greatest for current income and least for future income considerable empirical support for the blc theory is presented primarily drawn from published econometric studies

excessive deficits sense and nonsense in the treaty of maastricht maastricht s fiscal rules willem buiter giancarlo corsetti and nouriel roubini the maastricht treaty on economic and monetary union in the ec has specified limits on both government debt and fiscal deficits satisfying these criteria is necessary for getting into emu once inside violating these limits will also incur penalties the fiscal requirements especially the debt criterion are much tougher than is required to ensure public sector solvency trying to attain these targets will force the ec initially into substantial deflation and recession failure to correct for real growth inflation and the business cycle makes the nominal deficit a poor basis for any policy or target ambiguity about how fiscal targets will in fact be interpreted might provide a way out but cannot today be relied upon to do so supranational fiscal rules are sometimes claimed to be justified by externalities in national fiscal policies we find this justification wanting both in theory and empirically a better case might be built on the imposition of external commitments to offset domestic political distortions that systematically induce excessive deficits even so we conclude that the fiscal convergence criteria on balance are harmful and should be disregarded or applied very loosely to avoid the risk of serious fiscal overkill

melioration a theory of distributed choice in this paper we develop a theory of individual choice called melioration which implies that choices distributed over a period of time may be reliably and predictably suboptimal in terms of the person s own preferences consider some typical examples of distributed choices the expenditure rate on various non durables frequency of athletic exercise rate of work in free lance type occupations allocation of leisure time rate of savings or dissavings expenditures on lottery tickets and other forms of gambling when people express dissatisfaction about their choices their discontent seems clustered around these sorts of distributed choices for example complaints that one is working too hard or not hard enough exercising too little or too much wasting time overeating overspending and so on are commonplace the next two sections of the paper spell out the basic theory we are proposing the following section then applies the theory to pathological consumption patterns and shows that one should find a general underinvestment in those activities that exhibit increasing average returns to rate of consumption and an overinvestment in activities that have an addiction like interaction between value and rate the final section compares the theory with other approaches to suboptimal choice

international coordination of fiscal policy in limiting economies we examine the limiting behavior of cooperative and noncooperative fiscal policies as countries market power goes to zero we show that these policies converge if countries raise revenues through lump sum taxation however if there are unremovable domestic distortions such as distorting taxes there can be gains to coordination even when a single country s policy cannot affect world prices these results differ from the received wisdom in the optimal tariff literature the key distinction is that contrary to the tariff literature the spending decisions of governments are explicitly modeled

an analysis of the stability and growth pact we use a stylised model to analyse the stability and growth pact for countries that have formed the european monetary union emu in our model shortsighted governments fail to internalise the consequences of their debt policies for the common inflation rate fully therefore while governments have no incentive to sign a stability pact in the absence of a monetary union they do so with monetary union to restrain this externality with uncertainty a monetary union combined with an appropriately designed pact will be strictly preferred to autonomy with differences in initial conditions conflicts of interest arise we study the nash bargaining solution

federalism fiscal restraints and european monetary union a prominent feature of the maastricht treaty on european union is the restrictions it places on fiscal policy under the provisions of the excessive deficit procedure or edp the success of member states in avoiding excessive deficits during the transition to economic and monetary union emu is one of four criteria governing admission to the monetary union once monetary union has begun member states are unconditionally required to avoid excessive deficits a state has an excessive deficit when it is so declared by the european council upon a report by the european commission and a judgment by the monetary committee the edp is set in motion if a country s deficit and general government debt respectively exceed 3 percent and 60 percent of gdp the justification for these procedures is that member states participating in the monetary union must be restrained from overborrowing to avoid destabilizing the common currency if excessive deficits cause a debt crisis the european central bank ecb will come under pressure to bail out the imperiled government the bailout could be ex post in which case the ecb would monetize the government s debt or ex ante in which case it would keep interest rates low to lighten the debt service burden either way unfettered fiscal policies could create inflationary pressures that the ecb will find difficult to resist

optimal sin taxes abstract we investigate sin taxes on unhealthy items such as fatty foods that people may by their own reckoning consume too much of we employ a standard optimal taxation framework but replace the standard assumption that all consumers have 100 self control with an assumption that some consumers may have some degree of self control problems we show that imposing taxes on unhealthy items and returning the proceeds to consumers can generally improve total social surplus because such taxes counteract over consumption by consumers with self control problems while at the same time they naturally redistribute income to consumers with no self control problems who consume less such taxes can even create pareto improvements finally we demonstrate with some simple numerical examples that even if the population exhibits relatively few self control problems optimal taxes can still be large

poverty and self control we argue that poverty can perpetuate itself by undermining the capacity for self control in line with a distinguished psychological literature we consider modes of self control that involve the self imposed use of contingent punishments and rewards we study settings in which consumers with quasi hyperbolic preferences confront an otherwise standard intertemporal allocation problem with credit constraints our main result demonstrates that low initial assets can limit self control trapping people in poverty while individuals with high initial assets can accumulate indefinitely thus even temporary policies that initiate accumulation among the poor may be effective we examine implications concerning the effect of access to credit on saving the demand for commitment devices the design of financial accounts to promote accumulation and the variation of the marginal propensity to consume across income from different sources we also explore the nature of optimal self control demonstrating that it has a simple and behaviorally plausible structure that is immune to self renegotiation

discounting the distant future how much do uncertain rates increase valuations abstract we demonstrate that when the future path of the discount rate is uncertain and highly correlated the distant future should be discounted at significantly lower rates than suggested by the current rate we then use two centuries of us interest rate data to quantify this effect using both random walk and mean reverting models we compute the certainty equivalent rate that summarizes the effect of uncertainty and measures the appropriate forward rate of discount in the future under the random walk model we find that the certainty equivalent rate falls continuously from 4 to 2 after 100 years 1 after 200 years and 0 5 after 300 years at horizons of 400 years the discounted value increases by a factor of over 40 000 relative to conventional discounting applied to climate change mitigation we find that incorporating discount rate uncertainty almost doubles the expected present value of mitigation benefits

time inconsistency and free riding in a monetary union in monetary unions a time inconsistency problem in monetary policy leads to a novel type of free rider problem in the setting of non monetary policies the free rider problem leads union members to pursue lax non monetary policies that induce the monetary authority to generate high inflation free riding can be mitigated by imposing constraints on non monetary policies without a time inconsistency problem the union has no free rider problem then constraints on non monetary policies are unnecessary and possibly harmful this theory is here detailed and applied to several non monetary policies labor market policy fiscal policy and bank regulation

government finance in a common currency area abstract european integration in 1992 may require greater exchange rate coordination thatn currently exists the delors report goes as far as to recommend the eventual adoption of a single currency however the formation of a common currency area raises fears that independent fiscal policies may produce inferior outcomes this paper shows that lack of cooperation in fiscal policy leads to too little inflation too high taxes and too much government spending jel f33

cross disciplinary evidence for hyperbolic social discount rates researchers in different disciplines have independently found evidence to suggest that the social discount rate may be hyperbolic rather than exponential in nature both behaviorist research and some empirical economics studies support the hyperbolic discounting hypothesis u s and u k government discounting dispensations for some long run public development projects are explicable in terms of an underlying hyperbolic social discount rate a statistical aggregation argument demonstrates that even if the behaviorist economics and public choice evidence for hyperbolic discounting is not conclusive the social discount rate of a set of people who individually express time preferences best modeled by exponential discounting functions is nonetheless hyperbolic further empirical economics studies of discounting preferences are required comparisons of different national discounting practices would also be useful to see how widespread is the use of unusually low exponential rates of discount for long run projects the application of hyperbolic discounting would have most impact in long run benefit cost analyses however government agencies would require overwhelming evidence before switching from exponential to hyperbolic discounting

on what basis should health be discounted the discount rate to be applied in health care programmes should be based on the time preference rate for health and this same rate should be applied to costs as well due to the limited tradeability of health when eliciting its time preference rate the intertemporal choices must be framed in such a way as to resemble as closely as possible those facing health planners and decision makers

alternative measures of output in global economic environmental models purchasing power parity or market exchange rates comment abstract nordhaus nordhaus w 2006 alternative measures of output in global economic environmental models purchasing power parity or market exchange rates energy economics doi 10 1016 j eneco 2006 02 003 examines the question of the use of purchasing power parity versus market exchange rates in constructing global economic models he concludes that the best approach is to use ppp measures for relative incomes and outputs and national accounts prices and quantity indexes for time series extrapolations in this comment we argue and show that international real income comparisons based on ppp measures overstate the real incomes of poorer countries and underestimate the real incomes of richer regions this is the case because the ppp approach fails to account for the differences in various non traded attributes such as availability of public goods and the location attached to the final sale of the goods being compared additionally using a teleporting consumer model we show that the use of real exchange rates to convert real quantities and the use of market exchange rates to convert nominal incomes preserve real income rankings across nations and this approach is consistent with standard economic theory

monetary and fiscal policies interaction in monetary unions in this paper the literature on the interaction between monetary and fiscal policies in a monetary union is surveyed by adopting the concept of symbiosis as a starting point the paper highlights the importance of uncertainty policy makers preferences and targets then the role of commitment to policy rules and coordination is addressed the analysis also focuses on the importance of the data considered for the generation of the policy mix as a final step the paper discusses the main results in the literature on public debt management in a monetary union all the reported theoretical results are then adopted to retrieve policy and institutional implications for the european monetary union

when do cooperation and commitment matter in a monetary union abstract this paper offers a framework to study strategic interactions between private players national fiscal authorities and a common central bank in monetary unions we establish general conditions in terms of restrictions on spillover effects of actions by private and public players under which games that differ in the degree of cooperation and commitment can admit the same equilibrium outcome we use these conditions to characterize benchmark results on the irrelevance of cooperation and commitment established in recent literature moreover we show for a general setting in which the benchmark results do not apply that gains from fiscal cooperation depend on the number of countries and increase as this number gets larger

on the need for fiscal constraints in a monetary union the desirability of fiscal constraints in monetary unions depends critically on whether the monetary authority can commit to following its policies if it can commit then debt constraints can only impose costs if it cannot commit then fiscal policy has a free rider problem and debt constraints may be desirable this type of free rider problem is new and arises only because of a time inconsistency problem

a note on participatory decision making and rationality this paper addresses a particular issue of institutional choice it is concerned with one aspect of the argument for participatory decision making structures how to make sense of the claim that participation can raise productivity because it produces a change in motivation the argument of the paper turns first on distinguishing between the rational choice account of behaviour and a norm guided one and second on the thought that participatory structures give scope for norm guided behaviour to flourish in ways not found in hierarchies

fiscal federalism in argentina policies politics and institutional reform argentine fiscal federalism is considered to be very inefficient by all specialists its allocation of tax and spending authorities and its system of intergovernme ntal transfers do not correspond to any economic criteria and provide all sorts of perverse incentives and obstacles for sound economic policies agreeing with the above diagnostic we attempt to take a step further and to provide an explanation for the many inefficient features of argentine fiscal federalism in order to do that we apply and further develop an approach presented in spiller and tommasi 2000 that tries to explain public policies as the outcome of political transactions these approach argues that the nature and characteristics of the observed policies will be conditioned by the rules of the political game under which those t policies are made hence it re focuses policy recommendations from the level of policy reform to the level of institutional reforms with emphasis on political institutions

procrastination on long term projects we investigate naive procrastination on projects with multiple stages in addition to classic procrastination in starting projects naive people might undertake costly effort to begin projects but then never finish procrastination is more likely when the costs of completing different stages are more unequal and it is when later stages are more costly that people start but do not finish projects moreover if the cost structure is endogenous people are prone to choose cost structures that lead them to start but not finish projects some extensions further illustrate how people may incur costs on projects they never complete

on the evolution of thorstein veblen s evolutionary economics this article addresses the origins of thorstein veblen s evolutionary economics as announced in his 1898 essay why is economics not an evolutionary science before 1897 and partly under the influence of c lloyd morgan veblen rejected biological reductionism veblen s 1897 endorsement of a critique of marxism by max lorenz shows that he found karl marx s account of human action too limiting by this time veblen had also rejected the idea of either the individual or society as exclusive foundations for social science instead he embraced an evolutionary framework of explanation along darwinian lines involving multiple levels of explanation and emergent properties copyright 1998 by oxford university press

time consistency of optimal monetary and fiscal policy in a small open economy abstract this paper characterizes conditions under which optimal monetary and fiscal policy is time consistent in a stylized small open economy with a flexible foreign exchange rate regime it shows that these conditions depend on the way in which leisure is assumed to enter preferences and or on the process which productivity is assumed to follow this paper further argues that these conditions may fail to be sufficient if the small open economy implements a fixed foreign exchange rate regime thus a credible fixed exchange rate regime does not necessarily help render optimal policy time consistent

uncertain discount rates in climate policy analysis abstract consequences in the distant future such as those from climate change have little value today when discounted using conventional rates this result contradicts our gut feeling about such problems and often leads to ad hoc application of lower rates for valuations over longer horizons a step facilitated by confusion and disagreement over the correct rate even over short horizons we review the theory and intuition behind the choice of discount rates now and importantly the impact of likely variation in rates in the future correlated changes in future rates imply that the distant future should be discounted at much lower rates than suggested by the current rate thereby raising the value of future consequences regardless of opinions concerning the current rate using historic data to quantity the likely changes and correlation in changes in future rates we find that future valuations rise by a factor of many thousands at horizons of 300 years or more almost doubling the expected present value of climate mitigation benefits relative to constant 4 discounting ironically uncertainty about future rates reduces the ratio of valuations based on alternate choices of the current rate

the competence based approach veblenian ideas in the modern theory of the firm the author argues that a contemporary stronghold of a number of thorstein veblen s crucial ideas can be found in the emerging competence based approach to the firm e g penrose chandler winter for example the emphasis in this literature on firms as path dependent entities characterized by their heterogenous and group based knowledge bases can be linked with key themes in veblen s work thus the paper presents the competence based approach as a modern veblenian approach moreover the veblenian aspects of the competence based approach are also those aspects that most differentiate it from the other dominant economic approach to the firm the contractual approach e g alchian and demsetz williamson grossman and hart the aim of the paper is both to make this historical point and to present a contemporary body of theory that may with some justice be called veblenian copyright 1998 by oxford university press

international comparisons of gdp when it comes to making international comparisons of real gdp different views conventions and practices are still in evidence the authors set out the case for using purchasing power parity ppp converters for this purpose rather than conversions based on exchange rates and give reasons for rejecting various arguments that are still widely made to the contrary in doing so they provide instances of the differing current practices of international agencies and argue the case for greater uniformity and consistency on their part they make a number of suggestions general and specific for improving the quality and presentation of cross country comparative data