interpreting economic time series this paper explores some of the implications for econometric practice of the principle that people s observed behavior will change when their constraints change in dynamic contexts a proper definition of people s constraints includes among them laws of motion that describe the evolution of the taxes they must pay and the prices of the goods that they buy and sell changes in agents perceptions of these laws of motion or constraints will in general produce changes in the schedules that describe the choices they make as a function of the information that they possess until very recently received dynamic econometric practice ignored this principle the practice of dynamic econometrics should be changed so that it is consistent with the principle that people s rules of choice are influenced by their constraints this is a substantial undertaking and involves major adjustments in the ways that we formulate estimate and simulate econometric models

distributed energy infrastructure paradigm community microgrids in a new institutional economics context abstract this paper provides a theoretical framework based on new institutional economics nie concepts to guide the development of community microgrids given limited application thus far of such energy systems this paper also draws on empirical studies and experiences from the planning and development of other public community infrastructure and utility services in the development of this framework it links an efficient ownership and governance structure with transactional characteristics such as asset idiosyncrasy frequency and uncertainty defined in section 3 1 the key role of the customers and the microgrid service provider and more specifically their bilateral monopoly relationship and its effects on the choice of institutional structure is highlighted the paper examines the optimum conditions for public private or hybrid financial ownership and for unified or network governance through long term contracting this allows ex ante investment uncertainty and ex post appropriation risks to be efficiently managed the analysis suggests that long term contract completeness future demand for electricity and level of uncertainty are the determining factors in the selection of institutional structure this has significant real world implications for the communities seeking to achieve electricity self sufficiency and environmental benefits through community microgrids service providers and other private or public actors

quantitative models for operational risk extremes dependence and aggregation abstract due to the new regulatory guidelines known as basel ii for banking and solvency 2 for insurance the financial industry is looking for qualitative approaches to and quantitative models for operational risk whereas a full quantitative approach may never be achieved in this paper we present some techniques from probability and statistics which no doubt will prove useful in any quantitative modelling environment the techniques discussed are advanced peaks over threshold modelling the construction of dependent loss processes and the establishment of bounds for risk measures under partial information and can be applied to other areas of quantitative risk management 1

sensitivity analyses of anomalies in developed stock markets abstract the literature on anomalies in developed stock markets produces no consensus on specification this study uses extreme bound analysis eba to evaluate the robustness of 15 stock return anomalies given data covering 16 developed markets from may 1984 to march 1999 two factors are sturdy according to the extreme decision rule in the panel design d p and momentum under a less stringent eba criterion long run lagged returns country risk and the january effect are also robust time series eba for individual markets produces one robust result according to relaxed decision rules across a majority of cases long run government bond yields

the new institutional economics this outstanding book presents new original contributions from some of the world s leading economists including ronald coase douglass c north masahiko aoki oliver e williamson and harold demsetz it demonstrates the extent and depth of the new institutional economics research programme which is having a worldwide impact on the economics profession

smooth trading with overconfidence and market power we describe a symmetric continuous time model of trading among relatively overconfident oligopolistic informed traders with exponential utility traders agree to disagree about the precisions of their continuous flows of gaussian private information with enough disagreement an equilibrium exists in which prices reveal the average of all traders signals immediately but traders continue to trade gradually towards target inventories the price is a linear function of a trader s inventory the derivative of a trader s inventory and the average other traders valuations prices reflect a keynesian beauty contest faster than equilibrium trading generates flash crashes jel d8 d43 d47 g02 g14

three problems of social organisation institutional law and economics meets habermasian law and democracy this paper attempts to identify certain implications of habermasian ethics for the economic analysis of law it does so by demonstrating a complementarity between the habermas of between facts and norms and the veblen ayres commons tradition s of economic analysis three unresolved problems of social organisation raised by the institutionalists are addressed the legitimacy of the status quo ante buchanan schmid the legitimacy of society s transaction structure klevorick and the problem of social order hobbes platteau discourse ethics demonstrates how these problems may be resolved the model of human agency adopted in institutional law and economics permits an easier fit with discourse ethics than would be possible with the neoclassical traditions

the impact of federal government expenditures in the 1930s there is no shortage of explanations for the depressed conditions of the 1930s most of the recent literature has focused on the causes and severity of the great depression of 1929 33 but the failure of production to expand much beyond its 1929 peak by 1937 and the sharp 1937 38 recession have also received attention at the heart of the discussion has been the debate over monetary versus nonmonetary forces and the role of the federal reserve yet among possible nonmonetary forces little attention has been given to the role of federal government expenditures to cite only one example in the comprehensive study of this era edited by brunner 9 the role of government spending is ignored or at best mentioned only in passing in the volume s seventeen papers and comments

the contained rivalry requirement and a triple feature program for business ethics this paper proposes a description of the moral obligations of economic agents it will show that a threefold division should be adopted to distinguish moral obligations applying to their interactions in the market obligations applying to their interactions inside business firms and obligations applying to their interactions with agents outside the market competition might be permissible in the first case since markets are special patterns of social interactions called adversarial schemes they produce their benefits when agents try to satisfy exclusive preferences at the expense of others however moral obligations inside the firm and moral obligations outside the market are of a different nature this argument will be developed in the two first parts of this paper in the third part it will outline the relevant strengths of that account in relation with two popular views of economic agents moral obligations the shareholder primacy view and the stakeholder theory

coase s choice of methodology this paper examines the nature of ronald h coase s realism by considering the relationship between theories and facts in his methodology i focus especially on coase s criticisms of friedman s 1953 essay as set out in a lecture published in 1982 it is shown that in developing his argument coase applies his institutional economics to address the question of how economists operating within a regulated market for ideas choose their theories he calls for realism in methodology and carries out an empirical study of economists choices he explores how the profession is regulated and highlights how discourse impacts on the functioning of science a key question addressed within this paper is how can coase maintain a sociological and rhetorical view of science without falling into relativism i identify the different motives for theory choice that coase considers and show that his answer is both institutional and epistemic this helps to clarify the status of the empirical basis in coase s methodology and sheds new light on the nature of his realism i conclude by carrying out a reflexive analysis of coase s text as a text that attempts to justify the methodology on which it is itself based

practical methods for measuring and managing operational risk in the financial sector a clinical study abstract this paper analyzes the implications of the advanced measurement approach ama for the assessment of operational risk through a clinical case study on a matrix of two selected business lines and two event types of a large financial institution we develop a procedure that addresses the major issues faced by banks in the implementation of the ama for each cell we calibrate two truncated distributions functions one for normal losses and the other for the extreme losses in addition we propose a method to include external data in the framework we then estimate the impact of operational risk management on bank profitability through an adapted measure of raroc the results suggest that substantial savings can be achieved through active management techniques

technological learning and renewable energy costs implications for us renewable energy policy abstract this paper analyzes the relationship between current renewable energy technology costs and cumulative production research development and demonstration expenditures and other institutional influences combining the theoretical framework of learning by doing and developments in learning by searching with the fields of organizational learning and institutional economics offers a complete methodological framework to examine the underlying capital cost trajectory when developing electricity cost estimates used in energy policy planning models sensitivities of the learning rates for global wind and solar photovoltaic technologies to changes in the model parameters are tested the implications of the results indicate that institutional policy instruments play an important role for these technologies to achieve cost reductions and further market adoption

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

crude oil and the macroeconomy tests of some popular notions a note perhaps no other economic events in the post world war ii era have generated as much attention as the series of crude oil price shocks that have jolted the world economy since the opec boycott of 1973 a tremendous amount of space in the popular and professional literature has been devoted to analyzing the impacts of these shocks on the developed economies and the adjustments these shocks have induced one residual of this literature has been a general impression that since 1973 the functional relationship between crude oil prices and the developed macroeconomies has been dramatically and fundamentally altered yet to our knowledge no one has formally tested this impression recent evidence of hamilton 1983 suggests that crude oil prices had a strong impact on the u s business cycle well before 1973 further while textbook treatments of oil price shocks tend to highlight cost push inflationary effects the research of berndt and wood 1975 1979 and wilcox 1983 indicates the net complementarity between energy and capital in the u s economy is quite strong both before and after 1973 thus oil price shocks may have stronger real effects than generally believed in this paper we formally test three popular notions associated with the so called

flexible dependence modeling of operational risk losses and its impact on total capital requirements abstract operational risk data when available are usually scarce heavy tailed and possibly dependent in this work we introduce a model that captures such real world characteristics and explicitly deals with heterogeneous pairwise and tail dependence of losses by considering flexible families of copulas we can easily move beyond modeling bivariate dependence among losses and estimate the total risk capital for the seven and eight dimensional distributions of event types and business lines using real world data we then evaluate the impact of realistic dependence modeling on estimating the total regulatory capital which turns out to be up to 38 smaller than what the standard basel approach would prescribe

sustainability economics as a contested concept sustainability economics as a concept is interpreted differently in different publications some authors look for a modification of mainstream neoclassical economics while the present author regard

the new economics of organization over the last ten years or so an important new approach to the study of organizations has emerged within economics it is perhaps best characterized by three elements a contractual perspective on organizational relationships a theoretical focus on hierarchical control and formal analysis via principal agent models this paper provides political scientists with an overview of the new economics of organization and explores its implications for the study of public bureaucracy so far positive political theory has not contributed much to our understanding of public bureaucracy in part this is due to the unsympathetic treatment that rational modeling and most other modes of quantitative analysis have long received from students of public administration the other side of the coin however is that positive theorists have not made much of an effort to develop theories of bureaucracy their concerns have centered around two basic mechanisms of social choice voting and markets and they have devoted little systematic attention to a third mechanism that is clearly important for understanding how societies and other aggregates make collective decisions this third and relatively unexplored mechanism is hierarchy movement toward a positive theory of hierarchies would fill a serious gap in the social choice literature while at the same time making a theoretical contribution that strikes to the essence of public bureaucracy indeed of all organizations in fact significant steps toward a positive theory of hierarchies have very recently been taken but by economists not political scientists in small numbers of course economists made contributions to the study of public bureaucracy some time ago with the pioneering works of downs 1967 tullock 1965 and niskanen 1971 but this new wave of theoretical work is different it is already a large complex body of literature that is the focus of innovation and excitement among a growing number of economists and it reflects an unusual degree of theoretical coherence and cumulative effort work in this tradition tends to receive orientation from a distinctive economic approach to the analysis of organizations an approach perhaps best characterized by three elements a contractual perspective on organizational relationships a focus on hierarchical control and formal analysis via principal agent models this approach has emerged from recent attempts to move beyond the neoclassical theory of the firm which assumes away all organizational considerations to a theory of economic organizations that can explain why firms corporations and other enterprises behave as they do propo

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

the search for a development economics abstract in this paper i first note some of the pieces of evidence that suggest that development has gone reasonably well since the early 1950s then i discuss why this evidence is not fully convincing and examine the content and sources of development failures the main reason why development is so often accompanied by disappointment and tensions is that it is largely an effort to replicate the west rather than an effort to set in motion an indigenous process of change within the traditional sectors themselves the efforts to replace the values and institutions and relationships of the traditional society by imported ones create tensions and uncertainty that can offset the increase in welfare that larger amounts of goods and services could produce if the present less developed countries do not seek to imitate present gnp rich countries what approach is available to them a country must find its own way and to do this it must search it must learn it must choose and it must do all these things in a world with gnp rich countries readily available for imitation the content of these three notions search learning choice is examined in some detail in the last part of the article

institutions in theories of land markets illustrated by the dutch market for agricultural land theories of land markets should be intellectually sound and should be able to explain and predict market outcomes such as price and volume of transactions changes in these and locations of different land uses theories based on neo classical economics which largely ignore the role of institutions are not intellectually sound because it is known that markets cannot work without institutions nor do these theories predict outcomes satisfactorily moreover they assume market mechanisms and do not investigate them critically this paper explores how institutions may be taken into account in theories of land markets and whether that leads to better theories both of market outcomes and of market processes new institutional economics provides the tools to investigate how the interactions between market actors are influenced by institutions and the old institutional economics emphasises how institutions influence the motivations and preferences of those actors the conclusion is that there cannot be a general theory of land markets only theories with a limited applicability and scope such theories can be used to explain the effects of small changes and to predict the effects of marginal changes in institutions in that latter use these theories can be used for designing land policy how institutions can be incorporated into theory is illustrated by analysing the dutch market for agricultural land this shows how institutions affect the outcomes in that market and the consequences for the transformation of land from agriculture to urban use

territories development and specific resources what analytical framework most theoretical forms of regional development are based on the assumption that territory plays an active role in regional dynamics such a point of view risks generalizing regional development forms as a general model of development the point of view exposed here is that rather than considering territorial forms of production as a starting point it is possible to put the focus on the phenomena underlying regional development thus considering it as a result rather than a starting point most approaches use the distinction between generic and specific resources as a foundation of regional differentiation the approach here focuses on the process of specification of resources their dimensions and their repercussions for paths of regional development

an econometrics view of worldwide fossil fuel consumption and the role of us crude oil coal and gas known as fossil fuels play a crucial role in the global economy this paper proposes new econometrics modelling to demonstrate the trend of fossil fuels consumption the main variables affecting consumption trends are world reserves the price of fossil fuels us production and us net imports all variables have been analysed individually for more than half a century the research found that while the consumption of fossil fuels worldwide has increased trends in the us production and net imports have been dependent on the type of fossil fuels most of the us coal and gas production has been for domestic use which is why it does not have a strong influence on worldwide fossil fuel prices moreover the reserves of fossil fuels have not shown any diminution during the last couple of decades and predictions that they were about to run out are not substantiated the nominal and real price of fossil fuels was found to change depending on the type finally estimates of three econometric models for the consumption of fossil fuels from 1949 to 2006 are presented which identify the effects of significant variables

on the difficulty of evolutionary analysis thorstein veblen s 100 year old question why is economics not an evolu tionary science remains relevant evolutionary analysis even for those social scientists who trace their intellectual heritage to evolutionary thought has been difficult for three reasons effective incorporation of time requires a respectful and detailed treatment of the past dominant social science paradigms have made it difficult to account for novelty and concern with policy and current issues of social debate creates a tendency towards taxonomy the twentieth century history of economic anthropology and institutional economics illustrates that a failure to overcome these difficulties leaves veblen s vision unfulfilled the reasonable reaction to veblen s famous question why is economics not an evolutionary science is to ask a further question why is it still not an evolutionary science and then to continue with the questions why are the other social sciences not evolutionary sciences why especially have the american institutionalists who claim veblen as a founding father and who have an organisation called the association for evolutionary economics found evolutionary analyses difficult in this paper i propose to address these questions by examining aspects of the history of one discipline anthropology and one subdiscipline institutional economics that emerged from the evolutionary vision of the late nineteenth century 1 veblen s anthropological roots were

ecological economics in relation to democracy ideology and politics two recent studies and policy documents are discussed in the present article one is a un report prepared by experienced politicians as input into the 2012 rio de janeiro conference the other a st

values ideology and politics in ecological economics abstract ecological economics is built on a value commitment to study environmental issues and to contribute constructively to a more sustainable development path however many ecological economists still hesitate it appears to depart too much from other scholars by openly addressing issues of values and ideology in this essay the role of the scholar s orientation with respect to values and ideology is addressed it is observed that not only scholars but also actors in society are guided by their ideological orientation this leads to the idea that some of the weaknesses of economic man and profit maximising firm assumptions can be mitigated by introducing a political economic person and a political economic organisation

oil price shocks and employment the case of ohio coal mining economic theory suggests that oil price shocks will have an impact on employment in local coal markets however theory is silent on both the absolute and relative magnitudes based on vector autoregressive models we find that oil price shocks and therefore opec policies have significant impacts on ohio coal mining employment our study indicates that oil price shocks have larger impacts on ohio coal mining employment than do shocks to coal prices or coal wages our study is unusual in that we have examined the impact of oil price shocks on employment in a specific industry

debt and communications technology diffusion retrospective evidence this study has evaluated the relationship between debt in the capital structure of firms and the dynamics of broadband and digital technology adoption in the united states based on a large dataset on local exchange carriers in the united states over a contemporary historical fourteen year period from 1988 to 2001 using treatment effects modeling the impact of debt in impacting the levels of firms broadband deployment has been found to be negative and significant the primary source of debt in the sector has been in the form of arm s length corporate bonds and the assumptions of the monitoring hypothesis associated with such debt that lenders in the face of information and collective actions problems might not be able to control managers and hence invest less in highly technology intensive situations are supported by the data additionally the data set has been split into separate sets for two periods one between 1988 and 1995 for the period before the telecommunications act of 1996 came into force and the other set between 1996 and 2001 and the results have stayed consistent a test of the coefficients between the two periods has shown that the negative impact of leverage on broadband deployment has become stronger after the introduction of competition in the sector and this has suggested that the change in the institutional logics between the two periods has been of material impact in influencing lenders perceptions

institutional arrangements in the emerging biodiesel industry case studies from minas gerais brazil connecting small family farmers to the emerging biodiesel industry requires careful design of the institutional arrangements between the producers of oil crops and the processing companies according to institutional economics theory the design of effective and efficient arrangements depends on production and transaction characteristics the institutional environment and the organizational environment supporting the transaction between producers and the industry this paper presents a comparative study on two cases in the feedstock for biodiesel industry in the state of minas gerais brazil the two case studies represent the production and transaction system of soybeans glycine max l merrill and castor beans ricinus communis l important elements of effective and efficient institutional arrangements are farmer collective action availability of technical and financial support and farmer experience with particular crops

pricing catastrophe options with stochastic claim arrival intensity in claim time abstract we model claim arrival and loss uncertainties jointly in a doubly binomial framework to price an asian style catastrophe cat option with a non traded underlying loss index using the no arbitrage martingale pricing methodology we span these uncertainties by benchmarking to the shadow price of a one claim bond and the premium of a reinsurance contract we implement a stochastic time change from calendar time to claim time to more efficiently price the cat option as a random sum a binomial sum of claim time binomial asian option prices this choice of the operational time dimension allows us to incorporate different patterns of catastrophe arrivals by adjusting the claim arrival probability we demonstrate this versatility by incorporating a mean reverting ornstein uhlenbeck intensity arrival process simulation results verify our model predictions and demonstrate how the claim arrival probability varies with the expected claim arrival intensity

money growth volatility and the macroeconomy this study analyzes the effects of variability in money growth on the macroeconomy for the period 1961 1 1984 4 within the context of a vector autoregressive model that contains variables typically included in a small macro model variance decompositions and historical decompositions are used to assess the impact of money growth variability the variance decompositions suggest substantial effects of money growth variability on the long term interest rate output and the price level historical decompositions for 1979 4 1984 4 suggest substantial effects of money growth variability on the interest rate and output but smaller effects on the price level are found copyright 1988 by ohio state university press

extreme value theory in finance a survey extreme value theory is concerned with the study of the asymptotic distribution of extreme events that is to say events which are rare in frequency and huge in magnitude with respect to the majority of observations statistical methods derived from it have been employed increasingly in finance especially for risk measurement this paper surveys some of those main applications namely for testing different distributional assumptions for the data for value at risk and expected shortfall calculations for asset allocation under safety first type constraints and for the study of contagion and dependence across markets under conditions of stress

can analytic narrative inform policy change the political economy of the indian electricity irrigation nexus abstractagricultural electricity subsidisation has led to high electricity demand groundwater depletion and public financial burdens the policy persists although paralleled by fundamental changes in electricity governance how can lock in and policy trajectories be explained theories of institutional public choice and regulation are reviewed two game models are built to analyse narratives based on interviews and secondary historical data the findings reveal path dependencies inherent in the existing action situations resolving the current equilibrium requires changes outside the political or regulatory process such as the electricity distribution level where coordination failure impedes infrastructure improvements contributing to resistance among the agricultural electorate

market culture and authority a comparative analysis of management and organization in the far east three frameworks purport to explain industrial arrangements and practices a market approach that emphasizes economic characteristics a cultural approach that sees organization as the expression of patterned values and an authority approach that explains organization as a historically developed structure of domination the efficacy of each approach is tested in explaining the organizational structures of three rapidly growing east asian economies japan south korea and taiwan the paper argues through comparative analysis that organizational growth is best explained by market and cultural factors but that authority patterns and legitimation strategies best explain organizational structure

two conceptions of economics and maximisation fil crespo ricardo fernando consejo nacional de investigaciones cientificas y tecnicas argentina universidad austral instituto de altos estudios argentina

government support for economic agendas in developing countries a behavioral model abstract a behavioral model of the roles played by the key actors in the political system of a developing country is developed and experimented with to understand circular cause and effect relationships shaping government commitment to economic development agendas the model shows that an authoritarian government whether compassionate or otherwise will be unable to provide continued support for an economic agenda since its need to increase control will eventually take priority over the need to increase public welfare

the new institutional economics and the theory of behaviour under uncertainty the new institutional economics nie is diverse in terms of the theory of behaviour under uncertainty some views are close to neoclassical economics but others are similar to those held by heterodox economists distinctions between procedural and substantive uncertainty weak and strong uncertainty and ambiguity and fundamental uncertainty help to identify different approaches to uncertainty in nie regarding the influence of institutions on economics behaviour not all nie focuses on institutions as constraints and takes individuals as given the dominant views of rationality in nie are standard neoclassical maximization and bounded rationality but alternative notions have also been defended