conservative traders natural selection and market efficiency abstract this paper examines the impact of conservative traders on market efficiency in an evolutionary model of a commodity futures market this paper shows that the long run market outcome is informationally efficient as long as in every period there is a positive probability that entering traders are more conservative than their predecessors conservative traders are those who correctly predict the spot price with a positive probability and more importantly who in their mistakes err on the side of caution and rarely overpredict the spot price as buyers and underpredict the spot price as sellers this result does not require entry of traders with better information than their predecessors

theoretical and empirical specifications issues in travel cost demand studies the ultimate objective of empirical travel cost demand studies is to obtain an estimate of the welfare derived from utilizing outdoor recreational resources thus it is apparent that travel cost demand equations must be linked to utility maximization deyak and smith freeman bockstael and mcconnell hanemann bockstael hanemann and strand we specify a model of utilitymaximizing recreation demand behavior which postulates that individuals choose the total number of days that they wish to spend at the recreation site this total number of recreation days is the product of the number of trips

on the indeterminacy of capital accumulation paths abstract in neoclassical optimal growth models the stability of the accumulation paths depends on the discount parameter we prove that for discount factors small enough the policy function which describes an optimal path can be of any type the result is achieved using the notion of concavity we adopt a constructive approach given any twice differentiable map we show how to construct an optimal growth problem which produces that map as the optimal policy function a consequence is that chaos can appear in these models we also provide bounds on the values of the discount parameter for which indeterminacy is possible

a characterization of erratic dynamics in the overlapping generations model abstract in this paper we characterize and give examples o wide classes of utility functions which generate erratic dynamics in the standard deterministic overlapping generations model erratic dynamics refers to feasible trajectories which are bounded but which do not converge to stationary points or periodic orbits we show that such trajectories are pareto efficient we introduce credit into the model and show how a constant credit expansion rate can result in erratic trajectories in prices and the real value of credit finally we briefly discuss certain technical aspects of the mathematics used and the statistical nature of the dynamics that can arise from deterministic dynamical systems

risk rationality and time diversification the validity of the concept of time diversification is the subject of long running debate supporters of the concept argue that risk decreases as investment horizon increases detractors suggest that the concept is false on the face of it we argue that time diversification is consistent both theoretically and empirically with current conceptions of risk and rationality and we also note the implications of changes in investment horizon for stock market behavior

making economic policy in weak democratic post crisis states an indonesian case study summary economic crises in developing countries differ in their causes severity and recovery trajectories the literature on the causes and immediate management of these crises is well developed however it is more difficult to develop an a priori framework which facilitates an analytical interpretation of how crises affect economic policy and hence recovery this is especially so in the commonly occurring twin crises in which an economic crisis interacts with regime collapse country studies are needed to contribute to the development of such a framework this paper addresses these issues with reference to indonesia s deep economic and political crisis of 1997 98

rational behavior and economic theory abstract nowadays it seems almost universally presumed that the fundamental characteristic of homo oeconomicus is his rationality we analyze the role played by the concept of rationality in economic theory and demonstrate that it is necessarily constrained to be an essentially contentless notion we show that the main body of economic theory is firmly grounded and that some contrasting approaches to rationality although leading to heated debates and vivid confusion have no fundamental significance for economics with a refereshed view on the essence of economics we argue that the principles of economic theory form an essential methodological guide for the emergent line of research based on the use of so called evolutive models

behavioral finance and its implications for stock price volatility an increasing number of academic and professional articles are being published about research on and potential applications of behavioral finance this article offers a more complete picture of the origin content and rationale behind this emerging area of study than previously presented in the process the traditional dominance in finance of the economic concepts of subjective expected utility and rationality are discussed in addition the article argues that the newer theories of chaos and adaptive decision making which have a place in behavioral finance can help explain the puzzle of stock price volatility

the opportunity cost of travel time in recreation demand models deciding how to allocate forage among animals is a fundamentally important process in range management the wisdom of these decisions can be enhanced by estimating the marginal value of forage needed by competing species we present a method for

valuing non market wildlife commodities an evaluation and comparison of benefits and costs this paper compares the benefits and costs of nature conversation at three sites of special scientific interest benefits are estimated by contigent valuation expressed preferences and also the travel cost method revealed preferences oppurtunity costs are assessed from a financial cost viewpoint and also in terms of shadow prices or social costs results indicate that the valuation of wildlife and nature conservation largely depends upon the frame of reference adopted that social costs are considerably less than financial costs due to the effect of the common agricultural policy that user benefits are considerably less than financial costs and non user benefits must be included to cover even the social costs of nature conservation

signals or noise explaining the variation in recreation benefit estimates this paper uses meta analysis to summarize the benefit estimates derived from travel cost recreation demand models after reviewing approximately 200 published and unpublished studies prepared from 1970 to 1986 77 were found to report either consumer surplus estimates or sufficient information to derive them using these estimates of the consumer surplus per unit of use from each study it was possible to evaluate the influence of variables describing the site characteristics the activities undertaken at each site the behavioral assumptions and the specification decisions the findings provide clear support for using econometric methods to summarize results from diverse empirical studies they highlight the important research issues in model development and offer a consistency check to the procedures used in benefit transfer analyses for policy evaluations

nonlinear dynamics and stock returns simple deterministic systems are capable of generating chaotic output that mimics the output of stochastic systems for this reason algorithms have been developed to distinguish between these two alternatives these algorithms and related statistical tests are also useful in detecting the presence of nonlinear dependence in time series in this article the authors apply these procedures to stock returns and find evidence that indicates the presence of nonlinear dependence on weekly returns from the center for research in security prices value weighted index copyright 1989 by the university of chicago

chaos significance mechanism and economic applications imagine a bargaining model say involving diplomats negotiating tariff levels or a disarmament treaty in which each party has been instructed by higher headquarters to respond to each new offer by her opposite number with a counteroffer that is to be calculated from a simple reaction function provided in advance both negotiating parties are prohibited from revealing their own reaction functions to the other if the perfectly deterministic sequence of offers and counteroffers that must emerge from these simple rules were to begin to oscillate wildly and apparently at random the negotiations could easily break down as each party not understanding the source of the problem came to suspect the other side of duplicity and sabotage yet all that may be involved as we will see is the phenomenon referred to as chaos a case that is emphatically not pathological but in which a dynamic mechanism that is very simple and deterministic yields a time path so complicated that it will pass most standard tests of randomness chaos has become a subject of great interest to specialists and nonspecialists alike besides economics it has entered the literature of geometry physics ecology and meteorology it has been written about at length in the new york times magazine and scientific american as well as technical publications this article seeks to describe what it is how it works and what it means for economics

economic value of wetlands based recreation abstract the loss of wetlands is an issue of growing concern previous studies have focused primarily on quantifying the commercial storm protection and energy output values of wetlands relatively little research has been devoted to quantifying the outdoor recreational value of wetlands in this paper the recreational value of wetlands is discussed conceptually within a total economic value framework total economic value contains many value components which are broadly divided into non use current use and future use values each of these value categories can be further subdivided into expenditures and consumer s surplus an empirical study was conducted to measure expenditures and consumer s surplus associated with on site current recreational uses of a coastal wetlands area aggregate expenditures were estimated at approximately 118 million and aggregate consumer s surplus was estimated at approximately 27 million these results suggest that the economic impacts and net economic benefits associated with wetlands based recreation may be substantial hence recreational functions provided by wetlands may be important considerations for wetlands policy and management

irregular growth cycles this paper uses the familiar neoclassical theory of capital accumulation to show how complex behavior can emerge from quite simple economic structures indeed when sufficient nonlinearities and a production lag are present the interaction alone of the propensity to save and the productivity of capital can lead to growth cycles that exhibit a wandering sawtooth pattern not unlike those observed in reality these fluctuations need not converge to a cycle of any regular periodicity so they are not quasi periodic because such chaotic trajectories are unstable errors of estimation in parameters or initial conditions however tiny will accumulate rapidly into substantial errors of forecast moreover periods of erratic cycling can be interspersed with periods of more or less stable growth evidently the future behavior of a model solution cannot be anticipated from its patterns in the past a situation that seems to mimic experience apparent structural change and unpredictability is explained in the present theory by a deterministic single equation model random shocks play no role so the reader can visualize just what it is we are are talking about a noteworthy simulation is presented in figure 1 for gnp in a growth model that is described below in section iii a period of relatively rapid growth is followed by a period of cycles then remarkably for a considerable time about twenty periods apparently steady state growth occurs wandering cycles however emerge another brief period close to the steady state appears again toward the end of the series i establish conditions of savings and productivity that lead to results of this kind this analysis makes use of the mathematical theory of chaos which in the form exploited here originated in the work of edward lorenz a formal definition of chaos and sufficient conditions for chaotic trajectories were provided in a seminal paper by t y li and james yorke a survey of these related contributions is found in yorke and evelyn yorke this theory was introduced into economics by jess benhabib and myself 1981 where we showed that sequences of rational choices can be erratic when preferences depend on experience in a certain way by michael stutzer who provides a detailed analysis of trygve haavelmo s growth model by benhabib and myself 1980 in an application of the overlapping generations model and in my forthcoming study of the classical growth model

understanding variations in local conflict evidence and implications from indonesia recent studies of large scale headline conflicts have excluded consideration of local conflict in large part due to the absence of representative data at low levels of geographic specification this paper is a first attempt to correct for that by assessing the incidence impacts and patterns of local conflict in indonesia we employ a combination of qualitative fieldwork with an exploratory statistical analysis of the 2003 village potential statistics collected by the bureau of statistics potensi desa podes which maps conflict across all of indonesia s villages neighborhoods violent conflict can be observed throughout the archipelago the qualitative analysis shows that local conflicts vary in form and impacts across districts and that local factors are key the quantitative analysis which excludes high conflict areas of indonesia confirms the importance of economic factors with positive correlations between violent conflict and poverty inequality and variables measuring economic development clustering of ethnic groups and ill defined property rights were also positively associated with violence

is the business cycle characterized by deterministic chaos abstract tests are conducted on u s macroeconomic data for the presence of low dimensional deterministic chaos where deterministic chaos is defined as in grandmont s 1985 walras bowley lecture or in brock 1986 the idea is to test for evidence of endogenous instability causing the business cycle low order autoregressions are hard to reject with our methods evidence of chaos is weak but our tests may be too weak to detect it evidence of nonlinearity is present in employment 1950 i to 1983 iv unemployment 1949 i to 1982 iv monthly post war industrial production and pig iron production 1877 1937

power ownership and tourism in small islands evidence from indonesia this paper examines the political economy of tourism development in islands and uses gili trawangan indonesia as a case study a longitudinal study drawing from fieldwork contributes to the discussion of how different types of power shape community development and how the effects of hosting international tourism play an explicit role analysis using barnett and duvall s taxonomy of power model reveals the interplay between the types of power over time and its effects on different actors results raise questions for less developed countries and particularly islands concerning the social costs of using tourism for development

understanding and assessing financial risk tolerance a biological perspective 1990 understanding and assessing financial risk tolerance a biological perspective financial analysts journal vol 46 no 6 pp 50 62 80

on endogenous competitive business cycles the belief that the long run equilibrium of a competitive monetary economy that does not experience any exogeneous shocks whether originating from the external environment or from policy should be modelled as a state that is stationary or perhaps growing at a constant rate seems to be deeply rooted in the mind of some economists

small island developing states and their economic vulnerabilities abstract many small island developing states sids face special disadvantages associated with small size insularity remoteness and proneness to natural disasters these factors render the economies of these states very vulnerable to forces outside their control a condition which sometimes threatens their very economic viability the gdp or gnp per capita of these states often conceals this reality in this paper the major vulnerabilities faced by sids are discussed and when possible quantified in the form of an index an attempt is also made to construct a composite index of vulnerability

reconsidering the economics of demand analysis with kinked budget constraints this paper has two objectives first we identify a problem with the ability of the discrete continuous choice framework and conditional demand functions to fully describe consumer preferences in the presence of kinked budget constraints second we propose and illustrate an alternative preference based method for estimating consumer responses to price changes under these conditions this framework recognizes that commitments to commodities such as pools or outdoor landscaping influence how water consumption responds to price changes as part of the long run consumption adjustments with microdata on household choices this approach could be used to design increasing block rate structures that recognize the differences in water consumption responses with these commitments

rational choice and erratic behaviour in this paper we show that rational choice in a stationary environment can lead to erratic behaviour when preferences depend on experience we mean by erratic behaviour choice sequences that do not converge to a long run stationary value or to any periodic pattern early investigations of the effects of experience on choice goes back to pareto see also benhabib 1979 some keynesian theories of the consumption function incorporate the effects of experience and habit formation on current levels of consumption duesenberry 1949 modigliani 1949 and brown 1952 a general model of experience dependent choice was described in day 1970 and investigated in day and kennedy 1971 while the specific issue of the existence of stable representable long run consumer demand when tastes vary endogenously has been treated by gorman 1967 pollak 1970 1976 weizsaicker 1971 mccarthy 1974 and hammond 1976 pollak gave conditions for the representability of long run choice when the equations of preference dependence are linear and utility additive hammond in a generalization of these findings provides conditions for stable representable long run choice when preferences are acyclic a condition which in essence assures convergence to a long run choice

competitive equilibrium cycles recently there has been a surge of interest in endogenous business cycles that arise in competitive laissez faire economies in the context of standard overlapping generations economies conditions for the existence of equilibrium cycles have been given by grandmont 1983 and by benhabib and day 1982 models of the economy with extrinsic uncertainty or sunspots that have been developed by shell 1977 and by cass and shell 1983 see also balasko 1983 can also lead to equilibrium cycles

activities in models of recreational demand scholars have taken divergent approaches to incorporating on site activities into their empirical specifications of site choice models we provide a framework for assessing this methodological heterogeneity through a model that explicitly allows individuals to choose both on site activities and site attributes this model not only conditions the marginal value of site attributes on the choice of an activity but also explicitly recovers the marginal rates of substitution across activities this eliminates previously unrecognized biases in the welfare analysis of changes in site attributes we test hypotheses generated by our model by comparing rival models of demand for access to beaches in costa rica

theory and estimation of the household production function for wildlife recreation abstract the household production function is an intuitively appealing way to model man s interaction with nature this paper models the interaction between the household s behavior and publicly provided inputs into wildlife recreation the paper shows how to compute benefits assuming that the household production function is known the household production function approach collapses to the simple travel cost approach when households are unable to substitute their own inputs for publicly provided inputs in addition the paper demonstrates the conditions under which the parameters of cost and preference functions can be identified the conditions for identification are quite restrictive when several choices are endogenous

consumer s surplus without apology the purpose of this paper is to settle the controversy surrounding consumer s surplus and by so doing to validate its use as a tool of welfare economics i will show that observed consumer s surplus can be rigorously utilized to estimate the unobservable compensating and equivalent variations the correct theoretical measures of the welfare impact of changes in prices and income on an individual i derive precise upper and lower bounds on the percentage errors of approximating the compensating and equivalent variations with consumer s surplus these bounds can be explicitly calculated from observable demand data and it is clear that in most applications the error of approximation will be very small in fact the error will often be overshadowed by the errors involved in estimating the demand curve the results in no way depend upon arguments about the constancy of the marginal utility of income consequently this paper supplies specific empirical criteria which can replace the apologetic caveats frequently employed by those who presently apply consumer s surplus moreover the results imply that consumer s surplus is usually a very good approximation to the appropriate welfare measures to preview below i establish the validity of these rules of thumb for a

the impact of information on environmental commodity valuation decisions a conceptual model is developed which provides insight into how information affects willingness to pay for environmental commodities a refutable hypothesis of the effects of a specific information type on the magnitude of willingness to pay for an environmental commodity is developed this hypothesis is tested using a contingent valuation method experiment results indicate that information affects willingness to pay in a theoretically plausible manner the results support the contention that information is important for accurate environmental commodity consumer valuations

valuing the environment as input review of applications to mangrove fishery linkages the following paper reviews recent developments in the methodology for valuing the role of wetlands in supporting economic activity the main focus will be on mangroves serving as a breeding ground and nursery habitat in support of coastal and marine fisheries as this particular ecological function of a mangrove system means that it is effectively an unpriced environmental input into fisheries then it is possible to value this contribution through applying the production function approach the first half of the paper overviews the procedure for valuing the environment as an input applied to the case of a wetland supporting a fishery both the static ellis fisher freeman approach and the dynamic approach developed by barbier and strand incorporating the intertemporal bioeconomic fishing problem are reviewed the second half of the paper discusses briefly two recent case studies of mangrove fishery valuation an application in south thailand which is based on the static ellis fisher freeman model and an application in campeche mexico which is based on the dynamic approach 2000 elsevier science b v all rights reserved

production and investment in natural resource industries there has been a recent tendency for economists to view natural resource scarcity as a diminishing threat to man s existence and his ability to produce an abundant supply of worldly goods see john v krutilla this change in view has emanated from the world s experience of the last few decades with technological development and the absence of any evidence that this rapid accumulation of technical knowledge will cease in some respects one might think that modern technology has removed the need for an economic theory of conservation temporal allocation of natural resources on the other hand conservation of natural resources can now be looked upon with less emotion since the dire consequences of too rapid exploitation are no longer a threat the question of conservation is thus a cold economic problem removed from many of its older value connotations there is indeed considerable effort taking place in the economics profession to fill this need for a quantitative economic theory of conservation however with one exception vernon smith focus has been limited to specific resources earlier works by lewis c gray and harold hotelling concerning the theory of the mine have recently been extended in numerous papers see r cummings and 0 burt richard l gordon anthony scott 1967 problems associated with petroleum production are considered in paul davidson and the fishery is considered in j a crutchfield and arnold zellner h scott gordon james quirk and vernon smith anthony scott 1955 and ralph turvey an extensive literature exists on the temporal allocation of groundwater two recent contributions are gardner brown and charles b mcguire and burt a logical problem has been encountered however in efforts to examine the optimum allocation of a natural resource over time without explicitly considering the rate of investment associated with resource use this difficulty stems from the long life of many capital items used in the process of exploiting the natural resource earlier studies have either tacitly or explicitly amortized costs of investment associated with resource use and proceeded as though all costs of production were essentially variable smith was the first to explicitly bring capital investment into a production model for natural resources and his work was followed by the authors where only exhaustible resources were considered more recently quirk and smith have introduced a dynamic model of the fishery in which capital investment is treated explicitly it seems then that there is a need for a comprehensive model for simultaneously optimizing the rate of resource use and investment in natural resource industries

feedback from productivity growth to r d it is shown that while the scale of r d activity affects the rate of growth of productivity in manufacturing that rate of growth in turn affects the relative cost of r d and hence its demand for relative productivity of manufactures and r d services are crucial in determining their relative prices thus success in r d and the consequent increase in manufacturing productivity may raise the relative price of r d reducing the quantity demanded formal models of this feedback process are provided and show how it can lead to oscillatory behavior an to a slowdown of the economy s long run productivity growth

on the commodity value of travel time in recreational activities the allocation of individual time can have a commodity value if the use of time is enjoyable this paper investigates the commodity value of travel time in recreational activities the study focuses on recreational boating in east texas after specifying a model of multisite recreational demand for boating the commodity value of travel time to each site is estimated implications of the results for the analysis of outdoor recreation are discussed

downside risk measures and equity returns in the nyse although investors are concerned foremost with mean and variance they are also sensitive to downside risk in this article we employ several risk variables of traditional and downside risk measures to evaluate the equity returns in the new york stock exchange nyse market in order to test their explaining power the test results show that variance or sd is better than beta in the performance however those traditional risk measures have almost less explanatory power than total downside risk measures whether the downside risk measures are relative to zero the mean return or the market index return when they are used to predict the future risk premium the results also show that the significance of the downside risk measures in the nyse market is different between different industry sectors different periods of time and in different individual equities