the politics of conflict and consent abstract transaction cost economics claims to model the labor contract in terms of the opportunism practised by workers a recent alternative has seen custom as the main means by which workers impose their control of the contract both fail to explore workers co operative behavior in the workplace pay insufficient attention to managerial behavior and misunderstand the social organization of conflict and consent materials from industrial sociology and labor history are used to illustrate these limitations to show how the labor contract is in fact negotiated and to suggest how an alternative approach might be constructed

the impact of the national minimum wage on the pay distribution employment and training britain s first ever national minimum wage nmw came into force in april 1999 covering some 5 of workers between 1999 and 2002 the nmw rose in line with the growth in average earnings but for 2003 6 the nmw will be ratcheted up relative to median pay the evidence shows that between 1998 and 2002 the bottom decile of the pay distribution experienced above average pay rises with no spillover effects further up the distribution there was no overall employment effect but a small negative impact in the care home sector the nmw boosts the probability and intensity of training

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

hrm practices r d expenditure and innovative investment evidence from the uk s 1990 workplace industrial relations survey wirs uk labour flexibility is often portrayed as necessary for an innovative economy using evidence from the uk s 1990 workplace industrial relations survey we investigate the relationships between firms human resource management practices and innovation our results suggest that low road hrm practices short term contracts etc are negatively correlated with investment in r d and new technology high road work practices high commitment organization and other systems are positively correlated with investment in r d and new technology copyright 1999 by oxford university press

job quality and the economics of new labour a critical appraisal using subjective survey data this paper assesses the record on job quality during the early term of office of the new labour government by interpreting from a political economy perspective changes in a variety of subjective measures of job quality taken from several different data sources we find some improvements in job quality over the period 1998 2004 however we argue that these improvements have arisen not because of new labour s policies towards the workplace but because of low and falling rates of unemployment despite recent improvements a large number of workers in britain remain in low quality jobs and without a radical change of policy direction sustained and substantial progress in the quality of work will remain elusive

new labour and work time regulation a marxian analysis of the uk economy this paper examines the impact of work time regulation introduced by the uk s new labour governments 1997 to 2010 in doing so we return to marx s hypotheses regarding the length of the working day these include the arguments that class conflict over the length of the working day is inherently distributional in a surplus value sense and that workers often display a preference for reduced hours even with a proportionate reduction in pay our quantitative marxist methodology provides a way of assessing the pattern of surplus value before and during the period of office of the new labour governments and the distributional effects of regulation the impact of such regulations on workers preferences are examined through an investigation of british household panel survey data although many have been sceptical concerning the record of the last labour governments policies such as the working time regulations 1998 and the work life balance campaign 2000 are found to have been noteworthy innovations in the labour market this is all the more important given recent moves by the successor government to weaken work time regulation our results suggest the impact of these policy initiatives was broadly favourable though the effect on men and women was different

the impossibility of a perfectly competitive labour market using the institutional theory of transaction costs i demonstrate that the assumptions of the competitive labour market model are internally contradictory and lead to the conclusion that on purely theoretical grounds a perfectly competitive labour market is a logical impossibility by extension the familiar diagram of wage determination by supply and demand is also a logical impossibility and the neoclassical labour demand curve is not a well defined construct the reason is that the perfectly competitive market model presumes zero transaction costs and with zero transaction costs all labour is hired as independent contractors implying that multi person firms the employment relationship and labour market disappear with positive transaction costs on the other hand employment contracts are incomplete and the labour supply curve to the firm is upward sloping again causing the labour demand curve to be ill defined as a result theory suggests that wage rates are always and everywhere an amalgam of an administered and bargained price

the minimum wage as a redistributive tool most analyses of the minimum wage focus on its unintended employment consequences the goal of a minimum wage is not of course to reduce employment but to redistribute earnings to low paid workers under what conditions can a minimum accomplish this are those conditions met in economies which otherwise rely extensively on markets to set wages such as the united states which in i994 rejected mandating health benefits that would have effectively raised the minimum or the united kingdom where in i995 the labour party promised a national minimum upon election who pays for the redistribution who benefits the redistributive effects of a minimum wage depend on the labour market and redistributive system in which it operates on the level of the minimum and on its enforcement at best an effective minimum wage will shift the earnings distribution in favour of the low paid and buttress the bottom tiers of the distribution from erosion at worst minimum wages reduce the share of earnings going to the low paid by displacing many from employment neither outcome is certain so that enacting a minimum is a risky but potentially profitable investment in redistribution it is the balancing of risk against gain that makes a minimum so controversial until the i980s i99os competitive labour markets in the united states and united kingdom produced rising real earnings for the low paid and falling earnings inequality so the risk of enacting a national minimum united kingdom or of raising substantially the national minimum united states seemed unnecessary why interfere with the competitive market when it produces socially desirable trends in earnings albeit a bit slower than one might accomplish with a legislated minimum two decades of falling real wages for lower decile workers in the united states and of rising earnings inequality in the united kingdom1 have however put the minimum back in play the job market is not doing much for lower paid workers in the united kingdom virtually all social groups accept the need for some redistribution though they differ on the best way to accomplish such in the united states pressures for tax cuts can be interpreted as a way for employees to gain real wage increases unavailable through the market the consensus favouring redistribution through the earned income tax credit disappeared in the midi 990s rush to reduce federal budget deficits this paper takes as its operating premise the goal of redistributing earnings

immigration and prices this paper examines the behavior of prices following the unexpected arrival of a large number of immigrants from the former soviet union fsu to israel during 1990 i use store level price data on 915 consumer price index products to show that the increase in aggregate demand prompted by the arrival of the fsu immigration significantly reduced prices during 1990 when one controls for native population size and city and month effects a one percentage point increase in the ratio of immigrants to natives in a city decreases prices by 0 5 percentage point on average it is argued that this negative immigration effect is consistent with fsu immigrants the new consumers having higher price elasticities and lower search costs than the native population thus immigration can have a moderating effect on inflation through its direct effect on product markets and not only by increasing the supply of labor

predictable behavior in financial markets some evidence in support of heiner s hypothesis recently ronald heiner 1983 has proposed a theory of predictable behavior which has its roots in what heiner labels a competence difficulty gap hereafter called a c d gap this gap is a measure of the spread between an economic agent s competence to make an optimizing decision and the difficulty of the decision problem heiner argues that as the c d gap widens the agent is increasingly likely to follow rule governed behavior and it is this rule governed behavior that produces observed regularities in economic behavior if there is no c d gap heiner argues that rule governed behavior would disappear and along with it the observed regularities instead unpredictable behavior characterized by constant perturbation would replace predictable behavior furthermore the dynamic properties of heiner s theory are characterized in his words by sudden switching behavior this switching behavior is described as a sudden reversal of previous behavior and a persistent movement in another direction or behavior of a different kind one of the casual or intuitive examples heiner offers for support of his theory is the switching between buying and selling strategies in financial markets resulting in sudden movement in stock prices p 582 this paper explores this idea and argues that there is more than intuitive support for heiner s speculation that in fact the behavior of daily price changes in financial markets conforms better to the prediction of heiner s theory than to standard efficient market theory predictions

labour markets social justice and economic efficiency in conventional economic theory a trade off supposedly exists between social justice and economic efficiency in reality market and other economic institutions are dominated by power relations so that the sponsorship of social justice is a productive factor neo liberal economic policies by lifting the constraints on the exercise of unequal power increased injustice and triggered a downward economic and social spiral reversing this requires a revolution in economic theory and policy focused on full employment the working of labour markets the organisation of work and household organisation social provision and self sufficiency in conventional economic theory the initial resource endowments of individuals are taken as given and although these may be unequal they are essentially external to the market labour markets are assumed to be more or less competitive and within them real wages reflect the quality of workers resource endowments mainly human capital and their personal efficiency and energy that these result in a wide dispersion of labour market rewards some of which may be insufficient to sustain a reasonable standard of life is a demonstration it is argued of how widely dispersed are individual resource endowments and capabilities hirsch and addison 1986 from this perspective any idea of social justice designed to reduce income inequalities risks damaging incentives and lowering overall economic well being this is the basis of okun s 1975 thesis that there exists an inverse trade off between social equality and economic efficiency that greater social income equality can only be purchased at the cost of lowering economic efficiency the alternative perspective explored in this special issue recognises the central import ance of relative power in determining outcomes this focuses attention on the external and internal forces structuring markets and how these differentially affect the incomes and opportunities of individuals from this perspective social justice requires the removal of the obstacles that inhibit individuals and groups from developing their potential and from deploying their resources to full advantage thus contrary to the orthodox view increasing

bubbles crashes and endogenous expectations in experimental spot asset markets1 spot asset trading is studied in an environment in which all investors receive the same dividend from a known probability distribution at the end of each of t 15 or 30 trading periods fourteen of twenty two experiments exhibit price bubbles followed by crashes relative to intrinsic dividend value when traders are experienced this reduces but does not eliminate the probability of a bubble the regression of changes in mean price on lagged excess bids number of bids minus the number of offers in the previous period p pt a f b 1 o l supports the hypothesis that a e d the one period expected value of the dividend and that f 0 where excess bids is a surrogate measure of excess demand arising from homegrown capital gains losses expectations thus when bt 1 o goes to zero we have convergence to rational expectations in the sense of fama 1970 that arbitrage becomes unprofitable the observed bubble phenomenon can also be interpreted as a form of temporary myopia tirole 1982 from which agents learn that capital gains expectations are only temporarily sustainable ultimately inducing common expectations or priors tirole 1982 four of twenty six experiments all using experienced subjects yield outcomes that appear to the chart s eye to converge early to rational expectations although even in these cases we get 0 and small price fluctuations of a few cents that invite scalping

trade unions and regional development abstract we focus on the role that labour unions play in the context of a two region dual economy we show that unskilled unions will increase the wage of unskilled workers and depress growth in both the backward and the advanced regions the growth effects will be felt more strongly in the relatively poor region if skilled workers are allowed to migrate and unions recognize that a more aggressive wage setting policy may foster migration unions will moderate their wage requests however regional unions would then have a strong incentive to coordinate their wage demands across regions this would further raise the unskilled wage and more so in the backward region we conclude that labour market policies designed to foster regional convergence should seek both to discourage centralized wage setting and favour skilled labour mobility

the political economy of a divided ireland for a peace process in ireland to succeed it will require an active transition away from the underlying causes of conflict not just the partition of the country but the inequalities of opportunities and employment between the communities in northern ireland this requires the restructuring of existing unequal arrangements if this restructuring is not to be at the expense of the protestant community public intervention will be needed to ensure that opportunities for the protestant community can be developed alongside the necessary catching up of the previously disadvantaged community otherwise any type of future transition process risks grinding to a halt

political economy of growth with a taste for status abstract this paper investigates the political economy of growth when individuals prefer high levels of relative consumption a pivotal voter determines the equilibrium tax on capital the revenues from which fund the provision of productive public goods the taste for status and the distributions of wealth and political power interact to generate stylized versions of oligarchies middle class democracies and populist democracies a rise in the taste for status increases the role of distributional concerns in policy preferences lowering growth in an oligarchy or populist democracy but increasing it in a middle class democracy in addition the egalitarian redistribution of wealth or political power causes growth to first rise and then fall as the equilibrium tax rate approaches and then exceeds its growth maximizing level generating inverse u shaped relationships between democracy and growth and inequality and growth

the impact of the 1962 repatriates from algeria on the french labor market this paper uses census data to examine the impact on the french labor market of the 900 000 people repatriated from algeria in 1962 repatriates settled in regions culturally and climatically simil

the effect of immigration on unskilled native workers evidence from a natural experiment this study exploits the natural experiment provided by the start of the second intifada to measure the effect of immigration on the wage and employment of unskilled native workers it finds that immigration has no effect on the wage or employment of unskilled jewish workers the wage and employment of the least skilled israeli arab workers with zero to five years of schooling are adversely affected by immigration the slightly more skilled arab workers with six to 11 years of schooling in contrast are positively affected by immigration suggesting a complementarity effect with this group different explanations are proposed

britain s industrial performance since 1960 underinvestment and relative decline this article argues first that britain s industrial performance since i960 has been relatively poor secondly that despite the views of crafts and others the deindustrialisation which has resulted from this relatively poor industrial performance is a serious problem for the whole economy not just for the industrial sector itself thirdly that neither the specific problem of deindustrialisation nor the consequent general problem of continued relative economic decline were solved in the 1980s and fourthly that the key reason why british industry has been doing relatively poorly has been underinvestment in manufacturing this underinvestment has been allowed to persist by the lack of any strong modernising forces within british society with the trade union movement having been either too weak or too defensive and with government policy at best being rather ineffectual and at worst positively harmful the reasons for this policy failure lie in britain s economic history and in the resulting distorted nature of both the economy and society this fundamental problem of a lack of any strong modernising force has if anything been exacerbated since 1979

a materialist development of some recent contributions to the labour theory of value the paper offers a novel interpretation and affirmation of the opening arguments of capital answering the fundamental but neglected question of why labour is the substance of value marx s arguments require that two philosophical threads often separated in the literature on value be woven together the argument that value is the intrinsic content making commodities exchangeable employs the thread of realism the argument that abstract labour is the emergent social substance of value employs the thread of dialectics this interpretation develops the materialist and dialectical philosophy of e v ilyenkov and deepens the approach to value theory initiated by ben fine

the economics of new labour policy and performance this paper reviews the foundations of new labour s economic policies and the performance of the economy since 1997 it argues that new labour s policies have evolved from thatcherism and that it has largely embraced the tenets of neo liberalism new labour has rejected most aspects of keynesianism and its policies have eschewed the use of active demand management policies but it has been the high levels of demand in particular consumption expenditure that have driven economic growth in the uk and which have ensured that as yet new labour has not faced the problems of dealing with a major economic downturn

evaluating innovation and labour market relationships the case of italy in this paper the link between labour market flexibility and innovation is analysed paying particular attention to the different technological regimes of economic activities and the different geographical areas of the italian economy a dynamic panel data specification is used to assess the endogenous relationship between patents included as a proxy of the innovation and job turnover and wages which represent labour market indicators the results show that higher job turnover only has a significant and negative impact on patent activities in regional sectors of northern italy while a positive and significant impact of blue and white collar wages has been generally found

effort and comparison income experimental and survey evidence the authors test the hypothesis that individual effort on the job depends both on one s own income and on the individual s position in the relevant income distribution combining experimental evidence from a gift exchange game with multi country issp survey data they analyze the extent to which relative income affects an individual s effort finding that an individual s rank in the income distribution more strongly determines effort than does others average income which suggests that comparisons are more ordinal than cardinal their experiment also reveals that comparisons over time affect effort individuals who received higher income offers or enjoyed higher income rank in the past exerted lower levels of effort for a given current income and rank

uncertainty and partial adjustment in double auction markets abstract a model is presented of price determination in double auction markets the framework is contrasted with naive autoregressive models of price behavior implications of model choice are illustrated with the use of market experiments from several institutions

short run demand for palestinian labor palestinian residents of the west bank and gaza strip who work in israel generally earn more than palestinians employed locally but this wage premium is highly volatile beginning with the 1987 palestinian uprising changes in wage differentials by work location parallel palestinian absences from work in israel this article interprets changing location differentials in response to exogenous shocks as movements along an israeli demand curve for migrant workers estimates of a model of the west bank and gaza strip labor market are used to evaluate the effect of policies governing palestinian access to the israeli labor market

bounded rationality and market fluctuations abstract in a model of a competitive market each firm in each period faces a planning problem caused by random changes in circumstances due to bounded rationality a firm is unable to compute costlessly and exactly its optimal output instead the firm approximates optimal output through a decision making process called a deliberation technology this technology involves a rule of thumb a costly deliberation mechanism and a random deliberation error the issue addressed by the model is how bounded rationality affects market fluctuations the first glance intuition is that fluctuations will increase since deliberation error is an added disturbance to the market however the actual effect is much more complicated and might go either way

the development of the neoclassical tradition in labor economics this essay on labor economics examines neoclassical theory s rise to ascendancy following the second world war with a secondary focus on the relative decline but continued influence of institutionalist economic theory the authors describe the evolution of institutional and neoclassical theory from the late nineteenth to mid twentieth centuries examine some early intellectual debates between the two camps briefly describe the work of neoclassical labor economics pioneers and look at major developments over the past 30 years they argue that neoclassical economists increasing intellectual breadth and influence in public policy have led them to pay closer attention to issues that have long been of concern to institutionalists and neoinstitutionalists

ir theory built on the founders principles with empirical application to australia the authors identify 10 core principles of industrial relations ir theory and policy based on the writings of british ir founders beatrice webb and sidney webb and u s ir founder john commons these principles are then represented diagrammatically in an expanded ir version of the marshallian demand supply ds model the ds and ir models representing on one side the merits of abstraction and parsimony and on the other realism and complexity are applied to a case study an analysis and explanation of the reasons behind the formation of the australian ir system in the 1890s and its evolution to 2010 although the ds model captures important forces behind the shift from a centralized and unionized employment system in the early period to a significantly decentralized and deunionized system in the latter period the evidence indicates the extra structural and behavioral elements in the ir model are important for a full and accurate explanation

the emergence of chaos from classical economic growth this paper shows how fluctuations of an erratic and unstable nature can emerge from the classical deterministic economic growth process implications of the analysis would appear to be at least two first pronounced changes in the way an economy behaves need not cause us to reject our understanding of how it works second we need not seek in exogenous forces an explanation as to why behavioral patterns change and why it may be so difficult to anticipate future events from the profile of past experience

bandwagons and the threat of chaos interpersonal effects revisited abstract this paper extends granovetter and soong s work on bandwagons by introducing interpersonal effects at the level of preferences rather than at the level of demand it is found that markets generally will not follow the first order difference equations analyzed by g s because consumers will form expectations based on the market s entire history rather than the last period alone when those expectations are adaptive and the rate of expectations adjustment sufficiently low the threat of unstable and chaotic dynamics is eliminated the paper also describes the efficiency problems generated by interpersonal effects

structural change under new labour the paper examines specific features of structural change in the uk since 1997 contrasting the decline in industrial jobs with the rise in a variety of service jobs it examines the proximate causes of structural change in particular whether the chronically slow growth of manufacturing output in the 1980s has persisted the implications of this structural change are considered particularly the effects on the balance of payments and regional employment patterns the paper suggests that the main impact of government policies on regional employment may have been through the direct and multiplier effects of public expenditure

has the minimum wage policy been important for reducing poverty in brazil a decomposition analysis for the period from 2002 to 2013 abstract this study aims to analyze the contribution of the minimum wage valorization policy to the reduction in poverty that occurred in the first decade of the 21st century in brazil considering not only the incidence of poverty but also its intensity and severity a decomposition methodology was used to isolate the marginal contribution of the minimum wage in the observed changes taking into account the roles of setting the values of basic pension and social assistance benefits the beneficio de prestacao continuada or bpc in addition to setting the wage floor between 2002 and 2013 the minimum wage contributed to a 38 2 reduction in the proportion of impoverished people a 39 4 reduction in the intensity of poverty and 40 6 decrease in the severity of poverty our results also reveal geographic differences with the minimum wage being more important in the poorest regions

the formation of price forecasts in experimental markets this study utilizes laboratory experimental methods to evaluate the empirical validity of 1 muthian rational expectations assumptions 2 an adaptive expectations model and 3 an extrapolative expectations model over 5 00 price forecasts from 146 participants in twelve experimental double auction m arkets with a cash reward structure are analyzed the forecasting objective is t hemean price over a sequence of trading periods governed by stationary market parameters the price forecasts are found to be inconsistent with strict muthian rational expectations and the extrapolative modelis not supported by the data however the forecasts generally support the adaptive expectations model copyright 1987 by ohio state university press

the theoretical foundation of industrial relations and its implications for labor economics and human resource management the author identifies the core principle that forms the theoretical and policy foundation for the field of industrial relations labor is embodied in human beings and is not a commodity and argues that the field s two central dependent variables are labor problems and the employment relationship next he uses this core principle along with complementary ideas from institutional economics to develop a theoretical framework that not only explains the nature of the employment relationship and labor problems but also reveals shortcomings in related theories from labor economics and human resource management finally this framework is used to derive the fundamental theorem of industrial relations demonstrate that optimal economic performance occurs in a mixed economy of imperfect labor markets and organizations and show that a certain amount of labor protectionism promotes economic efficiency and human welfare

on the complexities of complex economic dynamics complex economic nonlinear dynamics endogenously do not converge to a point a limit cycle or an explosion their study developed out of earlier studies of cybernetic catastrophic and chaotic systems complexity analysis stresses interactions among dispersed agents without a global controller tangled hierarchies adaptive learning evolution and novelty and out of equilibrium dynamics complexity methods include interacting particle systems self organized criticality and evolutionary game theory to simulate artificial stock markets and other phenomena theoretically bounded rationality replaces rational expectations complexity theory influences empirical methods and restructures policy debates

work for all those who want it why the neoclassical labour supply curve is an inappropriate foundation for the theory of employment and unemployment this paper questions the usefulness of the neoclassical labour supply curve as a factor in the theory of employment and unemployment this curve rests on the false premise that workers can choose whether to work or not and gives credence to the idea that all unemployment constitutes chosen leisure despite this it was used by keynes to define the point of full employment this contributed to the misleading impression that the level of full employment is determined by psychological factors challenging this view joan robinson sought to integrate a wider set of issues into the theory of labour supply in order to build a different non neoclassical foundation for keynes s theory of effective demand drawing upon robinson the paper argues against the use of the neoclassical labour supply curve within macroeconomic analysis copyright 2006 oxford university press

the impact of the minimum wage if workers can adjust effort abstract in traditional models a binding minimum wage creates a excess supply of low skilled workers for minimum wage jobs employment falls and some jobs are reallocated from high to low rent workers this disequilibrium cannot persist competition to secure the property rights to now scarce jobs undoes most of the effects of the minimum wage workers who attach the highest value to the jobs are willing to work harder to keep them marginal workers are squeezed out of the market as high rent workers ratchet up effort level this process erodes the rent conferred by the minimum wage but also increases the value of marginal product which reduces the size of the employment effect the minimum wage confers more money income on low skilled workers and creates some distortion in the optimum combination of wage rate and effort level under plausible conditions the minimum wage has little effect on rent employment output and profits

expanding the behavioral foundations of labor economics the author examines critiques and suggests modifications to the psychological assumptions of the rational choice model of the human agent that underlies much of the theoretical work in modern neoclassical labor economics he analyzes the rational choice model in terms of three psychological constructs motivation cognition and emotion in the context of a five step model of the human behavioral process examples from the empirical and theoretical labor economics literature illustrate both problems with the current theory and new or improved insights and predictions that can be gained by incorporating additional psychological theories and concepts in economic analysis the author concludes that although the rational choice model is a powerful and productive conceptual device in many cases it cannot adequately explain behavior in the world of work and labor economic theory would be improved by a more interdisciplinary approach that integrates conceptual and empirical research from the behavioral sciences abstract courtesy jstor

the fiscal and distributional implications of job generation this article estimates the cost of a public investment led job creation programme for the united kingdom a programme creating an additional one million jobs at the current average wage would involve a net cost to the treasury dramatically lower than the gross cost 17 billion worth of spending would result in a net cost of around 7 billion given that even a partial restoration of progressive taxation would bring in more than half this net amount improved living standards could be brought about relatively easily provided dogmatic objections to public sector initiatives can be overcome

threshold models of interpersonal effects in consumer demand abstract whether one buys may be determined in part by how many others have when the correlation is positive we refer to bandwagon effects and when negative reverse bandwagons we construct demand schedules in the presence of such effects and with simple assumptions about supply investigate the existence of and approach to equilibrium stable price quantity equilibria exist but for many plausible parameter values equilibria are asymptotically unstable and system trajectories consist of cycles that can move with slight parameter changes via successive bifurcations into what has been called chaotic dynamics essentially indistinguishable from random noise these conditions occur despite assumptions of erfect information profit maximizing firms and utility maximizing individuals

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

wage theory new deal labor policy and the great depression were government and unions to blame a growing number of economists blame the length and severity of the great depression on factors that rigidified wage rates raised production costs and interfered with the market allocation of labor the target of their critique is president franklin roosevelt s new deal labor program which they portray as creating a series of large negative supply shocks through encouragement of unions minimum wages unemployment insurance and other anticompetitive industrial relations practices the author uses a combination of institutional and keynesian theory to present the other side of the story drawing principally from the works of j r commons and j m keynes he develops both a spending and productivity rationale for stable wages during the great depression and demonstrates that the new deal s interventionist labor program was on balance necessary and beneficial he also highlights the neglected macroeconomic dimension of industrial relations theory and policy

trust contract and economic cooperation after providing a brief overview of the standard economic analysis of incomplete contracts in terms of property rights transaction costs and self enforcing implicit contracts the author shows why in the orthodox view trust is not a pertinent category to their negotiation or effectiveness drawing on various empirical studies which he has undertaken in the area of industrial relations the author develops an alternative approach to the study of incomplete contracts in which the concept of trust is central in this alternative vision boundedly rational agents with limited foresight form provisional judgements about the trustworthiness of their trading partners based on the success of their past encounters a consequence of this alterna tive understanding of incomplete contracts is that there is no guarantee that coopera tion will succeed even when the circumstances appear to promise mutual gain the author argues however that by establishing an appropriate set of procedural rules to guide their response to the unanticipated agents can promote the kinds of mutual learning that contribute to the build up of trust and that increase the likelihood of successful cooperation

the necessity of delaying economic adjustment abstract i give an explanation for why agents react with a delay to decision and expectation parameters by showing that imperfect agents must adjust very slowly relative to optimally adjusting agents if they begin reacting as soon as the latter agents would react the results follow from the hypothesis of imperfect choice alone irrespective of whether there are any information search transaction or other costs of adjusting decisions the results thereby provide a general reason for observing inertially lagged behavior and also agree with recent asset market experiments whose dynamics are governed by adaptive rather than rational expectations

the impact of mass migration on the israeli labor market mass migration from the former soviet union increased the israeli population by 12 in the first half of the 1990s this exodus was precipitated by the lifting of emigration restrictions in an unstable ussr and by the open immigration policy of israel toward soviet jews who faced more restrictive entry policies elsewhere i use this natural experiment to study the impact of immigration on the labor market outcomes of native israelis ols yields significant reductions in wages and small reductions in employment however ols is biased if the distribution of immigrants across occupations in israel was not exogenous to relative wage and employment conditions i instrument for the entry of russians into an occupation in israel using information on their former occupations in the ussr there is a significant positive correlation between the former presence of the immigrants in an occupation in the ussr and their presence in that occupation in israel but the previous occupational choices of russians abroad were independent of israeli wage and employment growth subsequent to their migration iv estimates indicate that immigration did not have an adverse impact on native israeli labor market outcomes

the dynamic impact of immigration on natives labor market outcomes evidence from israel abstract this paper studies the short and medium run impact of highly skilled immigrants from the former soviet union to israel on natives wages and employment if immigrants are relatively good substitutes for native workers the impact of immigration will be largest immediately upon the immigrants arrival and may become smaller as the labor market adjusts to the supply shock conversely if immigrants upon arrival are poor substitutes for natives the initial effect of immigration is small and increases over time as immigrants acquire local labor market skills and compete with native workers we empirically examine these alternative hypotheses using data from israel between 1989 and 1999 we find that wages of both men and women are negatively correlated with the fraction of immigrants with little local experience in a labor market segment a 10 percent increase in the share of immigrants lowers natives wages in the short run by 1 3 percent but this effect dissolves after 4 7 years this result is robust to a variety of different segmentations of the labor market to the inclusion of cohort effects and to different dynamic structures in the residual term of the wage equation on the other hand we do not find any effect of immigration on employment neither in the short nor in the medium run

the globalisation of technology a new taxonomy book synopsis international management of research and development brings together the most influential contributions to managing organising and coordinating r d and innovation on a global scale in addition to papers on the fundamental principles trends and drivers of international r d it covers strategies and operations of global r d it also provides an introduction to modern concepts such as knowledge networks open innovation and virtual innovation it is a key reference collection for professors researchers and practitioners

the impact of forced displacement on host communities a review of the empirical literature in economics the paper reviews 49 empirical studies that estimate the impact of forced displacement on host communities a review of the empirical models used by these studies and a meta analysis of 762 separate results collected from them are the main contributions of the paper coverage extends to 17 major forced displacement crises that occurred between 1922 and 2015 to host countries at different levels of economic development and different types of forced migrants the focus is on outcomes related to household well being prices employment and wages all studies can be classified as ex post quasi natural experiments the analysis on empirical modeling shows a preference for partial equilibrium modeling differences in differences evaluation methods and cross section econometrics with all these choices largely dependent on the type of data available the meta analysis on household well being shows that between 45 and 52 percent of the results are positive and significant indicating a net improvement in household well being an additional 34 to 42 percent of the results are found to be nonsignificant and 6 to 20 percent show a decrease in household well being the analyses on employment and wages show positive and significant improvements for 12 to 20 percent of the results nonsignificant results in 63 percent of the cases and negative and significant results for 22 to 25 percent of the results negative results on employment and wages relate to young and informal workers in middle income countries the results on prices show asymmetric behavior across types of products overall the probability of having a negative outcome for host communities in the consumer and labor markets is below 20 percent

a theory of dual labor markets with application to industrial policy discrimination and keynesian unemployment this paper develops a model of dual labor markets based on employers need to motivate workers in order to elicit effort from their workers employers may find it optimal to pay more than the going wage this changes fundamentally the character of labor markets the model is applied to a wide range of labor market phenomena it provides a coherent framework for understanding the claims of industrial policy advocates it also can provide the basis for a theory of occupational segregation and discrimination that will not be eroded by market forces finally the model provides the basis for a theory of involuntary unemployment

do minimum wages fight poverty i introduction one of the most compelling rationales for a national minimum wage floor is to raise the incomes of poor or near poor families with members in the workforce this general point however is often missed in the debates over the merits of a higher minimum wage in contrast to these oft stated distributional goals much of the focus in such debates has been on the employment effects of minimum wages especially among the teenage population in large part this focus is probably attributable to the extensive body of economic research on the effects of minimum wages on employment of low skilled workers however although negative employment effects represent a cost of minimum wages such costs do not necessarily imply that minimum wages constitute bad social policy in particular the employment losses associated with a higher minimum wage may be more than offset by positive effects on low income families especially if minimum wages are a significant factor in helping move families out of poverty 1 this is not to argue that research on employment effects of minimum wages is irrelevant but such research may be more important as a test of the theory of labor demand and as a method of learning how employers and individuals adjust to exogenous wage increases than as a method of assessing the wisdom of the policy in addition we do not mean to suggest that the short run effects of minimum wages on the incomes of poor families should be the sole criterion for evaluating such policies other studies have found evidence suggesting for example that minimum wage increases reduce school enrollment rates and training neumark and wascher 1996a hashimoto 1982 factors that may affect longer run earnings or earnings growth these deleterious longer run effects might offset the benefits of shorter run effects of minimum wages on family incomes nonetheless our perception is that potential increases in the incomes of poor families provide the main motivation for raising the minimum wage making it important to assess the evidence on whether minimum wage increases achieve this goal in this regard there are two questions that pertain to the influence of minimum wages on family incomes generally and on poverty in particular first there is the question of the effects of minimum wages on low wage workers that is do the wage gains received by employed workers more than offset the lost earnings suffered by those who lose or cannot find jobs 2 second there is the question of how minimum wages affect workers in different parts of the family income distribution because many roughly speaking a large minority of minimum wage workers are in relatively affluent families gramlich 1976 card and krueger 1995 burkhauser et al 1996 which workers gain and which lose will have an important influence on the effects of minimum wages on the distribution of family incomes in this article we present evidence on the effects of minimum wages on family incomes focusing in particular but not solely on the effectiveness of minimum wages in reducing poverty using matched march current population surveys cpss we estimate the effects of minimum wages on the probabilities of various transitions in the family income distribution such as transitions into and out of poverty given that federal changes in minimum wages may be confounded with other aggregate level shocks influencing family income we rely heavily on state level changes in minimum wages to identify minimum wage effects in a nutshell our empirical strategy is to compare rates of transition through the family income distribution in states in which minimum wages do and do not increase for example if poor families are more likely to escape from poverty when minimum wages increase in their states of residence we would infer that minimum wage hikes help families move out of poverty on the other hand if transitions in to poverty are more common when minimum wages increase we would infer that the disemployment effects of minimum wages play a dominant role among the low income population

labor market adjustments and the persistence of unemployment persistent unemployment like that plaguing europe since the early 1980 s has been a persistent problem for economic theory competitive equilibrium theory assumes that all markets clear including the labor market all theories of unemployment thus must reflect significant departures from that paradigm the last 20 years have generated a plethora of such theories the challenge is to construct models that generate unemployment and are broadly consistent with a host of other labor and macroeconomic phenomena including patterns of real wages and hours the traditional approach is to focus on a simple static equilibrium in which wages are kept above their market clearing level for a variety of reasons in the older versions of this story minimum wages union power and normative traditions in its more recent incarnations efficiency wage considerations within the united states the older variants of these models have received decreasing credence as union power has eroded the real value of the minimum wage has declined and empirical evidence has buttressed a broader set of theoretical arguments based on imperfect competition within the labor market and efficiency wage considerations suggesting at most negligible effects from these government interventions efficiency wage variants are more broadly consistent with observed labormarket behavior and help explain both natural rates of unemployment and certain cyclical phenomena e g the use of layoffs rather than job sharing see carl shapiro and stiglitz 1984 lawrence summers 1990 moreover to the extent that unemployment compensation and protection against separations for cause have improved recently in europe these models can explain the secular rise in european unemployment see edmund phelps 1994 2 on the other hand as conventionally formulated they leave many aspects of the labor market unexplained 3 more recent theories analyze unemployment as the result of imbalances between flows into and out of the job market 4 in these models in steady state on average the flow supply into unemployment must balance the flow out the equilibrium level of unemployment is thus determined through relations between these flows and the level of unemployment most noted within this genre are the labor turnover theories in which labor costs are affected by wages and the unemployment rate and the job search models in which unemployment arises from the need for job matches which by assumption can only occur among the

origin of predictable behavior further modeling and applications economic theory is founded on the assumption that agents act as if they are able to maximize according to well behaved preferences regardless of how complex their decision problems might be consequently the theory has never investigated the consequences of a genuine gap between an agent s decision making competence and the difficulty of a decision problem called a c d gap in a recent paper 1983 hereafter called the origin paper i outlined a general theory for investigating the latter possibility a major theme was that recurrent pattern in behavior arises because of decision making uncertainty due to a c d gap so that uncertainty becomes the basic source of predictable behavior here i discuss certain theory topics that were only sketched in the origin paper and briefly suggest a few related applications to pursue these objectives i begin with a short restatement of the reliability condition introduced in the origin paper

adaptive behavior and economic theory the relationship between psychological and economic views of behavior once a subject of heavy dispute is now understood in a very similar way by practitioners of both these disciplines and of our sister social sciences in general terms we view or model an individual as a collection of decision rules rules that dictate the action to be taken in given situations and a set of preferences used to evaluate the outcomes arising from particular situation action combinations these decision rules are continuously under review and revision new decision rules are tried and tested against experience and rules that produce desirable outcomes supplant those that do not i use the term adaptive to refer to this trial anderror process through which our modes of behavior are determined if one is interested in modeling particular decisions in any very explicit way it is obviously necessary to think about rather narrow aspects of an individual s entire set of decision rules his or her personality experimental psychology has traditionally focused on the adaptive process by which decision rules are replaced by others in this tradition the influence of the subject s or as an economist says the agent s preferences this essay uses a series of examples to illustrate the use of rationality and adaptation in economic theory it is argued that these hypotheses are complementary and that stability theories based on adaptive behavior may help to narrow the class of empirically interesting equilibria in certain economic models an experiment is proposed to test this idea

rationality of self and others in an economic system in this paper i want to disentangle some of the senses in which the hypothesis of rationality is used in economic theory in particular i want to stress that rationality is not a property of the individual alone although it is usually presented that way rather it gathers not only its force but also its very meaning from the social context in which it is embedded it is most plausible under very ideal conditions when these conditions cease to hold the rationality assumptions become strained and possibly even self contradictory they certainly imply an ability at information processing and calculation that is far beyond the feasible and that cannot well be justified as the result of learning and adaptation let me dismiss a point of view that is perhaps not always articulated but seems implicit in many writings it seems to be asserted that a theory of the economy must be based on rationality as a matter of principle otherwise there can be no theory this position has even been maintained by some who accept that economic behavior is not completely rational john stuart mill 1909 bk 2 ch 4 argued that custom not competition governs much of the economic world but he adds that the only possible theory is that standard economic doctrine makes assumptions of rationality that have very strong implications for the complexity of individuals decision processes the most complete assumptions of competitive general equilibrium theory require that all future and contingent prices exist and be known in fact of course not all these markets exist the incompleteness of markets has several side consequences for rationality for one thing each decision maker has to have a model that predicts the future spot prices this is an informational burden of an entirely different magnitude than simply optimizing at known prices it involves all the complexity of rational analysis of data and contradicts the much praised informational economy of the price system it is also the case that equilibria become much less well defined similar problems occur with imperfect competition this research was supported by the office of naval research grant onr n00014 79 c 0685 at the center for research in organizational efficiency institute for mathematical studies in the social sciences stanford university stanford california

minimum wages for ronald mcdonald monopsonies a theory of monopsonistic competition recent empirical work on the effects of minimum wages has called into question the conventional wisdom that minimum wages invariably reduce employment we develop a model of monopsonistic competition with free entry to analyse the effects of minimum wages and our predictions fit the empirical results closely under monopsonistic competition we find that a rise in the minimum wage raises employment per firm causes firm exit and may increase or reduce industry employment minimum wages increase welfare if they raise industry employment but welfare effects are ambiguous if employment falls

technology unemployment and efficiency abstract this paper analyzes technology choices and unemployment in search equilibrium in contrast to standard search models the presence of technology choices makes the decentralized equilibrium inefficient there is too little investment in skills too little job creation and there can be multiple equilibria the paper also shows that technological progress is likely to be slower in labor markets where job tenure is low

emotional arousal as a source of bounded rationality abstract this paper proposes an alternative psychological explanation for bounded rationality according to herbert simon bounded rationality arises from human cognitive limitations following the suggestion of institutional economist john r commons i argue that extremes in emotional arousal also contribute to bounded rationality this idea is formalized and developed using the yerkes dodson law from psychology examples from the popular press and the academic literatures of law management and economics are presented to illustrate the impact of this type of bounded rationality on human behavior

the reemergence of segmented labor market theory according to dual labor market theory the labor market can be usefully described as consisting of two sectors a high wage primary sector with good working conditions stable employment and substantial returns to human capital variables such as education and experience and a low wage secondary sector with the opposite characteristics moreover primary jobs are rationed that is not all workers who are qualified for primary sector jobs and desire one can obtain one finally the sector of the labor market in which an individual is employed directly influences his or her tastes behavior patterns and cognitive abilities thus the dual labor market model or more generally segmented labor market models is simultaneously a description of the income distribution a claim about the absence of market clearing and a radical departure from the standard neoclassical assumption of fully rational actors and exogenously determined preferences while this last element is potentially the most interesting even its proponents fail to give it the attention it deserves and related work has not been incorporated into the segmented labor market model in this paper we therefore concentrate on the first two elements of the model segmented labor market theory was sufficiently popular in the late 1960 s and early 1970 s to be taken seriously by prominent mainstream labor economists however two influential and largely negative reviews glenn cain 1976 michael wachter 1974 portrayed the segmented labor market hypothesis as largely atheoretical and based at best on questionable statistical analysis it seems fair to say that even sympathetic mainstream critics felt that key insights from the segmented labor model could be incorporated into neoclassical analysis and that the remaining elements of the model did not form a sufficiently coherent theory to pose a challenge to the neoclassical model whatever the merits of this perception it is clear that advocates of the segmented labor market approach did not develop a formal theory which conformed to the standards of mainstream economists with some notable exceptions michael piore 1975 david gordon 1972 the work was atheoretical moreover the empirical methods used tended to fall outside the norm for example interviews observational studies and historical and institutional analysis advocates of the segmented labor market perspective mostly radical political economists chose instead to develop their own research program outside the mainstream the reemergence of segmented labor market theory is linked with the reversal of these two tendencies the theory has been pursued by economists using modern tools of imperfect information theory and state of the art econometrics as a result the approach has again attracted the attention of the mainstream even a few years ago it would have been a clairvoyant observer who predicted that lawrence summers would be working on a theoretical model of labor market duality with jeremy bulow 1986 that robert solow would count among his recent work a dual market model with ian mcdonald 1985 and that james heckman would publish an article in which he undertook an empirical test of a dual market model failed to reject the model and then devoted much of the rest of the article to attacking his and other tests of the dual labor market view see his article with v joseph hotz 1986 since the theoretical developments are largely associated with efficiency wage and departments of economics university of california berkeley ca 94720 and nber and boston university 270 bay state road boston ma 02215 and nber respectively this study was supported in part by nsf grant no ses 8606139 lang acknowledges support from a sloan faculty research fellowship dickens acknowledges support from the institute of industrial relations at berkeley

theory and evidence on the political economy of the minimum wage this paper examines how closely the minimum wage has been set to the most popularly stated goals of minimun wage policy i first estimate these goals the minimum wage rate at which the relevant labor demand is unitary elastic maximizing the total earnings of minimum wage workers about 5 35 and the level that would lift a typical minimum wage worker s family out of poverty about 5 17 i can reject that the actual minimum wage policy has been driven by desire to achieve these goals and find that a simple interest group model best explains the historical path of the minimum wage rate

asset market perspectives on the israeli palestinian conflict this paper locates turning points in the israeli palestinian conflict since the late 1980s using asset market data from israel and the palestinian authority pa we find that major escalations in violence such as the outbreak of the intifada in 2000 lead to significant declines in asset prices in both israel and the pa conversely major peace initiatives such as the oslo accords in 1993 and the road map plan in 2003 lead to substantial increases in asset prices on both sides of the conflict an additional novel finding is that asset markets respond positively to the success of politicians who favour a negotiated settlement to the conflict

is the new immigration really so bad this article reviews the recent evidence on us immigration focusing on two key questions 1 does immigration reduce the labour market opportunities of less skilled natives 2 have immigrants who arrived after the 1965 immigration reform act been successfully assimilated overall evidence that immigrants have harmed the opportunities of less educated natives is scant on the question of assimilation the success of the us born children of immigrants is a key yardstick by this metric post 1965 immigrants are doing reasonably well even children of the least educated immigrant origin groups have closed most of the education gap with the children of natives

is labour market flexibility harmful to innovation in a neoclassical framework one can argue that unemployment can be reduced by means of institutional changes that allow for a better working of the labour market and notably by achieving downward wage flexibility i argue that although various policy recommendations about removing labour market rigidities are indeed advantageous in the short trun they are detrimental from a schumpeterian perspective since they discourage product and process innovation reduced innovation efforts will in turn weaken the supply side strength of an economy the paper explores the implications of schumpeter s notion of creative destruction and of schmookler s hypothesis of demand pulled innovations borrowing from recent empirical innovation research

ergodic fluctuations in deterministic economic models abstract nonperiodic business fluctuations are shown to exist with positive measure generically and to behave like stationary stochastic processes in the standard dynamic macro model the implication is that so called chaotic fluctuations are probable for random initial conditions in a large class of recursive economies

schumpeterian patterns of innovation are technology specific this paper examines the patterns of innovative activities at the technological and country levels using patent data for 49 technological classes in six countries usa japan germany france united kingdom and italy it is shown that the patterns of innovative activities differ systematically across technological classes but are remarkably similar across countries for each technological class in particular two groups of technological classes are identified schumpeter mark i and schumpeter mark ii in these two groups innovative activities are structured and organized in different ways the first represents a widening pattern concentration of innovative activities is low innovators are of small economic size stability in the ranking of innovators is low and entry of new innovators is high the second represents a deepening pattern concentration of innovative activities is higher than in the first group innovators are of larger economic size stability in the ranking of innovators is greater and entry is lower the former group comprises mechanical technologies and traditional sectors while the latter includes chemicals and electronics this result suggests that technology related factors such as technological regimes defined in terms of conditions of opportunity appropriability cumulativeness and properties of the knowledge base play a major role in determining the specific pattern of innovative activities of a technological class across countries within these constraints country specific factors introduce differences across countries in the pattern of innovative activities for a specific technological class finally the relationships between the specific features of the patterns of innovative activities and international technological specialization are examined technological advantages appear in general to be linked to higher degrees of asymmetries among innovators higher stability of the ranking of innovators smaller economic size of the innovating firms and lower entry rates of new innovators these relationships however are different in the two groups of technological classes in schumpeter mark i widening technological classes international technological specialization is associated with relatively higher degrees of asymmetries among innovators and entry of new innovators as well as smaller firm size while in schumpeter ii deepening technological classes international technological specialization is linked to the existence of a stable but competitive core of persistent innovators

the bias towards zero in aggregate perceptions an explanation based on rationally calculating individuals i introduction a central theme in the study of economic behavior is individual rationality or utility maximizing behavior contrary to the accusations of many outside critics the economics assumption of rationality neither denies that information is costly nor implies that decisions are error free rational expectations allows for ignorance but insists on the absence of systematic errors in the aggregate even if some individuals make large underestimates their errors are offset by large overestimates made by others alternatively even if people on average underestimate the effect of some variable during one period they may overestimate its effect at a later date these assumptions form the basis for the standard conclusion that the government cannot systematically outsmart the public the theory and application of rational expectations has generated a vast literature over the last couple of decades it is now well known that the application of rational expectations theory to actual cases may for instance be unsuitable when there are systematic errors in the observed variables when loss functions are not quadratic or when variables are constrained to take only positive values while such limitations may well be problematic these objections have in our view not been very damaging in the sense that rational expectations still provides a natural starting point for much economic analysis like rational expectations this paper takes individual rationality as its central theme yet we reach a radically different conclusion from rational expectations regarding aggregate behavior we demonstrate that individual errors in identifying the relationships among variables cause a downward bias in the aggregate that would be equivalent to the public underestimating the strengths of the true relationships rational expectations has considered the misestimation type of error which can cancel out in the aggregate but with errors in identifying relationships there exists no similar cancelling out effect and thus the public appears to irrationally underestimate the strengths of relationships the paper is organized as follows first we set up a simple formal model to examine the misestimation problem and then contrast it to the identification problem section iii explains why the identification problem can be so important even when a relatively small number of variables are involved section iv reviews empirical evidence of bias in the expectations formation literature as shown in section v our hypothesis can be used to explain political business cycles in a standard aggregate supply and demand framework ii theory in our model individuals acquire knowledge in two steps they first identify the causal relationship between two or more variables and then estimate the strength of that relationship as with herbert a simon s satisficing approach 1959 1979 and the analysis in ronald a heiner 1988 we assume finite intellectual capabilities however our model neither assumes nor implies anything about simon s satisficing approach and the often related concept of bounded rationality instead our inquiry is strictly limited to the consequences of omitting variables and will not address the more ambitious question of what strategies individuals might adopt to improve learning like heiner we distinguish between the reliability of making decisions and the issue of obtaining information heiner shows that while decision making itself might be flawless when individuals face only a very limited amount of information it is optimal for them to choose a larger information set and enter into the imperfect decision zone he provides several different reasons finite channel capacity information complexity and nonlocal information for why the advantage of having much information also translates into more decision error while heiner s model deals with individuals making correct or incorrect decisions his underlying reasoning could equally well be used to motivate our analysis of why a portion of the population fails to appreciate certain economic relationships

institutional economics and the minimum wage broadening the theoretical and policy debate debate among labor economists on the pros and cons of a minimum wage law has come to focus on whether labor markets are competitive or monopsonistic using principles and concepts of institutional economics the author argues that this perspective on minimum wages is too narrow in particular he uses institutional theory to develop four theoretical rationales for minimum wage legislation setting a floor on wages to offset imperfect competition and inequality of bargaining power promote macroeconomic stabilization and full employment contribute to long term efficiency and growth and incorporate labor market externalities and social costs of labor one revisionist implication is that a minimum wage under plausible conditions may increase economic efficiency even in a purely competitive labor market

satiation and habit persistence or the dieter s dilemma abstract frequently individual consumption varies cyclically over time in order to model such behavior we have to generalize the intertemporal utility function so that it depends not only on current consumption but on total previous consumption and on the change in current consumption solving the resulting model requires a generalization of the euler lagrange equations

technological regimes and sectoral patterns of innovative activities this paper focuses on the relationships between observed patterns of innovative activities within a sector and the related context and underlying microeconomic processes that might account for them it claims that there are some invariant features with respect to relative prices and incentives mechanisms of learning and knowledge accumulation that greatly affect the rate and structure of innovative activity these features are different across sectors the paper proposes that the specific pattern of innovative activity of a sector can be explained as the outcome of different technological regimes that are implied by the nature of technology and knowledge the notion of technological regime provides a synthetic representation of some of the most important economic properties of technologies and of the characteristics of the learning processes that are involved in innovative activities copyright 1997 by oxford university press

explaining britain s economic performance a critical note the contributors to this controversy section have supplied a rich smorgasbord of potential explanations for britain s descent in angus maddison s rankings of real per capita incomes from second in i950 to tenth in i979 as with any good smorgasbord there is too much to digest comfortably on the table are inadequacies in the british system of education and training financial shortsightedness high tax rates barriers to competition the fragmented structure of industrial relations under investment in manufacturing plant and equipment and the defensive nature of investment the dilemma is deciding what to put on one s plate our four contributors provide little guidance on this score to be sure disputes over the relevance of some of the explanations are in the open for example where crafts minimises the importance of u k investment in machinery and equipment on the grounds that the country s investment ratio was never significantly below the european median and that physical investment is not an important source of productivity externalities other authors emphasise the inefficiency of investment eltis and positive linkages from investment in the manufacturing sector to employment in the rest of the economy kitson and michie generally speaking however we are provided little advice on how to weigh the different explanations and reconcile them with one another it would have helped had the authors done three things placed britain s postwar relative decline in its historical context provided more of an international comparative perspective and distinguished proximate from fundamental determinants no one would deny that the causes of britain s relatively slow growth since i950 are historically rooted not that one gets this sense from the papers in this symposium none makes more than passing reference to the legacy of the period before world war ii fig i shows for the century beginning in i 88o the extent to which the country s performance has lagged that which would be predicted by its relative standing in maddison s league tables for each year per capita income in each of maddison s i6 countries is regressed on its initial level in i870 i9i9 or i946 as appropriate and a constant term the fitted values are then used to construct the predicted rate of growth from the base year to the current year fig i shows the average annualised rate by which britain s actual growth lags that predipted by the regression the predominance of positive entries since i 950 confirms that british growth lagged that of the rest of the oecd since world war ii even after controlling for initial position

the origin of predictable dynamic behavior abstract nonlinear dynamic theory implies optimal decisions often behave like random chaos such random target motion is impossible for imperfect agents to follow without error however they can still gradually approach the optimal target if and only if they partially adjust toward its perceived location so as to induce their behavior to converge to an equilibrium reducing dynamic errors through partial adjustment thereby induces a stable regularity in behavior that otherwise may never evolve this result agrees with the stability properties observed in experimental markets including cobweb auction and asset markets whose dynamics before reaching equilibrium exhibit adaptive rather than rational expectations