government deficits the real interest rate and ldc debt on global crowding out abstract the paper uses a three regions model of global saving investment balance to present a global crowding out interpretation of present economic trends the model builds on data which point to a possible shortage of savings explosive growth of social expenditures structural public sector deficit in north and south changes of the age pyramid real wage rigidity in many industrial countries

an economic theory of self control the concept of self control is incorporated in a theory of individual intertemporal choice by modeling the individual as an organization the individual at a point in time is assumed to be both a farsighted planner and a myopic doer the resulting conflict is seen to be fundamentally similar to the agency conflict between the owners and managers of a firm both individuals and firms use the same techniques to mitigate the problems which the conflicts create this paper stresses the implications of this agency model and discusses as applications the effect of pensions on saving saving and the timing of income flows and individual discount rates

greenhouse policy persuasion towards a positive theory of discounting the climate future abstract the climate policy issue is in a state where different visions or proposals compete with one another in the political arena the success of such a vision or proposal largely depends on the success of its proponents in persuading the public or a yet undecided ultimate authority of its merits this essay identifies a discounting related ambiguity in cost benefit analyses of climate change making two competing visions and proposals legitimate by placing the induced opportunity for greenhouse policy persuasion in a political economy context it is shown how visionaries and lobbyists can exploit human time preferences for the purpose of greenhouse policy persuasion

discounting in integrated assessments of climate change one of the key decisions that economists working on integrated studies of climate change face is the selection of the method of accounting for damages resulting from possible climate change across a long temporal scale and the method for the intertemporal comparison of the costs associated with possible greenhouse gas abatement strategies sensitivity tests show that the method applied and the resulting discount rate has a major impact on the optimal climate strategy the paper is intended to provide a short review of the various techniques that have been proposed and applied in various integrated models of climate change the underlying problem is as follows we can attempt to be consistent with the economic theory and empirical observations but in this case the derived discount rate will be on the order of 5 to 8 as a result even possibly significant damages from climate change turn out to be negligible when considered at their present value the artificially low discount rate based on ethical reasoning on the other hand makes our climate related decisions and resource allocations inconsistent with the majority of other public policy decisions

time preference the discounted utility model and health the constant rate discounted utility model is commonly used to represent intertemporal preferences in health care program evaluations this paper examines the appropriateness of this model and argues that the model fails both normatively and descriptively as a representation of individual intertemporal preferences for health outcomes variable rate discounted utility models are more flexible but still require restrictive assumptions and may lead to dynamically inconsistent behaviour the paper concludes by considering two ways of incorporating individual intertemporal preferences in health care program evaluations that allow for complementarity of health outcomes in different time periods

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

intergenerational transfers and the social discount rate this paper investigates the relationship between intergenerational asset transfers and the choice of the discount rate for use in cost benefit analysis in a model of a competitive overlapping generations economy constrained by a socially managed exhaustible resource provided that there are no distortions in capital markets and that all agents hold perfect foresight cost benefit techniques will result in a pareto efficient resource allocation if the discount rate is set equal to the market rate of interest but since the path of the interest rate depends on the level of intergenerational transfers cost benefit techniques do not ensure a socially desirable distribution of welfare between generations a social optimum will result only if intergenerational transfers are properly chosen and enforced decentralized private altruism may result in intergenerational transfers that both present and future individuals would agree are too small if members of the present generation attach positive weight to the general welfare of future generations not simply their personal descendants in a world where intergenerational transfers are non optimal second best policy making may imply a constrained optimum that is inefficient together these findings suggest that cost benefit analysis is at best a partial criterion to policy formulation that should be used only in conjunction with ethical principles that define the proper distribution of welfare between present and future generations

new evidence on financial crowding out this paper has provided evidence that federal government borrowing has in fact as least for the period 1970 through 1982 exercised a significant impact upon short term interest rates in the private sector in particular it is shown here that the rate of change of the interest yield on three month t bills exercises a positive and very highly significant impact upon the rate of change of the prime rate of interest to the extent that private sector spending is sensitive to the interest rate a very strong argument on behalf of financial crowding out can be made

cost benefit analysis and the european union cohesion fund on the social cost of capital and labour florio m 2006 cost benefit analysis and the european union cohesion fund on the social cost of capital and labour regional studies 40 211 224 cost benefit analysis is a formal regulatory requirement for the evaluation of cohesion fund projects it requires the calculation of shadow prices observed prices in less developed european union regions do not reflect the social opportunity cost of labour and capital because of market failures and policy constraints the paper discusses simple rules for the calculation of financial and economic discount rates and of shadow wages i e the opportunity costs of capital and labour in the context of the appraisal of infrastructure projects part financed under the cohesion fund it is argued that for the 2007 13 programming period the european commission should adopt a unique financial discount rate of 3 5 in real terms social discount rates of 5 5 for the convergence regions and 3 5 for competitiveness regions and a region specific shadow wage rate co

are choice experiments incentive compatible a test with quality differentiated beef steaks this study compares hypothetical and nonhypothetical responses to choice experiment questions we test for hypothetical bias in a choice experiment involving beef ribeye steaks with differing quality attributes in general hypothetical responses predicted higher probabilities of purchasing beef steaks than nonhypothetical responses thus hypothetical choices overestimate total willingness to pay for beef steaks however marginal willingness to pay for a change in steak quality is in general not statistically different across hypothetical and actual payment settings

entrepreneurship social mobility and income redistribution in south india development economists have been preoccupied with the problem of increasing the size of the gnp pie to the relative neglect of its distribution despite the recent disenchantment with the viewpoint that all classes share in the benefits of industrial growth empirical data on the distribution of income business opportunity and economic power are in short supply many of the studies on entrepreneurship and economic development when they are not apologetics for ruthless capitalist exploitation as paul baran suggests extol the achievements of the capitalist entrepreneur without examining class origins and monopoly advantage joseph schumpeter sees entrepreneurs irrespective of class origin as heroic figures with the dream and will to found a private kingdom to conquer adversity to achieve success for its own sake and to experience the joy of creation for gustav papanek 1967 the private entrepreneur who is frugal diligent far sighted remarkably able and willing to take political risks is in large part responsible for the success of pakistan in achieving rapid industrialization

measuring heterogeneity survey engagement and response quality in preferences for organic products in nigeria abstractthe identification of the market potentials of organic products is important in the drive towards a sustainable agricultural development in sub saharan africa ssa however available evidence shows that valuing attributes of credence goods such as organic products while using stated preference methods faces additional obstacles compared to other normal goods in this study we examine consumers preferences and willingness to pay wtp for health and environmental attributes of organic products in nigeria we employ an approach that allows us to adequately capture the value of organic products by linking part of the heterogeneity across respondents to differences in scale while making use of indicators of survey engagement without risks of endogeneity bias and measurement error that arise from the deterministic methods the empirical results show that market for organic products exists in nigeria with reduction in pesticide residues attribute attracting the highest value followed by the ce

wilderness development decisions and the krutilla fisher model the case of scotland s flow country this paper reports some results from an empirical study of wilderness management in the flow country of northern scotland the flow country is an area of extensive blanket bog characterized by extensive populations of internationally rare breeding birds and by a very distinctive landscape the principle threat to the area at present comes from large scale afforestation this activity is subsidized by the state through the forestry commission and yet seems likely to create irreversible external cost flows the economic efficiency of continued planting in the area is tested for using the krutilla fisher model preservation benefits accruing to both users and non users are estimated using contingent valuation

are consumers in developing countries willing to pay more for micronutrient dense biofortified foods evidence from a field experiment in uganda vitamin a deficiency is a major health problem in africa and in many other developing countries biofortified staple crops that are high in pro vitamin a have the potential to reduce the prevalence of vitamin a deficiency using a choice experiment with the real product in uganda we quantify the magnitude of the premium or discount in consumers willingness to pay wtp that may be associated with it results suggest that taste plays an important role in consumer acceptance and the provision of nutrition information does translate into substantial premiums for the biofortified variety there is a substantial hypothetical bias in the wtp for the new varieties and while cheap talk mitigates this bias it does not eliminate it

stable allocations of risk abstract the measurement and the allocation of risk are fundamental problems of portfolio management coherent measures of risk provide an axiomatic approach to the former problem in an environment given by a coherent measure of risk and the various portfolios realization vectors risk allocation games aim at solving the second problem how to distribute the diversification benefits of the various portfolios understanding these cooperative games helps us to find stable efficient and fair allocations of risk we show that the class of risk allocation and totally balanced games coincide hence a stable allocation of risk is always possible when the aggregate portfolio is riskless the class of risk allocation games coincides with the class of exact games as in exact games any subcoalition may be subject to marginalization even in core allocations our result further emphasizes the responsibility involved in allocating risk

dea production games abstract in this paper linear production games are extended so that instead of assuming a linear production technology with fixed technological coefficients the more general non parametric dea production technology is considered different organizations are assumed to possess their own technology and the cooperative game arises from the possibility of pooling their available inputs collectively processing them and sharing the revenues two possibilities are considered using a joint production technology that results from merging their respective technologies or each cooperating organization keeping its own technology this gives rise to two different dea production games both of which are totally balanced and have a non empty core a simple way of computing a stable solution using the optimal dual solution for the grand coalition is presented the full cooperation scenario clearly produces more benefits for the organizations involved although the implied technology sharing is not always possible examples of applications of the proposed approach are given

dynamic inconsistency in valuing environmental goods abstract intertemporal tradeoffs continue to intrigue both academics and policy makers this paper explores patterns of dynamic inconsistency in valuing environmental goods we develop a model that predicts an individual will value extended access to an environmental good less than avoiding delayed access if time and money are complementary this value disparity results in a low marginal rate of time preference for avoiding delayed access and a high rate for acquiring extended access using the contingent valuation method we find behavior partially consistent with predictions marginal rates of time preference are highly situation and individual specific

is hypothetical bias a universal phenomenon a multinational investigation a concern with the contingent valuation method cvm is the finding that hypothetical and real statements of value often differ we test whether hypothetical bias broadly defined is independent of location by comparing real and hypothetical votes on a dichotomous choice referendum in china france indiana kansas and niger we find significant differences in hypothetical bias across locations and reject the hypothesis that hypothetical bias is independent of location as opposed to the typical finding reported in the literature subjects in niger significantly understated their willingness to pay in the hypothetical referendum

what experimental protocol influence disparities between actual and hypothetical stated values preferences elicited in hypothetical settings have recently come underscrutiny causing estimates from the contingent valuation method to bechallenged due to perceived hypothetical bias given that the receivedliterature derives value estimates using heterogeneous experimentaltechniques understanding the effects of important design parameters onthe magnitude of hypothetical bias is invaluable in this paper we addressthis issue statistically by using a meta analysis to examine data from 29experimental studies our empirical findings suggest that on averagesubjects overstate their preferences by a factor of about 3 in hypotheticalsettings and that the degree of over revelation is influenced by thedistinction between willingness to pay and willingness to accept publicversus private goods and several elicitation methods

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

research frontiers in the economics of climate change academic and policy debates over climate change risks and policies have stimulated economic research in a variety of fields in this article i briefly discuss eight overlapping areas of current research in which further effort is particularly warranted these areas include decision criteria for policy risk assessment and adaptation uncertainty and learning abatement cost and the innovation and diffusion of technology and the credibility of policies and international agreements further analysis in these areas not only will advance academic understanding but also will provide insights of considerable importance to policymakers

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

the economics of climate change and the theory of discounting this paper confronts the theory of discounting with climate change economics standard discounting would give long term damages a very low present value on the other hand low discount rates would imply more sacrifices for present generations although future generations may be richer and using multiple rates would lead to economic inefficiencies the paper first shows that arguments favouring a low or zero discount rate in general are weak even from an ethical point of view it goes on by considering different arguments in favour of discount rates decreasing over time and by recalling the argument that non reproducible environmental assets should be given a value growing over time through the example of climate change it finally shows that the latter argument not only implies that the costs of damages associated to climate change should not be underestimated but also reinforce the legitimacy of using decreasing discount rates

domestic saving and international capital movements in the long run and the short run the evidence and analysis in this paper support the earlier findings of feldstein and horioka 1980 that sustained increases in domestic savings rates induce approximately equal increases in domestic rates of investment new estimates for the post opec period 1974 79 imply that each extra dollar of domestic saving increases domestic investment by approximately 85 cents in a sample of 17 oecd countries an explicit analysis of the problems of identification and simultaneous equations bias suggests that the regression estimates are more relevant as a guide to the long run response of international capital flows than to their short run behavior coefficient estimates based on annual variations in savings and investment are subject to potentially severe simultaneous equations bias that is not present when annual observations are averaged over a decade or more and the regression is estimated with a cross country sample of these averages a portfolio model of international capital allocation that is presented in the paper indicates that the short run change in the rate of net foreign investment in response to a sustained increase in domestic saving is likely to be substantially greater than the ultimate steady state response this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

demographic variables in demand analysis in this paper the authors discuss five procedures for incorporating demographic variables into theoretically plausible demand systems translating scaling and the gorman reverse gorman and implicit prais houthakker procedures these five procedures are used to incorporate a single demographic variable the number of children in a household into the generalized ces demand system using household budget data for the united kingdom for the period 1966 1972 excerpt

reassessing the government s discount rate policy in light of new theory and data in a world economy with a high degree of capital mobility abstract the paper reexamines the government s discount rate policy in the context of new evidence on international capital mobility the relationship between deficits and interest rates the relationship between consumer interest rates and the consumer s rate of time preference and intergenerational compensation it concludes that the approximate discount rate for government decisions will differ depending on the policy problem and that the government s borrowing rate is appropriate in some cases and in others the private rate should be used for long term policies the benefit cost rationale for discounting breaks down and must be reestablished on principles incorporating intergenerational equity

using cheap talk as a test of validity in choice experiments abstract in two experiments on the choice of consumer goods the estimated marginal willingness to pay for food is found to be lower in the survey version with cheap talk our test can be seen as a test of hypothetical bias this implies that we cannot reject the hypothesis of a hypothetical bias for marginal wtp in choice experiments

discount rates and shadow prices for public investment abstract this paper extends the harberger sandmo dreze model for public discount rates to a many good economy it derives a formula for discount rates which are specific to each public enterprise or agency and used by them to discount future outputs and inputs evaluated at market prices such an approach is shown to be more efficient than that of simply using a single rate for all public projects it is also more practical than asking each public firm to use second best shadow prices in their analyses of investment projects the general results are first provided then simple cases are considered and numerical examples presented to help interpret our formula and analyse its main determinants

money debt and deficits in a dynamic game this paper analyzes a dynamic linear quadratic game between the fiscal and monetary authorities the equilibrium outcome of the game determines the time path of money creation fiscal deficits and public debt the game is solved for different equilibrium concepts the equilibria are then compared and interpreted with reference to alternative institutional arrangements the main results are i coordination increases the speed of adjustment towards the steady state and takes the steady state value of public debt closer to the desired target ii precommitments take the non cooperative equilibrium closer to the coordinated outcome iii increasing the weight that each policymaker assigns to his own private objectives slows down the adjustment process places more burden on the opponent but has ambiguous effects on the steady state value of public debt

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

a flow of funds analysis of crowding out some international evidence in a pioneering article in this journal zahn 22 investigated the separate and combined influences of increase in government spending and government borrowing on the time path of income the investigation was undertaken within the framework of a small quarterly model of the u s economy consisting of both commodity and financial flow of funds sectors by explicitly using government borrowing zahn tested the crowding out hypothesis as one involving both government spending and borrowing effects on the flow of funds between commodity and financial markets the combination of both the expansionary influences of government spending and contractionary influences of government borrowing on the time path of income determine the extent of real crowding out zahn distinguishes between pure and partial multipliers the influence of an increase in government spending financed strictly by an increase in government borrowing is measured by the pure multipliers they are based on the assumption that increases in endogenous net taxes as a result of an expansionary fiscal policy are held in a treasury account and offset in the government budget constraint by equal decreases in the monetary base on the other hand the influence of an increase in government spending financed in part by endogenous net taxes and the remainder by government borrowing is measured by the partial multipliers the major results in zahn 22 may be summarized as follows the pure multipliers show that the greatest influence of an increase in government spending financed strictly by borrowing is registered during the first two quarters but afterwards crowding out occurs the partial multipliers show similar results but crowding out is substantially less because borrowing requirements are reduced lastly the cumulative multipliers indicate that a sustained increase in government spending financed either by borrowing or by both endogenous net taxes and borrowing increases income during the sample period but at a decreasing rate and after many years the influence falls to zero in other words crowding out occurs as a result of the negative sign of the government borrowing multipliers but it is not large enough to outweigh the expansionary influence of government spending except in the very long run when the steady state government spending multiplier approaches zero zahn s conclusions are in principle compatible with those found in most previous and

dea production games and owen allocations abstract dea production games have recently been introduced in a paper by lozano 2013 in the present paper we further investigate these cooperative games we establish the links between the class of dea production games and the classes of linear programming games and linear production games we also analyse the owen set of dea production games and discuss the interpretation of these allocations for different levels of cooperation between agents

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

low discount rates and insignificant environmental values abstract difference between the discount rate on consumption and the rate of return on investment is often taken to prevent the former s being used as a social discount rate yet techniques have long been known for incorporating both these rates in a shadow price of investment funds assumptions about the proportion of investment revenues saved and reinvested are crucial in determining whether a low discount rate favours or discriminates against long term environmental values even a moderate saving rate may make the shadow price of funds indefinitely large the conceptually correct discount rate then becomes the growth rate of investment funds and the relative value of environmental effects becomes zero stochastic variation in rate of return makes this result more likely such an outcome may be avoided by setting reinvestment to zero or assuming convergence of rates of return and discount but no firm justification exists for these stratagems however various reasonable assumptions about environmental costs especially that they embody an investment element or require adequate compensation to be paid may make such costs indefinite also and therefore capable of standing against indefinite values of investible funds

empirical measures of factors affecting social rates of discount economists have long considered possible divergences between private and social rates of time preferences in this paper we investigate factors hypothesized to affect this potential divergence results indicate that time preferences of individuals may be influenced by 1 whether the resource in question is publicly or privately managed respondents tend to have lower rates of time prefernce for publicly managed resources and 2 the type of good being managed respondents tend to have lower rates of time preference for income derived from a forest than for income derived from a portfolio of stocks and bonds additional factors which may influence the revealed rate of time preference include the pattern of benefits derived over time and various personal characteristics of the respondent although numerous methodological problems cloud the issues our results suggest that capital markets may fail to aggregate utility over individuals and between goods and that it may therefore be appropriate for governments to consider using lower rates of discount than the private sector and to vary the rate used according to the type of good being evaluated

accounting for changes in tastes health concerns are thought by many to have shifted consumption away from red meats though econometric evidence is mixed testing for structural change is difficult especially when one time series is used for both estimating demand equations and testing their stability specification errors may suggest a shift where none has occurred using nonparametric demand analysis we find that meat consumption patterns in the united states and australia can be explained using only relative prices and expenditures only imposing particular functional forms can reverse the conclusion suggesting that specification errors in econometric demand studies can account for findings of taste changes

new evidence on deficits and interest rates it is generally assumed on theoretical grounds that increases in government borrowing cause interest rates to rise 1 but empirical support for this proposition has been weak at best several recent papers have uncovered no strong relationship between deficits and short terrn interest rates however the research reported here indicates that although the relationship between deficits and short terrn interest rates may be tenuous there is strong evidence that larger deficits are associated with higher long terrn interest rates much of the debate about whether there is a strong relationship between federal borrowing and interest rates concerns the crowding out question this controversy centers on the direct and indirect eilffects of government fiscal actions on private spending these effects have been well documented in the theoretical literature e g buiter 1977 carlson and spencer 1975 blinder and solow 1973 many of the crowding out effects studied in this literature depend on the connection between government borrowing and high interest rates friedman 1978 meyer 1975 silber 1970 this is called short run indirect crowding out and may occur when increases in government spending and borrowing cause interest rates to rise which then may cause private spending to be reduced buiter 1977 pp 310 13

intergenerational equity discounting and the role of cost benefit analysis in evaluating global climate policy when public policies with impacts far into the future are being debated the question inevitably is raised whether cost benefit analysis which discounts future costs and benefits is not biased against future generations and whether if such discounting is appropriate at all a lower rate should be used to avoid such bias the debate on global climate change is no exception this paper sketches and analyses the welfare foundations of cost benefit analysis and from this perspective analyses the role of cost benefit analysis in the climate policy debate particularly with reference to intergenerational effects the paper concludes that the cost benefit criterion cannot provide a definitive basis for deciding whether we should commit to a longer term programme to moderate climate change the issues of intergenerational equity are not that global climate change will significantly lower the gnp of future generations but relate to the possibility of science fiction like changes in the planet that will produce catastrophic effects in the future and the typical way in which the cost benefit problem is posed obscures the basic choices that we should be evaluating

land use regulation in the lake george basin an ecological economic perspective abstract this paper examines land use policy in lake george new york in spite of a multitude of federal state and local regulations the environmental quality of lake george has deteriorated significantly in recent years we attribute this to a planning approach based implicitly on conventional economics this approach is characterized by marginal analysis exclusive reliance on discounted market values and an emphasis on economic growth we argue that an ecological economic approach explicitly recognizing the inherent conflict between economic activity and environmental protection is necessary to prevent further deterioration of the lake george environment we recommend a proactive planning approach clearly delineating the level of environmental integrity to be achieved and allowing this to be the governing factor in determining the permissible level of economic activity

are there environmental limits to cost benefit analysis this paper considers the problem areas found in applying cost benefit analysis cba to projects involving environmental costs or benefits this is particularly relevant given recent moves by the uk government to include environmental valuations in cba exercises and in other related appraisal activities following the publication of the pearce report the paper argues that a major problem lies in placing monetary values on non market goods the paper also addresses the problems of i differences between citizen and consumer values ii complexity of ecosystems iii irreversibility and uniqueness and iv intergenerational equity and discounting the extent to which cba is an institution open to capture is also discussed

on fiscal deficits the real exchange rate and the world rate of interest we use a full general equilibrium two country two period model with perfect capital markets and intertemporal optimization and perfect foresight underlying private consumer behaviour in both countries to analyse effects of pure fiscal policy we demonstrate that higher government budget deficits in one country caused by a cut in commodity taxes today balanced by an equal present value increase tomorrow will not be offset one for one by higher private savings because of pure substitution effects triggered by the change in the intertemporal terms of trade the tax change causes the country with the increased government deficit will therefore run a larger current account deficit which in turn unambiguously leads to higher world real interest rates whether a real appreciation results in the country with the higher deficit is shown to depend on the metzler condition for an undereffected transfer if we spend more on our goods than they spend on our goods on the margin government deficits will lead to an appreciation of the exchange rate of the country with the government deficit and vice versa

choosing a government discount rate an alternative approach abstract this paper examines the choice of a government discount rate under the reasonable assumption that the level of government spending is determined in a top down fashion by macroeconomic and political considerations rather than in a bottom up fashion it is shown that setting the discount rate at the maximal internal rate of return available from unfunded government projects leads to an efficient portfolio choice under current and foreseeable conditions this implies a discount rate in the 10 or more real range rather than the 2 4 real discount rate recommended by second best theorists