the corporate psychopaths theory of the global financial crisis this short theoretical paper elucidates a plausible theory about the global financial crisis and the role of senior financial corporate directors in that crisis the paper presents a theory of the global financial crisis which argues that psychopaths working in corporations and in financial corporations in particular have had a major part in causing the crisis this paper is thus a very short theoretical paper but is one that may be very important to the future of capitalism because it discusses significant ways in which corporate psychopaths may have acted recently to the detriment of many further research into this theory is called for

preference heterogeneity in experiments comparing the field and laboratory do laboratory experiments provide a reliable basis for measuring field preferences economists recognize that preferences can differ across individuals but only a few attempts have been made to elicit individual preferences for representative samples of a population in a particular geographical area region or country our primary objective is to directly compare estimates of preferences elicited from a convenience sample and the estimates for the wider population from which that sample is drawn we examine the strengths and weaknesses of laboratory and field experiments to detect differences in preferences over risk and time that are associated with standard observable characteristics of the individual

preference reversals and the independence axiom of all of the paradoxical patterns of behavior reported in laboratory experiments one of the most perplexing for decision theorists is the preference reversal phenomenon a subject in a preference reversal experiment is typically given a choice between a lottery with a high probability of winning a modest amount of money a p bet and a lottery with a low probability of winning a large amount of money a bet the lowest amount of money for which the subject would willingly sell either of these lotteries is also elicited the most common reversal is for a subject to choose the p bet over the bet but to put a higher selling price on the bet preference reversals were first reported by harold lindman 1971 and sarah lichtenstein and paul slovic 1971 in discussing the psychologists discovery of such reversals david grether and charles plott remark the inconsistency is deeper than mere lack of transitivity or even stochastic transitivity it suggests that no optimization principles of any sort lie behind even the simplest of human choices 1979 p 623 this paper offers a simple alternative explanation of documented preference reversals an explanation that does not require the abandonment of the transitivity assumption

energy efficiency and financial literacy abstract financial literacy explains anomalies in a wide range of consumers financial decisions we extend the literature on financial literacy by examining its role in the purchase of energy consumer durables a setting purported to suffer from sub optimal levels of investment due to consumer mistakes we augment a standard choice experiment for purchasing a hot water system with data on financial literacy financial literacy is an economically important and statistically significant determinant of investment in energy efficiency this result is robust to incorporating individual discount rates and risk aversion as well as standard controls such as income and education indicating that financial literacy is not merely a proxy for standard demographic characteristics financial literacy also makes choices more consistent with standard consumer preferences and increases the probability that respondents select investments with the lowest lifetime discounted costs the results establish low financial literacy as a mechanism driving low investment in energy efficiency

wage flexibility in the united states lessons from the past in another paper forthcoming i have contrasted wage setting in the 1920 s with that of the post world war ii period during the 1920 s and early 1930 s the u s bureau of labor statistics published an incomplete sample of reported wage change decisions at the establishment level perhaps the best way to summarize the results is to direct attention to table 1 which presents the distribution of manufacturing wagechange decisions during 1924 and 1925 years in which consumer price inflation was respectively 2 and 4 0 percent on a december to december basis the table shows a wide array of wagechange decisions ranging from cuts of over 20 percent to increases of similar magnitude this dispersion of decisions is remarkable by post world war ii standards moreover the postwar evidence suggests that nominal wage cuts are a rarity even in periods of low inflation when they do occur as in some recent union concessions the cuts result from a painful negotiations process against a background of threatened or actual mass layoffs by the 1920 s many features of modern corporate enterprise were present but unions were of little significance in most sectors including manufacturing the result of a sustained open shop campaign by employers after world war i there was little labor market intervention by government workers resented wage cuts during periods of generalized wage cutting such reductions became important causes of strikes but employers implemented them anyway and when employers did not want to take the blame for wage cuts they used company unions to negotiate reductions robert dunn 1927 pp 21 23 in short in the absence of unions or other institutional constraints the implicit contracts offered by employers in the 1920 s provided substantially more wage flexibility than existed after world war ii the wagesetting mechanisms of the 1920 s did not approach the flexibility of a classical auction market a fact of some comfort to implicitcontract theorists however it is unclear that one needs to go much beyond simple explanations of how wage cuts or even relative wage slippage would lead to worker resentment and management caution

is there an energy efficiency gap many analysts have argued that energy efficiency investments offer an enormous win win opportunity to both reduce negative externalities and save money this overview paper presents a simple model of investment in energy using capital stock with two types of market failures first uninternalized externalities from energy consumption and second forces such as imperfect information that cause consumers and firms not to exploit privately profitable energy efficiency investments the model clarifies that only if the second type of market failure cannot be addressed directly through mechanisms such as information provision energy efficiency subsidies and standards may be merited this chapter therefore reviews the empirical work on the magnitude of profitable unexploited energy efficiency investments a literature which frequently does not meet modern standards for credibly estimating the net present value of energy cost savings and often leaves other benefits and costs unmeasured these problems notwithstanding recent empirical work in a variety of contexts implies that on average the magnitude of profitable unexploited investment opportunities is much smaller than engineering accounting studies suggest finally there is tremendous opportunity and need for policy relevant research that utilizes randomized controlled trials and quasi experimental techniques to estimate the returns to energy efficiency investments and the welfare effects of energy efficiency programs

u s ceos of sbus in luxury goods organizations a mixed methods comparison of ethical decision making profiles this study involved using a mixed method research design to examine the moral philosophy difference between the ethical decision making process of ceos in u s led and non u s led within the luxury goods industry the study employed a manova to compare the ethical profiles between the two leader types us and non us led and a phenomenological qualitative process to locate themes that give indication as to the compatibility of the luxury strategy values and practices with the principles and concepts of responsible leadership and conscious capitalism as the luxury goods industry is facing the first slowdown since 2000 pressure to achieve sales targets in the u s to make up for losses in other markets will place these ceos under extreme pressure from their headquarters these leaders must possess the ethical decision making capability to balance legal and moral dilemmas unique to multinational luxury goods organizations while delivering business results in a challenging environment results of the study show no evidence of difference in the ethical decision making profiles between the two groups of leaders the themes and emergent findings resulting from the qualitative analysis indicate a profound incompatibility between the values informing decision makers using the luxury strategy and those employed by leaders operating within the principles and parameters of responsible leadership and conscious capitalism recommendations for future research include replicating the study with a larger sample within a different geographic region or comparing leaders using the luxury strategy to those using conscious capitalism

profitability and profit sharing claims that profit sharing is a purely distributive wealth confiscation scheme without incentive effects due to free rider problems are based on neglect of cooperation and interaction in the workforce when these activities are difficult to monitor directly group incentives such as profit sharing can increase efficiency and maintain a superior nashequilibrium with strictly individual optimization with simultaneous wls tobit estimates we find here strong effects of profit sharing and worker ownership shares on residual owners return on capital in medium sized metal working firms in west germany complementing earlier results on productivity

three ethical roots of the economic crisis on sept 15 2008 dark monday the world witnessed a radical reshaping of wall street lehman brothers fell toward bankruptcy merrill lynch was sold to its rival bank of america and aig pleaded for 40 billion in government relief those calamities marched in step with a dismal parade including the us government takeover of fannie mae and freddie mac the bailout of bear stearns and the entire subprime debacle we rightly blame wall street leaders for bungling business decisions for misestimating risk and overloading banks with single strategy investments we now are living with the aftermath of these business mistakes but how about ethical mistakes were they too part of the crisis of course we need and certainly will get more robust regulation we have been reminded that banks are like utilities we must keep the lights on we must heat our homes the biggest banks cannot fail and that s why at least the utility like portion of banking will have to be regulated and regulated more firmly that s an important

optimal taxation in the presence of tax evasion expected utility versus prospect theory abstract it is now well known that the predictions of expected utility theory eut applied to tax evasion are quantitatively and qualitatively at variance with the evidence while prospect theory pt makes the correct predictions in this literature the tax rate is exogenous we endogenize the tax rate and require that a successful theory should explain jointly the facts on the tax rate tax gap and the level of government expenditure we find that the data is best described by taxpayers using pt and the government using standard utility theory eut the results are robust to several possible alternative specifications we discuss how our results have a bearing on the debate between liberalism versus paternalism in behavioral economics we also propose an alternative explanation based on the notion of context dependent preferences

a theory of collective reputations with applications to the persistence of corruption and to firm quality the paper is a first attempt at modelling the idea of group reputation as an aggregate of individual reputations a member s current incentives are affected by his past behaviour and because his track record is observed only with noise by the group s past behaviour as well the paper thus studies the joint dynamics of individual and collective reputations and derives the existence of stereotypes from history dependence rather than from a multiplicity of equilibria or from the existence of a common trait as is usually done in the literature it shows that new members of an organization may suffer from an original sin of their elders long after the latter are gone and it derives necessary and sufficient conditions under which group reputations can be rebuilt last the paper applies the theory to analyse when a large firm can maintain a reputation for quality 1 collective reputations collective reputations play an important role in economics and the social sciences countries ethnic racial or religious groups are known to be hard working honest corrupt hospitable or belligerent some firms enjoy substantial rents from their reputations for producing high quality products some departments are reported to treat their faculty or students fairly the paper is a first attempt at modelling the idea of group reputation as an aggregate of individual reputations a member s current incentives are affected by her past behaviour and because her track record is observed only with noise by the group s past behaviour as well the paper studies the joint dynamics of individual and collective reputations in a model in which current generations are progressively replaced by new ones and derives the existence of stereotypes from history dependence rather than from a multiplicity of equilibria or from the existence of a common trait as is usually done in the literature see section 2 for a detailed comparison with the literature it shows that new members of an organization may suffer from an original sin of their elders long after the latter are gone and it derives necessary and sufficient conditions under which group reputations can be rebuilt last the paper applies the theory to analyse when a large firm can maintain a reputation for quality let us spell out the building blocks of our theory in more detail a a group s reputation is only as good as that of its members each member is characterized by individual traits such as talent diligence or honesty past individual behaviour conveys information about these traits and generates individual reputations

the 2007 2009 financial crisis an erosion of ethics a case study this case study examines five dimensions of the 2007 2009 financial crisis in the united states 1 the devastating effects of the financial crisis on the u s economy including unparalleled unemployment massive declines in gross domestic product gdp and the prolonged mortgage foreclosure crisis 2 the multiple causes of the financial crisis and panic such as the housing and bond bubbles excessive leverage lax financial regulation disgraceful banking practices and abysmal rating agency performance 3 the extraordinary efforts of the federal reserve the federal reserve bank of new york and the department of the treasury to stem the financial freefall triggered by the crisis and resuscitate financial institutions 4 the ethical implications of the unprecedented actions by government institutions to rescue financial institutions and drag the country back from the brink of global financial collapse and the conduct of the various parties contributing to the financial crisis such as the shoddy behavior of mortgage brokers the massive securitization of mortgages into overly complex bonds the excessive leverage of financial institutions the disgraceful work of bond rating firms the abysmal risk management systems employed by financial institutions and the massive operations of the shadow banking and over the counter derivatives markets and 5 the major provisions of the dodd frank wall street reform and consumer protection act signed into law to in response to the financial crisis and for the purpose of correcting the egregious conduct of major financial institutions

securitization a financing vehicle for all seasons securitization is considered to be one of the biggest financial innovations of the last century it is also regarded as both a catalyst and a solution to the 2008 financial crisis once a popular method of financing the mortgage and consumer credit markets aspects of the global securitization market are now struggling to revive in this paper i discuss the role that ethics played in securitization prior to the 2008 financial crisis and find that it is not an obvious story of moral failures but rather that it lies in more subtle elements of the financial system the ethics uncertainty role in the securitization story is one of flawed incentives and the shifting of responsibility for handling risk the role of securitization and the ethics of risk transfer have rarely been discussed explicitly in the literature the historical origins of securitization and lessons learned from previous flawed uses of the process are also provided i also detail the various global institutional reform proposals that have taken place moving forward it is crucial to understand the causes consequences and ethical implications of securitization in the financial crisis so as to help individuals and managers better assess risk align incentives and design appropriate policy responses

impatience incentives and obesity this paper explores the relationship between time preferences economic incentives and body mass index bmi using data from the 2006 national longitudinal survey of youth we rst show that greater impatience increases bmi and the likelihood of obesity even after controlling for demographic human capital occupational and nancial characteristics as well as risk preference next we provide evidence of an interaction

from volatility to value analysing and managing financial and performance risk in energy savings projects abstract many energy related investments are made without a clear financial understanding of their values risks and volatilities in the face of this uncertainty the investor such as a building owner or an energy service company will often choose to implement only the most certain and thus limited energy efficiency measures conversely commodities traders and other sophisticated investors accustomed to evaluating investments on a value risk and volatility basis often overlook energy efficiency investments because risk and volatility information are not provided fortunately energy efficiency investments easily lend themselves to such analysis using tools similar to those applied to supply side risk management accurate and robust analysis demands a high level of understanding of the physical aspects of energy efficiency which enables the translation of physical performance data into the language of investment with a risk management analysis framework in place the two groups energy efficiency experts and investment decision makers can exchange the information they need to expand investment in demand side energy projects in this article we first present the case for financial risk analysis in energy efficiency in the buildings sector we then describe techniques and examples of how to identify quantify and manage risk finally we describe emerging market based opportunities in risk management for energy efficiency

the effect of myopia and loss aversion on risk taking an experimental test myopic loss aversion is the combination of a greater sensitivity to losses than to gains and a tendency to evaluate outcomes frequently two implications of myopic loss aversion are tested experimentally 1 investors who display myopic loss aversion will be more willing to accept risks if they evaluate their investments less often 2 if all payoffs are increased enough to eliminate losses investors will accept more risk in a task in which investors learn from experience both predictions are supported the investors who got the most frequent feedback and thus the most information took the least risk and earned the least money language en

the indirect ethics of aig s backdoor bailout we experimentally assess the ethics of the u s government s indirect bailout of the bank counterparties of american international group during the 2008 financial crisis when the indirect bailout is jointly compared with a counterfactual where the government directly bails out the banks subjects judge the indirect bailout to be far more unethical on the other hand when the two scenarios are judged separately subjects consider a direct bailout of banks to be more unethical this suggests that ethical judgments of indirect versus direct action exhibit a type of preference reversal that is dependent upon whether the evaluation mode is joint or separate the pedagogical and policy implications of this preference reversal are discussed

safety culture in financial trading an analysis of trading misconduct investigations high profile failures in financial trading have led to interest in how the culture of the industry produces risky and unethical behaviours among traders yet there is no established theoretical framework for studying this we apply safety culture theory to examine ten recent high profile trading mishaps investigated by the uk financial regulator the results show that the dimensions of safety culture e g management commitment to safety systems and procedures used to understand organisational accidents in domains such as aviation also explain failures in risk management within financial trading organisations this counters narratives focusing on traders who are unethical rule breakers and emphasises the value of a systemic approach whereby safety culture theory is used to explain why risky behaviours in financial trading occur safety culture therefore provides a conceptual basis for further research on risky and unethical behaviours in financial trading alongside providing insights for possible intervention

non welfarist optimal taxation and behavioral public economics research in behavioral economics has uncovered the widespread phenomenon of people making decisions against their own good intentions in these situations the government might want to intervene indeed individuals might want the government to intervene to induce behavior that is closer to what individuals wish they were doing the analysis of such corrective interventions through taxes and subsidies might be called behavioral public economics however such analysis where the government has an objective function that is different from that of individuals is not new in public economics in these cases the government is said to be non welfarist in its objectives and there is a long tradition of nonwelfarist welfare economics especially the analysis of optimal taxation and subsidy policy where the outcomes of individual behavior are evaluated using a preference function different from the one that generated the outcomes the object of this paper is to first of all present a unified view of the non welfarist optimal taxation literature and secondly to present behavioral public economics as a natural special case of this general framework

margin call using film to explore behavioural aspects of the financial crisis the aim of this article is to show how the critically acclaimed and award winning film margin call may be used in business ethics teaching set in a fictional investment bank at the dawn of the financial crisis the film zooms in on the motivations and decision making of people who had much to lose from the crash of the hitherto very profitable mortgage backed securities market the film offers rich material for analysis of behaviours that contributed to the crisis the article will set out topics for classroom discussion including the impact of incentives and power structures contextual factors that distance people from the consequences of their actions and considerations of how the banking industry may be transformed

re evaluating the role of energy efficiency standards a behavioral economics approach abstract the economic models that prescribe pigovian taxation as the first best means of reducing energy related externalities are typically based on the neoclassical model of rational consumer choice yet consumer behavior in markets for energy using durables is generally thought to be far from efficient giving rise to the concept of the energy efficiency gap this paper presents a welfare analysis of energy policies that is based on a behavioral model of temptation and self control introduced by gul and pesendorfer 23 24 we find that in the presence of temptation i pigovian taxes alone do not yield a first best outcome ii when viewed as substitutes energy efficiency standards can dominate pigovian taxes and iii a policy combining standards with a pigovian tax can yield higher social welfare than a pigovian tax alone implying that the two instruments should be viewed as complements rather than substitutes

how much energy do building energy codes save evidence from california houses regulations governing the energy efficiency of new buildings have become a cornerstone of us environmental policy california enacted the first such codes in 1978 and has tightened them every few years since i evaluate the resulting energy savings three ways comparing energy used by houses constructed under different standards controlling for building and occupant characteristics examining how energy use varies with outdoor temperatures and comparing energy used by houses of different vintages in california to that same difference in other states all three approaches yield estimated energy savings significantly short of those projected when the regulations were enacted

does csr reduce firm risk evidence from controversial industry sectors in this paper we examine the relation between corporate social responsibility csr and firm risk in controversial industry sectors we develop and test two competing hypotheses of risk reduction and window dressing employing an extensive u s sample during the 1991 2010 period from controversial industry firms such as alcohol tobacco gambling and others we find that csr engagement inversely affects firm risk after controlling for various firm characteristics to deal with endogeneity issue we adopt a system equation approach and difference regressions and continue to find that csr engagement of firms in controversial industry sectors negatively affects firm risk to examine the premise that firm risk is more of an issue for controversial firms we further examine the difference between non controversial and controversial firm samples and find that the effect of risk reduction through csr engagement is more economically and statistically significant in controversial industry firms than in non controversial industry firms these findings support the risk reduction hypothesis but not the window dressing hypothesis and the notion that the top management of u s firms in controversial industries is in general risk averse and that their csr engagement helps their risk management efforts

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

the global financial crisis and the values of professionals in finance an empirical analysis the idea that the ethical values of professionals in finance pifs e g stockbrokers and fund managers have played a role in the global financial crisis gfc is widespread the crisis of ethics debate is important concerning one of the main policy challenges of our times but is based on popular lore and anecdotes rather than systematic evidence we analyze the self enhancement and self transcendence values of pifs vis a vis the general population and test for patterns of variation that are consistent with the idea of a crisis of values meaning patterns of variation that would implicate pifs values in the gfc employing pre crisis data allows for an unbiased assessment results reveal only minor differences in values between pifs and the general population too small to support the idea of a crisis of ethical values by objective standards extensive robustness checks confirm these findings sometimes actually revealing values differences counter to the crisis of ethical values idea we conclude that the financial system would not have fared better had we had a different breed of pifs rather situational forces can induce severe disregard for the welfare of others also in people with ordinary decent values hence if anything the gfc shows that the financial services industry has been providing an environment highly conducive to unethical behavior the practical implication is that fixes to the financial system can only come from improved regulatory design

moral hazard income taxation and prospect theory the standard theory of optimal income taxation under uncertainty has been developed under the assumption that individuals maximise expected utility however prospect theory has now been established as an alternative model of individual behaviour with empirical support this paper explores the theory of optimal income taxation under uncertainty when individuals behave according to the tenets of prospect theory it is seen that many of the standard results are modified in interesting ways the first order approach for solving the optimisation prob lem is not valid over the domain of losses and the marginal tax schedule offers full insurance around the reference consumption level the implications of non welfarist objectives under income uncertainty are also examined

neoclassical theory versus prospect theory evidence from the marketplace several experimental studies have provided evidence that suggest indifference curves have a kink around the current endowment level these results which clearly contradict closely held economic doctrines have led some influential commentators to call for an entirely new economic paradigm to displace conventional neoclassical theory e g prospect theory which invokes psychological effects this paper pits neoclassical theory against prospect theory by investigating data drawn from more than 375 subjects actively participating in a well functioning marketplace the pattern of results suggests that prospect theory adequately organizes behavior among inexperienced consumers but consumers with intense market experience behave largely in accordance with neoclassical predictions moreover the data are consistent with the notion that consumers learn to overcome the endowment effect in situations beyond specific problems they have previously encountered this transference of behavior across domains has important implications in both a positive and normative sense

beyond revealed preference choice theoretic foundations for behavioral welfare economics we propose a broad generalization of standard choice theoretic welfare economics that encompasses a wide variety of nonstandard behavioral models our approach exploits the coherent aspects of choice that those positive models typically attempt to capture it replaces the standard revealed preference relation with an unambiguous choice relation roughly x is strictly unambiguously chosen over y written xp y iff y is never chosen when x is available under weak assumptions p is acyclic and therefore suitable for welfare analysis it is also the most discerning welfare criterion that never overrules choice the resulting framework generates natural counterparts for the standard tools of applied welfare economics and is easily applied in the context of specific behavioral theories with novel implications though not universally discerning it lends itself to principled refinements

individual time preferences and energy efficiency a large literature examines energy efficiency investments by consumers and firms partic ularly evaluation of the extent of and expla nations for an energy efficiency ee gap gerarden newell and stavins 2015 but prior studies have not considered the role of individ ual discount rates in such decisions instead most assessments assume a certain discount rate against which the rationality of observed choices is gauged allcott and wozny 2014 or alternatively estimate aggregate discount rates that best match observed ee decisions condi tional on an assumed decision model hausman 1979 the absence of evidence on the role of indi vidual discount rates is surprising because the profitability of ee investments depends fun damentally on the rate at which individuals discount future energy savings relative to the required upfront investment the potential importance of individual discount rates is further heightened by findings in experimental studies that elicited time preferences exhibit consider able heterogeneity frederick loewenstein and o donoghue 2002 this paper broadly examines the role of indi vidual discount rates in ee decisions our ear lier findings on information provision newell and siikamaki 2014 henceforth nsindicate that the efficacy of alternative labels in guiding cost efficient decisions depends critically on the discount rate used for analysis here we closely examine individual discount rates as a deter minant of the value households place on future energy savings our results demonstrate that individual dis count rates exhibit considerable heterogeneity

nudging farmers to use fertilizer theory and experimental evidence from kenya we model farmers as facing small fixed costs of purchasing fertil izer and assume some are stochastically present biased and not fully sophisticated about this bias such farmers may procrastinate post poning fertilizer purchases until later periods when they may be too impatient to purchase fertilizer consistent with the model many farmers in western kenya fail to take advantage of apparently profit able fertilizer investments but they do invest in response to small time limited discounts on the cost of acquiring fertilizer free deliv ery just after harvest calibration suggests that this policy can yield higher welfare than either laissez faire policies or heavy subsidies

time to change what to sow risk preferences and technology adoption decisions of cotton farmers in china this paper examines the role of individual risk attitudes in the decision to adopt a new form of agricultural biotechnology in china i conducted a survey and a field experiment to elicit the risk preferences of chinese farmers who faced the decision of whether to adopt genetically modified bt cotton a decade ago in my analysis i expand the measurement of risk preferences beyond expected utility theory to incorporate prospect theory i find that farmers who are more risk averse or more loss averse adopt bt cotton later farmers who overweight small probabilities adopt bt cotton earlier

wage rigidity micro and macro evidence on labor market adjustment in the modern sector aggregate data on wages and employment may provide misleading indicators of labor market conditions they may suggest inappropriate wage policies in the face of rising unemployment experienced in many developing countries during the 1980s such increases in unemployment are often attributed to wage rigidities a cursory review of aggregate data for the modern sector in cote d ivoire would support this view suggesting that employment declined during the 1979 84 recession due to an increase in real wages examination of disaggregated data from two labor force censuses of the modern sector however shows that real wages declined for specified classes of labor the work force was characterized by greater education training and experience workers with a given level of attributes received a lower real wage by the end of the recession than before it despite this drop in real wages employment in the modern sector declined

optimal policy instruments for externality producing durable goods under present bias abstract when consumers exhibit present bias the standard solution to market failures caused by externalities pigouvian pricing is suboptimal i investigate policies aimed at externalities for present biased consumers optimal policy includes an instrument to correct the externality and an instrument to correct the present bias either instrument can be an incentive based policy e g a tax on fuel economy or a command and control policy e g a fuel economy mandate under consumer heterogeneity a command and control policy may dominate an incentive based policy calibrated to the us automobile market simulation results suggest that the second best gasoline tax is 3 30 higher than marginal external damages the optimal price policy includes a gasoline tax set about equal to marginal external damages and a fuel economy tax that increases the price of an average non hybrid car by about 550 2200 relative to the price of an average hybrid car

specifications of social welfare in economic studies of climate policy overview of criteria and related policy insights an important assumption in economic studies of climate policy is the social welfare function this paper shows that applying distinct decision or social welfare criteria can result in different optimal policies of climate control notably if climate change impacts are uncertain first decision criteria in current climate economic studies are reviewed next the most important alternatives are discussed including their mathematical formalization and incorporation in economy climate models most of these alternative criteria suggest more stringent climate policies to be optimal than the standard discounted utilitarianism approach however several important welfare criteria have not or hardly seen any application in the economic analysis of climate policy we conclude that there is clear need for systematic research on this theme for which the current review provides a solid basis

uncertainty loss aversion and markets for energy efficiency increasing energy efficiency is critical to mitigating greenhouse gas emissions from fossil fuel combustion reducing oil dependence and achieving a sustainable global energy system the tendency of markets to neglect apparently cost effective energy efficiency options has been called the efficiency gap or energy paradox the market for energy efficiency in new energy using durable goods however appears to have a bias that leads to undervaluation of future energy savings relative to their expected value this paper argues that the bias is chiefly produced by the combination of substantial uncertainty about the net value of future fuel savings and the loss aversion of typical consumers this framework relies on the theory of context dependent preferences the uncertainty loss aversion bias against energy efficiency is quantifiable making it potentially correctible by policy measures the welfare economics of such policies remains unresolved data on the costs of increased fuel economy of new passenger cars taken from a national research council study illustrate how an apparently cost effective increase in energy efficiency would be uninteresting to loss averse consumers

prospect theory and energy efficiency abstract investments in energy efficiency entail uncertainty and when faced with uncertainty consumers have been shown to behave according to prospect theory preferences are reference dependent and exhibit loss aversion and probabilities are subjectively weighted using data from a choice experiment eliciting prospect theory parameters i provide evidence that loss averse people are less likely to invest in energy efficiency then i consider policy design under prospect theory when there are also externalities from energy use a higher degree of loss aversion implies a higher subsidy to energy efficiency numerical simulations suggest that the impact of prospect theory on policy may be substantial

energy conservation nudges and environmentalist ideology evidence from a randomized residential electricity field experiment nudges are being widely promoted to encourage energy conservation we show that while the electricity conservation nudge of providing feedback to households on own and peers home electricity usage works with liberals it can backfire with conservatives our regression estimates predict that a democratic household that pays for electricity from renewable sources that donates to environmental groups and that lives in a liberal neighborhood reduces its consumption by 3 percent in response to this nudge a republican household that does not pay for electricity from renewable sources and that does not donate to environmental groups increases its consumption by 1 percent

reference dependent job search evidence from hungary we propose a model of job search with reference dependent preferences with loss aversion relative to recent income the reference point in this model newly unemployed individuals search hard since consumption is below their reference point over time though they get used to lower income and thus reduce their search effort in anticipation of a benefit cut their search effort rises again then declines once they get accustomed to the lower postcut benefit level the model fits the typical pattern of exit from unemployment even with no unobserved heterogeneity to distinguish between this and other models we use a unique reform in the unemployment insurance ui benefit path in 2005 hungary switched from a single step ui system to a two step system with overall generosity unchanged the system generated increased hazard rates in anticipation of and especially following benefit cuts in ways the standard model has a hard time explaining we estimate a model with optimal consumption endogenous search effort and unobserved heterogeneity the reference dependent model fits the hazard rates substantially better than plausible versions of the standard model including habit formation our estimates indicate a slow adjusting reference point and substantial impatience likely reflecting present bias jel codes d03 j64 j65

organizational culture in the financial sector evidence from a cross industry analysis of employee personal values and career success we assess the organizational culture in the finance industry in relation to the global financial crisis gfc and consider the potential of cultural change to improve the financial sector to avoid response biases we build on the person organization p o fit literature and develop a novel indirect method for assessing organizational culture that revolves around relationships between employees personal traits and their career success in the industry or organization under study we analyze personal values concerning the pursuit of private gain self enhancement values versus personal values concerning caring for others self transcendence values and consider whether employees that value self enhancement more and self transcendence less enjoy more career success relative to their peers when working in finance than when working in other industries results do not reveal any sort of cross industry differences that would implicate the finance industry s culture in the financial crisis instead we find the opposite namely that strong self enhancement values and weak self transcendence values go together with less career success in the finance industry compared to other industries hence if anything the culture in the finance industry does not seem to resonate well with professionals that seek to pursue personal gain at the expense of clients welfare implication is that cultural change has little potential to improve the financial system meanwhile the method for assessing organizational culture indirectly by analyzing relationships between employees traits and their career outcomes has wider applicability particularly when relying on scores or measures obtained directly from the people concerned is likely to render biased evidence

exploring the transition to integrated reporting through a practice lens an australian customer owned bank perspective this article explores the transition to integrated reporting by a customer owned bank referred to as goodbank and identifies the drivers of this transition thereby providing insights for other businesses seeking to engage in such reporting practice theory provides a theoretical lens for this study a case study approach encompassing in depth interviews and documents analysis enabled the data to be collected for this research this study finds that a customer owned business context enables innovative approaches to reporting an understanding of reporting and recognition of the potential value of integrated reporting basic guidelines for such a practice and organisational ethical values and goals based on a combination of economic social and environmental considerations matched by an organisational structure that embeds economic social and environmental responsibilities rather than treating these as separate silos enabled goodbank to transition to integrated reporting and differentiate itself from its competitors and other organisations