a note on environmental risk and the rate of discount abstract this paper examines the use of risk adjusted discount rates to evaluate future environmental risks it is determined that the risk adjusted discount rate should be lower not higher than the risk free rate if evaluation of future environmental risks is to point toward optimality

a note on environmental risk and the rate of discount comment abstract the sign of the adjustment to the riskless discount rate for environmental risk depends on whether the price of avoiding the consequences of the externality is seen as reducing expected net benefits or increasing expected costs the conclusion is that the risk adjustment is positive when the externality is defined as reducing expected net benefits

uncertain climate change and the international policy response abstract the implications of alternative policy responses to uncertain climate change are analyzed within the context of a simple dynamic economic model the analysis emphasizes two sources of uncertainty that surround climate change scientific uncertainty about how greenhouse gas emissions affect the climate and natural climatic variability the analysis also incorporates an economy s ability to mitigate climate changes through emissions reductions as well as its ability to adapt to such changes through adjusting production decisions while the model is very stylized and excludes some broader issues of social optimality and the allocation of rights to resources across generations basic implications of uncertainty in a dynamic world are highlighted that have not been previously discussed these results suggest that analysts will have a difficult time trying to determine whether a certain emissions strategy improves economic efficiency whether the benefits are greater than the costs when uncertainty is explicitly incorporated into the analysis

multilateralism and democracy a dissent regarding keohane macedo and moravcsik in an article printed last year in international organization keohane macedo and moravcsik argued that multilateral organizations mlo could actually be good for democracy we argue that kmm discount the prospect that mlo influence can be detrimental to democracies not because mlos are distant elitist and technocratic but precisely because mlos are highly political international organizations have much to offer in improving the welfare of citizens and facilitating coordinations among states they are not likely to improve procedural functions of democracies without a cost that itself is problematic for democracy

resolving the regulator s dilemma international coordination of banking regulations since the early 1970s bankers have developed a host of new financial instruments and practices these innovations have altered the nature of banking and this in turn has complicated the task of banking regulation national regulations have become largely ineffective in monitoring the safety and soundness of global banks the resulting market changes and the growth of knowledge about the risks facing the international financial system have prompted governments to hold multilateral discussions regarding banking regulation however the task of international regulation has been compromised by the desire of states to attract foreign and domestic investment to the financial sector since states wish to create or maintain competitive banking institutions they have often deregulated in order to provide banks with a cost advantage in the international marketplace this competitive deregulation undermines collaborative efforts under the leadership of the united states and great britain a multilateral agreement on bank capital standards was reached in december 1987 this agreement suggests that the interplay of market factors consensual knowledge and leadership by powerful states can lead to international policy coordination the article describes the multilateral negotiations that led to this banking accord

the political economy of basle ii the costs for poor countries the financial crises of the 1990s triggered many changes to the design of the international financial system we use the formulation of the new basle capital accord for banks b ii to illustrate that while much affected developing countries have had very little influence on this so called new international financial architecture we argue that b ii has been formulated largely to serve the interests of powerful market players with developing countries being left out at the same time we demonstrate that b ii is likely to raise the costs and reduce the supply of external financing for developing countries in particular furthermore and importantly b ii may well increase the pro cyclicality of external financing an unfortunate outcome given that developing countries already face much volatility in terms of capital flows overall while b ii may indeed compensate for a range of weaknesses of basle i the exclusionary policy process and costs which b ii imposes on developing countries require a re think of the way in which crucial elements of financial governance such as the basle capital accords are developed and implemented

the intrinsic limits of modern economic theory the emperor has no clothes assumptions of the uniqueness and stability of general equilibrium in a walrasian framework have no theoretical justification this paper argues that the key reason for this is that the walrasian model treats people as acting independently of one another especially in their demand behavior this independence plays an essential role in constructing economies with arbitrary excess demand functions thus making individual behavior dependent or similar may open the way to obtaining meaningful restrictions on aggregate excess demand functions copyright 1989 by royal economic society

environmental bonds and environmental research in innovative activities abstract this paper considers the incentive to uncover potential future social costs of activities having no historical precedents since ex ante markets in the future external effects of historically unique activities are non existent the private incentives to uncover the possibility of thalidomide type results in such activities is weak the paper discusses the value of sequentially determined environmental bonds as mechanisms for the generation of research funds in these cases and derives measures for the calculation of such bonds

colluding victims a public choice analysis of international alliances analysis of international alliances is often premised on predicted responses by nation states when nation states are assumed to behave as utility maximising actors large allies are exploited by small allies when output is a public good empirical analysis of defence expenditures in nato yields results consistent with the proposition that exploitation increases as alliance output approximates a pure public good but why would large countries acquiesce a public choice analysis offers a different perspective if producers of armaments are rent seeking are large allies able to capture rent by incurring a disproportionate share of defence expenditure

capital rules the domestic politics of international regulatory harmonization in the past fifteen years financial regulators from the developed world have attempted to create international regulatory standards in a variety of financial issue areas their negotiations are notable for the stark variation in the preferences of regulators toward international regulatory harmonization certain regulators actively resist any attempts at regulatory harmonization while others are vocal in their advocacy for an international agreement when will regulators seek to harmonize their rules with their foreign counterparts i propose a principal agent framework for analyzing regulator behavior that views international harmonization as a means of satisfying domestic political pressures the framework predicts that regulators are more likely to seek international regulatory harmonization when confidence in the stability of financial institutions is declining and when competitive pressures are increasing from foreign firms facing less stringent regulations i explore the consistency of the framework with two important cases in the history of international financial regulation the negotiations among bank regulators leading up to the 1988 basel accord on bank capital adequacy and the negotiations among securities regulators over capital adequacy for securities firms between 1988 and 1992 i thank gabe aguilera david bach ethan bueno de mesquita dan carpenter bill clark mark copelovitch jeff frieden dan gingerich dan ho devesh kapur joseph n r sanberg ross schaap allan stam matt stephenson two anonymous reviewers and the editors of io for helpful comments discussions and feedback i am also indebted to the thirty current and former regulators and financial industry executives who participated in interviews to advance this project finally i thank the weatherhead center for international affairs and the center for european studies for research funding

a bio economic model of community incentives for wildlife management under campfire this paper formulates a bio economic model to analyze community incentives for wildlife management under benefit sharing programs like the communal areas management programme for indigenous resources campfire in zimbabwe three agents influence the wildlife stock a parks agency determines hunting quotas outside poachers hunt illegally and a local community may choose to protect wildlife by discouraging poaching wildlife generates revenues from hunting licenses and tourism it also intrudes on local agriculture we consider two benefit sharing regimes shares of wildlife tourism rents and shares of hunting licenses resource sharing does not necessarily improve community welfare or incentives for wildlife conservation results depend on the exact design of the benefit shares the size of the benefits compared with agricultural losses and the way in which the parks agency manages hunting quotas

interests power and multilateralism multilateralism characterizes to varying degrees patterns of interaction among states and the formal organizations they construct the utility of multilateral norms or organizations varies with the type of cooperation problem states confront thus the functional logic of international cooperation leads to hypotheses about the conditions under which the institution of multilateralism may be a feasible and efficient solution as in coordination problems and those under which it will not as in collaboration problems within these constraints powerful states choose institutions that will serve their interests with multilateral arrangements becoming more attractive as the future is valued more highly multilateral institutions should be stable in circumstances of changing distributions of power relative to more hierarchical institutions the vulnerability of patterns of international cooperation to various exogenous changes depends on the type of strategic interaction underlying state behavior

environmental economics an evolutionary critique and a plea for pluralism abstract environmental economics is a contradiction in terms the contradiction is intuitive to the puzzled lay person inquiring about the nature of our subdiscipline it is explicit to those who think of environmental systems in terms of complex evolving interconnectedness and identify the economic model with the atomistic and mechanistic assumptions of classical mechanics within the subdiscipline we try to resolve the contradiction by internalizing externalities by matching market feedbacks with environmental relations while acknowledging that insights can be drawn from the market view of environmental problems i argue in this essay that 1 the contradiction is nerver resolved 2 multiple incongruous perspectives are all we have for understanding the interface between economic and environmental systems and 3 environmental economics will thrive with a return to philosophical pluralism to the open acceptance of the contradiction

national accounts and environmental resources in the paper optimal growth theory is used to derive the appropriate definition of the net national product concept when there are environmental resources and environmental damage to take into account the basic conclusions are that conventional defined np should be corrected by deducting environmental damage and adding the value of the net change of all resources

unemployment collective bargaining and the demand for protection there is a widespread consensus among nonacademic observers that labor unions with large numbers of unemployed members have been central actors in political coalitions demanding protectionist trade policies since the mid 1970s in advanced industrial societies yet trade unions and unemployment are hardly mentioned in most theories of the politics of international trade the purpose of this paper is to develop a theoretical framework for understanding the importance of unemployment as a determinant of protectionist demands that is consistent with optimizing behavior on the part of union members and firms models of labor negotiations derived from cooperative bargaining theory are used to illustrate why the material benefits of protection received by union members and their employers in protected industries increase when union members are unemployed even when workers are risk neutral and capital is immobile

intertemporal valuation in an unpredictable environment abstract the inherent unpredictability of ecological systems is a vital feature for the development of theories at the interface between economics and ecology such unpredictability is caused by instabilities that are intrinsic parts of ecosystem function succession and evolution the complexity of ecological dynamics undermines the simple probabilistic treatment of uncertainty based on the equilibrium paradigm common in traditional environmental economics we investigate an important alternative by representing the dynamics of the biogeophysical system as an infinite sequence of instabilities this leads to a stochastic process exhibiting an exponentially growing variance our analysis is carried out in a macroeconomic setting in a situation where the value system here formalized in terms of risk averse social welfare functions contains at least two distinct aspects consumption rate and the state of the environment the central variables for intertemporal valuation i e the time dependent expected values of the two welfare function components are calculated using the probability distribution describing the environmental dynamics one result is that if the unpredictability of the environmental dynamics is taken into account then the social discount rate for environmental existence values may well be negative

explaining institutional change policy areas outside options and the bretton woods institutions i propose and test a theoretical framework that explains institutional change in international relations like firms in markets international institutions are affected by the underlying characteristics of their policy areas some policy areas are prone to produce institutions facing relatively little competition limiting the outside options of member states and impeding redistributive change in comparison institutions facing severe competition will quickly reflect changes in underlying state interests and power to test the theory empirically i exploit common features of the bretton woods institutions the international monetary fund and world bank to isolate the effect of variation in policy area characteristics the empirical tests show that despite having identical membership and internal rules bargaining outcomes in the bretton woods institutions have diverged sharply and in accordance with the theory

the international politics of harmonization the case of capital market regulation the internationalization and globalization of capital markets greatly complicates the tasks of national financial regulators it is becoming increasingly difficult if not impossible to regulate the activities of banking and securities firms and the broad range of transactions in which they engage on a national level in this article i explore the process of international regulatory harmonization in capital markets focusing especially on the mechanisms political pressure market pressure and institutional arrangements that facilitate this process i argue that the united states and the united kingdom are dominant players in the capital market and that the factors most relevant for understanding harmonization processes are 1 whether other jurisdictions have incentives to emulate the regulatory innovations of the dominant financial centers and 2 whether the dominant centers experience negative externalities in the process these two factors shed considerable light on whether harmonization will be spurred primarily by market forces or by politics they also suggest the likely role of international institutions in the process of regulatory harmonization the argument is illustrated using four issue areas capital adequacy requirements for banks anti money laundering rules accounting standards and information sharing among securities regulators

making rules for global finance transatlantic regulatory cooperation at the turn of the millennium this article explains a shift in the way transatlantic authorities managed conflicts over the cross border regulation of securities markets from cooperation skewed heavily toward the preferences of u s officials and accepted grudgingly by european counterparts to a euro american regulatory condominium characterized by close interactions among decision makers and mutual accommodation in the final decades of the twentieth century the asymmetric influence wielded by u s securities market authorities had few parallels in other regulatory areas why then did u s officials become more accommodating and european authorities more influential and why did the turning point occur in 2002 and 2003 an unlikely moment for intensified transatlantic sovereignty sharing my study shows that institutional change inside the eu recast the north atlantic balance of regulatory leverage and thereby was the primary factor behind the reshaping of transatlantic cooperation internal eu regulatory centralization changed the expectations of u s and european firms and authorities and generated new incentives in washington d c for accommodation and closer transatlantic coordination my explanation differs from models that accepting u s financial pre eminence as a given attribute variance in cross border regulatory cooperation to factors such as incentives derived from the particularities of issue areas or preferences rooted in domestic politics while resonating with a well established theme from the realist branch of ipe my findings have broad theoretical significance and open new avenues for dialogue between realists and constructivists about the social political and institutional foundations of power in global economic affairs the transatlantic political process set off by financial transformation in europe reveals contemporary sources of systemic change and raises questions about what the eu s ascendance as a global financial regulator will mean in the aftermath of the late 2000s crisis

the fairness of discounting a majority rule approach a model of majority rule is developed in which each of a finite number of generations votes on a redistribution of income between itself and the other generations in voting each generation expresses tastes for its own income and for the distribution of income across generations the model is then used to derive the conditions under which discounting is justified namely those conditions for which the majority rule exhibits a positive marginal rate of time preference it is demonstrated that when each generation is wealthier than those preceding it the parameters representing the taste for income equality must be relatively high for the majority rule to exhibit a positive marginal rate of time preference

the end of an era in international financial regulation a postcrisis research agenda the global financial crisis that erupted in the summer of 2007 has made the reform of international prudential financial regulation one of the top priorities of global public policy past scholarship has usefully explained the creation and strengthening of international financial standards with reference to three policy arenas inter state domestic and transnational despite the accomplishments of this specialist literature the recent crisis has revealed a number of limitations in the ways scholars have understood inter state power relations the influence of domestic politics and the significance of transnational actors within international financial regulatory politics taken together developments in each of these three arenas suggest that researchers may also need to be prepared to shift from explaining the strengthening of official international standards to analyzing their weakening in the post crisis world the latter task will require scholars to devote more analytical attention to a wider set of international regulatory outcomes including informal regulatory convergence regulatory fragmentation and especially cooperative regulatory decentralization

alternative approaches to economic environmental interactions abstract the key questions raised by recent developments in resource and environmental economics have been what useful economic functions does the environment provide and how are these functions affected by the process of economic environmental interaction this paper distinguishes between two different formal approaches to answering these questions the more conventional approach which is concerned with the optimal allocation of economically valuable exhaustible resources and an alternative analysis that considers the trade off between on the one hand environmental quality and on the other resource depletion and waste generation by the economic process to illustrate and extend the latter approach a model is constructed to show how this trade off might lead to continuously declining environmental quality and a future ecological constraint society must therefore optimally allocate output between consumption and services to improve the environment and choose between increased capital accumulation and environmental degradation although strict application of such a model may be limited it has wider implications for the role of technological change and the value of the environment in any system experiencing deteriorating environmental quality

efficiency and applicability of economic concepts dealing with environmental risk and ignorance abstract the paper examines the efficiency and applicability of various economic concepts dealing with environmental uncertainty their applicability is analysed by classifying environmental uncertainty according to different criteria using such a structure it can be shown that while the economic concepts are able to deal satisfactorily with some types of environmental uncertainty they are unable to deal with others adequately the analysis of efficiency distinguishes between environmental risk in which the decision maker is aware of the distribution function of the random variables and ignorance in which the decision maker does not know the relevant distribution functions the concept of a risk premium proposed by siebert the policy recommendation to promote integrated technologies and the environmental assurance bonding system developed by costanza and perrings are examined in terms of efficiency and applicability the analysis reveals the following i the application possibilities of the three concepts differ significantly ii a concept which concentrates on the reduction of risk may lead to an increase in ignorance iii while an economic concept may be efficient in the context of risk it can be inefficient when ignorance exists iv a trade off exists between the possibility to precisely state whether an economic concept is efficient and the scope of its applicability

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

depletion of the environmental basis for renewable resources the economics of interdependent renewable and nonrenewable resources abstract this paper synthesizes familiar theories of nonrenewable and renewable resource economics in a two sector partial equilibrium analysis of efficient trade offs between renewable resource production and environmental development the irreversible impacts of coastal zone development provide a motivating example while development proceeds the efficient harvest of renewable resources may exceed the sustainable rate while development may involve several periods of growth and decline once development begins it proceeds without significant interruptions if a profitable renewable sector survives development ceases before exhausting all profitable opportunities interdependent stocks reduce distinctions between resource types because each sector exhibits features of the other

toward a positive theory of international institutions regulating international aviation markets the regulation of postwar international aviation markets suggests that existing approaches to international institutions cannot adequately account for important elements of international institution building in particular scholars have neglected how domestic politics shapes the incentives of national governments to create and maintain international institutions and the impact of domestic politics on the scope and functions of international institutions drawing on positive theories of regulation and the literature on property rights i argue that national politicians use international institutions to increase the wealth available for domestic redistribution in short national politicians create and maintain international institutions to maximize domestic political support i present a domestic political model that explains how when and why national politicians create international institutions the model is applied to the creation of institutions governing international aviation markets in the late 1940s and the reformulation of these institutions over the past two decades

historical roots for ecological economics biophysical versus allocative approaches abstract a number of economists today are aware that the results of their science are more or less at variance with concrete fact and are alive to the necessity of perfecting it they go wrong rather in their choice of means to that end they try obstinately to get from their science alone the materials they know are needed for a closer approximation to fact whereas they should resort to other sciences and go into them thoroughly not just incidentally for their bearing on the given economic problem until economic science is much farther advanced economic principles are less important to the economists than the reciprocal bearings of the results of economics and the results of the other social sciences many economists are paying no attention to such interrelations for mastery of them is a long and fatiguing task requiring an extensive knowledge of facts whereas anyone with a little imagination a pen and a few reams of paper can relieve himself of a chat on principles pareto 1935 para 2022

redistributive cooperation market failure wealth transfers and the basle accord indecember1987 policymakersbelongingtothegroupoften g 10 signeda far reaching agreement on international nancial regulation the basle accord ontheinternational convergence of capital measuresand capital standards underthetermsof thisagreement g 10 policymakersimplemented uniform risk based capitalrequirements on commercial banks the origins of the basle accord according tokapstein lay in the consequencesof international nancial integration international nancial integration by raising systemic risk and eroding regulators capacity toensure the soundness of national banking systems generated a market failure evi denced by thedebt crisis commercial bankshad accepted ariskier portfolioofloansthan society considered optimal and were now unwilling to bear the full costs of thislending behavior financial market failurecreated a demand for international regula tiontowhichpolicymakersrespondedby supplying thebasleaccord to theextentthat the payments system had the characterof apublic good it wasreasonable to askevery state to contribute to its maintenance bank supervisors responded to theneed for greater oversight by negotiating the basleaccord

three dilemmas of environmental accounting abstract economist during the past two decades have tried to logically extended the system of national accounts to include the value of resources environmental systems and their services alternative proposals for improving the accounts have been extensively debated but no agreement has been reached the debate has been fueld by a false implicit belief among the participants that there is one best way to understand how economies interrelate with environmental systems the falsity is exposed through the elaboration of irresolvable dilemmas rather than trying to agree on a single approach the alternative strategy of experimenting with many approaches is espoused the development and use of multiple approaches would be scientifically more rigorous and more likely fail safe

global communications and national power life on the pareto frontier regime analysis has focused on issues of market failure the resolution of which depends upon knowledge and institution building global communications regimes however have been concerned either with issues of pure coordination or with coordination problems with distributional consequences outcomes have been decided by the underlying distribution of national power in those areas where power was asymmetrically distributed and there was no agreement on basic principles and norms radio broadcasting and remote sensing no regime was formed in those areas where distributional issues could not be unilaterally resolved allocation of the radio spectrum and telecommunications regimes were created although both principles and rules changed with alterations in national power capabilities

what is ecological economics ecological economics addresses the relationships between ecosystems and economic systems in the broadest sense these relationships are the locus of many of our most pressing current problems i e sustainability acid rain global warming species extinction wealth distribution but they are not well covered by any existing discipline environmental and resource economics as it is currently practiced covers only the application of neoclassical economics to environmental and resource problems ecology as it is cur rently practiced sometimes deals with human impacts on ecosystems but the more common tendency is to stick to natural systems ecological economics aims to extend these modest areas of overlap it will include neoclassical environmental economics and ecological impact studies as sub sets but will also encourage new ways of thinking about the linkages between ecological and economic systems we have chosen the name ecological economics for this area of study because it implies a broad ecological interdisciplinary and holistic view of the problem of studying and managing our world the earth from space cover of the journal reflects this global holistic perspective we did not intend to imply with the ordering of the two words in the title that the journal is mainly an economics journal it is intended to be a new approach to both ecology and economics that recognizes the need to make economics more cognizant of ecological impacts and dependencies the need to make ecology more sensitive to economic forces incentives and constraints and the need to treat integrated economic ecologic systems with a common but diverse set of conceptual and analytical tools there was much discussion of other possible names such as economic ecology or ecology and economics or some conjoining of the two words that to me end up being confusing tongue twisters like ecolnomics or econology but ecological economics seemed to get closest to the mean ing we desired while still being evocative to the uninitiated