wicksell lindahl and the theory of public goods wicksell s and lindahl s ideas on public goods and decisions are reviewed in light of later developments in the theoretical economics literature i begin by discussing their normative ideals in particular the notion of justness and the sources of the difficulties in reaching them wicksell s and lindahl s ideal states as well as the obstacles that they perceive are compared to more recent views on free riding and on the behavior of elected representatives their views on political bargaining are then related to later concepts in particular to the core of the economy

incentives in government contracts abstract this paper is concerned with the structure of compensation schemes that a government might employ when contracting with a private firm we characterize the class of all compensation schemes that induce contracting firms to share their inside information with the government

monetary shocks in models with inattentive producers we study models where prices respond slowly to shocks because firms are rationally inattentive producers must pay a cost to observe the determinants of the current profit maximizing price and hence observe them infrequently to generate large real effects of monetary shocks in such a model the time between observations must be long and or highly volatile previous work on rational inattentiveness has allowed for observation intervals that are either constant but long e g caballero 1989 or reis 2006 or volatile but short e g reis s 2006 example where observation costs are negligible but not both in these models the real effects of monetary policy are small for realistic values of the duration between observations we show that non negligible observation costs produce both of these effects intervals between observations are infrequent and volatile this generates large real effects of monetary policy for realistic values of the average time between observations

cooperation in international environmental negotiations due to a preference for equity this paper demonstrates that cooperation in international environmental negotiations can be explained by preferences for equity within a n country prisoner s dilemma in which agents can either cooperate or defect in addition to the standard non cooperative equilibrium cooperation of a large fraction or even of all countries can establish a nash equilibrium in an emission game however where countries can choose their abatement level continuously equity preferences cannot improve upon the standard inefficient nash equilibrium finally in a two stage game on coalition formation the presence of equity interested countries increases the coalition size and leads to efficiency gains here even a stable agreement with full cooperation can be reached

optimal inattention to the stock market with information costs and transactions costs recurrent intervals of inattention to the stock market are optimal if consumers incur a utility cost to observe asset values when consumers observe the value of their wealth they decide whether to transfer funds between a transactions account from which consumption must be financed and an investment portfolio of equity and riskless bonds transfers of funds are subject to a transactions cost that reduces wealth and consists of two components one is proportional to the amount of assets transferred and the other is a fixed resource cost because it is costly to transfer funds the consumer may choose not to transfer any funds on a particular observation date in general the optimal adjustment rule including the size and direction of transfers and the time of the next observation is state dependent surprisingly unless the fixed resource cost of transferring funds is large the consumer s optimal behavior eventually evolves to a situation with a purely time dependent rule with a constant interval of time between observations this interval of time can be substantial even for tiny observation costs when this situation is attained the standard consumption euler equation holds between observation dates if the consumer is sufficiently risk averse

analytical approximations in models of hysteresis decisions made under ongoing uncertainty and costly reversibility entail a range of the state variable where inaction is optimal which in turn produces hysteresis permanent effects of temporary shifts the range is usually defined by non linear equations that need numerical solutions in this paper a technique of analytical approximations is developed and applied to two models menu costs and investment the resulting explicit solutions help clarify why hysteresis is important even for small irreversibility in the menu cost model hysteresis is two orders of magnitude larger than under the akerlof yellen or mankiw assumptions when decisions that are costly to reverse are made under conditions of ongoing uncertainty the optimum policy usually entails a range of inertia the action should be taken only when the value of the underlying state variable becomes especially favourable and reversed only when it becomes especially unfavourable there is an intermediate range over which inaction is optimal this in turn gives rise to hysteresis starting from a value in the range of inertia if the state variable crosses the action trigger point and then returns to its original level the action will be taken but not reversed thus a temporary change will leave a permanent effect numerical solutions for models of irreversible investment show that the range of inaction is remarkably large even when the cost of reversal is small see brennan and schwartz 1985 constantinides 1986 and dixit 1989a b for examples of this unfortunately the equations tlhat determine the optimum policy are highly non linear they do not have analytical solutions therefore we lack a clearer and more general understanding of why hysteresis is numerically so important in this paper i derive analytical approximations for the solutions of more general problems of this kind when the costs of change are small the idea that small costs of change induce large amounts of inertia has been popularized in the model of akerlof and yellen 1985 mankiw 1985 and others in these models second order small costs of making price changes yield price stickiness in response to first order changes in the money supply this is a simple application of the envelope theorem but these models are static and their application to a dynamic reality must assume either permanent shocks or static expectations when there is ongoing uncertainty which is rationally expected by the decision maker the option value of the status quo enlarges the zone where inaction is optimal adding these features to the mankiw akerlof yellen may model i show that fourth order small costs of change generate first order inertia

who should abate carbon emission we review the optimal pattern of carbon emission abatements across countries in a simple multi country world we model explicitly with the model in chichilnisky 4 the fact that the atmosphere is a public good within this framework we establish conditions for it to be necessary for optimality that the marginal cost of abatement be the same in all countries these condition are quite restrictive and amount to either ignoring distributional issues between countries or operating within a framework within which lump sum transfers can be made between countries these results have implications for the use of tradeable emission permits which as normally advocated will lead to the equalization of marginal abatement costs across countries the observation that the atmosphere is a public good implies that we may need to look at a lindahl equilibrium rather than a walrasian equilibrium in tradeable permits

knowing what others know coordination motives in information acquisition we explore how optimal information choices change the predictions of strategic models when a large number of agents play a game with strategic complementarity information choices exhibit complementarity as well if an agent wants to do what others do they want to know what others know this makes heterogeneous beliefs di cult to sustain and may generate multiple equilibria in models with substitutability agents prefer to difierentiate their information choices we use these theoretical results to examine the role of information choice in recent price setting models and to propose modeling techniques that ensure equilibrium uniqueness

menu costs and phillips curves this paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation sellers can change price only by incurring a real menu cost we calibrate this cost and the variance and autocorrelation of the idiosyncratic shock using a new u s data set of individual prices due to klenow and kryvtsov the prediction of the calibrated model for the effects of high inflation on the frequency of price changes accords well with international evidence from various studies the model is also used to conduct numerical experiments on the economy s response to various shocks in none of the simulations we conducted did monetary shocks induce large or persistent real responses

price setting with menu cost for multi product firms we model the decisions of a multiproduct firm that faces a fixed menu cost once it is paid the firm can adjust the price of all its products we characterize analytically the steady state firm s decisions in terms of the structural parameters the variability of the flexible prices the curvature of the profit function the size of the menu cost and the number of products sold we provide expressions for the steady state frequency of adjustment the hazard rate of price adjustments and the size distribution of price changes all in terms of the structural parameters we study analytically the impulse response of aggregate prices and output to a monetary shock the size of the output response and its duration both increase with the number of products they more than double as the number of products goes from 1 to 10 quickly converging to the response of taylor s staggered price model

sticky information and sticky prices abstract in the u s and europe prices change at least once a year yet nominal macro shocks seem to have real effects lasting well beyond a year sticky information models as posited by mankiw and reis 2002 sticky information versus sticky prices a proposal to replace the new keynesian phillips curve quarterly journal of economics 117 1295 1328 sims 2003 implications of rational inattention journal of monetary economics 50 3 665 690 and woodford 2003 princeton university press princeton nj can reconcile micro flexibility with macro rigidity we simulate a sticky information model in which price setters update information on macro shocks less frequently than information on micro shocks we then examine price changes in the micro data underlying the u s cpi empirical price changes react to old information just as sticky information models predict

contracts without memory in multiperiod agency models abstract settings are considered in which optimal multiperiod contracts can have no memory i e where second period payments do not need to depend on first period outcomes if contracts have no memory a repeated agency game can be played myopically there are no gains to long term relationships conditions on preferences for a no memory contract are presented in an agency game with moral hazard on the act selection preference separability and domain additivity imply the existence of a no memory contract in a setting without moral hazard but with asymmetric information on the outcome domain additivity implies no memory

voluntariness and efficiency in the provision of public goods abstract this paper presents a characterization of lindahl allocations which makes no reference to personalized prices lindahl equilibria are characterized here by two conditions pareto efficiency and a voluntariness condition voluntariness requires that no consumer may benefit from a reduction in his contribution if this means that the vector of public goods must be reduced in the same proportion the intersection of the large set of voluntary allocations and that of efficient ones turns out to be under differentiability the set of lindahl allocations

the impact of burden sharing rules on the voluntary provision of public goods abstract we investigate how burden sharing rules impact the voluntary provision of a public good which generates heterogeneous benefits to agents we compare different rule based contribution schemes where agents can first suggest a minimum provision level of the public good before the smallest common denominator is implemented we find that rule based contribution schemes significantly increase payoff levels relative to the vcm while significant differences exist between the rules importantly the equal payoff rule maximizes payoffs for all player types this also holds relative to a scheme where different types of players separately can determine their minimum contribution levels our results lend insights into the efficient institutional design for voluntary private provision of public goods and how burden sharing rules interact with efficiency when agents are heterogeneous

optimal inattention to the stock market inattentive agents update their information sporadically and thus respond belatedly to news we generate optimally inattentive behavior by assuming that to observe the value of his investment portfolio the consumer must pay a cost that is proportional to the portfolio s contempo raneous value it is optimal for the consumer to check his investment portfolio at equally spaced points in time consuming from a riskless trans actions account in the interim the riskless transactions account that finances consump tion guarantees that funds are never unwittingly exhausted we show that the optimal interval of time between consecutive observations of the value of the portfolio is the unique positive solution to a nonlinear equation quantitatively even a small observation cost one basis point of wealth implies a substantial eight month decision interval under conventional parameter values

monetary shocks in models with observation and menu costs we study economies where price stickiness arises due to the simultaneous presence of both menu and information costs we identify the relative importance of these costs using firm s survey data and analyze the response of prices and output following a permanent unexpected monetary shock for a given frequency of price adjustment we find that the information friction significantly amplifies the real effect of the shock when the shock is small or when it is not known by firms instead when the shock is large and known to firms the flexibility of prices increases and the real effects gradually vanish

the effects of risk aversion on production decisions in decentralized organizations this paper presents a principal agent model in which subsequent to contracting the risk averse agent becomes informed about the production process communication of the agent s information is always valuable the optimal contract given this information asymmetry is characterized by less production and a larger risk premium than when information is symmetric leading to an efficiency loss comparative statics show that the loss in expected production increases as the agent becomes more risk averse

who should abate carbon emissions an international viewpoint abstract we review the optimal pattern of carbon emission abatements across countries in a simple multi country world we model explicitly with the model in chichilnisky 1993b the fact that the atmosphere is a public good within this framework we establish conditions for it to be necessary for optimality that the marginal cost of abatement be the same in all countries these conditions are quite restrictive and amount to either ignoring distributional issues between countries or operating within a framework within which lump sum transfers can be made between countries these results have implications for the use of tradeable emission permits which as normally advocated will lead to the equalization of marginal abatement costs across countries the observation that the atmosphere is a public good implies that we may need to look at a lindahl equilibrium rather than a walrasian equilibrium in tradeable permits

justifying the lindahl solution as an outcome of fair cooperation the motivation for the lindahl equilibrium is mostly a rather artificial price mechanism even though the analogy to a competitive market was emphasised by lindahl himself his approach does not directly explain the normative ideas behind his concept in the present paper we therefore show how the lindahl equilibrium can be deduced from some simple equity axioms these normative assumptions are the benefit principle on the one hand and the equal sacrifice principle or equivalently a non envy condition as a postulate for distributional equity on the other fairness among agents with different preferences and incomes is taken into account by considering their marginal willingness to pay as shadow prices in this way the reason why the lindahl solution can be perceived as an outcome of fair cooperation might become more understandable

effects of homeownership on household savings abstract causal effects of homeownership decisions on the level and composition of household savings accumulation are estimated genuine positive impacts on both total and nonhousing savings as a function of house value chosen are found the findings suggest however that the homeownership decision in conjunction with choice of an average owner occupied house value does not substantially alter the total amount of accumulated household savings

short term contracts and long term agency relationships abstract long term contracts are valuable only if optimal contracting requires commitment to a plan today that would not otherwise be adopted tomorrow we show that commitments are unnecessary and hence short term contracts are sufficient if 1 all public information can be used in contracting 2 the agent can acess a bank on equal terms with the principal 3 recontracting takes place with common knowledge about technology and preferences and 4 the frontier of expected utility payoffs generated by the set of incentive compatible contracts is downward sloping at all times

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

incomplete information higher order beliefs and price inertia the question that motivates this paper is how incomplete information impacts the response of prices to nominal shocks our baseline model is a variant of the calvo model in which firms observe the underlying nominal shocks with noise in this model the response of prices is pinned down by three parameters the precision of available information about the nominal shock the frequency of price adjustment and the degree of strategic complementarity in pricing decisions this result synthesizes the broader lessons of the pertinent literature however this synthesis provides only a partial view of the role of incomplete information once one allows for more general information structures than those used in previous work one cannot quantify the degree of price inertia without data on the dynamics of higher order beliefs or of the agents forecasts of inflation we highlight this with three extensions of our baseline model all of which break the tight connection between the precision of information and higher order beliefs featured in previous work

public goods and the distribution of income abstract this article addresses conceptual issues concerning the distributive incidence of public goods solutions depend on the specific purposes for asking the question of distributive incidence notably assessing the extent to which various public goods should be provided determining how the provision of public goods affects the desirability of income redistribution and providing a meaningful description of the distribution of well being in the course of the analysis a simple and intuitive version of the benefit principle of taxation qualitatively different from those commonly advanced in pertinent literatures is presented and some of the problems confronting empirical attempts to measure the distributive incidence of public goods are resolved

limited liability contracts between principal and agent abstract the optimal strategy of the principal is examined in an environment where there are ex post limitations on the maximum penalty that can be imposed on a riskneutral agent contrary to the case in which such limitations are not imposed it is in the principal s interest to deliberately forego the opportunity to induce socially efficient behavior and to instead design a contract that induces the agent to realize an efficient outcome only in the most productive state of nature and perhaps in certain very unproductive states the properties of the contract are examined in detail

real estate assets and consumer spending in an interesting contribution to this journal elliott 1980 shows that consumer spending is better explained if permanent income is estimated from explicit measures of wealth the wealth approach rather than current and past incomes the income approach in the income approach permanent income yp is computed as a distributed lag mechanism in the wealth approach this procedure is followed for labor income but permanent nonhuman income is specified as a constant multiple 72 of actual nonhuman wealth at the beginning of a period ant the distinction between income and wealth approaches is intuitively appealing and has been tried before elliott s equation 12 is the same as equation 5 in bhatia 1972 except that elliott uses actual wealth instead of bhatia s expected wealth the novelty in elliott s specification lies in considering different components of wealth which is also appealing because measures of wealth ranging from real money balances to broad aggregates of human and nonhuman wealth have been used in the literature elliott s most striking result that real assets mainly real estate and durable goods have no significant effect on consumer spending however is disturbing because real estate is a major household asset in fact the largest one in many years according to frb balance sheets 1983 and accrued gains on real estate have often been larger than gains on corporate equities during the last decade or two also there is some recent empirical evidence that gains on real assets significantly reduce personal saving peek 1983 the main purpose of this note is to reexamine and rehabilitate the role of real assets one can question elliott s specification which does not adequately allow for expected gains or his use of undistributed corporate profits as a contemporaneous proxy for all capital gains tenuous at best but the heart of the matter is the residential value series derived by elliott from perpetual inventory benchmarks pp 533 34 which being accumulations of construc

durable consumption and asset management with transaction and observation costs this paper provides a contribution to the recent growing literature on rational inattention we start by testing the implications of recent rational inattention models of asset management liquidity holdings and savings using two novel datasets some predictions of these models are at odds with the data which motivates us to introduce a new model that shifts the focus from non durable to durable consumption and features both information and adjustment costs the focus on non durable consumption which departs from the previous literature is key to improve the fit of the model the investor s behavior in our setup combines elements of what the literature refers to as state dependent and time dependent adjustments the model allows us to quantify the information and transactions costs that are consistent with observed patterns of information review and asset trades a calibration of the model shows that very small information costs are sufficient to reproduce the relatively high frequency of observation that is found in the data we test a novel prediction of the model on the relationship between assets trades and durable goods trades and find it aligned with the data

environmental goods and the distribution of income the paper presents a theoretical investigation of the distributional impacts of environmental commodities it introduces an appropriate framework defines concepts for measuring benefits and examines the determinants of benefit incidence within this setup its emphasis is on methodology and on recognizing the relevant economic variables and information it turns out that in an equal preference model the magnitude of the income elasticity of marginal willingness to pay for an environmental good is the crucial variable determining progressivity it is related to a number of other elasticities which are more easily accessible to an empirical estimation

the magnitude of menu costs direct evidence from large u s supermarket chains we use store level data to document the exact process of changing prices and to directly measure menu costs at five multistore supermarket chains we show that changing prices in these establishments is a complex process requiring dozens of steps and a nontrivial amount of resources the menu costs average 105 887 year per store comprising 0 70 percent of revenues 35 2 percent of net margins and 0 52 price change these menu costs may be forming a barrier to price changes specifically 1 a supermarket chain facing higher menu costs due to item pricing laws that require a separate price tag on each item changes prices two and one half times less frequently than the other four chains 2 within this chain the prices of products exempt from the law are changed over three times more frequently than the products subject to the law in principle fixed costs of changing prices can be observed and measured in practice such costs take disparate forms in different firms and we have no data on their magnitude so the theory can be tested at best indirectly at worst not at all alan blinder 1991 p 90

asymmetric information incentives and intrafirm resource allocation this paper considers the question how should a firm allocate a resource among divisions when the productivity of the resource in each division is known only to the division manager obviously if the divisions as represented by their managers are indifferent among various allocations of the resource the headquarters can simply request the division managers to reveal their private information on productivity knowing that the managers have no incentive to lie the resource allocation problem can then be solved under complete or at least symmetric information this aspect is a flaw in much of the recent literature on this topic i e there is nothing in the models considered which makes divisions prefer one allocation over another thus although in some cases elaborate allocation schemes are proposed and analyzed they are really unnecessary in the model we develop a division can produce the same output with less managerial effort if it is allocated more resources and effort is costly to the manager we further assume that this effort is unobservable by the headquarters so that it cannot infer divisional productivity from data on divisional output and managerial effort given these assumptions we seek an optimal resource allocation process our results show that certain types of transfer pricing schemes are optimal in particular if there are no potentially binding capacity constraints on production of the resource then an optimal process is for each division to choose a transfer price from a schedule announced by the headquarters division managers receive a fixed compensation minus the cost of the resource allocated to them at the chosen transfer price resources are allocated on the basis of the chosen transfer prices if there is a potentially binding constraint on resource production a somewhat more complicated but similar scheme is required

a dynamic economy with costly price adjustments this paper studies a general equilibrium model of a dynamic economy with menu costs each firm s productivity is exposed to idiosyncratic and aggregate productivity shocks around a trend and the money supply to monetary shocks around a trend all consumption pricing and production decisions are based on optimizing behavior there exists a staggered markov perfect equilibrium with prices determined by a two sided s s markup strategy the paper analyzes the optimal markup strategy and investigates the dynamics of the price index and the aggregate output the welfare consequences of the uncertain aggregate productivity and money supply are also examined

endogenous time dependent rules and inflation inertia in this paper we endogenize fixed price time dependent rules to examine the output effects of monetary disinflation we derive the optimal rules in and out of inflationary steady states and develop a methodology to aggregate individual pricing rules which vary through time because of strategic complementarities we have to solve both problems simultaneously this allows us to reassess the output costs of monetary disinflations including aspects such as the roles of the initial level of inflation and of the degree of strategic complementarity in price finally we relax the strict assumption of pure time dependent rules by allowing price setters to re evaluate their rules at the time disinflation is announced

progression under the benefit approach to the theory of taxation abstract the implications for progression of the benefit approach to the theory of taxation are studied in this paper it is concluded that the case for progression rests on the degree of substitutability between public and private goods

optimal price setting with observation and menu costs we study the price setting problem of a firm in the presence of both observation and menu costs in this problem the firm optimally decides when to collect costly information on the adequacy of its price an activity which we refer to as a price review upon each review the firm chooses whether to adjust its price subject to a menu cost and when to conduct the next price review this behavior is consistent with recent survey evidence documenting that firms revise prices infrequently and that only a few price revisions yield a price adjustment the goal of the paper is to study how the firm s choices map into several observable statistics depending on the level and relative magnitude of the observation vs the menu cost the observable statistics are the frequency of price reviews the frequency of price adjustments the size distribution of price adjustments and the shape of the hazard rate of price adjustments we provide an analytical characterization of the firm s decisions and a mapping from the structural parameters to the observable statistics we compare these statistics with the ones obtained for the models with only one type of cost the predictions of the model can with suitable data be used to quantify the importance of the menu cost vs the information cost we also consider a version of the model where several price adjustment are allowed between observations a form of price plans or indexation we find that no indexation is optimal for small inflation rates

what is benefit taxation abstract benefit taxation is a system in which individuals are taxed according to the benefits they receive from public expenditures this paper describes an alternative to the standard lindahl method of determining the distribution of individual benefits from government provided public goods and uses this alternative to calculate benefit taxes this alternative avoids some of the paradoxial features of lindahl pricing and generates outcomes in which all consumers benefit from reduced costs of providing public goods an illustrative calculation shows that benefit taxes defined in this way may be quite regressive

setting the right prices for the wrong reasons we consider a model of nominal price adjustment with firm specific and aggregate shocks to economic fundamentals and incomplete dispersed information firms update their expectations about fundamentals based on their own cash flows revenues and wages we show that in a model with realistic levels of product level price dispersion the firms inference about aggregate shocks is very gradual yet in the aggregate prices adjust rapidly in response to aggregate nominal shocks when an aggregate shock occurs firms mistakenly attribute it to firm specific shocks but adjust prices nevertheless since the exact nature of the shock matters little for its optimal pricing decision

egalitarian equivalent cost sharing of a public good in an economy with one public and one private good egalitarian equivalent cost sharing consists of finding the highest public good level x such that consuming x for free yields a feasible utility distribution the corresponding feasible allocation typically unique called egalitarian equivalent is in the core of the economy conversely any cost sharing method satisfying pareto optimality cost monotonicity nobody suffers a utility loss if the production technology improves upon ceteris paribus and individual rationality no single agent coalition objects or no private transfers no agent receives a positive amount of private good must select an egalitarian equivalent allocation in every economy copyright 1987 by the econometric society

voluntary provision of a public good and individual morality abstract we examine both in general games in strategic form and in games of voluntary provision of a public good some implications of the assumption that individuals may obey ethical codes of conduct the notion of morality considered captures the intuition often attributed to kant that a moral action leads to the best outcome when it is properly universalized we propose a formalization of this idea which generalizes earlier attempts made in this direction in the literature by allowing the players to differ both in their strategy sets and their preferences we show that it is easy to find examples of games in which no moral behavior of this type exists or where the only existing kantian code of conduct leads to a pareto inefficient outcome we then more specifically examine the issues of existence and pareto efficiency of kantian norms of behavior in games of voluntary provision of a public good we find in this context that there is no conflict between morality and pareto efficiency since any kantian norm of behavior is pareto efficient we also prove the existence of a kantian norm of individual contribution

integrating sticky prices and sticky information abstract understanding the relationship between nominal and real variables most notably inflation and cyclical output is one of the fundamental questions of economics toward this understanding we develop a model that integrates sticky prices and sticky information a dual stickiness model we find that both rigidities are present in u s data we also show that the dual stickiness model s closest competitor is the hybrid new keynesian model for both models current inflation depends in part on last period s inflation the former model achieves this dependence endogenously through the interaction of the two rigidities rather than through backward looking behavior u s data support the dual stickiness model over the hybrid model because lagged expectations terms appear in the former s inflation euler equation finally we show that it is quantitatively important to distinguish between the two by simulating a dynamic equilibrium model under each of the two inflation equations

ecological sufficiency individual liberties and distributive justice implications for policy making we investigate the prospects of voluntary ecological sufficiency for environmental and climate policy under the constraints implied by political liberalism we find that freedom of choice restricts sufficiency to rather wealthy societies and that a sufficiency threshold cannot be derived by referring to the poor sufficiency can be in conflict with the demands of social justice i e if the sufficiency threshold is below the social minimum implied by social justice benefits from sufficiency are highly related to individual perceptions such benefits cannot be expressed in a standard preference framework consequently alternative measures of welfare and inequality are required if sufficiency is a significant phenomenon in society standard environmental policies can have a pronounced interaction with voluntary sufficiency i e if quantity regulation is present overall the voluntary notion of sufficiency causes a dilemma as sufficiency is largely a matter of civil society however voluntary sufficiency is expected to make important contributions to the preservation of ecological resources if properly balanced with social and environmental policies and framed by public discursive control

optimal sticky prices under rational inattention this paper presents a model in which price setting firms decide what to pay attention to subject to a constraint on information flow when idiosyncratic conditions are more variable or more important than aggregate conditions firms pay more attention to idiosyncratic conditions than to aggregate conditions when we calibrate the model to match the large average absolute size of price changes observed in micro data prices react fast and by large amounts to idiosyncratic shocks but only slowly and by small amounts to nominal shocks nominal shocks have strong and persistent real effects we use the model to investigate how the optimal allocation of attention and the dynamics of prices depend on the firms environment jel e 3 e5 d8

investment diversion and equity release the macroeconomic consequences of increasing property values the 1970s argument that investment in land and property diverted finance from productive investment in manufacturing is shown to be fallacious the seller of property at higher prices will recirculate that investment into productive sectors and arguments that the distinction between services and manufacturing is important are erroneous the 1980s argument that households are able to release their increased equity gain from house price inflation to finance consumption is the converse of this argument rising house prices will require potential buyers to save more in advance of purchase this paper argues that both lines of reasoning neglect the influence of rising property values on the rate of savings rising property prices lead people to believe their wealth to have increased and thus depress their level of savings and increase consumption this is seen as a particularly british problem because of the impact of land use planning restrictions on land supply and thus land prices and the recent shif

implications of rational inattention abstract a constraint that actions can depend on observations only through a communication channel with finite shannon capacity is shown to be able to play a role very similar to that of a signal extraction problem or an adjustment cost in standard control problems the resulting theory looks enough like familiar dynamic rational expectations theories to suggest that it might be useful and practical while the implications for policy are different enough to be interesting

equity fairness and lindahl equilibria abstract the purpose of this paper is to establish a criterion of justice called l fairness for an economy with public goods the concept of l fairness is set up in such a way as to extract the ethical judgement from lindahl s equilibrium concept then it is shown that the lindahl equilibria are qualified as l fair that is any lindahl equilibrium net trade is strongly l fair and conversely any strongly l fair net trade must be a lindahl equilibrium net trade as a corollary to this proposition it is also shown that any lindahl equilibrium allocation with equal wealth is strongly l fair and conversely that any strongly l fair allocation has to be that of lindahl equilibrium with equal wealth