the impact of possible climate catastrophes on global warming policy abstract recent studies on global warming have introduced the inherent uncertainties associated with the costs and benefits of climate policies and have often shown that abatement policies are likely to be less aggressive or postponed in comparison to those resulting from traditional cost benefit analyses cba yet those studies have failed to include the possibility of sudden climate catastrophes the aim of this paper is to account simultaneously for possible continuous and discrete damages resulting from global warming and to analyse their implications on the optimal path of abatement policies our approach is related to the new literature on investment under uncertainty and relies on some recent developments of the real option in which we incorporated negative jumps climate catastrophes in the stochastic process corresponding to the net benefits associated with the abatement policies the impacts of continuous and discrete climatic risks can therefore be considered separately our numerical applications lead to two main conclusions i gradual continuous uncertainty in the global warming process is likely to delay the adoption of abatement policies as found in previous studies with respect to the standard cba however ii the possibility of climate catastrophes accelerates the implementation of these policies as their net discounted benefits increase significantly

what is capital economists and sociologists have changed its meaning should it be changed back this is a pre copyedited author produced pdf of an article accepted for publication in cambridge journal of economics following peer review the version of record geoffrey h hodgson what is capital economists and sociologists have changed its meaning should it be changed back cambridge journal of economics vol 38 5 1063 86 september 2014 is available online at http dx doi org 10 1093 cje beu013

emission taxes and optimal refunding schemes with endogenous market structure the purpose of this paper is to investigate optimal schemes for refunding the emission tax in a free entry market where the production process generates emissions we consider the regulation by a three part tax policy the government sets an emission tax a refunding scheme and an entry license tax in contrast to the case of the two part tax refund policy under no entry we show that even if it is impossible to obtain subsidies from outside the first best outcome is always attained further the government s budget constraint is binding under the optimal schemes our result implies that the tax refund system works effectively in a market with endogenous entry

environmental policy under oligopoly with endogenous market structure emission taxes under both fixed number oligopoly and endogenous market structure which are the most relevant market structures for policy issues are examined in the latter case and contrary to what is expected under imperfect competition the optimal tax could exceed marginal external damages which implies that externalities generated by oligopolistic firms could be optimally controlled by overinternalizing environmental damages under endogenous market structure a scheme consisting of a license fee and a second best underinternalizing emission tax can increase social welfare as compared to the use of a single emission tax exceeding marginal damages copyright 1995 by the editors of the scandinavian journal of economics

long run welfare effect of energy conservation regulation we investigate the long run effect of energy conservation regulation which forces firms to raise energy saving investment above the cost minimizing level if pigovian tax is imposed additional regulation always harms social welfare under perfect competition while it can improve welfare under imperfect competition our result under imperfect competition holds regardless of whether strategies are strategic substitutes or complements in contrast to direct entry regulation

entrapment in large technology systems institutional commitment and power relations abstract large technology systems cannot be developed without social commitments usually including legal especially in the form of contracts organisational involving producers users and financiers and political involving various actors associated with the state commitments without such commitments there can be no innovation and no investment given the high risks that are entailed however embedded commitments can create inertia causing inferior technologies and technology paths to survive long after they should have been abandoned this form of technological lock in may be reinforced when there are close relations between producers and states which prevent markets and democratic processes from operating effectively these phenomena are illustrated through study of the thermal oxide reprocessing plant thorp a nuclear reprocessing plant in the uk the lesson for technology policy is that much more attention needs to be given to the maintenance of reversibility and adaptability in infrastructural development

taxation within cournot oligopoly abstract when the production of output causes pollution we often consider taxation as a means to reduce it this paper examines various forms of taxation to control pollution within cournot oligopoly it shows that two commonly used forms can actually increase pollution in contrast both of these forms unambiguously reduce pollution within the competitive model the paper provides conditions in terms of demand and technology that make taxation effective in the cournot oligopoly case another implication of the analysis is that outside the price taking framework asymmetry of cost functions is particularly important and deserves careful attention when we examine the effect of taxation

optimal timing problems in environmental economics abstract because of the uncertainties and irreversibilities that are often inherent in environmental degradation its prevention and its economic consequences environmental policy design can involve important problems of timing i use a simple two period model to illustrate these optimal timing problems and their implications for environmental policy i then lay out and solve a continuous time model of policy adoption in which the policy itself entails sunk costs and environmental damage is irreversible the model generalizes earlier work in that it includes two stochastic state variables one captures uncertainty over environmental change and the other captures uncertainty over the social costs of environmental damage solutions of the model are used to show the implications of these two types of uncertainty for the timing of policy adoption

capital as a layer cake a systems approach to capital and its multi level structure abstract we elaborate a systems approach to the nature of capital that develops the work of menger and lachmann the ml trajectory we propose a layer cake metaphor to capture the kernel of the ml approach and contrast it with the neoclassical metaphor of capital as an amorphous homogeneous jelly according to the ml approach capital is combinatorial and is organized structurally and relationally the approach examines capital as it exists out there in the world as it is actually formed and experienced by entrepreneurs capital goods only exist and become productive once they are connected in entrepreneurs production plans so that the focus is upon relations of complementarity between heterogeneous capital goods as used in production hence capital has a layered structure there is a nested hierarchy of capital goods capital combinations and economy wide capital structures using bunge s theory of systems we investigate how each of these entities is a concrete system at a different layer of economic reality both capital combinations and overall capital structure arise in an irreversible causal genetic process in real time and capital structure has the added distinction of being an emergent spontaneous order

a general model of r d competition and policy this article constructs a model of r d with heterogeneous firms each firm s probability of success is a function of its sunk and recurrent r d expenditures the social gains from an innovation are not fully captured by the successful firm the comparison of the social optimum and the market equilibrium involves balancing spillover and crowding effects pigovian corrective policies as well as strategic policies for a subset of colluding firms are discussed

the aggregate production function is not neoclassical standard postulates concerning the aggregate production function are about marginal productivities and the associated demands for labour and capital these demands are supposed to be negatively related to the factor prices namely the wage rate and the interest rate the theoretical cases in which these neoclassical properties fail to hold are regarded as anomalies we compute the aggregate values for production capital and labour and find that the neoclassical postulates do not hold for the detailed dataset that we consider the obvious implication of this result is that the models and analysis based on the aggregate neoclassical production functions are ill founded as they are based on something that does not exist

strategic growth options we provide a strategic rationale for growth options under uncertainty and imperfect competition in a market with strategic competition investment confers a greater capability to take advantage of future growth opportunities this strategic advantage leads to the capture of a greater share of the market either by dissuading entry or by inducing competitors to make room for the stronger competitor as a result of this strategic effect payoffs are in a rough sense more convex than in the case of no investment in a growth option when the strategic advantage is strong increased uncertainty encourages investment in growth options higher uncertainty means more opportunity rather than simply larger risk if the strategic effect is weak the reverse is true on the other hand an increase in systematic risk discourages the acquisition of growth options our results contradict the view that volatility is a strong disincentive for investment

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

the classicals and the neoclassicals a rejoinder to frank hahn refutes the classical and marxist analysis of prices and competition presentation of an intertemporal equilibrium model in a simple formalism possibility of locating prices of production and a distributed profit rate in an intertemporal equilibrium relationship between prices in intertemporal equilibrium and prices of production ebsco

the kinetics of capital formation and economic organisation we examine the inseparability of capital formation and economic organisation in capitalist economic systems capital possesses a complex multilevel micro meso macro structure that is always in the process of transformation levels of the capital structure are interdependent and interactive correspondingly economic organisation at these various levels is not an independent entity in itself it occurs as a by product and structural aspect of capital formation rather than the transaction our focal unit of analysis is a production notion the capital combination that emanates from the kinetic organisation of material by human agency we consider the behaviour of entrepreneurs as causal agents in specifying and appraising potential capital combinations reorganising production and scrapping capital entrepreneurs combinatorial actions often change existing materials to serve functions for which they were not originally designed thereby changing capital structures and the shape and boundaries of economic organisation at different levels of economic complexity capital is created in a dynamic knowledge generation process that depends on entrepreneurs perceptions of gaps in the capital structure copyright the author 2012 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

optimal pollution taxation in a cournot duopoly it is well known that the optimal pollution tax in a competitive industry is equal to the marginal damage inflicted by the pollution it has also been shown that the optimal pollution tax on a monopoly is less than the marginal damage in this paper i derive the optimal pollution tax for a cournot duopoly if firms have different production costs the optimal tax rate may exceed the marginal damage this is so because the tax may be an effective instrument for allocating production from the less to the more efficient firm it is also shown that if one firm has a positive most preferred pollution tax the sum of consumer and producer surpluses will be declining in the tax at this level

the political economy of refunded emissions payment programs abstract we study the effects on the equilibrium tax of refunding firms pollution tax payments can lobbying yield stricter environmental policy do imperfect property rights affect policy clean firms may favor higher pollution levies but insecure property rights reduce this incentive

emission taxes and optimal refunding schemes abstract we examine how refunding emission taxes to firms dependent on market shares should be designed while refunding is harmful under perfect competition a first best self financing tax tax refunding scheme exists if the marginal damage from pollution exceeds the marginal distortion in an imperfectly competitive output market with symmetric firms under pre investment in cleaner technology with short term abatement opportunities a first best refunding scheme exists if pollution refunding can be made dependent on both market and investment shares

real options and preemption under incomplete information abstract this paper introduces incomplete information and preemption into an equilibrium model of firms facing real investment decisions the optimal investment strategy may lie anywhere between the zero npv trigger level and the optimal strategy of a monopolist depending on the distribution of competitors costs and the implied fear of preemption our model implies that the equity returns of firms which hold real options and are subject to preemption will contain jumps and positive skewness

refunded emission payments theory distribution of costs and swedish experience of nox abatement in this paper we discuss the effect of refunding environmental charges taxes are often resisted by polluters because they imply both abatement and tax costs when charges are refunded the incentives for abatement are essentially the same as for a tax as long as there are many producers the incidence and distribution of costs is however different lower net tax payments reduce resistance from the polluters and make refunded emissions payments politically easier to implement at a sufficiently high charge level to have significant abatement effects we describe and examine the refunded emissions payment scheme as a policy instrument and compare it with taxes and permits with regard to allocative properties distribution of costs property rights and consequently the politics of implementation as an empirical example the swedish charge on nitrogen oxides is analyzed

property rights entrepreneurship and coordination abstract the notion of plan coordination enjoys a central place in the analysis of institutions and competitive market processes the conventional wisdom is that institutions and policies vary in the extent to which they promote competition and how quickly and completely they bring individuals plans into closer coordination with one another kirzner has provided the most fully elaborated statement on the use of coordination as a positive analytical device for explaining market dynamics and as a normative criterion for evaluating economic policies we identify the core propositions in his analysis that elucidate how economic coordination depends upon that most fundamental of market institutions the system of private property rights we also probe into kirzner s claims about inherent limitations in our ability to compare the coordinative potential of alternative property rights systems we unpack the consequences of these core propositions using the economic theory of property rights we also examine kirzner s assertion that dynamic competition including schumpeterian innovation is necessarily coordinative in its market effects we find that his argument rests on the implicit assumption that property rights remain constant during the process of market adjustment we provide a case study of the advent of commercial aviation as a potential counterexample to his claims

entry barriers and economic welfare the relationship between economic welfare and the number of firms in a quasi cournot market is examined in the first place we presuppose the existence of a strong first best government that can enforce the marginal cost principle to the firms along with regulating the number of firms it is shown that there exist excessive number of firms at the free entry quasicournot equilibrium vis a vis the first best welfare maximizing number of firms the thrust of this result essentially survives even if we replace a utopian first best government by a secondbest government that leaves the firms to pursue their respective profit maximization freely and engages solely in regulating the number of firms it can be shown that the excess entry prevails again in this second best world recent studies in the theoretical industrial organization literature have uncovered several instances which cast serious doubt on the reasonableness of a widespread belief that increasing competition will increase welfare stiglitz 1981 p 184 it has been shown that there are cases which are not altogether unreasonable where social welfare will be increased by strengthening rather than weakening the protection of incumbent firms from the threat of potential entry this is in sharp contrast with the traditional belief 2 what is not known however is how robust these pathologies in fact are we intend to settle this problem by proving two excess entry theorems in the quasi cournot parametric conjectural variations homogeneous oligopoly model seade 1980a b in the first place we presuppose the existence of a strong first best government that could costlessly enforce the marginal cost pricing principle by firms in an oligopolistic market and regulate entry in pursuit of first best social welfare optimization it is shown that the number of firms at the free entry equilibrium exceeds the first best welfare optimizing number of firms the result has already been noted by von weizsacker 1980a b and others in terms of numerical examples our theorem 1 asserts that this phenomenon always holds true for the family of quasi cournot models at hand an implication of this result is that the existence of entry barriers which protect incumbent firms from potential competitors is not necessarily welfare decreasing in sharp contrast with the traditional belief a problem remains with theorem 1 however in that an omnipotent first best government does not exist in reality and the first best ideal is unrealizable in the actual economy therefore even if the intervention by a first best government with a view to restricting the number of firms within an industry may be welfare improving it does

market failure and government failure f or several decades a debate has been raging in development economics on the relative virtues of the free market as opposed to state intervention with the help of analytical models of a market economy the interventionists demonstrate what they consider serious instances of market failure that is the inability of a market economy to reach certain desirable outcomes in resource use the protagonists of free markets on the other hand compile impressive lists of ill conceived and counterproductive policy measures implemented by the governments of different countries at various times leading to wasteful use of resources in their economies this debate inevitably remains inlconclusive the analytical results on market failure do not disappear in the face of the evidence that most governments or for that matter most economies of less developed countries with or without state intervention have performed rather badly when there appears to be scope for imnprovement over the market outcome the search for the appropriate corrective measures goes on some protagonists of government failure question the significance of such market failures others voice skepticism about the ability of governments to take any action in the economy which is not counterproductive but none of them seems to be able to explain why a less developed country like india failed to grow during the first half of this century under a non interventionist colonial adnministration thus while the debate goes on neither side succeeds in convincing the other

induced effects and technological innovation with strategic environmental policy abstract this paper investigates an environmental policy designed to reduce the emission of pollutants under uncertainty where the agents problem is formulated as an optimal stopping problem we first analyze the single agent s case according to pindyck pindyck r s 2002 optimal timing problems in environmental economics journal of economic dynamics and control 26 1677 1697 we then extend the model to the case in which there are two competing agents therefore we consider the external economic effects that are peculiar to an agent s environmental policy decision finally we consider the effect of technological innovation the results of the analysis suggest that if there are two competing agents they implement environmental policy simultaneously furthermore the threshold for implementing environmental policy is higher when there are two agents and how long these two agents take to implement environmental policy depends on the magnitude of the external economic effect furthermore when we consider the effect of technological innovation we show that the incentive to be the leader occurs if an additional condition is satisfied

asymptotic properties of a leontief economy abstract in this paper we discuss the asymptotic properties of equilibrium quantities of a leontief economy when agents have additively separable utilities we estimate the rate of growth of equilibrium quantities and prices that either tend to zero or infinity or remain bounded below and above by strictly positive vectors in the case of homogeneous preferences we prove that the quantities of any equilibrium converge to those of an equilibrium that grows at a constant rate

the neo ricardians focuses on the neoclassical theory of economics in great britain calculation for the standard commodity assumptions of piedro sraffa on the cycle of production functions of the rate of return ebsco

the anatomy of emergence with a focus upon capital formation abstract emergence is a unifying theme of both evolutionary economics and complex systems theory in spite of this centrality emergence in economics has not been subject to an extensive critical analysis this paper remedies this deficit we identify several conditions that economic patterns i e rule systems structures must satisfy to qualify as emergent 1 material realization emergent patterns are realized in physical structures and processes 2 coherence pattern is not a mere aggregate but a systemic whole 3 non distributivity pattern possesses global properties absent from its parts 4 structure dependence systemic properties depend upon connective structure these four core features are common to all forms of emergence in economics evolutionary economic systems also exhibit extra strength versions of emergence which require that patterns possess one or more additional features 5 genuine novelty 6 unpredictability in principle and 7 irreducibility we introduce three basic forms of emergence that occur in economic systems minimal diachronic and synchronic emergence and apply these ideas to capital formation at all levels of economic order the economy wide capital structure exhibits strongly emergent properties both diachronic and synchronic that depend on its structural and functional organization it is not a mere aggregate of capital goods within the realm of capital phenomena we also compare the distinguishing characteristics of emergent and spontaneous self organizing orders we provide a case study of the iphone as an emergent capital pattern to illustrate conditions 1 7 above and the different types of emergence

international emission permit markets with refunding we propose a blueprint for an international emission permit market such as the eu trading scheme each country decides on the amount of permits it wants to offer a fraction of these permits is grandfathered the remainder is auctioned revenues from the auction are collected in a global fund and reimbursed to member countries in fixed proportions we show that international permit markets with refunding lead to outcomes in which all countries tighten the issuance of permits and are better off compared to standard international permit markets if the share of grandfathered permits is sufficiently small we obtain approximately socially optimal emission reductions

technology and economic theory technology and technological change play a central role in economics whether in the theory of resource allocation or in the theory of growth and development yet the nature of technology is largely ignored in economic theory it being considered sufficient to treat technology as a constraint on productive opportunities this short essay delves a little deeper into the nature of technology and the material energy and information transformation processes that it represents a deeper understanding of technology leads to a deeper understanding of the main currents of technological advance and to the reasons why the development of technology and its application are so uneven over time and place copyright the author 2009 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

a theory of entangled political economy with application to tarp and nra the recent financial crisis has provoked a raft of contending claims as to whether the cause of the crisis is better attributed to market failure or political failure such claims are predicated on a presumption that markets and polities are meaningfully separate entities to the contrary we argue that contemporary arrangements create an entangled political economy that renders theorizing based on separation often misleading within this alternative framework of entangled political economy we illuminate both the recent troubled assets relief program tarp and the new deal s national recovery administration nra

an optimal ad valorem tax subsidy with an output based refunded emission payment for permits auction in an oligopoly market in this paper we explores a hybrid mechanism of output based refunded emission payment and an ad valorem tax subsidy to remove the distortions emerging in the permit auction market and the product market we find that first best outcomes can be achieved under such a hybrid mechanism a clearing price equal to a pigouvian tax will endogenously result in the permit auction market moreover we extend the analysis to take into consideration the investment in abatement technology

economics of development and the development of economics the purpose of this paper is to restore some historical perspective by highlighting the many contributions of development economics to the rest of economics we will point out to the younger generations how some of the glittering ideas they currently play with originally came from that now neglected field and how in some cases they have rediscovered with great fanfare insights that were well known in the development literature familiarity with which would have enriched their own work