managing without growth abstract there are three main arguments why developed countries should consider managing without growth 1 continued economic growth worldwide is not an option owing to environmental and resource constraints and so developed countries should leave room for growth in developing countries where the benefits of growth are evident 2 in developed countries growth has become uneconomic in the sense that it detracts more from well being than it adds and 3 economic growth in developed countries is neither necessary nor sufficient for meeting specific policy objectives such as full employment no poverty and protection of the environment this paper explores various growth scenarios for canada over the medium range to 2020 using lowgrow a dynamic simulation model after describing lowgrow a scenario is presented that shows conditions under which the rate of unemployment in canada could be reduced to historically low levels poverty eliminated and greenhouse gas emissions reduced to comply with canada s commitment under the kyoto protocol without relying on economic growth this is not to say that zero growth should itself become a policy objective rather that the dependence on and defence of economic growth should not be an obstacle to fulfilling more specific welfare enhancing objectives of full employment eliminating poverty and protecting the environment the paper concludes with some policy implications for managing without growth followed by an annex which provides a technical description of lowgrow

demand and supply of infrequent payments as a commitment device evidence from kenya despite extensive evidence that preferences are often time inconsistent there is only scarce evidence of willingness to pay for commitment infrequent payments for frequently provided goods and services are a common feature of many markets and they may naturally provide commitment to save for lumpy expenses multiple experiments in the kenyan dairy sector show that i farmers are willing to incur sizable costs to receive infrequent payments as a commitment device ii poor contract enforcement however limits competition among buyers in the supply of infrequent payments we then present a model of demand and supply of infrequent payments and test its additional predictions

an experimental examination of labor supply and work intensities estimated negative substitution effects on work hours question the empirical validity of the classical labor supply model estimates are reconciled by allowing a dual choice of hours and effort for piecerate workers in such a model these negative substitution effects result from substituting on and off the job leisure we test our model using controlled experimentation on human subjects these experiments while not naturally occurring environments represent real economic choices and can generate data unavailable elsewhere e g effort data the results support our model and they have implications both for labor management and for empirical research focusing only on the hours choice the classical static model of the labor leisure choice offers positive compensated wage effects on hours of work as its main testable implication previous attempts to test this hypothesis with field data have cast doubt on the empirical validity of the static labor supply model due to the frequency of negative estimated compensated wage elasticities a limitation of the model is that it views the choice of hours of work as the only

status effects and environmental externalities abstract this paper examines a static competitive economy where the production of a consumption good generates pollution that adversely affects human welfare preferences are defined over consumption leisure pollution and economic status each person s status increases with her own consumption but decreases with the average consumption of society the achievement of a pareto efficient resource allocation requires a consumption tax to offset the incentive to overconsume in the pursuit of enhanced status in contrast with standard prescriptions the efficient pollution tax generally exceeds the sum of individuals marginal willingness to pay for pollution abatement these findings remain unaltered when preferences are modified to incorporate altruistic concern for others well being altruism however suggests a potential role for government intervention to achieve a desirable i e pareto efficient distribution of welfare between individuals

an integrated approach to climate change income distribution employment and economic growth a demand driven growth model involving capital accumulation and the dynamics of greenhouse gas ghg concentration is set up to examine macroeconomic issues raised by global warming e g effects on output and employment of rising levels of ghg offsets by mitigation relationships among energy use and labor productivity income distribution and growth the economic significance of the jevons and other paradoxes sustainable consumption and possible reductions in employment and sources of instability and cyclicality implicit in the two dimensional dynamical system the emphasis is on the combination of biophysical limits and post keynesian growth theory and the qualitative patterns of system adjustment and the dynamics that emerge

state and prospect of public choice a european view the victory of public choice may not yet have arrived and the share of european contributions may still be small it has nevertheless been argued that there is a great future in public choice three especially promising areas have been indicated by way of example the theory of economic policy politico economic models and international political economy

the economic theory of agrarian institutions introduction alternative approaches to the theory of institutions in economic development pranab bardhan rational peasants efficient institutions and a theory of rural organization methodological remarks for development economics joseph e stiglitz part 1 land and labour theories of sharecropping nirvikar singh a comparison of principal agent and bargaining solutions the case of tenancy contracts clive bell contracts with eviction in infinitely repeated principal agent relationships bhaskar dutta et al production relations in semi arid african agriculture hans binswanger et al part 2 credit and interlinked transactions rural credit markets the structure of interest rates exploitation and efficiency kaushik basu credit and agrarian class structure mukesh eswaran and ashok kotwal credit rationing tenancy productivity and the dynamics of inequality avishay braverman and joseph e stiglitz on choice among creditors and bonded labour contracts t n srinivasan some aspects of linked product and credit market contracts among risk neutral agents clive bell and t n srinivasan a note on interlinked rural economic arrangements pranab bardhan interlinkages and the pattern of competition debraj ray and kunal sengupta part 3 marketing and insurance agricultural institutions for insurance and stabilization david m newbery peasants risk aversion and the choice of marketing intermediaries and contracts a bargaining theory of equilibrium marketing contracts pinhas zusman part 4 co operatives technology and the state agricultural producer co operatives louis putterman institutional analysis of credit co operatives avishay braverman and j luis guasch agrarian structure technological innovations and the state alain de janvry et al

interfirm relationships and informal credit in vietnam trading relations in vietnam s emerging private sector are shaped by two market frictions the difficulty of locating trading partners and the absence of legal enforcement of contracts examining relational contracting we find that a firm trusts its customer enough to offer credit when the customer finds it hard to locate an alternative supplier a longer duration of trading relationship is associated with larger credit as is prior information gathering customers identified through business networks receive more credit these network effects are enduring suggesting that networks are used to sanction defaulting customers

ecological macroeconomic models assessing current developments our society faces a dilemma while continued economic growth is ecologically unsustainable low or negative rates of economic growth are accompanied by adverse social impacts hence there is a need for macroeconomic tools that can help identify socially sustainable post growth pathways the emerging field of ecological macroeconomics aims to address this need and features a number of new macroeconomic modelling approaches this article provides 1 a review of modelling developments in ecological macroeconomics based on the literature and interviews with researchers and 2 an analysis of how the different models incorporate policy themes from the post growth literature twenty two ecological macroeconomic models were analysed and compared to eight policy themes it was found that environmental interactions and the monetary system were treated most comprehensively themes of income inequality work patterns indicators of well being and disaggregated production were addressed with less detail while alternative business models and cross scale interactions were hardly addressed overall the combination of input output analysis with stock flow consistent modelling was identified as a promising avenue for developing macroeconomic models for a post growth economy however due to the wide interpretation of what the economy entails future research will benefit from employing a range of approaches

tracking the quality premium of certified coffee evidence from ethiopia summary certification of voluntary sustainability standards vss is rapidly increasing in global value chains while consumers mostly in developed countries are willing to pay significant premiums for the certification of such standards it is not well understood how effectively these incentives are transmitted to producing countries we study vss more in particular fair trade and organic certification in ethiopia s coffee sector the country s most important export commodity using a unique census of transaction data at the export level and large scale data at the production level we find that transmission of export quality premiums to coffee producers is limited with only less than one third of this premium being passed on and we find limited evidence of effects due to communal investments moreover as quality premiums are small and average production levels in these settings are low we estimate that these premiums would only lead to an increased income for coffee farmers of 22 usd per year even with a perfect transmission scenario and therefore would have little impact on the welfare of the average coffee farmer given that the vss studied are characterized by the highest premiums among vss schemes it can be assumed that even lower benefits from other vss certification schemes trickle down to producers

networks in conflict theory and evidence from the great war of africa we study from both a theoretical and an empirical perspective how a network of military alliances and enmities affects the intensity of a conflict the model combines elements from network theory and from the politico economic theory of conflict we obtain a closed form characterization of the nash equilibrium using the equilibrium conditions we perform an empirical analysis using data on the second congo war a conflict that involves many groups in a complex network of informal alliances and rivalries the estimates of the fighting externalities are then used to infer the extent to which the conflict intensity can be reduced through i dismantling specific fighting groups involved in the conflict ii weapon embargoes iii interventions aimed at pacifying animosity among groups finally with the aid of a random utility model we study how policy shocks can induce a reshaping of the network structure

does competition encourage credit provision evidence from african trade credit relationships previous work has claimed that monopoly power facilitates the provision of credit because monopolists are better able to enforce payment here we argue that if relationship specific investments are required by borrowers to establish creditworthiness monopoly power may reduce credit provision because holdup problems ex post will deter borrowers from investing in establishing creditworthiness empirically we examine the relationship between monopoly power and credit provision using data on the supply relationships of firms in five african countries consistent with the up front investment story we find that monopoly power is negatively associated with credit provision and that this correlation is stronger in older supplier relationships because the data include several observations per firm we are able to utilize firm fixed effects thus netting out unobserved firm characteristics that may have been driving results in earlier studies

relational contracts and the theory of the firm relational contracts informal agreements sustained by the value of future relationships are prevalent within and between firms we develop repeated game models showing why and how relational contracts within firms vertical integration differ from those between nonintegration we show that integration affects the parties temptations to renege on a given relational contract and hence affects the best relational contract the parties can sustain in this sense the integration decision can be an instrument in the service of the parties relationship our approach also has implications for joint ventures alliances and networks and for the role of management within and between firms

the perception and efficiency of labour supply choices by pigeons hunter and davison 1982 observed how pigeons supplied labor by pecking on discs connected to devices allowing access to food both the devices and the forces needed to depress the discs were varied widely this paper models the pigeons choice problems as a neo classical type of labor allocation problem it estimates the paths containing the least effortful allocations of pecks for given total rates of access to food and compares the subjects actual choices for proximity to the efficient choices the estimated efficiency levels are high supporting the neo classical model also shown is that the neo classical model predicts that the subjects behavior should be consistent with the melioration model of choice an alternative model of choice advocated by some psychologists copyright 1992 by royal economic society

subjective performance measures in optimal incentive contracts objective measures of performance are seldom perfect in response incentive contracts often include important subjective components that mitigate incentive distortions caused by imperfect objective measures this paper explores the combined use of subjective and objective performance measures in respectively implicit and explicit incentive contracts naturally objective and subjective measures often are substitutes sometimes strikingly so we show that if objective measures are sufficiently close to perfect then no implicit contracts are feasible because the firm s fallback position after reneging on an implicit contract is too attractive we also show however that objective and subjective measures can reinforce each other if objective measures become more accurate then in some circumstances the optimal contract puts more weight on subjective measures because the improved objective measures increase the value of the ongoing relationship and so reduce the firm s incentive to renege we also analyze the use of subjective weights on objective performance measures and provide case study evidence consistent with our analyses

on testing the utility hypothesis in order to be able to conduct a test of the core utility hypothesis that is not confounded with tests of subsidiary hypotheses that economic agents all have the same preferences and that their preferences are weakly separable it is necessary to use data that are disaggregated and complete in order to carry out a utility hypothesis test with complete data revealed preference theory must first be extended the generalised axiom of revealed preference is extended to include labour supply and portfolio choice then a complete disaggregated data set is used to test the utility hypothesis and two preference separability hypotheses

economic growth inequality and well being in advanced industrial societies rising levels of inequality have contributed strongly to the observed gap that has emerged between per capita income and the index of sustainable economic welfare isew which in its current versions is known as the genuine progress indicator gpi yet the isew gpi approach to measuring the social costs of inequality has been criticized as ad hoc the present paper reviews the literature on this topic and efforts to resolve it based on the construction of indicators grounded in a a classical utilitarian ethical framework and b empirical evidence on the relationship between income and well being in the united states after tax income per capita grew at an annual rate of 1 7 between 1979 and 2011 a growth rate of 1 2 per year arises when income is adjusted to account for the social costs of inequality the most common adjustment used in isew gpi studies yields a similar growth rate despite much smaller subtractions from baseline income

strategic default in the international coffee market this article studies strategic default on forward sale contracts in the international coffee market to test for strategic default we construct contract specific measures of unanticipated changes in market conditions by comparing spot prices at maturity with the relevant futures prices at the contracting date unanticipated rises in market prices increase defaults on fixed price contracts but not on price indexed ones we isolate strategic default by focusing on unanticipated rises at the time of delivery after production decisions are sunk and suppliers have been paid estimates suggest that roughly half of the observed defaults are strategic we model how strategic default introduces a trade off between insurance and counterparty risk relative to indexed contracts fixed price contracts insure against price swings but create incentives to default when market conditions change a model calibration suggests that the possibility of strategic default causes 15 8 average losses in output significant dispersion in the marginal product of capital and sizable negative externalities on supplying farmers

the social contingency of wants abstract economic models typically assume that individual wants are determined by forces exogenous to the economic system social psychology and consumer research in contrast support the view that the perceived benefits of goods and services are strongly affected by endogenously determined social norms we present a selective overview of the literature on the relationship between consumption and well being exploring the ways in which informal arguments from social science might be linked to formal models of economic behavior we find that the fixed preferences hypothesis leads to the systematic undervaluation of environmental services and the underprovisioning of environmental goods

a theoretical foundation to support the index of sustainable economic welfare isew genuine progress indicator gpi and other related indexes abstract for some time now ecological economists have been putting forward a threshold hypothesis the notion that when macroeconomic systems expand beyond a certain size the additional cost of growth exceeds the flow of additional benefits in order to support their belief ecological economists have developed a number of similar indexes to measure and compare the benefits and costs of growth e g the index of sustainable economic welfare isew and the genuine progress indicator gpi in virtually every instance where an index of this type has been calculated for a particular country the movement of the index appears to reinforce the existence of the threshold hypothesis of late a number of observers have cast doubt over the validity of these alternative indexes one of the concerns commonly expressed is the supposed lack of a theoretical foundation to support the isew the gpi and other related indexes by adopting a concept of income and capital outlined by fisher nature of capital and income a m kelly new york 1906 this paper demonstrates that these alternative indexes are theoretically sound but in order to be broadly accepted require the continuous development of more robust valuation methods

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 case for methodological pluralism abstract ecology and economics share the same greek root both address complex systems ecology consists of numerous approaches to understanding natural systems energetics population biology food web models hierarchy theory to mention just a few within ecology field knowledge and the reporting of new observations are well respected economics on the other hand is dominated by one pattern of thinking and standard of proof the market model and econometrics within economics field knowledge and observations per se are little valued agreement on a correct method is frequently taken as an indication of the maturity of a science the argument is developed in this paper that all the aspects of complex systems can only be understood through multiple methodologies the agreement on method within economics however seems to reflect stronger pressures within the discipline for conformity than for truth relative to ecology since ecological economics seeks to understand a larger system than either economics or ecology seeks to understand a diversity of methodologies is appropriate and pressures to eliminate methodologies for the sake of conformity should be avoided

in kind finance a theory of trade credit it is typically less profitable for an opportunistic borrower to divert inputs than to divert cash therefore suppliers may lend more liberally than banks this simple argument is at the core of our contract theoretic model of trade credit in competitive markets the model implies that trade credit and bank credit can be either complements or substitutes among other things the model explains why trade credit has short maturity why trade credit is more prevalent in less developed credit markets and why accounts payable of large unrated firms are more countercyclical than those of small firms

second best institutions the focus of reforms in the developing world has moved from getting prices right to getting institutions right this reflects the recognition that markets are unlikely to work well in the absence of a predictable and legitimate set of rules that support economic activity and dis pense its fruits governance reforms have become the buzzword for bilateral donors and multilateral institutions in much the same way that liberalization privatization and stabiliza tion were the mantras of the 1980s but what kind of institutions should reform ers strive to build it is easier to list the func tions that good institutions perform than it is to describe the shape they should take desirable institutions provide security of property rights enforce contracts stimulate entrepreneurship foster integration in the world economy maintain macroeconomic stability manage risk taking by financial intermediaries supply social insurance and safety nets and enhance voice and account ability but as the variety of institutional forms that prevail in the advanced countries themselves suggests richard freeman 2000 peter hall and david soskice 2001 each one of these ends can be achieved in a large number of different ways rodrik 2007a

comments on arrow and on lucas such a number of interesting and provocative things are put forward in lucas and in arrow in this issue that i would like to be able to dissect them in detail for example lucas states that the problem of controlling inflation has been successfully solved in a scientific sense p s405 i am tempted to explore the limits of the set of problems that might be said to be scientifically solved in the lucas sense but i fear that this would take up a good deal of space arrow deplores the use of homogeneity assumptions as a device for adding content to otherwise inconclusive economic theories but presumably he does not believe that the sonnenschien mantel debreu theorem is the ultimate conclusion regarding the useful content of the propositions of general equilibrium theory some restrictions of intermediate strength are presumably called for and i would like to make the case that strong empirical generalizations about the nature of human actors such as those describing the biological requirements for survival are available and relevant in this connection this too would take some space to develop in detail though not as much as the first subject given the constraints i must choose a focus i will focus on what i take to be the main message that lucas has put forward regarding the relationship between adaptive behavior and the rationality assumptions employed in standard economic theory this message is recognizable as the intellectual descendant of similar discussions by friedman and machlup in the 1940s and 1950s and the ideas involved remain extremely influential in the discipline today i will present and comment on my own statement of this position which i following blaug 1980 will call the classic defense of the rationality as

how basic are behavioral biases evidence from capuchin monkey trading behavior behavioral economics has demonstrated systematic decision making biases in both lab and field data do these biases extend across contexts cultures or even species we investigate this question by introducing fiat currency and trade to a colony of capuchin monkeys and recovering their preferences over a range of goods and gambles we show that capuchins react rationally to both price and wealth shocks but display several hallmark biases when faced with gambles including reference dependence and loss aversion given our capuchins inexperience with money and trade these results suggest that loss aversion extends beyond humans and may be innate rather than learned

are people inequality averse or just risk averse individuals preferences for risk and inequality are measured through choices between imagined societies and lotteries the median relative risk aversion which is often seen to reflect social inequality aversion is between 2 and 3 most people are also found to be individually inequality averse reflecting a willingness to pay for living in a more equal society left wing voters and women are both more risk and inequality averse than others the model allows for non monotonic swfs implying that welfare may decrease with an individual s income at high income levels which is illustrated in simulations based on the empirical results

intra generational equity and sustainable welfare a time series analysis for the uk and sweden this paper discusses the importance of intra generational equity to sustainable development it outlines a number of methodologies for measuring income inequality in the economy and presents several possible ways of incorporating the impact of distributional effects into measures of welfare in the economy the authors highlight in particular an index developed by atkinson atkinson a b 1970 distributive politics and economic growth q j econ may 465 490 based on the social welfare model this method possesses two main advantages over other methods firstly it is expressed directly in terms of social well being secondly value judgements incorporated into the measure are made explicit through the parameter o which expresses society s degree of aversion to income inequality the paper calculates the value of the atkinson index for two case study countries sweden and the uk between 1950 and 1996 for a central estimate of o0 8 the results show that the welfare loss due to inequalities in the distribution of income varied between 5 and 10 for sweden and between 6 and 14 for the uk with the higher values coming towards the end of the period the paper explores the sensitivity of these results to changes in the value of o for the case of the uk and discusses the relevance of the work to the measurement of sustainable welfare 2000 elsevier science b v all rights reserved

is more always better a survey on positional concerns abstract we use survey data to provide some empirical information about concerns regarding relative standing respondents chose between a world where they have more of a good than others and one where everyone s endowment of the good is higher but the respondent has less than others questions asked about education attractiveness and intelligence for one s child and oneself income vacation time approval and disapproval from a supervisor and papers to write half of the respondents preferred to have 50 less real income but high relative income concerns about position were strongest for attractiveness and supervisor s praise and weakest for vacation time

excess entry vertical integration and welfare this article provides a systematic analysis of the welfare effects of vertical integration by a monopolist input supplier into a monopolistically competitive downstream industry we give sufficient conditions on consumer preferences that lead to pareto improving vertical integration and demonstrate a close relationship between assumptions on preference for variety excess entry in monopolistically competitive markets and the welfare effects of vertical integration excess entry in downstream markets tends to give rise to pareto improving vertical integration we extend the analysis to vertical oligopoly and access price regulation

the impact of competition on management quality evidence from public hospitals in this paper we examine the causal impact of competition on management quality we analyze the hospital sector where geographic proximity is a key determinant of competition and english public hospitals where political competition can be used to construct instrumental variables for market structure since almost all major english hospitals are government run closing hospitals in areas where the governing party has a small majority is rare due to fear of electoral punishment we find that management quality measured using a new survey tool is strongly correlated with financial and clinical outcomes such as survival rates from emergency heart attack admissions ami more importantly we find that higher competition as indicated by a greater number of neighboring hospitals is positively correlated with increased management quality and this relationship strengthens when we instrument the number of local hospitals with local political competition adding another rival hospital increases the index of management quality by one third of a standard deviation and leads to a 10 7 reduction in heart attack mortality rates

management practices relational contracts and the decline of general motors abstract general motors was once regarded as the best managed and most successful firm in the world however between 1980 and 2009 gm s us market share fell from 46 to 20 percent and in 2009 the firm went bankrupt we argue that the conventional explanation for this decline namely high legacy labor and healthcare costs is seriously incomplete and that gm s share collapsed for many of the same reasons that many highly successful american firms of the 1960s were forced from the market including a failure to understand the nature of the competition they faced and an inability to respond effectively once they did we focus particularly on the problems gm encountered in developing the relational contracts essential to modern design and manufacturing and we discuss a number of possible causes for these difficulties we suggest that gm s experience may have important implications for our understanding of the role of management in the modern knowledge based firm and for the potential revival of manufacturi

the economics of casino taxation in this article a model of the costs of a casino is developed that focuses on the implications for economic welfare of different taxation schemes for casinos the situation being considered is in a country where casinos cater exclusively to foreign tourists the goal of the country is to determine the maximum amount of taxes that can be extracted from the activities of this sector under different systems of taxation when the price of gambling is set by regulation above its competitive level the economic losses created by excessive investment in the sector can be reduced by taxation a turnover tax on the amount gambled can maximize both tax revenue and the economic welfare of the country due to administrative constraints a number of countries rely on the taxation of the casinos fixed assets or a combination of a turnover tax and a tax on fixed costs the model is applied to the situation in north cyprus the annual economic efficiency loss from its poorly designed tax policies on casino gambling is

what determines productivity lessons from the dramatic recovery of the u s and canadian iron ore industries following their early 1980s crisis great lakes iron ore producers had faced no competition from foreign iron ore in the great lakes steel market for nearly a century as the 1970s closed in the early 1980s as a result of unprecedented developments in the world steel market brazilian producers were offering to deliver iron ore to chicago the heart of the great lakes market at prices substantially below prices of local iron ore the u s and canadian iron ore industries faced a major crisis that cast doubt on their future in response to the crisis these industries dramatically increased productivity labor productivity doubled in a few years whereas it had changed little in the preceding decade materials productivity increased by more than half capital productivity increased as well i show that most of the productivity gains were due to changes in work practices work practice changes reduced overstaffing and hence increased labor productivity by increasing the fraction of time equipment was in operating mode changes in work pra

report cards the impact of providing school and child test scores on educational markets this paper studies study the impact of providing school and child test scores on subsequent test scores prices and enrollment in markets with multiple public and private providers a randomly selected half of the sample villages markets received report cards this increased test scores by 0 11 standard deviations decreased private school fees by 17 percent and increased primary enrollment by 4 5 percent heterogeneity in the treatment impact by initial school quality is consistent with canonical models of asymmetric information information provision facilitates better comparisons across providers improves market efficiency and raises child welfare through higher test scores higher enrollment and lower fees

competition and relational contracts in the rwanda coffee chain how does competition affect market outcomes when formal contracts are not enforceable and parties resort to relational contracts difficulties with measuring relational contracts and dealing with the endogeneity of competition have frustrated attempts to answer this question we make progress by studying relational contracts between upstream farmers and downstream mills in rwanda s coffee industry first we identify salient dimensions of their relational contracts and measure them through an original survey of mills and farmers second we take advantage of an engineering model for the optimal placement of mills to construct an instrument that isolates geographically determined variation in competition conditional on the suitability for mills placement within the catchment area we find that mills surrounded by more suitable areas i face more competition from other mills ii use fewer relational contracts with farmers and iii exhibit worse performance an additional competing mill also iv reduces the aggregate quantity of coffee supplied to mills by farmers and v makes farmers worse off competition hampers relational contracts directly by increasing farmers temptation to default on the relational contract and indirectly by reducing mill s profits

measuring future grandparents preferences for equality and relative standing individuals aversion to risk and inequality and their concern for relative standing are measured through experimental choices between hypothetical societies it is found that on average individuals are both fairly inequality averse and have a strong concern for relative income the results are used to illustrate welfare consequences based on a utilitarian swf and a modified crra utility function it is shown that the social marginal utility of income may then become negative even at income levels that are far from extreme

beyond gdp measuring and achieving global genuine progress article i nfo while global gross domestic product gdp has increased more than three fold since 1950 economic wel fare as estimated by the genuine progress indicator gpi has actually decreased since 1978 we synthesized estimates of gpi over the 1950 2003 time period for 17 countries for which gpi has been estimated these 17 countries contain 53 of the global population and 59 of the global gdp we compared gpi with gross domestic product gdp human development index hdi ecological footprint biocapacity gini coefficient and life satisfaction scores results show a significant variation among these countries but some major trends we also estimated a global gpi capita over the 1950 2003 period global gpi capita peaked in 1978 about the same time that global ecological footprint exceeded global biocapacity life satisfaction in almost all countries has also not improved significantly since 1975 globally gpi capita does not increase beyond a gdp capita of around 7000 capita if we distributed income more equitably around the planet the current world gdp 67 trillion yr could support 9 6 billion people at 7000 capita while gpi is not the perfect economic welfare indicator it is a far better approximation than gdp development policies need to shift to better account for real welfare and not merely gdp growth

adaptive behavior and economic theory the relationship between psychological and economic views of behavior once a subject of heavy dispute is now understood in a very similar way by practitioners of both these disciplines and of our sister social sciences in general terms we view or model an individual as a collection of decision rules rules that dictate the action to be taken in given situations and a set of preferences used to evaluate the outcomes arising from particular situation action combinations these decision rules are continuously under review and revision new decision rules are tried and tested against experience and rules that produce desirable outcomes supplant those that do not i use the term adaptive to refer to this trial anderror process through which our modes of behavior are determined if one is interested in modeling particular decisions in any very explicit way it is obviously necessary to think about rather narrow aspects of an individual s entire set of decision rules his or her personality experimental psychology has traditionally focused on the adaptive process by which decision rules are replaced by others in this tradition the influence of the subject s or as an economist says the agent s preferences this essay uses a series of examples to illustrate the use of rationality and adaptation in economic theory it is argued that these hypotheses are complementary and that stability theories based on adaptive behavior may help to narrow the class of empirically interesting equilibria in certain economic models an experiment is proposed to test this idea

measuring development with inequality how should aggregate indicators of development account for inequality abstract the paper analyzes how inequality is accounted for in aggregate indicators of development and whether and how it should be used the motivation behind the study stems from the renewed interest in inequality in academia public discourse and in global policy first we argue that inequality should be considered when constructing development indicators the role of distribution in development is important both because people generally prefer lower inequality and inequality tends to have negative effects on development outcomes second we analyze how ten selected development indicators account for inequality in terms of justification type of inequality measure of inequality and method of incorporation and what the strengths and weaknesses of different approaches are we found considerable diversity especially for inequality measures and methods of incorporation as for the type of inequality inequality of opportunities is considered marginally and overlapping inequalities not at all increasing data availability opens the door for inclusion especially for the latter aspect as most indicators suffer from insufficient methodological substantiation we argue for increased clarity regarding why and how inequality is accounted for in development indicators the analysis is complemented by a detailed review of treatment of inequality by the analyzed indicators annex

economic growth quality environmental sustainability and social welfare in china provincial assessment based on genuine progress indicator gpi abstract in order to devise scientific and sustainable development strategy it is vital to assess the quality of economic growth as a useful complement to traditional economic indicators gpi s most reputed virtue is its great improvement in evaluating environmental and social costs in this paper we estimate the gpi for all 31 provinces in mainland china from 1997 to 2016 gpi estimation is highly sensitive to income inequality climate change damage and depletion of non renewables we address contestable methodological assumptions associated with the three items which have been usually ignored in empirical studies we use the atkinson index in place of the gini index as a measure of income inequality we avoid the problematic duplicated counting of climate change damage and the unjustified cost escalation factor in depletion of non renewables our results show that first gpi per capita has recently declined in some provinces unveiling a threat to social welfare and sustainability second the relative threshold effect the progress of social welfare promotion is slower than the expansion of economic scale has been found in many provinces third resource consumption and environmental pollution especially water pollution and carbon emissions would generate substantial welfare losses

the value of relationships evidence from a supply shock to kenyan rose exports this paper provides evidence on the importance of reputation in the context of the kenyan rose export sector a model of reputation and relational contracting is developed and tested a seller s reputation is defined by buyer s beliefs about seller s reliability we show that i due to lack of enforcement the volume of trade is constrained by the value of the relationship ii the value of the relationship increases with the age of the relationship and iii during an exogenous negative supply shock deliveries are an inverted u shaped function of relationship s age models exclusively focusing on enforcement or insurance considerations cannot account for the evidence jel d86 f14 l14 o13 o19 q17 imperfect contract enforcement is a pervasive feature of real life commercial transactions in the absence of formal contract enforcement trading parties rely on informal mechanisms to guarantee contractual performance e g johnson mcmillan and woodruff 2002 greif 2005 fafchamps 2010 among those mechanisms long term relationships based on trust or reputation are perhaps the most widely studied and have received substantial theoretical attention the theoretical literature has developed a variety of models that capture salient features of real life relationships e g enforcement problems e g macleod and malcomson 1989 baker gibbons and murphy 1994 baker gibbons and murphy 2002 levin

sources of economics majors more biology less business this paper uses national data from 1975 to 2003 to examine which alternative academic disciplines were chosen by undergraduates as if they were complements to or substitutes for an economics major one familiar hypothesis suggests that majoring in economics is a reluctant choice for students more interested in a business major however when the proportion of economics majors is considered across all disciplines i find a striking inverse relation between the shares of graduating majors in economics and those in biology no relationship between any other two disciplines is closer the paper closes with speculations about possible reasons for the strong negative relation between the shares of graduates in biology and economics

competition and regulation in vertically related markets in an industry where naturally monopolistic and competitive activities are vertically related should the natural monopolist be allowed also to operate in the deregulated competitive sector unlike much of the literature on vertical integration this paper assumes that monopoly pricing behaviour is regulated and therefore the effect of vertical integration on the task of regulation is central to the analysis in the model there is both imperfect information and imperfect competition when vertical integration by the monopolist is allowed the regulator s task is made harder insofar as the monopolist has anticompetitive incentives to raise rivals costs on the other hand integration may lead to there being fewer firms in the deregulated sector and hence less duplication of fixed costs the overall welfare comparison between separation and integration is ambiguous as two simple examples illustrate various extensions to the analysis are also considered one of the central questions in debates on regulatory reform is how to organize industries that contain both naturally monopolistic and potentially competitive activities electricity transmission and distribution are characterized by natural monopoly cost conditions but electricity generation is not in the gas industry pipeline services may be naturally monopolistic but supply to larger customers is not in telecommunications natural monopoly is more a feature of local network operations than of long distance operations and is not present in apparatus manufacture and supply or in the provision of value added services in railways while the infrastructure of track and stations is naturally monopolistic the supply of train services might not be policy developments notably those associated with privatization in britain and deregulation in the united states have sometimes led to radical structural reform in these industries at t for decades a vertically integrated monopolist was required under the 1982 settlement of its long running antitrust case against the u s government to divest itself of its local network operations the central electricity generating board cegb in england and wales was restructured both vertically transmission grid activities were separated from generation and horizontally before privatization in 1990 1991 by contrast british telecom was privatized as a vertically integrated dominant firm bt now faces competition from mercury and others especially in the long distance market but its dominance of local network operations might affect competition there and in other areas such as apparatus supply the local network monopoly would of course have to be regulated in any event but its link via ownership to vertically related and potentially competitive activities poses additional regulatory questions many of the efforts of the regulatory body oftel notably in relation to interconnection between bt s and rivals 1 for a general account of the theory and british experience of regulatory reform in the utility industries

time versus state in insurance experimental evidence from contract farming in kenya the gains from insurance arise from the transfer of income across states yet by requiring that the premium be paid upfront standard insurance products also transfer income across time we show that this intertemporal transfer can help explain low insurance demand especially among the poor and in a randomized control trial in kenya we test a crop insurance product which removes it the product is interlinked with a contract farming scheme as with other inputs the buyer of the crop offers the insurance and deducts the premium from farmer revenues at harvest time the take up rate is 72 compared to 5 for the standard upfront contract and take up is highest among poorer farmers additional experiments and outcomes indicate that liquidity constraints present bias and counterparty risk are all important constraints on the demand for standard insurance finally evidence from a natural experiment in the united states exploiting a change in the timing of the premium payment for federal crop insurance sho s that the transfer across time also affects insurance adoption in developed countries

does slow growth lead to rising inequality some theoretical reflections and numerical simulations this paper explores the hypothesis most notably made by french economist thomas piketty that slow growth rates lead to rising inequality if true this hypothesis would pose serious challenges to achieving prosperity without growth or meeting the ambitions of those who call for an intentional slowing down of growth on ecological grounds it would also create problems of social justice in the context of a secular stagnation the paper describes a closed demand driven stock flow consistent model of savings inequality and growth in a macroeconomic framework sigma with exogenous growth and savings rates sigma is used to examine the evolution of inequality in the context of declining economic growth contrary to the general hypothesis we find that inequality does not necessarily increase as growth slows down in fact there are certain conditions under which inequality can be reduced significantly or even eliminated entirely as growth declines the paper discusses the implications of this finding for questions of employment government fiscal policy and the politics of de growth

reputation effects and the limits of contracting a study of the indian software industry this paper examines evidence of the role that reputation plays in determining contractual outcomes we conduct an empirical analysis of the indian customized software industry using a data set we collected containing detailed information on 230 projects carried out by 125 software firms we propose a model ofthe industry where reputation determines contractual outcomes the evidence supports the view that reputation matters ex ante contracts as well as the outcome after ex post renegotiation vary with firms characteristics plausibly associated with reputation this holds after controlling for project client and firm characteristics

the missing missing middle the notion that the distribution of firm size in poor countries is characterized by a bimodal distribution with a missing middle is a widely accepted fact in development economics for example see krueger 2013 the idea of the missing middle is that there are a large number of small firms some large firms but very few medium sized firms the purported fact about the missing middle is cited as evidence for two broad stories of why many countries are poor perhaps surprisingly these models look for the cause of the missing middle in two fundamentally different places one approach suggests that small firms are disfavored in low income countries for example by a lack of access to financial capital and thus face difficulties in growing to become middle sized firms the other approach posits a dual economy of large high productivity firms and small low productivity firms and then suggests that larger firms are disfavored in low income countries for example by having to bear large fixed costs of regulation which make it difficult for middle sized firms to become established we begin by reviewing these theories of development based on the purported fact of a missing middle we then explore the evidence on distribution of firm sizes in more detail and challenge the presumption that a missing middle occurs at all we present three main facts first there is in fact no evidence of a missing middle in detailed and comprehensive data on the size of manufacturing firms in india indonesia or mexico regardless of how we slice the data to be sure there

market structure and casino taxation in tourist resorts this article examines the association of tax effects with market structure for casino gaming we show that if market structure is uncompetitive much of casino taxation falls on tourists whose demand is inelastic relative to supply the tax is likely to be efficient under strong external demand if imposed on oligopoly casinos with a monopoly location in a cross border market the likelihood of economically good taxation is greater under oligopoly than under competition but lower than under monopoly casino taxes should be lowered in a more competitive market with weaker external demand our prediction is consistent with the evidence found from casino tourism development in macao with high gambling taxes

on the methodology of isew gpi and related measures some constructive suggestions and some doubt on the threshold hypothesis existing country studies of the index of sustainable economic welfare isew the genuine progress indicator gpi and related measures while sharing the same basic methodological approach differ with respect to the valuation of important items this paper provides a critical but constructive discussion of the various methods used for the valuation of non renewable resource depletion and long term environmental damage and for the weighting of consumption expenditures for income inequalities several recommendations are given on how to improve the methodology for future updates of existing studies or for the construction of new measures sensitivity analysis shows that if these recommendations are followed for the valuation of resource depletion and long term environmental damage then the so called threshold hypothesis which seems to have gained empirical support from all studies undertaken so far fails to materialise this suggests that as far as factors related to the environment are concerned the widening gap between isew and gpi on the one hand and gross national product gnp on the other might be an artefact of highly contestable methodological assumptions 2000 elsevier science b v all rights reserved

commodity choice behavior with pigeons as subjects starting from an initial baseline budget line income compensated price changes always resulted in substitution effects consistent with the slutsky hicks theory this behavior cannot be explained by a simple random behavior model similar changes in relative prices that did not originate from the initial baseline budget line resulted in undersubstitution effects the composition of consumption changed in the expected direction but the magnitude of change was not large enough to be consistent with the initial commodity bundle chosen these undersubstitution effects are not explainable by shifting preference patterns or anchoring effects found in inconsistent choice sequences with human subjects

proposed changes to the index of sustainable economic welfare an application to belgium abstract this paper presents the results of a belgian case study on the index of sustainable economic welfare isew the index is first compiled using the standard methodology applied in other international studies owing to the short period in which belgium s traditional isew has recently declined it is not possible to draw any solid conclusion regarding max neef s threshold hypothesis after a brief review of the criticism that the isew has attracted over the years the paper then explains and discusses the rationale for omitting the net capital growth and change in net international investment position items it is argued that these items do not comply with the theoretical foundation underpinning the isew the paper also puts forward new valuation methods for several items within the index the escalation factor in the valuation of natural capital depletion is dropped long term environmental damage is valued using a stock based approach and considerably more government expenditures are considered to be non defensive the results of the revised isew show significant improvements in sustainable economic welfare over the entire study period these findings are not in line with the threshold hypothesis finally the paper offers some guidelines for communicating about the isew namely that a all methodological assumptions should be made explicit and b all raw unadjusted data used should be included in any final isew report so as to enable the reader to make his or her own assessment about the assumptions the researcher has employed