discounting and divergence of opinion the objective of this paper is to adopt a general equilibrium model and determine the socially efficient discount factor risk free rate and discount rate when there are heterogeneous anticipations about the growth of the economy as well as heterogeneous time preference rates among others we tackle the following questions is the socially efficient discount factor an arithmetic average of the individual subjectively anticipated discount factors more generally can the arrow debreu prices the risk free rates the subjectively expected socially efficient discount factors and discount rates be obtained as an average of the individual subjectively anticipated ones can beliefs dispersion be analyzed as a sort of additional risk or uncertainty leading to possibly lower discount rates is it socially efficient when diversity of opinion is taken into account to reduce the discount rate per year for more distant horizons if so what is the trajectory of the decline

bilateral trade and shocks in political relations evidence from china and some of its major trading partners 1990 2013 abstract an extensive number of studies investigate the effects of political relations on trade by estimating a gravity model using annual or quarterly data we argue that the use of low frequency data introduces an aggregation bias because the cycle of moderate political shocks is much shorter measured in weeks using monthly data from 1990 through 2013 for china we estimate a model of political relations and conclude that political shocks are short lived narrative evidence from two case studies illustrates the transitory nature of these shocks a var model shows that although political shocks influence exports to china the effects largely vanish within two months a comparison of the monthly and annual frequency gravity equation regressions illustrates the effects of temporal aggregation

towards an attention based view of the firm the central argument is that firm behavior is the result of how firms channel and distribute the attention of their decision makers what decision makers do depends on what issues and answers they focus their attention on what issues and answers they focus on depends on the specific situation and on how the firm s rules resources and relationships distribute various issues answers and decision makers into specific communications and procedures the paper develops these theoretical principles into a model of firm behavior and presents its implications for explaining firm behavior and adaptation 1997 by john wiley sons ltd

household energy and climate mitigation policies investigating energy practices in the housing sector abstract one central aim of climate change mitigation in the european union is to reduce energy consumption in the housing sector in order to ensure effectiveness of policies targeting household energy conservation it is important to investigate existing energy practices of different social groups this article describes and explains energy practices in three leading states in environmental politics technological innovation and support for renewable energy production denmark austria and the united kingdom based on a longitudinal analysis of housing utility costs from the european community statistics on income and living conditions we show that income plays a central role in households energy practices while high income households have higher overall energy consumption low income groups spend a larger share of their income on utility costs the variation of energy consumption across income groups is related to household characteristics characteristics of the dwellings and cross national differences in the housing sector

the utilization of competing technologies within the firm evidence from cardiac procedures this paper examines the role of technological status in determining the rates at which competing techniques are used within a firm consistent with prior studies technological status is measured on the basis of an actor s prior contributions to the body of knowledge concerning a given technique the empirical analysis considers two treatments for coronary artery disease cad each of which is associated with a distinct professional group within a hospital these two groups are often characterized as engaging in a turf war for patients after controlling for several factors that might explain technological choice the clinical severity of patients the relative quality of the two procedures at a given facility firm level financial performance and other firm level characteristics i find that the technological status of the group associated with each technique affects the relative rate at which it is used within a given hospital moreover this effect is strongest for patients at the margin between the two techniques these results suggest that viewing the choice between competing innovations as a single firm level decision may not always capture the true dynamics underlying such a situation

what separates us sources of resistance to globalization with increasing sophistication economists have been estimating gravity equations for five decades robust evidence shows that borders and distance impede trade by much more than tariffs or transports costs can explain we therefore advocate investigation of other sources of resistance despite the greater difficult involved in measuring and modelling them from our selective review of recent findings a unifying explanation emerges a legacy of historical isolation and conflict forged a world economy in which neither tastes nor information are homogeneously distributed cultural difference and inadequate information manifest themselves most strongly at national borders and over distance

overt interfunctional conflict and its reduction through business strategy we study why production and sales departments tend to disagree with the former wanting long production runs and the latter wanting a broad product line we then analyze why these disagreements lead to overt conflict in which functional areas fight with each other by presenting arguments that damage each other s position we show how the firm benefits from the information generated by this conflict in spite of these benefits the equilibrium conflict can exceed its profit maximizing level finally we show that concentrating innovative talent in only one department can help reduce interfunctional conflict

the evolution of time preference with aggregate uncertainty we examine the evolutionary foundations of intertemporal preferences when all the risk affecting survival and reproduction is idiosyncratic evolution selects for agents who maximize the discounted sum of expected utility discounting at the sum of the population growth rate and the mortality rate aggregate uncertainty concerning survival rates leads to discount rates that exceed the sum of population growth rate and death rate and can push agents away from exponential discounting

a status based model of market competition this article explores the significance of status processes for generating and reproducing hierarchy among producers in a market it develops a conception of a market as a status order in which each

demand inducement and the physician patient relationship the physician patient relationship is a paradigm for any expert client relationship the physician both diagnoses the patient s illness and recommends a treatment this dual role gives the physician incentive to recommend treatments whose costs outweigh their medical benefits these socially inefficient treatments correspond to the notion of physician induced demand the level of inducement chosen by the physician is shown to depend on the price and potential medical benefits of treatment and the relative diagnostic skills of physician and patient this model offers several testable hypotheses some of which are confirmed by related studies

distributional preferences and the incidence of costs and benefits in climate change policy we explore the relationship between willingness to pay wtp for climate change mitigation and distributional preferences by which we mean individuals opinions about who should be responsible for climate change prevention and whether the share of climate change impacts borne by the poor is a cause for concern we use 1 770 responses to an online stated preference survey the domestic costs in our survey s policy choice scenarios are expressed as a set of randomized shares across four different payment vehicles and the international cost shares are randomized across four groups of countries we also elicit respondents perceptions of the likely regressivity of climate change impacts under a policy of business as usual wtp is higher when larger cost shares are borne by parties deemed to bear a greater responsibility for mitigation and when respondents believe and care that the impacts of climate change may be borne disproportionately by the world s poor that wtp for an environmental policy depends on the distributional consequences of the policy is an unsettling result efficiency assessments are typically assumed to be separate from equity considerations in most benefit cost analyses

the effects of bilateral attitudes on imports research based on the gravity model has shown that non economic factors affect international trade and recent studies have shown that people s perception affects economic exchange in this study we explore the effects of attitudes on bilateral trade using survey data from the pew research center s global attitudes projects for 68 countries from 2002 to 2015 we find that a more favourable attitude of a country towards another country will increase the former country s imports from the latter the result is robust to an endogeneity check to different measures of attitudes and to different estimation methods however heterogeneity is observed across different types of goods and countries the result holds for trade in intermediate and consumer goods but the effects are not statistically significant for capital goods the effects are statistically significant for bilateral trade between different country groups except for high income countries imports from non high income countries

market structure uncertainty and intrafirm diffusion the case of optical scanners in grocery stores this study uses monthly data on the adoption of optical scanners by sixty three grocery chains in thirty two large u s cities to identify the determinants of the rate of intrafirm diffusion the methodology involves a two stage approach that relates market environment characteristics to the estimated rate of intrafirm diffusion the results indicate that firms with larger market shares adopt a new innovation scanners more quickly initially but diffuse the innovation through their stores more slowly than firms with smaller market shares in addition firms that lag competitors in the initial adoption of scanners tend to diffuse the innovation more quickly copyright 1992 by mit press

a role based ecology of technological change this article considers what factors determine whether an innovation becomes a foundation for future technological developments rather than a dea end the authors introduce the concept of the technological niche which includes a focal innovation the innovations on which the focal innovations builds the innovations that build upon the focal innovation and the technological ties among the innovations within the niche using patents and patent citations to measure characteristics of innovation niches within the semiconductor industry the authors show that the size of the niche and the status of the actors within the niche have a positive effect on the likelihood that subsequent innovations will build upon the focal innovation competitive intensity within the niche has a negative effect on this likelihood

an economic approach to influence activities in organizations members of organizations spend considerable time effort and ingenuity attempting to influence decision makers such influence activities may bring benefits to the organization but they also involve real costs this essay offers an economic rationale for such influence activity as representing rational self interested behavior in the presence of informational asymmetries and an analysis of how the design of the organization s structure and policies should respond to the incentives for attempting influence it is posited that information valuable for the organization s decision making is directly available only to members of the organization who have some personal stake in the decisions these individuals may then have an incentive to try to manipulate the information they develop and provide in order to influence the resulting decisions to their benefits this can be costly both in degrading the quality of decision making and in diverting the attention and effort of the organization s members from more productive activities the organization has three different methods it can employ to discourage excessive influence activities and to encourage more directly productive uses of time and effort it can limit access to decision makers and participation in decision making it can alter its decision making criteria to favor those performing well in productive activities and it can provide direct financial incentives to encourage the desired allocation of effort it is shown that an efficiently designed organization will use such financial incentives only as a last resort instead it will always first alter its decision participation policies and decisionmaking criteria

the determinants of technology adoption the case of the banking firm using data on the adoption of automatic teller machines by firms in the banking industry this study examines the relationship between the decision to adopt new technology and its determinants since banking firms differ considerably in terms of the competitive environments in which they operate focusing on this one innovation in this industry allows a stronger test of the relationship between market structure and the adoption of new technology than has been previously conducted using a failure time estimation procedure we find that larger banks and banks operating in more concentrated local banking markets register a higher conditional probability of adopting this new technology all else equal we also find that other results are consistent with the underlying model and that the bank s regulatory environment shapes its adoption decision in plausible ways

within u s trade and the long shadow of the american secession using data from the us commodity flow surveys we show that the historical union confederacy border lowers contemporaneous trade between us states by about 16 percentrelative to trade flows within the former alliances amongst one million placebos there is no other constellation of state grouping that would yield a larger border effect the finding is robust over different econometric models treatment of the rest of the world available survey waves or levels of aggregation including contemporaneous controls such as network institutional or demographic variables and heckscher ohlin or linderterms lowers the estimate only slightly historical variables such as the incidence of slavery do not explain the effect away adding us states unaffected by the civil war we argue that the friction is not merely reflecting unmeasured north south differences finally the estimated border effect is larger for differentiated than for homogeneous goods stressing the potential role for cultural factors and trust

the slave trade and the origins of mistrust in africa in a recent study nunn 2008 examines the long term impacts of africa s slave trade he finds that the slave trade which occurred over a period of more than 400 years had a significant negative effect on long term economic development although the article arguably identifies a negative causal relationship between the slave trade and income today the analysis is unable to establish the exact causal mechanisms underlying this reduced form relationship in this article we examine one of the channels through which the slave trade may affect economic development today combining contemporary individual level survey data with historical data on slave shipments by ethnic group we ask whether the slave trade caused a culture of mistrust to develop within africa initially slaves were captured primarily through state organized raids and warfare but as the trade progressed the environment of ubiquitous insecurity caused individuals to turn on others including friends and family members and to kidnap trick and sell each other into slavery sigismund wilhelm koelle 1854 p e h hair 1965 charles piot 1996 we hypothesize that in this environment a culture of mistrust may have evolved which may persist to this day we show that current differences in trust levels within africa can be traced back to the transatlantic and indian ocean slave trades combining contemporary individual level survey data with historical data on slave shipments by ethnic group we find that individuals whose ancestors were heavily raided during the slave trade are less trusting today evidence from a variety of identification strategies suggests that the relationship is causal examining causal mechanisms we show that most of the impact of the slave trade is through factors that are internal to the individual such as cultural norms beliefs and values jel j15 n57 z13

declining discount rates economic justifications and implications for long run policy should economic policy target immediate problems like malaria and aids or should it target climate change which may have even more dramatic life threatening effects in the very long term we discuss how the pattern of discount rates over the planning horizon bears on this important issue a declining pattern of discount rates is theoretically justified by uncertainty about future economic conditions and its shape and relevance can be estimated from historical data we analyse empirically long term interest rate data from nine countries construct a weighted average representing a possible global discount rate pattern for a very long range of future dates and assess its implications for the valuation of carbon mitigation policies christian gollier phoebe koundouri and theologos pantelidis

does ecological economics have a future contradiction and reinvention in the age of climate change abstract this paper addresses the role of neoclassical methodologies in ecological economics and the contradictions these methodologies pose to the field s critical founding principles we first consider robert costanza s treatment of nicholas stern s global deal and then survey climate change related articles published in this journal over the past five years this survey reveals how mainstream neoclassical methodologies dominate discourse and do so by marginalizing more critical political economy analyses this situation imperils the field s founding vision of a no growth steady state it also fails to address the related growth dynamics of capitalism without such a critical treatment the field s formal embrace of methodological pluralism actually entails an ideological empiricism that renders ecological economics theoretically incoherent this situation undermines the field s historical promise as an alternative economic paradigm ecological economics now faces a problematic future its survival in a form faithful to its founding vision will require an explicit choice to address its internal contradictions and reinvent itself in ways relevant to our contemporary context without such a choice ecological economics will likely succumb to an implicit acceptance of the hegemony of mainstream economic methodologies and their pro growth imperatives

climate policy and the social cost of power generation impacts of the swedish national emissions target the purpose of this paper is to discuss how the design of climate policy in a small open economy may affect the internalization of carbon related external costs and ultimately the social choice between different power generation technologies empirically we focus on the swedish case and analyze three climate policy regimes out of which two represent different national goal formulations and thus compliance strategies the results show that the social choice between power generation technologies in sweden will be significantly influenced by the choice of climate policy regime most notably if sweden would abandon its present national target for carbon dioxide emissions and instead make full use of the country s participation in international emissions trading natural gas fired power would replace onshore wind power as the power generation source with the lowest social cost

the determination of optimal climate policy abstract analyses of the costs and benefits of climate policy such as the stern review evaluate alternative strategies to reduce greenhouse gas emissions by requiring that the cost of emission cuts in each and every year has to be covered by the associated value of avoided damage discounted by a an exogenously chosen rate an alternative is to optimize abatement programmes towards a stationary state where the concentrations of greenhouse gases are stabilized and shadow prices including the rate of discount are determined endogenously this paper examines the properties of optimized stabilization it turns out that the implications for the evaluation of climate policy are substantial if compared with evaluations of the present value of costs and benefits based on exogenously chosen shadow prices comparisons of discounted costs and benefits tend to exaggerate the importance of the choice of discount rate while ignoring the importance of future abatement costs which turns out to be essential for the optimal abatement path numerical examples suggest that early action may be more beneficial than indicated by comparisons of costs and benefits discounted by a rate chosen on the basis of current observations

once an enemy forever an enemy the long run impact of the japanese invasion of china from 1937 to 1945 on trade and investment abstract in this study we exploit one of the most important conflicts of the 20th century between what are currently the world s second and third largest economies that is the japanese invasion of china from 1937 to 1945 to investigate the long term impact of conflicts between countries on cross border trade and investment we find that japanese multinationals are less likely to invest in chinese regions that suffered greater civilian casualties during the japanese invasion and these regions also trade less with japan our study shows that historical animosity still influences international trade and investment despite the trend toward an increasingly globalized world

the stern review a deconstruction using a simple model designed for transparency but nonetheless calibrated to support the much quoted damage estimates of the stern review of the economics of climate change we demonstrate significant sensitivity of those results to assumptions about the pure rate of time preference the time horizon and the rates of risk and equity aversion used to compute certainty and equity equivalent annuities most importantly we demonstrate enormous sensitivity to presumed constant regional vulnerability and underlying assumptions about adaptive capacity manipulation of any of these parameters one at a time across reasonable ranges can diminish damage estimates by as much as 84 or in the case of extending the time horizon with the review s low discount rate increase damage estimates by 900 we also confirm the usual result that limiting atmospheric concentrations to specific benchmarks above 400 ppm cannot eliminate all damages nonetheless we applaud the stern review author team for reconfirming that the climate problem can be approached productively as an economic problem whose solutions can be explored with the tools of decision analysis 2008 elsevier ltd all rights reserved

the erosion of colonial trade linkages after independence high trade between countries with colonial ties may be explained by government policies that establish preferential access or as a consequence of networks formed through social interactions using bilateral trade data from 1948 to 2003 we examine the eect of independence on post colonial trade the severing of formal colonial relations can lead to an immediate reduction in trade as preferential access is eliminated as well as a gradual reduction corresponding to the deterioration of trading networks our results reveal that independence reduces colonial trade with its colonizer metropole the reduction cumulates over a 30 year period and the disruption is particularly severe for hostile separations we also find that overall colonial trade falls subsequent to independence but to a lesser extent than trade with the metropole

how much does violence tax trade abstract we investigate the empirical effect of violence as compared to other trade impediments on trade flows our analysis is based on a panel data set with annual observations on 177 countries from 1968 to 1999 which brings together information from the rose data set the iterate data set for terrorist events and data sets of external and internal conflict we explore these data with traditional and theoretical gravity models we calculate that for a given country year the presence of terrorism together with internal and external conflict is equivalent to as much as a 30 tariff on trade this is larger than estimated tariff equivalent costs of border and language barriers and tariff equivalent reduction through generalized systems of preference and wto participation

a review of the stern review on the economics of climate change the stern review calls for immediate decisive action to stabilize greenhouse gases because the benefits of strong early action on climate change outweighs the costs the economic analysis supporting this conclusion consists mostly of two basic strands the first strand is a formal aggregative model that relies for its conclusions primari ly upon imposing a very low discount rate concerning this discount rate aspect i am skeptical of the review s formal analysis but this essay points out that we are actual ly a lot less sure about what interest rate should be used for discounting climate change than is commonly acknowledged the review s second basic strand is a more intuitive argument that it might be very important to avoid possibly large uncertain ties that are difficult to quantify concerning this uncertainty aspect i argue that it might be recast into sound analytical reasoning that might justify some of the review s conclusions the basic issue here is that spending money to slow global warming should perhaps not be conceptualized primarily as being about consump tion smoothing as much as being about how much insurance to buy to offset the small change of a ruinous catastrophe that is difficult to compensate by ordinary savings

adoption of competing inventions by united states steel producers a hstract this research investigates innovative behavior in the u s steel industry under the assumption that basic oxygen and large electric furnaces are competing technologies the empirical model of innovation is based on recent theoretical research the coefficients are estimated by a seemingly unrelated tobit approach the research finds innovation is strongly influenced by a demonstration effect adoption is also influenced by potential cost savings and technical progress there is no evidence that large u s steel producers modernized more slowly than their smaller rivals the large electric furnace becomes sufficiently attractive by 1980 that firms choose not to adopt basic oxygen

the emergence of a regional financial architecture in asia this paper provides an assessment of monetary and financial cooperation in asia since the regional financial crisis of 1997 98 with a view to determining whether the emerging regional financial architecture in asia is compatible with the global financial architecture and what are the prospects for possible economic and monetary union monetary and financial cooperation has focused on four architectural pillars economic policy surveillance crisis prevention liquidity support and bond market development which can be consistent with the global architecture however progress toward full integration is likely to be gradual and experimental given the lack of strong regional institutions regional economic disparities and the need to build political commitment to such a goal

the behavioural economics of climate change this paper attempts to bring some central insights from behavioural economics into the economics of climate change in particular it discusses i implications of prospect theory the equity premium puzzle and time inconsistent preferences in the choice of discount rate used in climate change cost assessments and ii the implications of various kinds of social preferences for the outcome of climate negotiations several reasons are presented for why it appears advisable to choose a substantially lower social discount rate than the average return on investments it also seems likely that taking social preferences into account increases the possibilities of obtaining international agreements compared to the standard model however there are also effects going in the opposite direction and the importance of sanctions is emphasized

a dynamic analysis of human welfare in a warming planet anthropogenic greenhouse gas ghg emissions have caused atmospheric concentrations with no precedents in the last half a million years inducing serious uncertainties about future climates and their effects on human welfare recent climate science supports the view that the climate stabilization will require very low ghg emissions in the future we ask is a path of low emissions compatible with sustainable levels of human welfare with steady growth in human quality of life addressing these questions requires both defining welfare criteria and empirically estimating the possible paths of the economy we specify and calibrate a dynamic model with four intertemporal links education physical capital knowledge and the environment in line with nordhaus 2008a and with the stern review 2007 we assume that ghg emissions allow increased production while a higher stock of atmospheric carbon decreases production our index of human welfare which we call quality of life quol emphasizes education knowledge and the environment affected by greenhouse gas emissions in addition to consumption and leisure thus we avoid a consumptionist fallacy that welfare depends only on commodity consumption and perhaps leisure we reject discounted utilitarianism as a normative criterion and consider two alternatives the first is an intergenerational maximin criterion which maximizes the quality of life of the first generation subject to maintaining at least that level for all successive generations the second is human development optimization that seeks the maximization of the quol of the first generation subject to achieving a given constant rate of growth in all subsequent generations hence our analysis focuses on a human notion of sustainability as opposed to the conventional green sustainability limited to keeping the quality of the environment constant because our dynamic optimization programs defy explicit analytical solutions our approach has been computational as a benchmark we consider a simple model with physical and human capital for which we prove a turnpike theorem we then devise a computational algorithm inspired by the turnpike property to construct feasible although not necessarily optimal paths in the more complex and realistic model our analysis indicates that with ghg emission paths entailing very low emissions in the future positive rates of growth in quol are possible while the first generation experiences a quol higher than the historical reference level we also observe a tradeoff between the quality of life of the first generation and the rate of growth in the quality of life yet generation 1 s sacrifice for the sake of a higher growth rate appears to be small the paths that we compute involve investments in knowledge at noticeably higher levels than in the past

numerical analysis of non constant pure rate of time preference a model of climate policy abstract when current decisions affect welfare in the far distant future as with climate change the use of a declining pure rate of time preference prtp provides potentially important modeling flexibility the difficulty of analyzing models with non constant prtp limits their application we describe and provide software available online to implement an algorithm to numerically obtain a markov perfect equilibrium for an optimal control problem with non constant prtp we apply this software to a simplified version of the numerical climate change model used in the stern review for our calibration the policy recommendations are less sensitive to the prtp than widely believed

did the stern review underestimate us and global climate damages abstract the stern review received widespread attention for its innovative approach to the economics of climate change when it appeared in 2006 and generated controversies that have continued to this day one key controversy concerns the magnitude of the expected impacts of climate change stern s estimates based on results from the page2002 model sounded substantially greater than those produced by many other models leading several critics to suggest that stern had inflated his damage figures we reached the opposite conclusion in a recent application of page2002 in a study of the costs to the us economy of inaction on climate change this article describes our revisions to the page estimates and explains our conclusion that the model runs used in the stern review may well underestimate us and global damages stern s estimates from page2002 implied that mean business as usual damages in 2100 would represent just 0 4 percent of gdp for the united states and 2 2 percent of gdp for the world our revisions and reinterpretation of the page model imply that climate damages in 2100 could reach 2 6 percent of gdp for the united states and 10 8 percent for the world

the relationship between political tensions trade and capital flows in asean plus three we estimate the effects of political tension on trade and capital flows in asean plus three countries in the framework of a gravity model we quantify political tension through text parsing software reading daily reuters articles from 1990 to 2013 and exclude brunei and laos due to sparsity of news coverage regarding bilateral trade we find that political conflict measured by negative reports in reuters articles seems to only affect bilateral trade between countries that are not both members of the world trade organization wto for these countries a 1 per cent rise in the tension score results in a 0 05 per cent decline in trade there is weaker evidence that improvement in bilateral relationship measured by positive reports in reuters articles is associated with more trade as for capital flows while long term capital flows measured by foreign direct investment appear to be unaffected by short term tensions both a non democratic government and a history of war negatively affect fdi

is hospital competition socially wasteful we study the consequences of hospital competition for medicare beneficiaries heart attack care from 1985 to 1994 we examine how relatively exogenous determinants of hospital choice such as travel distances influence the competitiveness of hospital markets and how hospital competition interacts with the influence of managed care organizations to affect the key determinants of social welfare expenditures on treatment and patient health outcomes in the 1980s the welfare effects of competition were ambiguous but in the 1990s competition unambiguously improves social welfare increasing hmo enrollment over the sample period partially explains the dramatic change in the impact of hospital competition

collateral damage trade disruption and the economic impact of war abstract conventional wisdom in economic history suggests that conflict between countries can be enormously disruptive of economic activity especially international trade we study the effects of war on bilateral trade with available data extending back to 1870 using the gravity model we estimate the contemporaneous and lagged effects of wars on the trade of belligerent nations and neutrals controlling for other determinants of trade as well as the possible effects of reverse causality we find large and persistent impacts of wars on trade national income and global economic welfare we also conduct a general equilibrium comparative statics exercise that indicates costs associated with lost trade might be at least as large as the conventionally measured direct costs of war such as lost human capital as illustrated by case studies of world wars i and ii

economists value judgments and climate change a view from feminist economics abstract a number of recent discussions about ethical issues in climate change as engaged in by economists have focused on the value of the parameter representing the rate of time preference within models of optimal growth this essay examines many economists antipathy to serious discussion of ethical matters and suggests that the avoidance of questions of intergenerational equity is related to another set of value judgments concerning the quality and objectivity of economic practice using insights from feminist philosophy of science and research on high reliability organizations this essay argues that a more ethically transparent real world oriented and flexible economic practice would lead to more reliable and useful knowledge

make trade not war this paper analyses theoretically and empirically the relationship between military conflicts and trade we show that the conventional wisdom that trade promotes peace is only partially true even in a model where trade is economically beneficial military conflicts reduce trade and leaders are rational when war can occur because of the presence of asymmetric information the probability of escalation is lower for countries that trade more bilaterally because of the opportunity cost associated with the loss of trade gains however countries more open to global trade have a higher probability of war because multilateral trade openness decreases bilateral dependence to any given country and the cost of a bilateral conflict we test our predictions on a large data set of military conflicts on the 1950 2000 period using different strategies to solve the endogeneity issues including instrumental variables we find robust evidence for the contrasting effects of bilateral and multilateral trade openness for proximate countries we find that trade has had a surprisingly large effect on their probability of military conflict

a new global deal on climate change a global target of stabilizing greenhouse gas concentrations at between 450 and 550 parts per million carbon dioxide equivalent ppm co2e has proven robust to recent developments in the science and economics of climate change retrospective analysis of the stern review 2007 suggests that the risks were underestimated indicating a stabilization target closer to 450 ppm co2e climate policy at the international level is now moving rapidly towards agreeing an emissions pathway and distributing responsibilities between countries a feasible framework can be constructed in which each country takes on its own responsibilities and targets based on a shared understanding of the risks and the need for action and collaboration on climate change the global deal should contain six key features i a pathway to achieve the world target of 50 per cent reductions by 2050 where rich countries contribute at least 75 per cent of the reductions ii global emissions trading to reduce costs iii reform of the clean development mechanism to scale up emission reductions on a sectoral or benchmark level iv scaling up of rd v an agreement on deforestation and vi adaptation finance

a penny for your quotes patent citations and the value of innovations the use ofpatents in economic research has been seriously hindered by the fact that patents vary enormously in their importance or value and hence simple patent counts cannot be informative about innovative output the purpose of this article is to put forward patent counts weighted by citations as indicators of the value of innovations thereby overcoming the limitations of simple counts the empirical analysis of a particular innovation computed tomography scanners indeed shows a close association between citation based patent indices and independent measures of the social value of innovations in that field moreover the weighting scheme appears to be nonlinear increasing in the number of citations implying that the informational content of citations rises at the margin as in previous studies simple patent counts are found to be highly correlated with contemporaneous rd however here the association is within afield over time rather than cross sectional

a quantitative minimax regret approach to climate change does discounting still matter abstract using cost benefit analysis to determine an optimal climate mitigation target is criticised especially because i it fails to sufficiently take into account low probability high impact events and ii results strongly depend on the discount rate used one of the alternative suggestions to inform policymakers about the right mitigation target that does take the risks associated with low probability high impact events explicitly into account is the minimax regret criterion we apply the minimax regret criterion quantitatively using an integrated assessment model with extreme values for climate sensitivity damage estimates and mitigation costs the goal is to analyse whether such a method leads to different results compared to standard cost benefit analysis and whether the results are still sensitive to the discount rate used we find that the minimax regret approach leads to more stringent and robust climate targets for relatively low discount rates and if both a high climate sensitivity and high damage estimates are assumed if one of these assumptions does not hold the difference between the minimax regret approach and standard cost benefit analysis is much smaller therefore we conclude that the discount rate used can still be of vital importance even when applying a minimax regret approach

physician response to fee changes with multiple payers this paper develops a general model of physician behavior with demand inducement encompassing the two benchmark cases of profit maximization and target income behavior it is shown that when income effects are absent physicians maximize profits and when income effects are very strong physicians seek a target income the model is used to derive own and cross price expressions for the response of physicians to fee changes in the realistic context of more than one payer under the alternative behavior assumptions of profit maximization and target income behavior the implications for public and private fee policy and empirical research on physician response to fees are discussed

a regional dynamic general equilibrium model of alternative climate change strategies outcomes and noncooperative equilibria this study finds that cooperative policies show much higher levels of emissions reductions than do noncooperative strategies that there are substantial differences in the levels of controls in both the cooperative and the noncooperative policies among different countries and that high income countries may be the major losers from cooperation jel h41 q4 q2 q20

a review of the stern review on the economics of climate change how much and how fast should we react to the threat of global warming the stern review argues that the damages from climate change are large and that nations should undertake sharp and immediate reductions in greenhouse gas emissions an examination of the review s radical revision of the economics of climate change finds however that it depends decisively on the assumption of a near zero time discount rate combined with a specific utility function the review s unambiguous conclusions about the need for extreme immediate action will not survive the substitution of assumptions that are consistent with today s marketplace real interest rates and savings rates

the impact of climate change on the balanced growth equivalent an application of fund the stern review added balanced growth equivalents bge to the economic climate change research agenda we first propose rigorous definitions of the bge for multiple regions and under uncertainty we show that the change in the bge is independent of the assumed scenario of per capita income for comparable welfare economic assumptions as the stern review we calculate lower changes in bge between a business as usual scenario and one without climate impacts with the model fund than the stern review found with the model page we find that mitigation policies give even lower changes in bge and argue that those policy choices should be the focus of the research effort rather than total damage estimates according to our results the current carbon tax should be below 55 tc sensitivity analyses show that the stern review chose parameters that imply high impact estimates however for regionally disaggregated welfare functions we find changes in bge that are significantly higher than the results from the stern review both for total damage as for policy analysis with regional disaggregation and high risk aversion we observe fat tails and with that very high welfare losses

ethics of the discount rate in the stern review on the economics of climate change any comparison of the costs and benefits of climate change is dominated by the chosen discount rate but although the stern review emphasises the ethical nature of the parameters entering into its choice of a relatively low discount rate its discussion of the pure time preference parameter is unbalanced in particular no consideration is given to the role of agent relative ethics which i has a wellestablished philosophical pedigree going back to david hume ii is likely to correspond closely to world wide public attitudes towards intergenerational welfare and iii would entail discounting a unit of welfare accruing to future generations compared to an equal unit accruing to people alive today at a positive rate the authors also discuss the other ethical parameter upon which the discount rate depends namely the elasticity of marginal utility with respect to consumption in the conventional model this simultaneously reflects different aspects of inequality aversion as well as risk aversion which complicates its interpretation finally they discuss the divergence between market rates of discount and the low rate chosen in the review and the limitations on the one hand on the normative significance of market rates as well as the danger on the other hand of relying on rates chosen by elites or philosopher kings

on modeling and interpreting the economics of catastrophic climate change with climate change as prototype example this paper analyzes the implications of structural uncertainty for the economics of low probability high impact catastrophes even when updated by bayesian learning uncertain structural parameters induce a critical tail fattening of posterior predictive distributions such fattened tails have strong im plications for situations like climate change where a catastrophe is theoretically possible because prior knowledge cannot place sufficiently narrow bounds on overall damages this paper shows that the economic consequences of fat tailed structural uncertainty along with unsureness about high temperature damages can readily outweigh the effects of discounting in climate change policy analysis

social discounting under uncertainty a cross country comparison recent research suggests that social cost benefit analysis should be conducted with a declining discount rate for instance newell and pizer discounting the distant future how much do uncertain rates increase valuations j environ econ manage 46 2003 52 71 show that the us certainty equivalent discount rate declines through time using a simple autoregressive model of us interest rates this paper extends that line of research estimating both autoregressive and regime switching models of real interest rates to determine certainty equivalent discount rates in australia canada germany and the uk it is found that the regime switching model is a better model of past interest rate behavior for all four countries this model tends to produce a more rapid decline in certainty equivalent discount rates the paper provides applications to the economics of climate change and nuclear power

time perspective and climate change policy the tendency to foreshorten time units as we peer further into the future provides an explanation for hyperbolic discounting at an inter generational time scale we study implications of hyperbolic discounting for climate change policy when the probability of a climate induced catastrophe depends on the stock of greenhouse gasses we characterize the set of markov perfect equilibria mpe of the inter generational game amongst a succession of policymakers each policymaker reflects her generation s preferences including its hyperbolic discounting for a binary action game we compare the mpe set to a restricted commitment benchmark we compare the associated constant equivalent discount rates and the willingness to pay to control climate change with assumptions and recommendations in the stern review on climate change ymy picture of the world is drawn in perspectivey i apply my perspective not merely to space but also to time ramsey

endogenous discounting and climate policy under risk of abrupt climate change the occurrence hazard is added to the social discount rate as a result the social discount rate 1 increases and 2 turns endogenous to the global warming policy the second effect bears profound policy implications that are magnified by economic growth in particular we find that greenhouse gases ghg emission should be terminated at a finite time so that the ensuing occurrence risk will vanish in the long run due to the public bad nature of the catastrophic risk the second effect is ignored in a competitive allocation and unregulated economic growth will give rise to excessive emissions in the long term the ghg emission paths under the optimal and competitive growth regimes lie at the extreme ends of the range of feasible emissions