altruistic egoistic and biospheric values in willingness to pay wtp for wildlife abstract we attempt to measure general attitudes and ethical beliefs towards preservation as well as the importance of each of the three considered value orientations biospheric egoistic and altruistic in wtp estimates in the present study we apply the gac scale to a contingent valuation exercise for the recovery of the common murre uria aalge in galicia spain up to now only a few studies in the field of environmental and ecological economics have analyzed value orientations under the environmental concern ec framework obtaining mixed results in the present work we conclude that ethical aspects affect the individuals decision making process and that value orientations play an important role in the pro environmental attitude formation these value orientations affect willingness to pay wtp estimates for environmental goods

are optimal emissions really optimal four critical issues for economists in the greenhouse although the greenhouse effect is by many considered as one of the most serious environmental problems several economic studies of the greenhouse effect most notably nordhaus s dice model suggest that it is optimal to allow the emissions of greenhouse gases ghg to increase by a factor of three over the next century other studies have found that substantial reductions can be justified on economic grounds this paper explores into the reasons for these differences and identifies four partly overlapping crucial issues that have to be dealt with when analysing the economics of the greenhouse effect low probability but catastrophic events cost evaluation methods the choice of discount rate the choice of decision criterion the paper shows that i these aspects are crucial for the policy conclusions drawn from models of the economics of climate change and that ii ethical choices have to be made for each of these issues this fact needs wider recognition since economics is very often perceived as a value neutral tool that can be used to provide policy makers with optimal policies

eductive stability in real business cycle models we reexamine issues of coordination in the standard rbc model is the unique rational expectations equilibrium attainable by rational agents who contemplate the possibility of small deviations from equilibrium surprisingly we nd that coordination cannot be expected even with strong common knowledge assumptions rational agents anticipating small but persistent deviations are led to take actions that eventually contradict the common knowledge assumption this impossibility theorem for eductive learning is not fully overcome when adaptive learning is incorporated into the framework

arbitrary values good causes and premature verdicts abstract this paper offers an alternative interpretation of the conclusions kahneman and knetsch propose based on two contingent valuation cvm surveys the evaluation argues that while framing is important to cvm estimates the design implementation and empirical findings reported from these surveys do not support their judgments moreover with the exception of temporal embedding conventional economic descriptions of individual behavior can explain the response patterns that they suggest are at variance with standard value theory

sentiments and aggregate demand fluctuations we formalize the keynesian insight that aggregate demand driven by sentiments can generate output fluctuations under rational expectations when production decisions must be made under imperfect information about demand optimal decisions based on sentiments can generate stochastic self fulfilling rational expectations equilibria in standard economies without persistent informational frictions externalities nonconvexities or strategic complementarities in production the models we consider are deliberately simple but could serve as benchmarks for more complicated equilibrium models with additional features

fiscal policy and growth in a small open economy with elastic labour supply endogenizing labour supply leads to fundamental changes in the equilibrium structure of the ak growth model of a small open economy the balanced growth equilibrium is described by two tradeoff loci relating the equilibrium growth rate to the fraction of time devoted to leisure the implications of endogenous labour supply for fiscal policy are addressed the effects of distortionary taxes and government expenditure on the equilibrium growth leisure employment tradeoff are analysed the responses contrast with both those of a closed economy having an elastic labour supply and an open economy with fixed labour supply optimal fiscal policy is also characterized jel classification f41 f43 politique fiscale et croissance dans une petite economie ouverte quand l offre de travail est elastique l endogeneisation de l offre de travail entraine des changements fondamentaux dans la structure d equilibre du modele de croissance du type ak d une petite economie ouverte l equilibre de croissance balancee est decrit par deux lieux de relations d equivalence reliant le taux de croissance d equilibre a la fraction du temps allouee au loisir on examine les implications de cette endogen6isation de l offre de travail pour la politique fiscale on analyse les effets de taxes distorsionnantes et des depenses gouvemementales sur la relation d 6equivalence entre taux de croissance et loisir et donc emploi on obtient des reactions differentes de celles qu on obtient en economie ferm6e quand l offre de travail est elastique et en economie ouverte quand l offre de travail est fixe on proc ede alors a la definition de la politique fiscale optimale

increasing returns capital utilization and the effects of government spending abstract we show that a one sector real business cycle model with mild increasing returns to scale variable capital utilization and saddle path stability is able to produce qualitatively realistic business cycles driven solely by disturbances to government purchases due to an endogenous increase in labor productivity a positive spending shock can lead to simultaneous increases in output consumption investment employment and real wage our analysis illustrates a close relationship between this result and the recent literature that explores indeterminacy and sunspots in real business cycle models under laissez faire in particular the condition which governs the required magnitude of increasing returns for government spending shocks to generate procyclical macroeconomic effects is identical to that necessary for a laissez faire one sector real business cycle model to exhibit local indeterminacy

the political economy of financial systems evidence from suffrage reforms in the last two centuries initially voting rights were limited to wealthy elites providing political support for stock markets the franchise expansion induces the median voter to provide political support for banking development as this new electorate has lower financial holdings and benefits less from the uncertainty and financial returns from stock markets our panel data evidence covering 1830 1999 shows that tighter restrictions on the voting franchise induce a greater stock market development whereas a broader voting franchise is more conducive towards the banking sector consistent with perotti and von thadden 2006 our results are robust to controlling for other political determinants and endogeneity

schumpeter redux a review of raghuram g rajan and luigi zingales s saving capitalism from the capitalists saving capitalism from the capitalists1 is an ambitious probe into capitalism s past present and future whereas joseph a schumpeter viewed capitalism as doomed because it was losing its political and social supports rajan and zingales see it more as threatened from within by established or incumbent industrialists and financiers who become enemies of free markets the authors contend that free financial markets foster economic progress while undermining the ability of incumbents to have their way rajan and zingales may overstate the significance of the great reversal of financial development in the middle decades of the twentieth century and their evidence and interpretations are sometimes flawed nonetheless they make a strong case for the fundamental importance of financial development for economic modernization and their warnings about the antimarket tendencies of incumbents are well worth pondering

fickle consumers durable goods and business cycles abstract this paper develops a three sector dynamic general equilibrium model with the specific aim of evaluating the role of consumer durables in the generation and propagation of business cycles the model displays indeterminacy at commonly considered realistic parameter restrictions and basically constant returns to scale if calibrated at modest increasing returns to scale the sunspots driven model version produces a close match to moments of aggregate u s data journal of economic literatureclassification numbers e00 e32

nonoptimality of the friedman rule with capital income taxation this paper studies the efficient taxation of money and factor income in intertemporal optimizing growth models with infinite horizons transaction costs technologies and flexible prices second best optimality calls for a positive inflation tax and a non zero capital income tax when there are restrictions on taxation of production factors or profits rents our cases of nonoptimality of the friedman rule which differ from those of mulligan and sala i martin 1997 and extend substantially those of schmitt grohe and uribe 2004a follow from the violation of the diamond and mirrlees 1971 principle on production efficiency

stable near rational sunspot equilibria abstract we introduce a new class of solutions to nonlinear forward looking models called near rational sunspot equilibria nrse nrse are natural nonlinear extensions of the usual sunspot equilibria associated with the linearized version of the economy and are near rational in that agents use the optimal linear forecasting model when forming expectations generic results for existence and stability under learning are established nrse in indeterminate nonlinear models are found to be stable under learning provided that the corresponding linearized model s minimal state variable solution is e stable nrse are readily computable and our results make it possible to use the standard linear tools to search for stable nrse we illustrate our results using a canonical nonlinear new keynesian model

the great mortgaging housing finance crises and business cycles this paper unveils a new resource for macroeconomic research a long run dataset covering disaggregated bank credit for 17 advanced economies since 1870 the new data show that the share of mortgages on banks balance sheets doubled in the course of the twentieth century driven by a sharp rise of mortgage lending to households household debt to asset ratios have risen substantially in many countries financial stability risks have been increasingly linked to real estate lending booms which are typically followed by deeper recessions and slower recoveries housing finance has come to play a central role in the modern macroeconomy

voracity vs scale effect in a growing economy without secure property rights abstract this paper extends the standard model of growth with insecure property rights by introducing variable labor supply and increasing returns to scale it is assumed that capital stock is jointly owned by multiple interest groups and that each group participates in production activities by supplying its labor force in this setting there are two opposing factors that affect growth over consumption in the absence of secure property rights and the scale effect due to the presence of increasing returns the growth performance of the economy thus depends on which factor dominates

using labels to investigate scope effects in stated preference methods insufficient sensitivity to scope variations in the scale of the environmental good on offer remains a major criticism of stated preference methods and many studies fail a scope test of some sort across a range of existing explanations for insensitivity to scope commodity mis specification embedding warm glows there seems to exist no clear conclusion on how to deal with the problem this paper provides an alternative explanation for insufficient sensitivity to scope based on re definition of the determinants of value for environmental goods within an attributes based choice model in the proposed framework respondents willingness to pay need depend not only on physical characteristics of a good but may also depend on the label under which the environmental good is sold in the hypothetical market to investigate this problem a choice experiment study of biodiversity was conducted we find that controlling for the effects of a label in this case national park designation leads to significant increase in the scope sensitivity of welfare measures

government spending local indeterminacy and tax structure this paper develops an endogenous growth model where sustained growth is due to the introduction of a public input consumers derive utility from consumption leisure and a public good the public input and the public good are the flow of government expenditures these expenditures are financed by means of income taxes with these assumptions it is shown that the dynamic equilibrium may exhibit local indeterminacy when the tax rate on the labour income is large the tax structure that maximizes growth and the optimal tax structure are characterized and compared

capital is back wealth income ratios in rich countries 1700 2010 how do aggregate wealth to income ratios evolve in the long run and why we address this question using 1970 2010 national balance sheets recently compiled in the top eight developed economies for the united states united kingdom germany and france we are able to extend our analysis as far back as 1700 we find in every country a gradual rise of wealth income ratios in recent decades from about 200 300 in 1970 to 400 600 in 2010 in effect today s ratios appear to be returning to the high values observed in europe in the eighteenth and nineteenth centuries 600 700 this can be explained by a long run asset price recovery itself driven by changes in capital policies since the world wars and by the slowdown of productivity and population growth in line with the s g harrod domar solow formula that is for a given net saving

public goods self selection and optimal income taxation using the self selection approach to tax analysis this paper derives a modified samuelson rule for the provision of public goods when the government deploys an optimal nonlinear income tax this approach gives a straightforward interpretation of the central result in this area generalises it and provides a simple characterisation of optimal policy in a wide range of circumstances the analysis also emphasises and clarifies the significance of the choice of numeraire for the optimality of decentralising public spending decisions it is well known that the famous samuelson rule for the provision of public goods may not be applicable when the tax revenues used to finance the public goods come from distorting taxes the principle was recognized as long ago as pigou 1947 long before the samuelson rule was devised pigou saw that in addition to the resource cost involved in transferring funds from the private to the public sector there was a deadweight loss involved from this insight he suggested that the criterion for providing public goods should be more stringent than the samuelson rule would later suggest in particular one might expect that the inclusion of the deadweight loss of taxes as part of the cost of providing a public good would lead to a reduction in its optimal provision relative to a situation in which lump sum taxes were available the problem was investigated more systematically by atkinson and stern 1974 who considered the case in which a public good is financed by a set of optimal commodity taxes all individuals were assumed to be identical so efficiency alone dictated the objective they found that no prima facie case could be made for the pigou position that the use of distortionary taxes called for a reduction in the supply of the public good their analysis clearly showed that there were two influences at work when the financing of a public good was by distorting taxes on the one hand

the level and distribution of global household wealth the level of average household wealth in all countries is estimated via the determinants of assets and debts for 39 countries which have balance sheet or survey data the distribution of wealth in all countries is inferred from information on the pattern of wealth ownership for 20 countries covering 59 of world population combining the level and distribution figures suggests that median global wealth was ppp 8 635 in the year 2000 and that ppp 518 361 was needed to belong to the top percentile the top decile owned 71 of world wealth and the global gini value was 0 802

poverty traps indeterminacy and the wealth distribution we consider a one sector growth model in continuous time with a production externality and endogenous labor supply there is a continuum of households who have identical preferences but differ with respect to their initial wealth we show that there exist economies such that an indeterminate steady state exists for some wealth distribution but not for others a second result is that a redistribution of wealth may drive the economy from a steady state with strictly positive output to a poverty trap in which output converges asymptotically to zero these results indicate that differences in the wealth distribution may be responsible for drastic differences in the long run standard of living journal of economic literature classification numbers d31 d50 o41

capital labor substitution and equilibrium indeterminacy empirical evidence indicates that the elasticity of capital labor substitution for the aggregate u s economy is below unity in contrast the existing indeterminacy literature has mostly restricted attention to a cobb douglas production function which imposes a substitution elasticity exactly equal to unity this paper examines the quantitative relationship between capital labor substitution and the conditions needed for equilibrium indeterminacy and belief driven fluctuations in a one sector growth model with variable capital utilization the substitution elasticity has little quantitative impact on the minimum degree of increasing returns needed for indeterminacy however when capital utilization is constant a below unity substitution elasticity sharply raises the minimum degree of increasing returns in this version of the model lower substitution elasticities impose a higher adjustment cost on labor hours that cannot be mitigated by shifts in the capital utilization rate overall our results show that empirically plausible departures from the cobb douglas specification can make indeterminacy more difficult to achieve

consumer and citizen roles and motives in the valuation of agricultural genetic resources in finland this study analysed consumer and citizen roles in contingent valuation of a conservation programme of agricultural genetic resources and a native breed product the willingness to pay wtp for the conservation programme 48 was mainly driven by perceived taxpayer responsibility and existence and use motives while the wtp for the product price premium of 14 was to a larger extent associated with perceived purchaser responsibility we identified four respondent groups those who emphasized citizens or consumers roles indifferent and negative which differed in terms of their conservation motivations responsibility perceptions and wtp furthermore the results emphasize that citizen and consumer roles overlap and individuals may act as either or both in the context of a purchasing decision and a taxpayers decision of policy support although the conservation programme received more support future conservation could partly be based on the consumption of specialty products

returns to scale market power and the nature of price rigidity in new keynesian models with self fulfilling expectations increasing returns to scale and firms market power are two potential sources of sunspot expectations in neoclassical models we show that in new keynesian models returns to scale and market power can have fundamentally different implications for broad macroeconomic issues including self fulfilling expectations depending on the nature of price rigidity our findings suggest that the design of stabilization monetary policy can depend on precise knowledge about the economy s real and nominal features therefore a clear understanding of the specific economic environment and its relevance to monetary policymaking for ensuring macroeconomic stability can be an integrated part of monetary policy practice

indeterminacy under constant returns to scale in multisector economies recently there has been a renewed interest in indeterminacy or alternatively put in the existence of a continuum of equilibria in dynamic economies that exhibit some market imperfections one of the primary concerns of this literature has been the empirical plausibility of indeterminacy which arises in markets with external effects or with monopolistic competition often coupled with some degree 10 of increasing returns

endogenous participation risk in speculative markets abstract this paper analyses the dynamic implications of an asset pricing model with incomplete participation due to entry costs it is shown that heterogeneity in entry costs can lead to the existence of multiple stochastic sunspot equilibria whereby the number of agents in the market and asset prices fluctuate endogeneously over time in the absence of fundamental uncertainty such asset price fluctuations occur despite the uniqueness of the deterministic equilibrium and thus bear no link to the usual notion of steady state indeterminacy in addition to excess volatility the equilibria exhibit predictable and conditionally heteroskedastic returns

aggregate stability and balanced budget rules it has been shown that under perfect competition and a cobb douglas production function a basic real business cycle model may exhibit indeterminacy and sunspot fluctuations when income tax rates are determined by a balanced budget rule bbr this paper introduces in an otherwise standard real business cycle model a more general and data coherent class of production functions namely a constant elasticity of substitution production function we show that the degree of substitutability between production factors is a key ingredient to understanding the de stabilizing properties of a bbr then we calibrate the model consistently with the empirical evidence that is we set the elasticity of substitution between labor and capital below unity we show that compared to the cobb douglas case the likelihood of indeterminacy under a bbr is greatly reduced in the u s the eu and the uk

indeterminacy and increasing returns abstract we investigate properties of the one sector growth model with increasing returns under two organizational structures capable of reconciling the existence of aggregate increasing returns with competitive behavior by firms the first involves input externalities the second involves monopolistic competition we show for parameters in close accord with recent literature on real business cycles that the model displays an indeterminate steady state that can be exploited to generate a model of business fluctuations driven by self fulfilling beliefs in our first class of models growth is generated by exogenous increases in factor productivity in the second class the marginal product of capital is large enough for endogenous growth journal of economic literature classification numbers e00 e3 o40

toward a new welfare economics for sustainability the debate over various definitions of sustainability has for the most part been conducted within the framework of traditional welfare economics discussion has centered on technical issues imbedded within the functional forms of various optimization models especially the coefficient of the elasticity of substitution and the social discount rate two more basic problems are 1 intractable theoretical difficulties within welfare economics call into question the results of traditional models of sustainability regarding intergenerational welfare and 2 equating per capita consumption with welfare contradicts empirical evidence suggesting that the link between happiness and wealth income is relatively weak alternative approaches to measuring well being are being developed and these have great potential to move the sustainability debate forward

animal welfare and social decisions is it time to take bentham seriously abstract this paper analyzes and questions the standard welfare economics assumption of anthropocentric welfarism i e that only human well being counts intrinsically alternatives where also animal welfare matters intrinsically are analyzed both theoretically and empirically the general public s ethical preferences are measured through a survey of a representative sample in sweden and the responses from a clear majority suggest that animal welfare should indeed carry intrinsic weight in public decision making current legislation in many countries is consistent with this a brief review of moral philosophy on animal welfare indicates that a large majority of philosophers believe that animal welfare should count intrinsically it is moreover demonstrated that it is theoretically and practically possible to generalize welfare economics in order to give intrinsic value also to animal welfare the paper concludes that there are strong reasons to sometimes generalize welfare economics in order to take animal welfare into account directly i e in addition to effects through individual utilities the practical implications of doing so are likely to be more important over time as the scientific methods of measuring animal welfare are gradually improving

non optimality of the friedman rule and optimal taxation in a growing economy with imperfect competition abstract this paper shows that if capital generates production externality there exists a wedge between returns to money and to capital driving the friedman rule is not optimal however in the absence of capital externality the friedman rule may be valid even under imperfect competition

choices without prices without apologies valuing is usually regarded as a process of compressing information about attributes into a single metric armed with this reduced form of compact information the consumer can consider a particular object with a particular price attached or implied and make an informed decision but the process of valuing is less straightforward than we ordinarily suppose when environmental goods and services become the object of information compaction it is possible that important information is lost we comment on the choice problem germane to environmental goods and services and challenge the presumption that environmental choices made without explicit pricing are inferior to those in which hypothetical valuation studies are undertaken

the contingent valuation debate why economists should care t he contingent valuation method involves the use of sample surveys questionnaires to elicit the willingness of respondents to pay for generally hypothetical projects or programs the name of the method refers to the fact that the values revealed by respondents are contingent upon the constructed or simulated market presented in the survey a spirited and occasionally mean spirited battle over such methods is currently being waged involving competing factions within the federal government economists and lawyers representing business and environmental groups and interested academics as well at issue is a seemingly quite specific question should environmental regulations currently under development at both the department of the interior and the department of commerce sanction the use of the contingent valuation method in estimating the damage done by spills of oil chemicals or other substances covered by federal law more generally the debate raises broad questions about what economists have to say about the values that individuals place on public or private goods the two papers that follow this one make cases for and against the use of the contingent valuation method my aim here is to provide an overview of the technique and the debate surrounding it i also want to suggest why this debate should matter to economists both professionally and in their roles as citizens and consumers

scale effects time varying markups and the cyclical behaviour of primal and dual productivity this paper presents estimates of the degree of returns to scale using nonparametric measures of primal and dual productivity for 2 digit us manufacturing industries as part of the analysis the cyclical behaviour of primal and dual productivity measures are considered time varying markups are allowed for and the small sample properties of the instrumental variables estimator used to derive the estimates from the primal and dual relations examined both the primal and dual estimates indicate the existence of increasing returns to scale for the durable goods industries the simulation results indicate there is a slight tendency for the dual equation estimates to overestimate the degree of returns to scale however small sample bias appears to be most severe for the non durable goods industries

the value of biodiversity markets society and ecosystems the value of biodiversity is discussed at different levels including market value non market values to humans and the value of biodi versity to ecosystems the main conclusion is that although market exchange values of environmental services may be used to justify biodiversity protec tion measures it must be stressed that exchange value constitutes a small portion of total biodiver sity value the total value of existing biodiversity is largely unknown but indications are that it is essen tial to human existence the various levels of biodi versity value point to the need for a hierarchical and pluralistic methodology to determine appropri ate policies for its preservation jel q21 i introduction among ecologists there is a general con sensus that biodiversity1 is of critical impor tance to the health of ecosystems and even for the long term survival of the human species there is also a consensus that bio diversity is being lost at a rate which is a cause for concern 2 economists on the other hand generally view biodiversity as just an other good which is to be placed in the basket of market choices just as any other the discussion of the specifics of biodiver sity policy has been unsatisfactory partly because of the different meanings of the word value used by economists and ecolo gists many ecologists fail to understand the logic of market allocation and why biologi cal resources are used in seemingly irra tional ways many economists fail to ap preciate the narrowness of the concept of economic value as indicated by relative prices determined by market exchange fol lowing anderson 1966 and brown 1984 the discussion below considers economic measures of value to be species of the genus assigned value which belongs to the family value many biologists and paleontologists be lieve that we are at a critical point in the history of the human species and perhaps even in the 600 million year history of com plex multicelled life on earth if the paleon tologists and biologists who study the phe nomenon of mass extinction are correct the current human induced mass extinction may be of the same order of magnitude as the five other major extinction episodes which destroyed between 20 and 96 percent of existing species on the planet ehrlich and ehrlich 1992 ward 1994 wilson 1992 we are living in a truly remarkable period in earth s 41 billion year history the valua tion decisions our species has made in the recent past and will make during the next few decades will determine the fate of life on earth for the next tens of millions of years it is critical to clarify the language and concepts we use to estimate the value of biodiversity and thus policies leading to its destruction or preservation the importance attached to the issue of biodiversity preservation necessarily in volves ethical judgments about duty to fu ture generations and responsibility toward the nonhuman natural world although in dividuals hold a variety of conflicting beliefs about human responsibility to the natural world this does not mean that policy choices

altruism in cost benefit analysis it has recently been argued that altruistic motives for paying for a public sector project should be ignored in a cost benefit analysis the reason is that including altruism would mean a kind of double counting of the project s benefits this paper takes a look at these arguments and derives cost benefit rules which cover different kinds of altruism the paper also provides some recommendations for the treatment of altruism in studies using the contingent valuation method

a sunspot paradox abstract this paper shows that the local stability properties of dynamic general equilibrium macroeconomic models may depend on the length of a period in the model economy this leads to the following paradoxical situation the economy may be driven by sunspots for some decision frequencies while sunspots can have no impact at other decision frequencies

the economic crisis from a neoclassical perspective abstract this paper assesses the 2007 2009 recession using neoclassical business cycle theory i find that the 2007 2009 u s recession differs substantially from other postwar u s recessions and also from the 2008 recession in other countries in that lower labor input accounts for virtually all of the decline in income and output in the united states while lower productivity accounts for much of other u s recessions and the 2007 2009 recession in other countries i also find that existing classes of models including financial market imperfections models do not explain the u s recession this is because the 2007 2009 recession is almost exclusively related to what appear to be labor market distortions that drive a wedge between the marginal product of labor and the marginal rate of substitution between consumption and leisure a topic about which current classes of financial imperfection models are largely silent i discuss future avenues for developing this class of models and i consider alterna

aggregation and deliberation in valuing environmental public goods starting from a distinction between kantian principle based and utilitarian preference based approaches in political theory this essay argues that we may understand normative judgments individuals make about policy to express principled views of the public interest or purpose not private preferences about their own consumption opportunities these judgments in other words state opinions about what we ought to do as a society rather than report preferences about what i want as a utility maximizer this essay then argues that contingent valuation can take into account these kinds of judgments which dominate public discourse about the environment only if it moves toward a deliberative discursive jury like research method emphasizing informed discussion leading toward a consensus based on an argument about the public interest

willingness to pay for improved air quality in sweden the aim of the paper is to quantify individual willingness to pay measures of improved air quality in sweden by using the contingent valuation method cvm such measures are important for policy makers when deciding about public investments and policy instruments in order to regulate environmental impacts e g from road transportation and industry the mean willingness to pay wtp for a 50 reduction of harmful substances where the respondents live and work was about 2000 sek year which is of the same order of magnitude as earlier stated preference studies in nordic countries most parameters in the econometric analysis had the expected sign wtp was increasing in income wealth and education it was larger for men members of environmental organizations people living in big cities which are on average more polluted and people who own their house or apartment it was lower for retired people however the additional wtp for people in big cities although significantly higher than for other people

economies of scale in banking indeterminacy and monetary policy this paper investigates economies of scale es in financial intermediation as a source of equilibrium indeterminacy consumption in the model can be purchased with currency and deposits and es in intermediation implies that deposit costs are decreasing in aggregate deposits the results suggest that indeterminacy does not depend on a large degree of es nor a large intermediation sector but on monetary policy and the determination of nominal interest rates monetary policies not targeting nominal rates allow for indeterminacy to arise for any degree of es while policies targeting nominal rates eliminates indeterminacy for all degrees of es

monetary policy and asset prices with belief driven fluctuations abstract we present a heterogeneous agents new keynesian model subject to a cost channel of monetary policy transmission constant turnover between long time traders and newcomers in market activities combined with restricted trading opportunities introduces a feedback from the stock market to real activity making stock prices non redundant for the business cycle we show that strict inflation targeting can lead to equilibrium indeterminacy even if the policy rule satisfies the taylor principle a belief driven shock to stock price generates relative volatilities of key financial variables which are very close to what is observed in u s data this result hints to the possibility that the financial instability witnessed since the mid to late 1990s was the result of waves of rational exuberance and pessimism in financial markets our analysis suggests that a mild response to stock prices in the central bank s policy rule can restore equilibrium determinacy and therefore rule out non fundamental volatility

do existence values for cost benefit analysis exist the use of the contingent valuation method to generate estimates of existence value for input to cost benefit analysis requires that individuals have utility functions defined over the relevant arguments the validity of the assumption that the required utility functions generally exist has been questioned it has been argued that some individuals will respond on the basis of lexicographic preference orderings it has also been argued that some individuals do not consider that market or individual willingness to pay criteria are appropriate where existence value type issues are at stake the paper considers survey evidence bearing upon these arguments it is concluded that the evidence is consistent with the view that it is incorrect to proceed on the assumption that individuals generally satisfy the assumptions required for the existence of existence values for use in cost benefit analysis

wealth and inequality over eight centuries of british capitalism abstract this paper constructs annual data for the wealth income ratio w y for the uk over the period 1210 2013 it is found that the w y ratio has fluctuated at one two century frequencies about a constant level of approximately 500 over the past eight centuries furthermore a u shaped w y path is identified over the past two centuries and it is argued that the descending part of the u shape is driven by the transition from pre industrial modes of production to industrialization and that the post 1980 upturn in the w y ratio represents the transition from the industrial to the post industrialization era

population growth and economic growth a reconsideration abstract in an endogenous growth model endogenous fertility a neo malthusian relation emerges only when all exogenous variables are controlled for this suggests that conflicting findings in the literature may originate from heterogeneity in unobserved variables in cross country panel data sets

comparative national balance sheets a study of twenty countries 1688 1978 raymond w goldsmith has combined his experience good sense and flair with figures to construct this groundbreaking comparative study of the balance sheets of twenty of the largest nations a pioneer in the field of national accounts goldsmith now presents a work that will be a valuable tool in tracking the economic progress of and between nations the majority of the balance sheets were created especially for this project their components gleaned from fragmentary and heterogeneous data there are approximately 3 500 entries each measuring the value of one type of tangible or financial asset or liability at a given date goldsmith s estimates are keyed to fifteen benchmark dates in the economic progress of the cited nations and for twelve nations he was able to construct balance sheets dating back to the nineteenth century or earlier combined worldwide balance sheet are included for 1950 and 1978 comparative national balance sheets will provide an essential basis for the quantitative analysis of the long term financial development of these nations in addition to national balance sheets for all large countries except brazil and china sectoral balance sheets for france germany great britain india japan and the united states in the postwar period are also included

international business cycle and financial intermediation the paper extends a standard two country international real business cycle model to include financial intermediation by banks of loans and government bonds taking in household deposits from home and abroad the loans are produced by the bank in a cobb douglas production approach such that a bank productivity shock can explain financial data moments the paper contributes an explanation for both the us relative to the euro area and the us relative to china of cross country correlations of loan rates deposit rates and the loan premia it provides a sense in which financial retrenchment resulted in the us following the 2008 bank crisis and how the euro area and china reacted the paper contributes evidence of how the euro area has been more financially integrated with the us and china less financially integrated with the euro area becoming more financially integrated after the 2008 crisis and china becoming less so integrated

capital mobility and the origins of stock markets i illustrate the accepted though hardly researched idea that political institutions play a role in locking in factor specificity across sectors space and borders i use the emergence of modern capital markets in the nineteenth century a process that threatened to redeploy financial resources away from land and traditional sectors to heavy industry as a test case to ascertain the degree of domestic financial capital mobility in nine advanced industrialized countries the main finding is that cross national variations in financial capital mobility holding constant the level of economic development reflect the degree of state centralization

the evolution of preferences why sovereign preferences may not lead to sustainable policies and what to do about it abstract the conventional economic paradigm assumes that tastes and preferences are exogenous to the economic system and that the economic problem consists of optimally satisfying those preferences tastes and preferences usually do not change rapidly and in the short term this assumption makes sense sustainability is an inherently long term problem and in the long run it does not make sense to assume tastes and preferences are fixed and given if preferences are expected to change over time and under the influence of education advertising changing cultural assumptions etc the old assumption of consumer sovereignty is not adequate different criteria of optimality are needed how preferences change how they relate to the goal of sustainability and how they can or should be actively influenced to satisfy the new criteria needs to be determined ecological economics has emphasized the three rank ordered goals of ecological sustainability fair distribution and allocative efficiency this paper examines how preferences evolve and change over time and the implications of this for developing policies that meet these three goals in democratic societies

aggregate instability under balanced budget consumption taxes a re examination we re examine the destabilizing role of balanced budget fiscal policy rules based on consumption taxation using a one sector model with infinitely lived households we consider a specification of preferences derived from jaimovich 2008 14 and jaimovich and rebelo 2009 15 which is flexible enough to encompass varying degrees of income effect when the income effect is not too large we show that there exists a laffer curve which explains the multiplicity of steady states and that non linear consumption taxation may destabilize the economy promoting expectation driven fluctuations if the elasticity of intertemporal substitution in consumption is sufficiently larger than one and the tax rate is counter cyclical with respect to consumption numerical illustrations also show that consumption taxation may be a source of instability for most oecd countries for a wide range of structural parameters configurations we finally prove the robustness of our conclusions if we consider a discrete time setup

what determines aggregate returns to scale abstract this paper develops a unified framework that incorporates four features important in existing models with increasing returns fixed costs decreasing marginal costs product variety and market power when fixed costs are not allowed to vary and profits are imposed to be zero in every period only the degree of returns to variety determines the degree of aggregate increasing returns to scale when fixed costs respond to changes in aggregate activity or the zero profit condition does not hold in the short run aggregate returns depend not only on product variety but also on diminishing marginal costs or market power the degree of market power however does not affect input prices which are critical to determine the uniqueness of equilibrium

nominal income targeting versus money growth targeting in an endogenously growing economy abstract we find that local indeterminacy more easily emerges under a regime of nominal income targeting both targeting regimes are equally effective in influencing economic growth and inflation the results thus favor money growth over nominal income as a nominal anchor

economic policy in a second best environment the article begins by summarizing the arguments that lie behind the use of first best models and notes the inappropriateness of using these results in what is patently a second best world using several well known examples from the literature it is claimed that if second best considerations are taken seriously then it is much more difficult if not impossible to divorce efficiency from equity than one might have thought from the use of first best economic models from this it follows that policy recommendations require us to make and use interpersonal comparisons of utility and that we should do this as well as we can even if it is not scientific

the cost of business cycles under endogenous growth robert e lucas jr argued that the welfare gains from reducing aggregate consumption volatility are negligible subsequent work that revisited his calculation continued to find small welfare benefits further reinforcing the perception that business cycles do not matter this paper argues instead that fluctuations can affect welfare by affecting the growth rate of consumption i show that fluctuations can reduce growth starting from a given initial consumption which can imply substantial welfare effects as lucas himself observed empirical evidence suggests the welfare effects are likely to be substantial about two orders of magnitude greater than lucas original estimates

the rate of return on everything 1870 2015 what is the aggregate real rate of return in the economy is it higher than the growth rate of the economy and if so by how much is there a tendency for returns to fall in the long run which particular assets have the highest long run returns we answer these questions on the basis of a new and comprehensive data set for all major asset classes including housing the annual data on total returns for equity housing bonds and bills cover 16 advanced economies from 1870 to 2015 and our new evidence reveals many new findings and puzzles

individual firm and market dynamics of csr activities this paper investigates how firms should plan corporate social responsibility short csr this dynamic analysis starts with a firm s intertemporal optimization problem and proceeds to analyze interactions with other firms which are crucial if csr is profitable for firm a then it is most likely also profitable for competitors b and c and these simultaneous decisions affect the gain each would achieve from trying to advance its own position we find that multiple equilibria exist irrespective of whether interactions with other firms are taken into account interactions can eliminate or create additional steady states and can lead to a situation in which history is insufficient to determine the long run outcome among multiple steady states so that coordination is beneficial

the importance of ethics in environmental economics with a focus on existence values the importance of ethics and fundamental value judgments in environmental economics is high lighted by discussing the controversial concept of existence values the social value depends crucially on the social objective which is not necessarily self evident e g since some individuals tend to value nature intrinsically it is shown that the motives behind willingness to pay figures matter for the social value and the conventional view that people respond to cv questions solely in order to maximize their own utility or well being is questioned the importance of being explicit about value judgments is emphasized and it is argued that environmental economics should consider non conventional assumptions which take the social context into account to a larger degree

on the economics of philanthropy friedman says that he accepts this argument as justifying governmental action to alleviate poverty economists will be familiar with this kind of argument someone takes as a premise that a particular activity is the subject of altruistic concern by individuals he shows that if matters are left to unco ordinated private philanthropy a free rider problem will arise and then he claims that this problem can be solved by some kind of intervention by government this strategy has been used to justify many kinds of intervention including compulsory transfers of income through the tax system hochman and rodgers i969 public policy to stimulate saving and investment marglin i963 sen i967 and the subsidisation or public provision of health care arrow i963 lindsay i969 culyer i976 this whole line of argument rests on a particular theory of private philanthropy which in turn relies on three principal assumptions first there is the publicness assumption the charitable activity in question say the relief of poverty or the provision of health care is a common argument in many individuals utility functions and so is a public good in the theoretical sense samuelson i954 in some cases of private philanthropy it is indisputable that the charitable activity is a public good from which donors derive utility consider for example the case of yachtsmen contributing to the royal national lifeboat institution or potential cancer victims contributing to the cancer research campaign in other cases the assumption takes on a rather different character rich britons contribute towards famine relief in cambodia childless old age pensioners contribute towards the care of handicapped children in such cases one would have to be extremely cynical to believe that the charitable activity furthers the self interest of the donor in any significant way but one might suggest that for purely altruistic reasons the donor derives utility from knowing that less fortunate people are being made better off such an effect will be called an altruistic externality friedman along with all of the other writers quoted in the first paragraph of this paper relies on altruistic externalities to justify the publicness assumption the second assumption is that of utility maximisation each individual s decisions concerning his philanthropic