variable returns to scale in production and patterns of specialization this paper discusses some trade and welfare implications of the two sector model based on increasing returns to scale irs in one industry and decreasing returns to scale drs in the other it has been shown by horst herberg and murray kemp that given homothetic production functions with irs in one industry and drs in the other the production possibilities frontier ppf is strictly concave to the origin near the irs axis and strictly convex to the origin near the drs axis while this result constitutes an important finding and is contrary to the general impression among economists even twelve years after the publication of herberg and kemp s paper no attempt has been made to analyze its implications for welfare and patterns of specialization in this paper i consider a simple twocommodity model with irs in one industry and drs in the other and discuss some interesting implications of variable returns to scale vrs first i demonstrate that in this model if a small open economy specializes completely in production it will do so in the drs commodity and not in the irs commodity as is generally believed second if at a given price ratio an internal production equilibrium exists a welfaremaximizing small open economy will never specialize completely in production even though the ppf exhibits decreasing opportunity costs over a part of its range third given output generated economies and diseconomies of scale welfare maximization for a small country requires a permanent tax subsidy scheme encouraging expansion of the irs industry and contraction of the drs industry finally in a two country model with identical tastes and technology across the countries free trade equilibrium may result in incomplete specialization by the exporter of the irs commodity and complete specialization by the exporter of the drs commodity in the course of the analysis i argue that tinbergen s formulation of frank graham s case for protecting the irs industry is incorrect i then present a possible reformulation of it in section i the basic production model is introduced in section ii the model is analyzed and in section iii it is argued that all the results continue to hold in the multifactor case

deviations from rules based policy and their effects abstract rules based monetary policy evaluation has long been central to macroeconomics using the original taylor rule a modified taylor rule with a higher output gap coefficient and an estimated taylor rule we define rules based and discretionary eras by smaller and larger policy rule deviations the absolute value of the difference between the actual federal funds rate and the federal funds rate prescribed by the three rules we use tests for multiple structural changes to identify the eras so that knowledge of subsequent economic outcomes cannot influence the choice of the dates with the original taylor rule monetary policy in the u s is characterized by a rules based era until 1974 a discretionary era from 1974 to 1985 a rules based era from 1985 to 2000 and a discretionary era from 2001 to 2013 with the modified taylor rule the rules based era extends further into the 1970s and there is an additional rules based period starting in 2006 we calculate various loss functions and find that economic performance is uniformly better during rules based eras than during discretionary eras and that the original taylor rule provides the largest loss during discretionary periods relative to loss during rules based periods

realising the wellbeing dividend an exploratory study using the human scale development approach abstract despite claims about the existence of the wellbeing dividend that sustainable and reduced consumption is compatible with increased wellbeing there is little evidence that this dividend is being realised the present research illustrates how through workshops addressing the cultural economic political and personal factors that impede or promote human need satisfaction a given society can unravel its own pathway towards sustainability and wellbeing this study draws on the wellbeing literature particularly max neef s approach to human needs and satisfiers it uses an analysis of group discussions in lleida a medium sized catalonian city to show how unsustainable consumption is associated with local hurdles for actualising needs and how sustainable consumption is linked to local descriptions of the utopian need actualising society the manner of progressing towards need actualisation and sustainability is also addressed by participants who identify the changes in norms institutions and personal identity that need to be in place the analysis reveals the interrelatedness of satisfiers and argues for a systemic perspective to address social transition towards sustainability and wellbeing at the local level

monetary and macroprudential policies in an estimated model with financial intermediation abstract we estimate the smets wouters model featuring the gertler karadi banking sector on us data using real and financial observables we investigate the gains from coordination between a flexible inflation targeting central bank and a macroprudential regulator charged with safeguarding financial stability the potential gains from coordination depend on how much importance is given to the output gap in the macroprudential mandate coordination conflicts can be avoided by assigning similar importance to this common objective in the respective mandates of both policies when we derive optimal mandates for monetary and macroprudential policy under no coordination we find that both policy makers should place a higher weight than society on the output gap

innis lecture environmental crises past present and future environmental crises are distinguished by rapid and largely unexpected changes in environmental quality that are difficult if not impossible to reverse examples would be major extinctions and significant degradations of an ecosystem i argue there are three preconditions for crisis failures in governance an ecological system exhibiting a tipping point and an economy environment interaction with positive feedbacks i develop a simple model to illustrate how a crisis may arise and draw on our knowledge of past and present crises to highlight the mechanisms involved i then speculate as to whether climate change is indeed a crisis in the making les crises environnementales sont caracterisees par des changements rapides et largement non anticipes dans la qualite de l environnement qui sont difficiles sinon impossibles a renverser des exemples pourraient etre des extinctions d especes et des degradations significatives d un ecosysteme l auteur suggere qu il faut trois conditions pour qu il y ait crise faillites de gouvernance un systeme ecologique au point de bascule et une interface environnement economie riche de retroactions positives l auteur developpe un modele simple pour illustrer comment une crise peut emerger et s appuie sur la connaissance des crises passees et presentes pour souligner les mecanismes en jeu on specule en fin de texte sur la question a savoir si le changement climatique est une crise en train de prendre

location choice by households and polluting firms an evolutionary approach this paper examines several policy regimes to deal with the problem of households suffering from environmental damage by firms in the same region we employ an evolutionary framework to analyze migration movements in the course of time since firms and households will not relocate immediately in response to payoff differentials we show that taxation gives firms and households an incentive to stay away from each other laissez faire compensation only gives households firms an incentive to stay away from firms households we find that taxation creates the right incentives to reach a local welfare maximum however when there are multiple local maxima circumstances may arise under which compensation leads to a better outcome than taxation c 2004 elsevier b v all rights reserved

nonconvexity induced by external costs on production theoretical curio or policy dilemma this paper considers with a degree of scepticism the sweeping policy conclusions that can be found in the theoretical literature concerning nonconvexit ies in the social production set induced by external costs on firms this literature has provided proofs of the possibility that such nonconvexit ies exist but these proofs have readily been interpreted as a basis on which to judge the advisability of policies to control external costs 2 indeed a number of authors have felt able to proceed from specific theoretical examples of the existence of nonconvexity to the opinion that nonconvexity represents a general obstacle to policy one of the ma in themes will be to demonstrate that the theoretical possibility of the existence of a nonconvexity at a m icro level does not imply the existence of a m icro or a fortiori macro nonconvexity in the real world nor does it imply that any nonconvexity that does exist in reality is relevant to policy the intention is not to deny that nonconvexit ies may represent an obstacle to the efficient control of external costs in specific contexts but in order to establish the real world policy relevance of a nonconvexity it is necessary to verify its existence emp irically and to establish that it stands in a particular relationship to the no policy starting point

consumption of market goods and wellbeing in small scale societies an empirical test among the tsimane in the bolivian amazon abstract researchers propose sustainable degrowth as an alternative economic model to face current environmental crisis standard economic theory criticizes the viability of degrowth under the assumption that there is a causal link between wellbeing and the consumption of goods and services here we test the universality of the association between human wellbeing and the consumption of market goods a standard indicator of economic growth using a unique body of data collected among 600 adults in a small scale foraging horticultural society in the bolivian amazon the tsimane data include two measures of consumption weekly expenditures and annual consumption of durables and two measures of wellbeing self reported wellbeing and frequency of smiles multivariate analyses suggest that for this society in the early stages of integration to the market economy consumption of market goods is not associated with wellbeing the result is robust to the two measures of wellbeing to the measurement of consumption at the individual and at the household level and to other changes in the estimation model the analysis provides support to one of the social premises in which the theory of sustainable degrowth is based that human wellbeing does not necessarily bear a direct link with consumption of market goods

buffalo hunt international trade and the virtual extinction of the north american bison in the sixteenth century north america contained 25 to 30 million buffalo by the late nineteenth century fewer than 100 remained while removing the buffalo east of the mississippi took over 100 years the remaining 10 to 15 million buffalo on the great plains were killed in a punctuated slaughter lasting little more than ten years i employ theory international trade statistics and first person accounts to argue the slaughter was initiated by a foreign made innovation and fueled by a foreign demand for industrial leather european demand and american policy failure are jointly responsible for the slaughter on the plains jel f14 n51 n71 q57

monetary policy rules work and discretion doesn t a tale of two eras this lecture examines monetary policy during the past three decades it documents two contrasting eras first a rules based era from 1985 to 2003 and second an ad hoc era from 2003 to the present during the rules based era monetary policy in broad terms followed a predictable systemic approach and economic performance was generally good during the ad hoc era monetary policy is best described as a discretion of authorities approach and economic performance was decidedly poor by considering alternative explanations of this policy performance correlation and examining corroborating evidence the paper concludes that rules based policies have clear advantages over discretion this abstract was borrowed from another version of this item

monetary policy theory and practice in respect of the theory of monetary policy i am reminded of the comment that jacob viner made many years ago at a meeting of the american economic association about alfred marshall s economics what is new is highly unlikely at this late date also to be true and significant 1 consequently i shall restrict my remarks on theory to trying to summarize what i regard as the present intellectual position

the influence of fomc member characteristics on the monetary policy decision making process abstract this paper provides new empirical evidence on a monetary policy committee with heterogeneous members whose decisions affect the efficacy of monetary policy it thereby provides a link between the literature on monetary policy committees and central bank monetary policy implementation through monetary rules using a novel dataset of the idiosyncratic characteristics of fomc members over the period from august 1979 to february 2014 the empirical findings show that characteristics such as education age and to a lesser extent work experience are not important in understanding the fomc decision making process instead the results point to the importance of time spent within the federal reserve system tenure on the fomc itself and the influence of the chair in shaping the decision making process the results are expected to have implications for the capacity of economic agents as well as various markets in the economy to more readily interpret public monetary policy information that reaches them this makes the monetary policy decision process less noisy and thus enhances the capability of agents and markets to attach the correct weight to this information

shifts in us federal reserve goals and tactics for monetary policy a role for penitence during the fi rst period starting in the mid 1920s the federal reserve offi cial during the fi rst period starting in the mid 1920s the federal reserve offi cial policy was to support high quality bank lending but not speculative lending this policy was to support high quality bank lending but not speculative lending this goal was set aside once in 1927 in an episode that many observers then blamed for goal was set aside once in 1927 in an episode that many observers then blamed for the economic collapse that followed the fi nancial crash of 1929 the fed was then the economic collapse that followed the fi nancial crash of 1929 the fed was then reluctant to increase the funds available to banks through the early 1930s even as reluctant to increase the funds available to banks through the early 1930s even as the great depression ravaged the economy the fed s concern with the volume and the great depression ravaged the economy the fed s concern with the volume and quality of lending in the setting of monetary policy did eventually wither however quality of lending in the setting of monetary policy did eventually wither however this only seems to have happened after the publication of friedman and schwartz this only seems to have happened after the publication of friedman and schwartz 1963 a revisionist history of the great depression that blamed its depth on the 1963 a revisionist history of the great depression that blamed its depth on the fed s inappropriate focus on productive lending fed s inappropriate focus on productive lending in the second period after the experience of post world war ii infl ation the in the second period after the experience of post world war ii infl ation the federal reserve in the 1950s was highly concerned with infl ation and was willing to federal reserve in the 1950s was highly concerned with infl ation and was willing to raise interest rates and bring on recessions to nip even modest infl ation rates in the raise interest rates and bring on recessions to nip even modest infl ation rates in the bud this brought withering criticism for the federal reserve on the grounds that bud this brought withering criticism for the federal reserve on the grounds that the recessions of 1957 and 1960 had been unnecessary by the mid 1960s some fed the recessions of 1957 and 1960 had been unnecessary by the mid 1960s some fed offi cials seem to have developed an aversion to creating recessions as a method of offi cials seem to have developed an aversion to creating recessions as a method of

a consumption based theory of the environmental kuznets curve abstract most theories about the inverted u relationship between pollution and income termed the environmental kuznets curve ekc are production side theories emphasizing pollution and abatement technologies production side theories are implicitly based on the assumption of low factor mobility and the absence of pollution as a variable in the utility function both assumptions are called into question by the empirical evidence of ekcs for i pollutants that are long lived and not easily shiftable and ii regional cross sections with free labor mobility hazardous waste sites are a prime example this paper develops a stylized model of the ekc based on perfect mobility of households and labor it represents the first attempt at developing a consumption side model of the ekc

north south investment flows and optimal environmental policies abstract in the context of a simple north south model that focuses on the international movement of capital we show how neglect of pollution generating effects of foreign investment may lead to distorted and misleading policy recommendations such a neglect has recently received emphasis in the empirical literature on east asian economies as in bello and rosenfeld 1990 dragons in distress asia s miracle economics in crisis food first san francisco and was shown to overlook resulting tendencies in these economies toward specialization away from agriculture and toward manufacturing our simple model formalizes this observation and allows us to show that even for an unspecialized capital poor resource rich south such pollution generating effects provide incentives for the north to encourage rather than to discourage foreign investment abroad and strengthen southern incentives to restrict foreign investment more sharply than is conventionally assumed in a nutshell it brings out the implications of northern capital creating its own demand as a consequence of its adverse impact on the southern resource base despite its simplicity the model thus sheds light on three interrelated aspects of international trading relations production asymmetry incomplete markets and monopolistic advantage

spreading versus concentrating damages environmental policy in the presence of nonconvexities abstract this paper examines the role of nonconvexities in externality control from a policy perspective nonconvexities can arise from a number of sources and can significantly alter the optimal solution to an externality problem for instance it may be socially desirable to concentrate externality damages in one area and prohibit them in another rather than spread the effects of the externality across a number of sites if this solution is optimal a pollution tax will not achieve the social optimum but a system of marketable permits will

endogenous lobby formation and endogenous environmental protection with unilateral tariff reduction this paper studies how one country s decision to liberalize trade affects the political economic structure that determines environmental policy in another country by constructing a political economy model in which the formation of lobby groups and environmental policy are endogenously determined we show that unilateral tariff reductions by a large country importing a polluting good will generate a lobby group with a relatively lower cost of organization in a small country exporting that good a formulated lobby demands an inefficient environmental policy and hence the small country s environmental regulations become less efficient then we show that when a lobby already exists unilateral tariff reductions result in the formation of a rival lobby and consequently make the small country s environmental policy more efficient

has monetary policy become more efficient a cross country analysis over the past twenty years macroeconomic performance has improved in industrialized and developing countries alike in a broad cross section of countries inflation volatility has fallen markedly while output variability has either fallen or risen only slightly this increased stability can be attributed to either 1 more efficient policymaking by the monetary authority 2 a reduction in the variability of the aggregate supply shocks or 3 changes in the structure of the economy in this paper we develop a method for measuring changes in performance and allocate the source of performance changes to these two factors our technique involves estimating movements toward an inflation and output variability efficiency frontier and shifts in the frontier itself we study the change from the 1980s to the 1990s in the macroeconomic performance of 24 countries and find that for most of the analyzed countries more efficient policy has been the driving force behind improved macroeconomic performance

trade and transboundary pollution spatial separation reconsidered abstract copeland and taylor 1999 j int econ 47 137 168 show that trade allows the spatial separation of two incompatible industries concentrating the polluting industry in one country eliminates its degenerative effects in the other this paper extends the analysis by allowing for transboundary pollution thus specialization has indirect repercussions on the level of pollution in the other country we show i how cross national differences in exposure to pollution emissions can generate comparative advantage and ii under what condition the resulting trading pattern combined with transboundary pollution can increase pollution exposure with negative effects on productivity and welfare in both countries

pollution havens and industrial agglomeration abstract this paper examines the pollution haven hypothesis using a spatial economy model of two countries and two sectors the manufacturing sector generates cross border pollution which reduces cross sectoral productivity of agricultural goods and lowers local income we derive a demand reducing effect that discourages firms to move to the country with laxer environmental regulations in the absence of any comparative advantage our analysis also demonstrates that manufacturing agglomeration forces can alleviate the pollution haven effect a pollution haven may not arise if environmental regulation is slightly more stringent in the larger country

is bioenergy trade good for the environment we analyze the impacts of bioenergy trade on greenhouse gas emissions using a two good three factor model bioenergy is an agricultural good used as a substitute for fossil fuels in industry governments tax domestic pollution without international coordination we assume that northern countries have higher labor productivity than southern ones and that agriculture is less pollution intensive than industry after taxation we show that whereas southern countries impose a lower tax rate than northern ones they do not necessary have a competitive advantage in industry and that compared to autarky trade liberalization either increases or decreases worldwide emissions depending on regional comparative advantages

climate and international trade policies when emissions affect production possibilities abstract in this paper we develop a model of international trade and climate change in which emission discharges arising from production have a feedback effect on national production sectors by impacting upon effective factor endowments with this context the objectives are first to provide a general characterization of pareto efficient climate and trade policies and second to examine the possibility starting from non pareto efficient equilibria for pareto improving environmental policies we provide conditions under which several particular reforms of carbon taxes are welfare improving

trade spatial separation and the environment we develop a simple two sector dynamic model to show how pollution can provide a motive for trade by spatially separating incompatible industries we assume that the production of smokestack manufactures generates pollution which lowers the prod uctivity of an environmentally sensitive sector farming two identical unregulated countries will gain from trade if the share of world income spent on smokestack goods is high in contrast when the share of world income spent on the dirty good is low trade can usher in a negatively reinforcing process of environmental degradation and real income loss for the exporter of smokestack goods 1999 elsevier science b v all rights reserved

five capital impact assessment appraisal framework based on theory of sustainable well being abstract this paper sets out to formulate an appraisal approach in context with sustainable development in conventional project appraisal such as energy undertakings most emphasis is placed on financial flows and rate of return on infrastructure investments although current greenhouse gas emissions are estimated to pose large costs on future generations these emissions are generally not estimated as part of the investment cost other public goods may also be omitted because their value is not recognized we review conventional cost benefit assessment and propose a new broader evaluation this new evaluation approach is based on the theory that five capital value types support long term well being rather than economic growth alone the theory states that humans depend on the size of stocks and flows from natural manufactured human social and financial capital we describe the five capitals to illustrate the value categories and outline an approach to evaluate all these in the context of energy development

an empirical analysis of the revival of fiscal activism in the 2000s an empirical review of the three fiscal stimulus packages of the 2000s shows that they had little if any direct impact on consumption or government purchases households largely saved the transfers and tax rebates the federal government only increased purchases by a small amount state and local governments saved their stimulus grants and shifted spending away from purchases to transfers counterfactual simulations show that the stimulus induced decrease in state and local government purchases was larger than the increase in federal purchases simulations also show that a larger stimulus package with the same design as the 2009 stimulus would not have increased government purchases or consumption by a larger amount these results raise doubts about the efficacy of such packages adding weight to similar assessments reached more than thirty years ago jel e21 e23 e32 e62 h50

bernanke versus taylor a post mortem our analysis sheds light on the issue of whether the monetary policy contributed to the recent housing boom and bust we have estimated and analysed a model that allows a comparison between the actual policy and several alternative taylor rules when the taylor rule path was computed using revised data and the deflator for the gdp we found a notable impact on key housing market variables supporting taylor s critique of the fed policy however the bulk of our evidence suggests that the policy as it would have been conducted under our real time taylor rules would not have had any significant impact on the housing market variables this conclusion is robust with regard to the price index used as well as the relative weights used on the inflation and output gaps

towards a systemic development approach building on the human scale development paradigm abstract since its inception the scope of inquiry within modern economics has been overall reduced to the chrematistic market centred dimension of the economic process this has been reflected in the very way it shaped the modern idea of development which more and more has been represented in monetary terms to the point of being equated to chrematistic growth altogether this reductionism has been severely criticized for various reasons mostly related to the ignorance of the complex multidimensional social cultural and psychological motives and aspirations of human beings ignoring as well crucial environmental and ecological dimensions within and by means of which the economic process unfolds one fundamental early contribution to the re conceptualization of the economic development process in terms of well being from a systemic perspective came about with the human scale development approach h sd in the 1980s central to this paradigm is a systemic re conceptualization of human needs and an attempt to place this discussion at the centre of the development debate it suggested a recovery of the oikonomy in its original classical meaning as a means for achieving better well being beyond the chrematistics narrow scope this theory presents a very wide outlook for its theoretical and practical applications and in this paper we will try to build on h sd s original contribution we begin this by briefly outlining what can be termed the chrematistic turn within both modern economics theory and practice at the dawn of modern capitalism in the second section the main aspects of the h sd approach are briefly presented and discussed the last sections are devoted to propose some methodological extensions to the original h sd version suggesting innovative ways of enlarging its scope through the development and improvement of its evaluation tools thereby we hope to enhance its application within its traditional context as well as indicating means for applying it to other fields as development policies strategies or eventually appraisal of new technologies

transboundary pollution and the gains from trade we analyse the effects of transboundary pollution on trade patterns and welfare in a general equilibrium trade model production in a dirty industry generates pollution that negatively effects productivity both at home and abroad in a clean industry trade may lead to the spatial separation of production but the existence of transboundary pollution can offset the benefits from specialization we present a general model in which the effects of a country s pollution is country specific we analyse particular cases that correspond to an acid rain problem and a problem in which one country has a cleaner technology than the other we also present some results for small open economies to examine the effects of transboundary pollution in the absence of terms of trade effects