market structure and market outcomes in deregulated rail freight markets abstract using cross section data on a national sample of city pair markets for rail freight i examine correlations between prices quantities and the number of single line and interline firms serving markets i estimate the reduced form of a structural model in which rail rates and quantities depend on the number of firms i find that rates increase as the number of firms serving the market falls and quantities shipped rise as the number of firms falls the result is consistent with market power for rail freight shippers that causes markups to rise when fewer firms serve the market and is not consistent with other explanations of the relationship between number of firms and rates and quantities interline shipment is much more costly than single line suggesting that mergers may be desirable even if they exacerbate market power problems

energy as a factor of production and entropy as a pollution indicator in macroeconomic modelling abstract fluctuating energy prices and the environment s limited capacity for absorbing pollution constitute significant uncertainties for future industrial evolution solving a set of differential equations and using the simplex algorithm in linear programming we look into the questions how changing energy inputs and prices have affected industrial growth in the past and how the energy system can be optimized so that pollution becomes minimum in the future we obtain production functions which depend linearly on energy and exponentially on the ratios of labor capital and energy capital they describe well the growth of output in west germany and the u s a during the last two decades and the responses to theenergy price explosions energy conservation was an important response element the most optimistic possible savings of primary energy by heat exchangers heat pumps and cogeneration at the present fixed energy demand profiles are computed to be 54 in the netherlands 36 in west germany and 59 in japan a pollution indicator entropy production is proposed and incorporated in a model of enviromental constraints on industrial growth

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

double co2 and beyond benefits costs and compensation abstract economic decisions over what action if any to take concerning the greenhouse effect tend to revolve around the social discount rate implicitly the debate concerns how to attribute intertemporal weights to welfare and implies a moral stance that is rarely given explicit recognition refocusing on the outcomes of current actions emphasises the role of compensation a conflict is apparent between the view that the current generation need be unconcerned over the loss or injury caused to future generations because they will benefit from advances in technology investments in both man made and natural capital and direct bequests and the requirement to avoid harming the innocent changes in units of welfare cannot be viewed as equivalent regardless of their direction in general doing harm is not cancelled out by doing good the result is a rejection of the potential compensation principle which underlies the current economic stance and a reconsideration of the acceptability of compensation altogether the concept of human rights and a non utilitarian perspective are used to show how cost benefit analysis denies the existence of inalienable rights and economics limits the moral considerability of harm

information order and knowledge in economic and ecological systems implications for material and energy use abstract ecological and economic systems are open systems that require energy to change the thermodynamic states of materials from naturally occurring to more valued forms these changes are accompanied by information flows and changes in the order of systems and their surroundings in this paper thermodynamics is used to assess these system changes and relate them to the knowledge present in a system particular emphasis is given to 1 the fundamental relationships among material energy and information flows and changes in order and knowledge 2 the role of equilibrium and non equilibrium thermodynamics in assessing system change 3 the increasing role of material and energy flows through economic systems and 4 the necessity for improved societal valuation of these flows

thermodynamic constraints on optimal depletion of copper and aluminum in the united states a dynamic model of substitution and technical change abstract the paper proposes a methodology to integrate concepts from thermodynamics into economic models of optimal natural resource use and to empirically determine relationships between changes in thermodynamic states of materials and the use of high quality energy sources the integration is aimed at an assessment of technologies substitution and technical change based on economic concepts that do justice to fundamental physical constraints a model of natural resource use and production has been developed that combines econometric time series analysis with dynamic modeling techniques the model explicitly includes thermodynamic constraints on i the process of separating minerals from crude ore ii smelting processes iii substitution among inputs and iv endogenous technical change in mining smelting and refining based on empirical information the model has been simulated to assess outer limits of feasible resource savings in copper and bauxite mining smelting and refining in the united states conclusions are drawn for the evaluation of products and effluents from mining smelting and refining operations with regard to changes in the physical resource base and environmental quality

a reexamination of the role of thermodynamics for environmental economics abstract as the discussion about the role of thermodynamics in environmental economics has not led to a conclusion yet a more fundamental approach seems to be necessary which also takes into consideration the relationship between economics and the natural sciences in general to this end value theory is chosen as a starting point because it is the centerpiece of every economic theory it is shown that neoclassical environmental economics suffers from serious deficiencies because of its value concept heedlessly copied from classical mechanics thermodynamics can be expected to be helpful to redress these defects because the economy can be thought of as a dissipative structure dependent on its environment the obvious way to integrate thermodynamics consists in the formulation of thermodynamic constraints to complement neoclassical environmental economics but this approach remains unsatisfactory because the neoclassical mechanical hardcore is incompatible with the entropy law and its implications evidently the neoclassical paradigm and its value concept have to be given up but the alternative of the energy theory of value must be rejected because its determinism cannot be reconciled with the richness of human behaviour as thermodynamic analogies offer no solution either there is a dilemma between the necessity and the apparent impossibility of adequately integrating thermodynamic concepts it turns out that a normative inconsistency is responsible which is due to the demand for intergenerational justice therefore the integration of thermodynamics into environmental economics hinges on a meta economic value decision if sustainability is adopted as the guiding principle the insights of thermodynamics call for a macro economic environmental policy setting absolute limits to the economy but this macro policy is incompatible with neoclassical economics so that a social reconstruction of economics based on a social theory of value becomes necessary in sum thermodynamics is important for environmental economics besides fulfilling a general heuristic function it also fulfils a decisive conceptual and an analytical function insofar as it helps to justify sustainability and to operationalize macro economic environmental policy

a graphical exposition of the economic theory of regulation i introduction historically many if not most economic theories have advanced in three fairly distinct stages progressing from descriptive to graphical to mathematical formulations generally in that sequence the economic theory of regulation however has been an exception to this normal order of progression the fundamental corpus of this theory was laid out initially in the descriptive discussions provided by stigler 1971 posner 1974 and others from these early presentations however the theory was subsequently formalized mathematically by peltzman 1976 and becker 1983 without passing through the graphical stage of its development 1 regardless of the chronological order of the progression of this theory however we believe that a fully developed graphical exposition is likely to be of considerable value even now at least two considerations support this view specifically by making this theory more accessible to a wider audience and by better illustrating the basic underlying mechanics behind it the likelihood of significant future advancement we believe is enhanced indeed currently there remain a number of observed regulatory phenomena that have yet to be satisfactorily explained by the existing theory e g the deregulation movement and the specific pattern of observed cross subsidies 2 an improved understanding of the fundamental components of the theory should facilitate its further advancement and lead to an expanded ability to explain a broader range of regulatory practices we illustrate this point through a variety of applications to provide an improved understanding of inter alia the markets likely to be chosen for regulation the propensity of regulatory benefits to be spread across interest groups the symbiotic nature of regulation and cross subsidization and the economics of deregulation we also are able to depict graphically the relationship between the economic theory of regulation and the traditional normative model of regulation which assumes that regulators maximize social welfare the article is organized as follows in section ii we briefly describe the regulator s general optimization problem viz what precisely is being maximized and what constraints apply to that maximization problem the latter topic the constraints will be of primary interest here section iii presents the formal graphical analysis of these constraints by deriving what we label the regulator s benefits budget constraint as its name suggests the benefits budget constraint defines the locus of maximum benefits the regulator is able to deliver to the affected interest groups importantly that constraint is determined by the prior unregulated market equilibrium price and output and by general market parameters such as demand elasticity costs and so on section iv describes the resulting regulatory equilibrium section v then applies the graphical tools developed in sections ii iv to explain a number of commonly observed regulatory phenomena here both the ability to provide new insights and the pedagogical value of the graphical approach are illustrated finally section vi concludes ii the regulator s general optimization problem the economic theory of regulation postulates that regulators will attempt to maximize some objective function most generally the regulator s utility by implementing regulatory policies that benefit and by necessity harm particular interest groups 3 the benefits provided to these groups are then used to purchase from them the objects that are directly valued by the regulator that is the direct arguments contained in the regulator s objective function the distribution of these benefits and harms across the affected groups which is determined by the regulator s choice of a particular regulatory policy is selected to maximize the value of the regulator s objective function the ability of any specific interest group to curry regulatory favor then will depend on the capacity of that group to deliver the objects of value to the regulator in exchange for the benefits provided by the regulatory process

experiments on the difference between willingness to pay and willingness to accept comment reply willingness to pay wtp and willingness to accept wta measures of welfare change have been found to differ substantially when elicited from surveys or experimental market transactions conventional economic theory suggests that the difference between wtp and wta should be smaller than those observed in empirical tests this study focuses on the hypothesis that the availability of substitutes for the good being evaluated affects the difference between the two measures the results suggest that the existence of a substitute does reduce the difference between wtp and wta however the difference between these two measures is significant with or without substitutes

measuring the existence value of wildlife reply we know little about the motives underlying individual responses to contingent valuation cv questions concerning the existence of wildlife yet motives are important because they determine how the resulting value estimates should be interpreted and used in making management decisions for example zero bids are very common in cv but these are often protests that do not represent zero valuation for the resource itself protest zero bids may be particularly prevalent in wildlife existence value studies because some people may view trade offs between money and wildlife as unethical or immoral if protest zero bids are not interpreted correctly existence value estimates obviously will be biased the motives underlying positive cv bids also matter unfortunately these motives have received much less research attention and so may be more controversial our study of wildlife values in new england suggests that many respondents who gave positive bids were motivated by ethical concerns altruism or the desire to do their fair share concerns that indicate they used decision making processes inconsistent with the neoclassical paradigm stevens et al 1991 cv results may therefore fail to measure the economic value of existence in traditional terms the bergson tintner samuelson formulation presented by kohn 1993 is useful in this context because it attempts to disentangle behavior motivated by ethical concerns about existence from preferences about wildlife use each individual is assumed to wear two hats one as citizen the other as consumer from this perspective citizens express social values which may be ethically driven while economic values are expressed by consumers kohn suggests that we make use of this distinction by first asking respondents as citizens to make implicit trade offs between income and the preservation of wildlife respondents are then asked about their willingness to pay for the option of consuming wildlife while this is an interesting proposal the bergson tintner samuelson framework is only one of several alternative theories about behavior involving ethical considerations for discussion these theories can be classified into three groups a theories of social or group interest b natural rights and c theories based upon the neoclassical model of self interest social interest theories include the bergson tintner samuelson formulation outlined by kohn and the dual utilities model proposed by margolis 1982 margolis suggests that people are motivated by two basic concerns a self interest and b social or group interest social interest which pertains to the welfare of society as a whole is assumed to be governed in part by ethics moral duty and commitment expressions of social interest include charity participation in the political process voting and contributions for the provision of public goods margolis maintains that the neoclassical theory of self interest generally fails to adequately explain individual behavior about social interests and he proposes a dual utilities model of individual preferences in which people have irreducibly distinct social and private preferences unlike the framework proposed by kohn there is no grand maximum where social value is traded off against private value rather individuals are assumed to allocate income between social and private preferences so as to do their fair share for the welfare of society as a whole con

on the life cycle metaphor where ecology and economics diverge abstract there is an attractive analogy between nature and industry based on the similarity of natural functions and certain industrial activities for instance animals ingest eat and digest food finally there are metabolic wastes firms are analogous to organisms in several respects insofar as they consume material resources process digest them and produce output products and excrete wastes firms like organisms also compete with each other for resources curiously enough one of the apparent differences between natural and man made systems is actually not one like the industrial system the natural system does not recycle everything however there are at least four real and important differences between the biosphere ecology and the technosphere economy first there is no primary producer in the economic system analogous to what photosynthesizers play in the biosphere inputs to the economy are mostly natural resources capital services and labor second in the economic system output is a heterogeneous mix of manufactured products and services labor in economics is an input but not an output the economic system recycles much less than the ecological system but utilizes a far greater suite of elements in the biosphere there are no products as such growth is tantamount to accumulation of embodied solar exergy in the form of cellulose sugars lipids and proteins the biosphere produces only wastes and more of itself plus dead matter third in the biosphere there are no markets there is no medium of exchange like money and there is nothing analogous to paid labor exchanges are involuntary i e by predation parasitism or theft fourth evolution in nature is driven by differentiation by random mutations of the genome and darwinian selection based on reproductive success in economics differentiation is based on discovery invention and innovation by intelligent economic agents and selection is based on competition at the individual or firm level either way the economic system is not closely analogous to an ecosystem attempts to use ecological concepts in an economic context are often misleading and unjustified the paper discusses the implications of the eco eco mismatch for resource accounting and life cycle analysis

the economics of climate change impacts a la stern novel and nuanced or rhetorically restricted abstract the stern report conducts an estimation of greenhouse gas control costs weighed against the benefits of avoiding damages at the global scale as i show stern and colleagues are aware of the limits to cba although they chose to ignore the considerable literature on the subject the many contributions by ecological economists and especially work specific to the enhanced greenhouse effect various problems are raised or mentioned in the report including strong uncertainty incommensurability plural values non utilitarian ethics rights distributional inequity poverty and treatment of future generations how then can this report acknowledging so many of those aspects of climate change that render cba an unsuitable tool for generating policy recommendations go ahead to conduct a global cba and make policy recommendations i explain how issues are suppressed and sidelined in a careful and methodical manner with the pretence they have been addressed by state of the art solutions meanwhile the authors maintain allegiance to an economic orthodoxy which perpetuates the dominant political myth that traditional economic growth can be both sustained and answer all our problems besides perpetuating myths this diverts attention away from alternative approaches away from ethical debates over harming the innocent the poor and future generations and away from the fundamental changes needed to tackle the very real and serious problems current economic systems pose for environmental systems

on the intergenerational allocation of natural resources it is known hartwick and others that under standard assumptions a society that invests in reproducible capital the competitive rents on its current extraction of exhaustible resources will enjoy a consumption stream constant in time it is shown here that this result can be interpreted as saying that an appropriately defined stock of capital including the initial endowment of resources is being maintained intact and that consumption can be interpreted as the interest on that patrimony this seems like a useful rule of thumb for policy

energy money and pollution abstract this paper explores general equilibrium consumption choices and interest rate determination in a deterministic two period model in which the production side explicitly describes the thermodynamic process unavoidably connected with production as argued by georgescu roegen a simple energy based production process is modeled which is not in a stationary state the resulting production function is time dependent in neoclassical general equilibrium the thermodynamic implication of the production process i e the production of waste will not be taken into account by decision making agents for welfare optimality the resulting externality needs to be corrected by a social planner or through the use of environmental related taxation however it is shown that imposing energy as a medium of exchange money in the same economy makes agents energy conscious and decreases the externality associated with entropic waste through a market mechanism without the need for intervention in the limit case in which production occurs in thermodynamic equilibrium no entropic waste is produced and the model collapses to the nested neoclassical model a contribution of the proposed approach is the determination of energy money prices in general equilibrium despite the fact that energy does not enter the agents utility function and therefore has no direct value money prices and interest rate can be fully characterized in the model due precisely to the production technology adopted in this competitive equilibrium the market interest rate will be greater than the real interest rate the change in the numeraire and medium of exchange used affects the economy due to the non stationarity of the production process but has no effect in the limit case in which the productive process reaches a steady state

the extraction of natural resources the role of thermodynamic efficiency abstract the modelling of production in microeconomics has been the subject of heated debate the controversial issues include the substitutability between production inputs the role of time and the economic consequences of irreversibility in the production process a case in point is the use of cobb douglas type production functions which completely ignore the physical process underlying the production of a good we examine these issues in the context of the production of a basic commodity such as copper or aluminium we model the extraction and the refinement of a valuable substance which is mixed with waste material in a way which is fully consistent with the physical constraints of the process the resulting analytical description of production unambiguously reveals that perfect substitutability between production inputs fails if a corrected thermodynamic approach is used we analyze the equilibrium pricing of a commodity extracted in an irreversible way we force consumers to purchase goods using energy as the means of payment and force the firm to account in terms of energy the resulting market provides the firm with a form of reversibility of its use of energy under an energy numeraire energy resources will naturally be used in a more parsimonious way

jevons paradox revisited the evidence for backfire from improved energy efficiency beginning with william stanley jevons in 1865 a number of authors have claimed that economically justified energy efficiency improvements will increase rather than reduce energy consumption jevons paradox is extremely difficult to test empirically but could have profound implications for energy and climate policy this paper summarises and critiques the arguments and evidence that have been cited in support of jevons paradox focusing in particular on the work of len brookes and harry saunders it identifies some empirical and theoretical weaknesses in these arguments highlights the questions they raise for economic orthodoxy and points to some interesting parallels between these arguments and those used by the biophysical school of ecological economics while the evidence in favour of jevons paradox is far from conclusive it does suggest that economy wide rebound effects are larger than is conventionally assumed and that energy plays a more important role in driving productivity improvements and economic growth than is conventionally assumed

railroads competition the santa fe southern pacific merger proposal in september of 1983 the santa fe and southern pacific railroads announced their long rumored long negotiated plan to merge this merger would combine two primarily parallel operations along the southern corridor of southwestern united states the merger was opposed by the antitrust division of the justice department and was turned down by the interstate commerce commission this paper uses the framework provided by the u s department of justice merger guidelines and more recent data to analyze the competitive implications of the merger the author finds that a serious loss of competition would likely have followed from the merger resulting in large gross deadweight losses and much larger transfers from shippers to the merging railroads his analysis demonstrates the critical importance of three factors in evaluating the impact of a merger such as this one a careful location and commodity specific analysis of the loci of likely competitive harm an unbiased estimate of those operating savings promised by the merger which could not be obtained through means less anticompetitive and a careful judgment as to the importance or lack of importance of transfers in the calculation of welfare losses thus an overall welfare calculus requires not only an accurate estimate of the efficiencies resulting from the merger but also a judgment as to the welfare relevance of wealth transfers

valuing public goods with the contingent valuation method a critique of kahneman and knetsch the social stakes in the use and abuse of the contingent valuation method cvm are very high recent developments in environmental law have elevated the cvm to the status of a refutable presumption in cases brought under certain statutes it is no longer adequate for economists to sniff at the continued popularity of the cvm in such cases it is instead incumbent on economists to come to some conclusions as to the domain under which the cvm may or may not be correctly applied one should not expect a simple thumbs up or thumbs down assessment in this matter such an expectation would be naive with respect to the inherent complexity of the issue not to mention the financial incentives that expert witnesses might have to breed as if controversy in an adversarial legal system in this context the strong admonitions of kahneman and knetsch 3 kk against the casual use of the cvm must be carefully examined they present what they believe to be evidence to support the claim that the cvm suffers from an embedding effect and that any reported willingness to pay wtp is best interpreted as the purchase of moral satisfaction rather than as a measure of the value associated with a particular public good i argue that their evidence is insufficient to test the implied hypotheses that it is incorrectly reported and that it is in large measure fully consistent with received economic theory

is sustainability optimal examining the differences between economists and environmentalists abstract this paper examines a number of possible explanations for the apparent differences between economists and environmentalists concerning economic growth and sustainable development some of the differences are well known and relate to issues such as resource scarcity intergenerational equity and the composition of social capital however our analysis finds that while economic notions of optimal growth and the techniques of benefit cost analysis have important advantages for evaluating complex tradeoffs because they are quantifiable they may have potentially serious drawbacks as well the paper focuses on two potential sources of bias in the use of welfare economics for social choice first there is a conservative reinforcement in benefit cost analysis which is likely to produce biases against policy interventions to protect a degraded environment second and perhaps more importantly the aggregation of individual willingness to pay as a measure of social benefits is shown to be invalid in the case of positional goods where the demand for the good reflects the desire of individuals to raise their own relative standing this error may cause the economic calculus to be biased against non positional goods including non rival goods such as environmental resources these biases further complicate the already strained assumptions in utilitarian based welfare economics that by relying on revealed preference and consumer sovereignty are unable to distinguish between or apply different weights to the satisfaction of different categories of preferences furthermore because the dynamic consequences of even small biases in judging social optimality may give rise to large social costs or advance an unsustainable path there is a danger in relying solely on a potentially biased measure of welfare as a basis for guiding social choice the paper concludes by suggesting that efforts to correct these drawbacks of economic analysis are likely to result in approaches to sustainable development that narrow the apparent differences between economists and environmentalists

energy efficiency and the slump in labour productivity in the usa energy consumption is included in an aggregate cobb douglas production function for the usa the data suggest that energy conservation has not reduced the growth rate for real gnp by more than 0 3 percentage points and that less than one fifth of the overall slump in labour productivity since 1973 should be attributed to higher energy prices

autoregressive modelling and money income causality detection abstract a step wise procedure based on granger s concept of causality and abaike s final prediction error criterion is suggested as a practical means to identify the order of lags of each variable in a multivariate autoregressive process the model seems useful because it can serve as a reduced form formulation to avoid imposing often spurious or false restrictions of the model it also provides a reasonably powerful test of causality the idea is applied to u s postwar money and income data it is found that between m1 and gnp a bivariate feedback model fits the data best between m2 and gnp a one way causal model from money to income performs better diagnostic checks applied to our model seem to indicate the adequacy of our approach

simulating the effects of railroad mergers the purpose of the study reported in this paper is to add to the empirical literature concerning market power and competition between railroads in particular the paper examines the effect of railroad mergers on railroad market power this is achieved through a case study of the transportation market for the export of kansas wheat to houston texas the models techniques and general conclusions of the study can be applied to similarly situated regional transportation markets for homogeneous goods such as coal ores field crops and lumber two models are developed to achieve the objectives of the study a network model of the wheat logistics system is used to identify the least cost transportation routes from the kansas study area to the market at houston a profit improvement algorithm which identifies nash equilibrium prices is developed to measure the amount by which railroads can profitably raise their prices above variable cost the results of the study have implications for united states railroad merger policy the paper indicates that railroad mergers do not necessarily increase railroad market power or make railroad shippers worse off instead the study demonstrates that the impact of railroad mergers on shippers and railroads depends on factors that vary geographically such as the degree of intrarailroad and intermodal competition in the area

towards an ecological economics of sustainability abstract persistent disagreement both as to the interpretation to be given to sustainability and as to the relation between ecological and economic sustainability has hindered the development of an ecological economics of sustainable resource use this paper identifies the main concepts of sustainability deriving from the two disciplines in order to explore the difference implied by an ecological approach to the problem it is argued that present economic and ecological approaches are largely disjoint and that they address basically different phenomena by combining the efficiency requirements of what is usually thought of as economic sustainability with the stability requirements of an ecological approach it is shown that an intertemporally efficient allocation of resources that satisfies the conditions for constant levels of consumption is not necessary to assure ecological sustainability ecological sustainability requires that the allocation of economic resources should not result in the instability of the economy environment system as a whole

an ecological monetary theory abstract while money is critical to the modern world ecological economics does not have a theory of money that is applicable to its theoretical framework and policy prescriptions accordingly the field often defers to an orthodox conception of money that is historically inaccurate and ontologically inconsistent the dualized nature of western philosophy informs orthodoxy by defining money according its function as a medium of exchange this conceptualization creates logical and historical problems that can be addressed by exploring an interdisciplinary literature that defines money according to its nature as a social relation expressed in a unit of account this paper develops an ecological monetary theory that is simultaneously rooted in a socio historical understanding of money s nature and in an ontology of social and ecological embeddedness such a theory provides ecological economists and others concerned with social and ecological equity with a framework from which to address monetary systems and policy

efficiency sustainability and global warming abstract economic analyses of global warming have typically been grounded in the theory of economic efficiency such analyses may be inappropriate because many of the underlying concerns about climate change are rooted not in efficiency but in the intergenerational allocation of economic endowments a simple economic model is developed which demonstrates that an efficient economy is not necessarily a sustainable economy this result leads directly to questions about the policy relevance of several economic studies of the issue we then consider policy alternatives to address global warming in the context of economies with the dual objectives of efficiency and sustainability with particular attention to carbon based taxes

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

horizontal concentration and anticompetitive behavior in the central canadian cement industry testing arbitrage cost hypotheses abstract consider a market with a small number of firms attempting to collude if they successfully act as a dominant firm they will raise price this in turn will expand output by any fringe firms and thus reduce the market share of the colluding group thus higher prices will decrease concentration over time here we test this hypothesis using a modification of spiller and huang 1986 and data from the post 1974 toronto cement market the weight of the evidence indicates that market price has a negative effect on concentration implying that the firms in this market act with significant though limited success as a cartel

measuring the strength of cointegration and granger causality this study uses poskitt and tremayne s 1987 posterior odds ratio test and the associated model portfolio approach to measure the strength of the evidence from cointegration and granger causality tests as an illustration of the methodology the bivariate relationship between money and income in canada is re examined using historical data

the specification of econometric strike models a varma approach in the case of macro econometric strike models classical regression techniques do not deal with important specification issues 1 the question of causality between strikes and other variables 2 the choice of appropriate lag structures and 3 omitted variable bias moreover since rational bargainers would tend to avoid previous bargaining mistakes the determinants of strike activity in a given period may not apply in subsequent periods this study attempts to model post war us strike behaviour beacuse of the spurious regression problems vector autoregressive moving average varma techniques are preferred to standard regression methods for the early post war period strikes are successfully modelled in terms of unemployment and wage and price inflation there is no feedback from strikes to the other variables contrary to the predominant view that us strikes are more frequent when real wage increases are small increasing rates of wage change both real and nominal lead to more strikes for t

are causal relationships sensitive to causality tests 1987 are causal relationships sensitive to causality tests applied economics vol 19 no 4 pp 459 465

a general framework for the analysis of preference variation the traditional approach to changing preferences introduced a vector of shift variables in the utility function but was confronted with the problem of specifying the effects of changes in these variables on the marginal utilities the new theory of demand introducing intervening variables characteristics basic commodities offers an attractive and psychologically richer way of describing preferences changes it is however difficult to operationalise and the use of shadow prices in a two stage decision procedure raises some difficult theoretical problems in this paper we try to integrate the two approaches we start from the traditional framework but use the specification of the household technology to specify changes in the marginal utilities of the market goods in this way we get a very general model from which most existing definitions of preference changes can be derived as special cases this is illustrated with an analysis of habit formation the effect of quality changes in a lancaster setting and the content of advertising messages use of the model makes it possible to gain some new insights in each of these cases

competition and rail rates for the shipment of corn soybeans and wheat this article investigates the extent and importance of rate competition among railroads for the export shipment of three narrowly defined agricultural commodities since passage of the staggers rail act of 1980 which increased the railroads freedom to set rates i construct measures of intermodal and intramodal competition and find that each has strong impacts on rail rates the farther a shipper is from competing water transportation the more considerably rates rise rates fall as railroad competition in a region increases there appears to be some interaction between intermodal and intramodal competition i find that the competitive effects of two proposed rail mergers depend on the vigor of intermodal competition from truck and water transport and on the change in interrailroad competition that results from the reduced number of competing rail systems

imperfect competition in multiproduct food industries with application to pear processing agricultural product markets often involve relatively few firms processing a farm product into multiple processed products this market structure prompts concern that processing firms may exercise both oligopsony and oligopoly power the present paper develops and applies a methodology to test simultaneously for market power in both the raw input market and multiple processed output markets application of the methodology to california pear processing indicates the industry has exerted power in both its farm input market and the markets for canned pears and fruit cocktail

the regulatory transition a number of regulated industries particularly in transportation and communications have recently undertaken the transition from a regime of rigid price and entry controls to that of a more competitive market structure while the different industries have experienced somewhat different fates the responses to this transition do have certain common underlying characteristics to start demands for some form of temporary or continuing regulation during the transition to deregulation can be explained almost entirely as a response to the strength of the entry threat relative to the magnitude of sunk costs incurred by the affected parties in the previous regulatory regime where the obstacles to entry are low the incumbent firms and labor ordinarily seek protective conditions during the transition to permit them to recover some or all of their sunk costs when the obstacles to entry are high customers are likely to make similar demands for protective conditions designed to do the same particularly when the customers own sunk costs severely restrict their competitive options after deregulation pleas for protective conditions during the transition are widely regarded as introducing market imperfections that should be resisted in the name of regulatory reform this view however naively equates the market results during the transition when choices are constrained by the presence of sunk costs to the results that would prevail in a long run equilibrium where deregulated prices and quantities are established in the absence of most or any sunk costs the regulatory problem during the transition is to define a set of residual hopefully self terminating economic constraints that will satisfy the equity and other considerations created by the shortto medium term continuation of some sunk costs without creating insurmountable obstacles to approaching an efficient competitive outcome in the long run any transition mechanism must thus come to grips with the essence of the transition problem from a political as well as an economic perspective who is to bear the consequences of the overhang of sunk costs note that we are not making a generalized plea for the compensation of losers from deregulation especially for windfall gains conferred by the regulatory process itself see kenneth gordon 1981 rather the transition problem is defined here to be a limited period in which participants in the regulatory game are permitted to amortize financial commitments made under the prior set of rules while other participants are constrained in their ability to exploit the presence of those sunk costs during the transition misunderstanding or failing to recognize this transition problem can pose substantial dangers specifically premature application of economic concepts that while arguably valid in some future regime in which all sunk costs are amortized decidedly do not account for the effect of these sunk costs on the marketplace in the short run misunderstandings of the transition problem may also encourage false conclusions about the eventual results of deregulation that is the long run competitive equilibrium and industry structure that will emerge as a consequence policy recommendations designed to address the problems of the transition may tdiscussants robert willig princeton university thomas moore hoover institution

long term trends in resource exergy consumption and useful work supplies in the uk 1900 to 2000 abstract our aim is to explain historical economic growth in the uk economy by introducing an empirical measure for useful work derived from natural resource energy inputs into an augmented production function to do this we estimate the long term 1900 2000 trends in resource exergy supply and conversion to useful work in the united kingdom the exergy resources considered included domestic consumption of coal crude oil and petroleum products natural gas nuclear and renewable resources including biomass all flows of exergy were allocated to an end use such as providing heat light transport human and animal work and electrical power for each end use we estimated a time dependent efficiency of conversion from exergy to useful work the 3 factor production function of capital labour and useful work is able to reproduce the historic trajectory of economic growth without recourse to any exogenous assumptions of technological progress or total factor productivity the results indicate that useful work derived from natural resource exergy is an important factor of production

energy capital substitutability complementarity the dichotomy abstract changes in the price of energy affect not only the demand for energy but also the rates of capital formation and labour utilization these changes depend on the functional relationship between energy and the primary factor inputs in particular the relationship between energy and capital has been characterized by major conflicting evidence time series data classify the two inputs as complements by contrast pooled cross section studies conclude that capital and energy aresubstitutes in the production process in this case higher priced energy will stimulate the demand for investment while several reconciliation attempts on this disparity deserve marked attention the most prominent explanation is that time series studies reflect short term relationships and cross section analyses capture long term effects

a casual varma model analysis with an application to canadian money and income data 1988 a casual varma model analysis with an application to canadian money and income data applied economics vol 20 no 9 pp 1167 1183

limits to substitution and irreversibility in production and consumption a neoclassical interpretation of ecological economics abstract there are many methodological approaches within ecological economics one of the principal modes of analysis is a modified version of the standard neoclassical model this paper examines the parallels which emerge between the ideas of some ecological economists concerning production and the ideas of others concerning consumption when these ideas are interpreted in the neoclassical paradigm it is well known that ecological economics is characterized by arguments concerning limits to substitution between inputs energy natural capital etc vs manufactured capital labor etc in production and the implications these have for sustainability however various authors have also expressed concerns regarding limits to substitution in consumption either between environmental assets and other goods or between basic needs commodities and other goods though the specific reasons for non substitution are different in the production and consumption cases the underlying theme is that individual commodities and other inputs have unique physical or other properties which make them poor substitutes ideas about irreversibility in production and economic development are also prominent in ecological economics likewise many authors have argued for similar irreversibilities in consumption behavior in analogy to the term technological change i coin the term preferential change to describe these phenomena the linking themes in this case are that the economy environment system is evolutionary in character and that external effects intended and unintended consequences of actions or processes imposed on other parties or resources are all pervasive

a varma analysis of the causal relations among stock returns real output and nominal interest rates previous research has documented a negative relation between common stock returns and inflation recently fama 3 and geske and roll 6 have argued that this relation results from a more fundamental one between real activity and expected inflation stock returns they argue signal changes in real activity which in turn affect expected inflation however unlike fama geske and roll argue that changes in real activity result in changes in money supply growth which in turn affect expected inflation empirical tests have analyzed separately each link in the proposed causal chain in this article we investigate simultaneously the relations among stock returns real activity inflation and money supply changes using a vector autoregressive moving average varma model our empirical results strongly support geske and roll s reversed causality model there have been many attempts to explain the negative relations observed between stock returns and expected inflation changes in expected inflation and unexpected inflation 1 these phenomena documented by fama and schwert 5 are troublesome because they appear contrary both to fisher s theory that nominal asset returns are positively related to expected inflation and to received wisdom that common stocks are hedges against expected as well as unexpected inflation fama 3 suggests an explanation for the observed negative relation between stock returns and inflation based on money demand theory an increase in anticipated real activity leads he argues to an increase in the demand for real money balances given the level of nominal money the increased demand for real money balances must be accommodated by a fall in the price level because stock returns are assumed to be positively related to expected future real activity a negative relation between inflation and stock returns is induced however this negative relation is merely a proxy for the more fundamental relation between anticipated real activity and stock returns therefore fama argues that the observed relation between stock returns and inflation is spurious as noted by fama and others this line of reasoning cannot explain completely the negative relation between stock returns and inflation fama finds that measures of unexpected inflation are significant determinants of monthly stock returns in regressions where anticipated real activity is included as an explanatory variable in addition the explanatory power of expected inflation is eliminated

measuring the existence value of wildlife what do cvm estimates really show two research programs are brought together to contribute to the growing body of work on alternatives to standard welfare based approaches to environmental valuation and policy the first is the theoretical literature undermining the new welfare

from microscopic to macroscopic theories entropic aspects of ecological and economic processes abstract the paper discusses the relevance of thermodynamics and related theories to ecological economics it is argued that it is not useful to apply the entropy term directly to economic processes physical entropy terms defined on a microscopic level for isolated systems are quite far from economic and ecological reality only theories that deal with the development of open systems far from thermodynamics equilibrium provide the important link between entropy and evolution towards higher complexity major new impulses for ecological economics come especially from evolutionary ecological theories these quite recent theoretical approaches incorporate the knowledge of far from equilibrium thermodynamics and explain dynamic changes in ecosystems on a macroscopic level from a thermodynamic perspective thermodynamic approaches provide a heuristic base for the analysis of economy environment interactions important implications of these approaches concern time irreversibility ecological efficiency and the interdependencies of environmental problems and evolution

what is ecological economics ecological economics addresses the relationships between ecosystems and economic systems in the broadest sense these relationships are the locus of many of our most pressing current problems i e sustainability acid rain global warming species extinction wealth distribution but they are not well covered by any existing discipline environmental and resource economics as it is currently practiced covers only the application of neoclassical economics to environmental and resource problems ecology as it is cur rently practiced sometimes deals with human impacts on ecosystems but the more common tendency is to stick to natural systems ecological economics aims to extend these modest areas of overlap it will include neoclassical environmental economics and ecological impact studies as sub sets but will also encourage new ways of thinking about the linkages between ecological and economic systems we have chosen the name ecological economics for this area of study because it implies a broad ecological interdisciplinary and holistic view of the problem of studying and managing our world the earth from space cover of the journal reflects this global holistic perspective we did not intend to imply with the ordering of the two words in the title that the journal is mainly an economics journal it is intended to be a new approach to both ecology and economics that recognizes the need to make economics more cognizant of ecological impacts and dependencies the need to make ecology more sensitive to economic forces incentives and constraints and the need to treat integrated economic ecologic systems with a common but diverse set of conceptual and analytical tools there was much discussion of other possible names such as economic ecology or ecology and economics or some conjoining of the two words that to me end up being confusing tongue twisters like ecolnomics or econology but ecological economics seemed to get closest to the mean ing we desired while still being evocative to the uninitiated