the effect of payoff feedback and information pooling on reasoning errors evidence from experimental markets avast literature shows that individuals frequently violate normative principles in reasoning in this paper we report the results of four studies designed to determine if information dissemination in competitive auctions can reduce or even eliminate logical errors in the wason selection task our results show that payoff feedback and exposure to the information flow drive the aggregate behavior toward the normative solution we also found evidence of spillover effects from informed to uninformed traders in one sided combinatorial auctions as well as positive transfer effects from competitive to individual settings

effects of local and civil environmental regulation on green total factor productivity in china a spatial durbin econometric analysis this paper employs metafrontier malmquist luenberger index and a spatial durbin model to investigate the influence of both local and civil environmental regulation and its spatial spillover effect on green total factor productivity in 273 cities of china in 2003 2013 according to city political attribute and regional differences this article divides the sample city into six categories the results show that effect of local environmental regulation on green total factor productivity is significantly positive in high political attribute cities a1 and a2 zone but negative effects in lower political attribute cities b2 and b3 zone moreover the race to the top results in significantly positive spatial spillover effects from local environmental regulation on green total factor productivity in high political attribute cities a1 and a2 zone while the race to the bottom causes significantly negative spatial spillover effects in lower political attribute cities b2 and b3 zone as for civil environmental regulation it has positive direct and indirect effects in promoting green total factor productivity we further find that environmental regulation inhibits the original technological innovation of enterprises which suggests that government should reduce market intervention improve enterprise flexibility of market change and promote enterprises to carry out the original technological innovation thus the government and citizen should make targeted pollution reduction policies for the green total factor productivity increase

the gains debate framing state choice the theoretical bifurcation of international relations theory into neo realist and neo liberal camps has resulted in a gains debate that says little about an empirical world in which states exhibit both relative and absolute gains pursuit this article deploys prospect theory in an attempt to move beyond the gains debate the intent here is synthetic by bringing the predictions of both perspectives under a single theoretical umbrella we can model a broader set of state behavior the thesis developed demonstrates that states in a gains frame pursue absolute gains and are risk averse while states in a losses frame pursue relative gains and are risk acceptant this hypothesis is assessed against the behavior of the european community in the formation of the montreal protocol a regime intended to protect the earth s protective ozone shield the new model accurately predicts the timing and content of shifts in ec preferences suggesting that a synthesis of realist and liberal approaches is possible

optimal taxation in the presence of tax evasion expected utility versus prospect theory abstract it is now well known that the predictions of expected utility theory eut applied to tax evasion are quantitatively and qualitatively at variance with the evidence while prospect theory pt makes the correct predictions in this literature the tax rate is exogenous we endogenize the tax rate and require that a successful theory should explain jointly the facts on the tax rate tax gap and the level of government expenditure we find that the data is best described by taxpayers using pt and the government using standard utility theory eut the results are robust to several possible alternative specifications we discuss how our results have a bearing on the debate between liberalism versus paternalism in behavioral economics we also propose an alternative explanation based on the notion of context dependent preferences

climate policy without tears cge based ancillary benefits estimates for chile this study examines a hithertoneglected set of benefits from climate policy viz the reduction in emissions of localair pollutants and the associated healthbenefits in this case for residents ofsantiago de chile by using an economy widemodel we are able to compare these monetisedbenefits to the direct costs of carbonabatement thereby determining the scope for no regrets co2 reductions sensitivityanalysis is performed in recognition of theuncertainty surrounding certain key parameterand exogenous variable values notably households willingness to pay wtp forreduced mortality and morbidity risk and thesubstitution elasticities among energy sourcesand between energy and other inputs ourresults suggest that even with the mostconservative assumptions low wtp lowelasticities chile could reduce co2emissions by almost 20 from the 2010 baselinewith no net welfare loss though a 10 reduction is closer to optimal if insteadchile were to target a 20 reduction inparticulate concentrations a particulate taxwould incur slightly lower costs than anequivalent carbon tax to achieve the samehealth benefits while the latter is asecond best method of addressing localpollution the welfare loss of choosing thisinstrument could be fully compensated by carboncredit sales at a world market price of 20 tc

enforcement of pollution levies in china abstract this paper investigates how industrial plants react to inspections conducted by environmental authorities under the pollution levy taxation regulation in china contrary to studies in the united states and canada magat and viscusi 1990 laplante and rilstone 1996 and previous studies in china dasgupta et al 2001 we find that inspections increase plants self reported pollution by 3 45 we provide a model to analyze plants strategic reactions to the pollution levy regulation in china the model concludes that under the specific regulation plants actual pollution might increase with inspections our study provides a key policy implication that inspections by environmental authorities in china are effective for verifying plants self reported pollution but not for reducing their pollution

the aggregate effect of air pollution regulation on co2 mitigation in china s manufacturing industry an econometric analysis abstract we studied the aggregate effect of actual air pollution regulation on co2 mitigation in china based on a theoretical framework of co benefits and the empirical evidence under the lens of the factor demand theory in economics different types of pollutants can be treated as different inputs in firms production functions and thus become complements or substitutes which well characterize the impact on one type of emissions from regulating the other type of emissions the spillover mechanisms can be decomposed into an output effect and a substitution effect with industry aggregate data of 18 manufacturing sectors from 1991 to 2010 we used the panel data models to estimate the complementarity or substitutability of two types of local air pollutants i e so2 and soot for co2 and the contributions of the output and the substitution effects in china we empirically found that co2 was a gross complement and a net substitute to so2 this means that more stringent regulation on so2 reduced the overall co2 emissions but it caused more co2 emissions when the output effect was eliminated in contrast we detected the conflict between the control of co2 and soot at the aggregate level by finding that co2 was both a gross and a net substitute to soot after 2006 due to the regulation improvement co2 became a net complement to so2 indicating the enhancement of technical synergy between so2 and co2 abatement while it remained a gross and a net substitute to soot the contrasting results for so2 and soot can be attributed to the different regulations on them so2 regulation provides a reference and model for regulating other air pollutants and for reaping the ancillary carbon benefits in china as china has announced the launch of the nationwide carbon market which will cap its total co2 emissions in 2017 based on our results so2 regulation will reduce the price of carbon permits due to the complementarity between so2 and co2

financial incentives and endogenous enforcement in china s pollution levy system abstract using data from 3000 chinese factories we estimate an econometric model of endogenous enforcement in which factories levy rates and emissions are jointly determined by the interaction of local and national enforcement factors abatement costs and regulator manager negotiations that are sensitive to plant characteristics our results demonstrate the significant deterrent impact of a system that combines progressive financial penalties and self reporting with few options for contesting regulatory decisions despite the prevalence of state enterprises and developing country conditions in china despite central pressure for uniformity in enforcement we find great regional diversity that reflects local conditions we also find that pollution control through financial incentives has a much greater impact on production processes than on end of pipe abatement

risk perception in psychology and economics abstract the concept of rationality has been basic to most economic analysis its content has been successively refined over the generations as applied to the static world of certainty it has turned out to be a weak hypothesis not easily refuted and therefore not very useful as an explanation though not literally a tautology but recent decades have seen the development of stronger versions applied to a world in which time and uncertainty are real among its most important manifestations have been criteria for consistency in allocation over time the expected utility hypothesis of behavior under uncertainty and what may be termed the bayesian hypothesis for learning that is the consistent use of conditional probabilities for changing beliefs on the basis of new information these hypotheses have been used widely in offering explanations of empirically observed behavior though as not infrequently in economics the theoretical development has gone much further than the empirical implementation these hypotheses have also been used increasingly in normative analysis as a component of benefit cost studies therefore frequently referred to as benefit risk studies the value of reducing mortality rates from diseases for example has been studied by assuming that choice of occupations is made inter alia by comparing wage differences with mortality differences

the long term impacts of air pollution control policy historical links between municipal actions and industrial energy efficiency in kawasaki city japan abstract under the pressures of rapid industrialization and urbanization many asian countries are facing the challenge of reducing air pollution and co 2 emissions simultaneously while maintaining their economic growth under such a circumstance a growing attention is focused on successful implementation of co benefit policies that are designed to reduce both air pollutants and co 2 emissions however the concept of co benefit policies must be developed further in order to identify its quantitative and qualitative validity which can be assessed using a reliable methodology for the estimation of co benefits and through clarification of the importance of this approach for stakeholders in urban environmental policy making based on a systematic review of co benefit research and air pollution control policies in japan we investigated the local air pollution control policy in kawasaki city one of the industrial centers of japan and confirmed that it has contributed both to the sharp decline of atmospheric sulfur dioxide so 2 levels and to energy efficiency improvements in local industries our results suggest that preventive actions and local scale compliance enforcement tools that are uniquely designed and act as a form of agreement between government and individual firms could contribute significantly to successful implementation of co benefit policies in the long term we conclude our paper with a discussion of linkages between low carbon technology innovations and policy designs that could further nurture co benefits

homo ludens social rationality and political behavior the most straightforward defense of political democracy is grounded in rational choice political democracy gives people power in public life parallel to that afforded by markets in private life the power to turn their preferences into social outcomes however rational choice models of voter behavior dramatically underpredict voter turnout in all but the smallest elections fiorina 1990 has called this the paradox that ate rational choice theory this anomaly is the centerpiece of green and shapiro s 1994 critique of rational choice methodology in political theory this paper proposes a form of social rationality that strengthens the classical rational actor model this concept explains many central statistical regularities concerning voter turnout and the historical regularities concerning collective action

the escalation of great power militarized disputes testing rational deterrence theory and structural realism realism we test the relative explanatory power of these two theoretical approaches on the escalation of deterrence encounters among great powers from 1816 to 1984 we derive a set of hypotheses from each model operationalize them for systematic empirical analysis and test the hypotheses on 97 cases of great power deterrence encounters by means of probit analysis the results are that the hypotheses derived from deterrence theory receive considerable support whereas none of the hypotheses derived from structural realism are supported in contemporary research on the causes of international conflict the realist paradigm has been the dominant theoretical approach within this broad framework however scholars have developed at least two prominent alternative models of the conditions under which conflict is likely to arise the first approach structural realism 1 focuses on the attributes of the international system while the second deterrence theory is largely dyadic and emphasizes the resolve and relative military capabilities of adversarial states while both theoretical approaches attempt to identify the conditions under which international crises and wars are likely to arise their

synergy between pollution and carbon emissions control comparing china and the united states abstract we estimate the potential synergy between pollution and climate control in the u s and china summarizing the results as emissions cross elasticities of control in both countries ancillary carbon reductions resulting from so 2 and no x control tend to rise with the increased stringency of control targets reflecting the eventual need for wholesale change toward non fossil technologies when large reductions are required under stringent pollution targets the non target effects tend to be higher in china than in the u s due to china s heavy reliance on coal this result suggests that china may have greater incentives to reduce so 2 and no x with locally apparent pollution benefits but related efforts would at the same time reduce co 2 emissions significantly we also find strong non target effects of co 2 abatement in both countries but the cross effects in this direction depend less on the stringency of control and are stronger in the u s than in china

homo diplomaticus mixed method evidence of variation in strategic rationality psychology is traditionally used in political science to explain deviations from rationality lost in the debate between rationalists and their critics however is a sense of whether the kinds of strategic self interested behavior predicted by these models has psychological microfoundations what would homo economicus look like in the real world we argue that strategic rationality varies across individuals and is characterized by a pro self social value orientation and a high level of epistemic motivation testing our argument in the context of international relations we employ a laboratory bargaining game and integrate it with archival research on german foreign policy making in the 1920s we find in both contexts that even among those interested in maximizing only their own egoistic gains those with greater epistemic motivation are better able to adapt to the strategic situation particularly the distribution of power our results build a bridge between two approaches often considered to be antithetical to one another

free banking and monetary control despite growing interest in competitive payments systems and the continuing progress of bank deregulation relatively little is known about the macroeconomic implications of completely unregulated or free banking its advocates view free banking where competing banks freely issue monetary liabilities redeemable in base money 1 as a means for depoliticising the money stock by replacing public holdings of government money with private bank money while limiting changes in the monetary base such a programme begs many crucial questions how would the unregulated stock of bank money be determined would free banking enhance or reduce macroeconomic stability compared to regulated banking what implications would free banking have for the proper conduct of monetary policy lawrence h white i 984 ch i employs a model of a free banking system to answer some of these questions however because it concerns free banklng as practised in scotland in the nineteenth century white s model assumes an open economy operating in an international gold standard where the price level is given and there is no such thing as monetary policy in its modern sense were free banking to reemerge today it would probably be based not on a gold standard but on irredeemable paper fiat base money issued by a former or extant central bank under this form of free banking the price level is no longer given and conventional monetary policy questions remain relevant in particular would free banking on a fiat standard simplify or complicate the control of nominal variables including the price level and nominal income would it be easier or more difficult to adhere to a simple monetary rule what would happen if the stock of base money were frozen as a means for ruling out discretion altogether answers to such questions require an analysis of determinants of the money stock in a closed free banking system with a centrally determined stock of base money here i offer some preliminary answers based upon carl christ s i 989 formal interpretation of selgin i988 the features of free banking stressed here because they bear most on questions of monetary control include i the freedom of banks to issue notes as well as deposits where banknotes are a more

multiple pollutants uncovered sectors and suboptimal environmental policies in our analytical general equilibrium model where two polluting inputs can be substitutes or complements in production we study the effects of a tax on one pollutant in two cases one where both pollutants face taxes and the second where the other pollutant is subject to a permit policy in each case we solve for closed form solutions that highlight important parameters we demonstrate two important ways that environmental taxes and permits are not equivalent first the change in the pollutant facing a tax increase depends on whether the other pollutant is subject to a tax or permit policy second if that other pollutant is subject to a tax then general equilibrium effects can increase or decrease its quantity affecting overall welfare however when the second pollutant is subject to a permit policy that binds then welfare is not affected by this spillover effect finally a numerical exercise helps demonstrate these two ways that taxes and permits differ using the example of coal fired power plants our numerical exercise examines the impacts of increasing a hypothetical carbon tax on the quantity of sulfur dioxide emissions don fullerton department of finance university of illinois bif box 30 mc520 515 east gregory drive champaign il 61820 and nber dfullert illinois edu daniel h karney department of economics university of illinois david kinley hall champaign il 61820 dkarney2 illinois edu in a simple model with multiple pollutants the first best can be achieved either by a tax on each pollutant or equivalent permit price that reflects each marginal environmental damage that is the first best requires each pollutant to be optimally regulated not all pollutants are regulated however and even regulated ones likely face suboptimal policy the multiple pollutant setting creates complications for regulators tightening rules on one pollutant changes how firms value other pollutants thus a regulator concerned with social welfare who can change only one policy needs to account for changes across multiple pollutants for example policymakers who adopt a new carbon policy may not be able to adjust each regulation on other types of pollution especially where different laws and jurisdictions govern the different pollutants our model is general enough to represent any industry with multiple pollutants that are substitutes or complements so a price increase on one can induce firms to increase or decrease other pollutants for example sigman 1996 studies chlorinated solvents used for metal cleaning and degreasing and she finds that raised disposal costs for liquid chemical wastes may lead to more air emissions i e substitutes ren et al 2011 find that reducing co2 by use of biofuel can increase nitrogen runoff from farms our numerical example below involves coal fired electric power plants that emit both carbon dioxide co2 and sulfur dioxide so2 agee et al 2014 describe four ways these two pollutants could be substitutes or complements they find that reducing nox has substantially reduced so2 and co2 while reducing so2 has substantially increased co2 p 66 our illustration uses the u s epa assumption that a carbon tax reduces use of coal and therefore both pollutants i e complements a permit policy limits so2 from power plants under the u s acid rain program arp which has received much academic attention if co2 were to be regulated by a 1 in fact studies of a particular environmental regulation often include ancillary benefits from the reduction of other pollutants see burtraw et al 2003 groosman et al 2011 and kolstad et al 2014 2 yet greenstone 2003 finds little evidence that the clean air act increased water or ground pollution gamper rabindran 2006 finds that off site recycling is a substitute for chemical waste disposal while fare et al 2012 find that nox and so2 are substitutes in production at power plants 3 in response to so2 controls the switch to low sulfur coal with lower heat rate could increase co2 per kilowatt hour also desulfurization equipment uses electric power that requires burning more coal and may generate added co2 emissions from the chemical reactions that capture so2 if the response is to shut down dirty plants then effects on co2 depend on whether new plants use coal or natural gas 4 see schmalensee et al 1998 burtraw et al 1998 and carlson et al 2000 the arp s cap on so2 is not currently binding so the permit price is zero starting in 2011 to explore the general problem of interactions between pollution policies our numerical exercises use positive so2 prices from 2007 data

ancillary benefits of reducing greenhouse gas emissions in transitional economies abstract the paper presents the results of an ancillary benefits study in russia including the health benefits of reducing conventional pollutants as well as the economic benefits of saving fuel achieved by controlling greenhouse gas emissions we present illustrative examples of the ancillary benefits in the forestry sector our findings show that the benefits from conventional pollution reduction and savings in fuel are significant and institutional reforms are needed to capture them the aggregated approach using a crosscountry macroeconomic model contains some uncertainties but the assumptions required for our analysis did not compromise this study which is the first of its kind for russia

contrasting rational and psychological analyses of political choice we contrast the rational theory of choice in the form of expected utility theory with descriptive psychological analysis in the form of prospect theory using problems involving the choice between political candidates and public referendum issues the results showed that the assumptions underlying the classical theory of risky choice are systematically violated in the manner predicted by prospect theory in particular our respondents exhibited risk aversion in the domain of gains risk seeking in the domain of losses and a greater sensitivity to losses than to gains this is consistent with the advantage of the incumbent under normal conditions and the potential advantage of the challenger in bad times the results further show how a shift in the reference point could lead to reversals of preferences in the evaluation of political and economic options contrary to the assumption of invariance finally we contrast the normative and descriptive analyses of uncertainty in choice and address the rationality of voting

supersized votes ballot length uncertainty and choice in direct legislation elections voters in polities that make heavy use of direct democracy are frequently confronted with ballots that contain a multitude of propositions claims that direct legislation elections overwhelm voters with choices they are not competent to make should particularly apply to such demanding settings yet evidence on the effects of lengthy ballots on voting behavior is scant this study reviews theories of decision making under uncertainty and tests their predictions in a mixed heteroscedastic model of vote choice that is fitted to a unique collection of survey and contextual data on swiss referendums increasing ballot length is demonstrated to interfere with the voters ability to translate their political preferences into consistent policy choices

loss aversion in politics we study how loss aversion affects the political equilibrium in a simple majority voting model first we show a status quo bias which leads to path dependence second loss aversion implies a moderating effect on the most extreme voters third in a dynamic setting the effect of loss aversion diminishes with the length of the planning horizon of voters however in the presence of a projection bias majorities are partially unable to understand how fast they will adapt to a new policy this makes changes less likely and induces time inconsistency policy changes are timid at the beginning while in later periods they are made progressively more radical fourth in a stochastic environment loss aversion yields a significant distaste for risk but also a smaller attachment to the status quo the application of these results to a model of redistribution leads to empirically plausible implications

emissions taxes versus intensity standards second best environmental policies with incomplete regulation the best emissions tax or emissions cap may be an inferior instrument under incomplete regulation leakage without leakage an intensity standard regulating emissions per unit of output is inferior due to an implicit output subsidy this inefficiency can be eliminated by an additional consumption tax with leakage an intensity standard can dominate the optimal emissions tax since the implicit output subsidy prevents leakage the addition of a consumption tax improves an intensity standard s efficiency may prevent leakage and may be efficient comparing intensity standards to output based updating shows that the latter dominates if updating is sufficiently flexible