bluuebunny/crossref_metadata_2025 huggingface dataset:
The Subject and Method
Authors: Kornai János
Published: October 2003

This chapter explains the coverage of the book, and outlines the methods used in the analysis of the socialist system. The purpose of the book is stated as a close study of the phenomena, causal relationships and regularities that are similar in China, the Soviet Union, North Korea, Yugoslavia, and in general all countries where a Communist Party was, or still is, in power. Definitions are given of socialist countries, and of the terms socialism and political economy. The methods used – positive analysis of the socialist system in reality, as it has emerged historically, and modelling – are described.
Power
Authors: Kornai János
Published: October 2003

An account is given of the institutions of power in socialist systems and the way that they work. It starts with the party, and then goes on to the state, and the organizations and associations (mass organizations) in society, which, with few exceptions, are characterized by having an organizational monopoly (i.e. there is one of each per field). Further sections discuss the cohesive forces and internal conflicts in the system, and its repressive totalitarian nature.
Ideology
Authors: Kornai János
Published: October 2003

Aspects are discussed of the ideology of socialist systems, and of the ideas, beliefs, promises, values, and moral imperatives that contribute to the formation, stabilization, and maintenance of the classical socialist system. The various parts of the chapter cover: the official ideology; the socialist system's sense of superiority; the basic promises; self‐legitimization and the paternalistic nature of power; discipline, willing sacrifice, vigilance; and power and ideology.
Property
Authors: Kornai János
Published: October 2003

The first part of the chapter explains the general concepts involved in ownership. It then considers some of the characteristic forms of private property (private ownership) typical of contemporary capitalism, before going on to a methodical examination of property rights (public ownership) under the classical socialist system. This covers the state‐owned firm, other forms of state property, the co‐operative, and the very restricted scope of private property and private production.
Coordination Mechanisms
Authors: Kornai János
Published: October 2003

A coordination mechanism is a subsystem of the social system that coordinates the activities of the persons or organizations within it. Wherever a relation subsists between two or more persons or organizations , their activities require coordination in some form. This chapter defines and discusses the five main types of coordination mechanisms and notes their relative roles in the classical socialist system. The five types are bureaucratic coordination (the system applied most widely under classical socialism), market coordination, self‐governing coordination, ethical coordination, and family coordination.
Planning and Direct Bureaucratic Control
Authors: Kornai János
Published: October 2003

A comprehensive analysis is made of planning under the socialist system. This starts with an account of the elaboration of the national economic plan; there are various plans of various lengths, and this discussion focuses on the annual plan, which is the real operational tool in running the economy. The next section of the chapter discusses plan implementation. Both these sections describe the processes according to the official regulations. The remaining sections of the chapter discuss the ‘actual rules of the game’, together with the interests, motives, and conflicts of the participants, and the problem of the vast amount of information required for the planning process.
Money and Price
Authors: Kornai János
Published: October 2003

This chapter addresses the financial system and prices under the socialist system. The first three sections survey the institutions of the financial system and the structure of the financial processes—banking, the state budget, and the different money‐holding sectors that control money flow. The next two sections examine the social relations expressed in those processes—soft and hard budget constraints, and income and price responsiveness. The remainder of the chapter discusses prices—administrative producer prices, administrative consumer prices, market prices, and non‐price signals.
Shortage and Inflation: The Causes
Authors: Kornai János
Published: October 2003

An examination is made of the multiple causes of the two related phenomena of shortage and inflation in the classical socialist system, addressing these causes at both the micro and the macrolevel. The first two sections of the chapter contrast the behaviour of the firm in short‐ and long‐term decision making under the capitalist system, with that under the socialist system. The next seven sections discuss the behaviour of the bureaucracy managing production; the role of relative prices; repressed inflation in interfirm relations and in the consumer sphere; excess demand on the macrolevel; the propensity to inflation, and the relationship between shortage and inflation; and the self‐inducement and reproduction of shortage. The last two sections give an overview of the socialist system–specific nature of the causes of shortage and inflation, and point out the economic inefficiency and lack of innovatory technical progress in the system.
External Economic Relations
Authors: Kornai János
Published: October 2003

Various aspects of the external economic relations of socialist countries are examined. The first section of the chapter looks at the external relations of socialist countries with various different categories of countries in the light of the ideological tenet of the classical system that socialism is surrounded by enemies intent on destroying it. The institutional system of socialist external economic relations is then described. The next two sections describe the behaviour of socialist countries, and economic trends in foreign trade and financial relations, first with capitalist countries, and then with other socialist countries. The last section looks at the attempts of socialist countries at integration, specifically describing the establishment and operation of the Council of Mutual Economic Assistance (CMEA, known in the West as Comecon).
The Coherence of the Classical System
Authors: Kornai János
Published: October 2003

This last chapter on the classical socialist system identifies the main connections among the regularities in its constituent elements. First, the main lines of causality between the different phenomena of the system (undivided power, dominance of the state, bureaucracy, plan bargaining, and forced growth and shortage) are discussed, and the affinity among these main elements of the system is addressed. The socialist prototype and its national variations are described, and the possible importance of the Soviet effect in the development of the structure and main attributes of the classical socialist system is discussed. The last part of the chapter proffers the theory that the socialist system is not capable of a renewal (reform) that could free it from its dysfunctional features while retaining the sole rule of the communist party, and briefly addresses the viability of the classical system in terms of timescales.
The Dynamics of the Changes
Authors: Kornai János
Published: October 2003

This chapter looks at the causes for the move away from the classical socialist system and discusses the dynamics of the process. The inducements for the change, which may differ in depth and radicalism, are rooted in the accumulated tensions and contradictions of the classical system: the first group of symptoms is an accumulation of economic difficulties, the second public dissatisfaction, the third loss of confidence by those in power, and the fourth outside example. The distinction is made between change based on reform and that based on revolution, and a chronology is presented of reforms and revolutions in different socialist countries in which they have occurred
The “Perfection” Of Control
Authors: Kornai János
Published: October 2003

The ‘perfection’ of control described in this chapter refers to the sorts of apparently genuine changes to the classical socialist system seen in official declarations, regulations, and campaigns that, in fact, result in no alterations to the basic features of the system. These pseudoreforms are initiated by people who have realized that there is something wrong, but are still convinced that the system is basically right and would operate better if ‘perfected’. The ‘perfection’ tendency results in reorganization, and this is shown to have occurred at upper and lower levels during the course of disintegration of socialist systems. Another factor in the perfection tendency is the transformation of planning and direct control. Eventually, it is realized that no amount of reorganization or transformation of planning and control will improve the situation.
Political Liberalization
Authors: Kornai János
Published: October 2003

This chapter discusses political liberalization as one of the real reforming tendencies of classical socialism. Aspects addressed are the monopoly of power, the easing of repression, constant and variable elements in the official ideology, the seeds of pluralism, opening towards the capitalist world, and change in the scale of publicity and candour. The limits to political reform are discussed.
The Rise of the Private Sector
Authors: Kornai János
Published: October 2003

The rise of the private sector is the most important tendency in the economic sphere during the process of reform of classical socialism. This is also matched by a no less strong tendency to obstruct and restrict the development of the private sector. The following aspects of this type of reform are addressed in the chapter: inducements behind the development of the private sector, types of private sector reform that have occurred in various socialist countries, the private sector in relation to official ideology, the affinity of private ownership and market coordination, the private sector and bureaucracy, and the economic role of the family.
Price Reforms
Authors: Kornai János
Published: October 2003

One of the major tendencies in the move away from the classical socialist system is a modification of the price system. This is closely related to the revival of the private sector and reform of the control of the state sector towards market socialism. The price reforms described in this chapter alter the coordination mechanisms and behaviour of participants in the economy. They do not cause a radical change but are sufficiently important to qualify as part of the reform process. The different sections of the chapter discuss changes in the determination of product prices as a result of a change in the proportions of the areas in which each of the three types of price determination (administrative, pseudoadministrative, and market) occur; determination of the prices of production factors; principles and practice of state price determination and fiscal redistribution; and the scope and limits of price reforms.
International Economics and Domestic Politics: Notes on the 1920s
Authors: Eichengreen Barry , Simmons Beth
Published: October 2003

There were radical differences in post‐war exchange‐rate regimes, and associated monetary and fiscal policies. Some countries accommodated moderate inflation by abandoning their pre‐war gold parities; others subjected themselves to painful deflation in order to restore gold convertibility at the pre‐war rates. Major policy differences were again evident in response to the Great Depression, with some eagerly abandoning the gold standard, others seeking at all costs to preserve it. To explain these differences, Eichengreen and Simmons investigate the relationship between economic policy and domestic political systems. They find that countries with independent central banks, more stable governments, larger governing majorities, and, more surprisingly, left‐wing parliamentary majorities were better able to resist currency depreciation in the 1920s.
Exchange‐Rate Policy and Macroeconomic Performance: A Comparison of French and Italian Experience Between the Wars
Authors: Asselain Jean‐Charles , Plessis Alain
Published: October 2003

France and Italy both stabilized their currencies relatively late. Although the French franc was initially undervalued and the lira overvalued, there were significant similarities in subsequent developments. Both countries remained on the gold standard after the departure of Britain in 1931, and both were eventually forced to devalue after a difficult period of deflation in the mid‐1930s. This study examines the effects of these decisions on trade and growth in the two countries. Italy was more successful than France in holding down the rate of inflation and also achieved a more rapid rate of economic growth. The authors attribute this primarily to the ability of the Fascist dictatorship to impose a consistent policy on the Bank of Italy and the commercial banks, to maintain effective exchange controls, and to enforce wage reductions on the labour force.
Managing the Franc in Belgium and France: The Economic Consequences of Exchange‐Rate Policies, 1925–1936
Authors: Cassiers Isabelle
Published: October 2003

The central feature of this comparative analysis of the French and Belgian experience is the distinction between the international and domestic sectors of the two economies. The author shows that in Belgium, as in France, the stabilization of the franc in 1926 brought a period of export‐led growth to an end, and further economic expansion rested on a boom in the domestic sector, with high profitability and a surge in private investment. In the case of Belgium, the domestic sector remained relatively prosperous during the initial stages of the Great Depression, but the strict deflationary policies imposed in the attempt to sustain the gold standard eventually reduced domestic demand and the economy plunged into depression. Both countries were forced to devalue, but political and economic differences made the process more successful in Belgium than in France.
Norwegian Banking in the Inter‐War Period: A Scandinavian Perspective
Authors: Nordvik Helge W.
Published: October 2003

Begins with an account of the development of the Norwegian banking system before the First World War and then examines the long and severe banking crisis of 1923–28, and the policies adopted following the decision to leave the gold standard in 1931. In the 1920s, the deflationary policy pursued by the Bank of Norway in order to return to the gold standard at the old 1914 parity was responsible, together with the exceptional boom that the banking sector had experienced during the war years, for the severity of the banking crisis and for the slow real growth of the Norwegian economy. By contrast, the depreciation of the currency in 1931 contributed in important ways to the successful recovery and subsequent favourable growth record of the economy in the 1930s.
Portuguese Banking in the Inter‐War Period
Authors: Reis Jaime
Published: October 2003

Portugal was still a relatively poor country at the end of the First World War, and its banking system was small and undeveloped. The public viewed the commercial banks with suspicion, and growth of deposits and assets was very slow. The author examines events between the two wars and shows that the system changed considerably. Those banks that emerged in this period and learnt both to weather its storms, and to work within the highly regulated political regime in force from 1928, were to be Portugal's long‐term survivors. The events and policies of the two decades produced a financial system that was becoming progressively less fragile, more concentrated, and more specialized. Public trust in the system increased, and there was a strong expansion in the level of deposits and, thus, of the money supply.
Introduction and Overview
Authors: Banerjee Anindya , Dolado Juan J. , Galbraith John W. , Hendry David F.
Published: October 2003

Serves as an introductory overview for the rest of the book, and outlines its main aims. As a basis for the following chapters, an overview and clarification of equilibrium relationships in economic theory is presented. A preliminary discussion of testing for orders of integration and the estimation of long‐run relationships is provided. The chapter summarizes key concepts from time‐series analysis and the theory of stochastic processes and, in particular, the theory of Brownian motion processes. Several empirical examples are offered as illustration of these concepts.
Properties of Integrated Processes
Authors: Banerjee Anindya , Dolado Juan J. , Galbraith John W. , Hendry David F.
Published: October 2003

Presents the important properties of integrated variables and sets out some of the preliminary asymptotic theories essential for the consideration of such processes. It explores the concepts of unit roots, non‐stationarity, orders of integration, and near integration, and demonstrates the use of the theory in understanding the behaviour of least‐squares estimators in spurious regressions and in models involving integrated data. The theoretical analysis is accompanied by evidence from Monte Carlo simulations. Several examples are also provided to illustrate the use of Wiener distribution theory in deriving asymptotic results for such models.
Co‐Integration in Individual Equations
Authors: Banerjee Anindya , Dolado Juan J. , Galbraith John W. , Hendry David F.
Published: October 2003

Examines methods of testing for co‐integration in single equations via static regressions, and provides simulation estimates of the percentiles of the distributions of statistics used in these tests. The finite‐sample biases of the estimates of the co‐integrating vectors and powers of the tests based on static regressions are discussed within the framework of extensive Monte Carlo simulations. Dynamic models leading to an error‐correction mechanism based test (ECM test for co‐integration) and non‐parametrically modified estimators are also considered as better ways of estimating the co‐integrating relationships.
Conclusion
Authors: Banerjee Anindya , Dolado Juan J. , Galbraith John W. , Hendry David F.
Published: October 2003

The final chapter summarizes the main themes of the book, and considers the invariance of the matrix of co‐integrating vectors in a linear system under both linear transformations and seasonal adjustment. Next, co‐integration is related to structured time‐series models that offer an alternative approach to modelling integrated data. Further developments in the theory are described, and the book concludes by reinterpreting some old econometric problems in light of co‐integration theory.
Boyhood
Authors: Ross Ian Simpson
Published: October 2003

The emotional strength of his mother, Margaret Douglas, and close kinship bonds, to some degree, compensated Adam Smith for the loss of his father. In addition, he was well prepared at the Kirkcaldy burgh school for his student years, and found his vocation as a moral philosopher, in an era marked by a strong drive for advance in agriculture and other economic sectors.

Most important of all, his Presbyterian inheritance, together with training in the Latin and Greek classics, instilled in him the values of self‐command of a Stoic cast, frugality, diligence in his calling, and strict justice towards others tempered with benevolence, which characterized his actions and his teaching. At the same time, he seemed to have developed an independence of mind, which led him to rebel against the strict controls of Calvinism meant to check human depravity, and to set store by human goodness, and the will to enjoy natural liberty.
Glasgow
Authors: Ross Ian Simpson
Published: October 2003

Glasgow had a number of advantages as the place of Smith's university education beginning in 1737. Expenses were moderate and important reforms had been implemented in 1727, which put the teaching of logic and metaphysics, moral philosophy, and natural philosophy (physics) on a thoroughly modern basis. As well, regulations were made for an arts curriculum including the ancient classics, philosophy, also mathematics and Newtonian science, which provided a firm grounding in cultural and intellectual values for subsequent careers in the professions. Smith noticed the natural beauty of Glasgow's setting, also the emerging industries and thronged local markets, plus the transatlantic shipping in the Clyde estuary, which gave the city a rising economy, contrasting it with Kirkcaldy's declining one.
Called to Glasgow University
Authors: Ross Ian Simpson
Published: October 2003

Smith returned to Glasgow in 1751 to occupy the Chair of Logic, and within a year moved to that of moral philosophy. In his logic course, he substituted for the Aristotelian treatment his system of rhetoric and criticism, which he believed explained and illustrated best the powers of the mind. His moral philosophy course was a four‐part one, covering natural theology, presenting empirical proofs of the existence and attributes of God; Ethics, which gave rise to TMS; Justice, covering a history of civil society, taking up the theme of human progress through the four socio‐economic stages of hunting and fishing, herding, farming, and commerce; and, in essence, Political Economy, the basis for WN. Two surviving sets of lectures on Jurisprudence, combining parts three and four of the moral philosophy course, are discussed to demonstrate the growing sophistication of Smith's economic analysis during his Glasgow professorship.
Travelling Tutor
Authors: Ross Ian Simpson
Published: October 2003

Smith's two‐year tour abroad with young Buccleuch was modest rather than ‘grand,’ but allowed him to investigate a range of regional economies and two unfamiliar political systems: France's autocracy and republican oligarchy in Switzerland. France's taxation problems in the aftermath of war were of particular interest to him, a topic found in WN. Most of his time was spent in Toulouse, when Voltaire was leading a successful fight for a posthumous retrial there of Jean Calas, a victim of religious bigotry and miscarriage of justice. Smith later visited Voltaire, who was his intellectual hero, at his home, Ferney, near Geneva. When in Paris, Smith was introduced to leading philosophes, who were impressed by TMS, also to Turgot and Quesnay, whose Physiocratic views on circular flow in the economy persuaded him to make adjustments in his system.
Euge! Belle! Dear Mr Smith
Authors: Ross Ian Simpson
Published: October 2003

Terminally ill in 1776, Hume was relieved from anxieties over Smith's masterwork when it finally reached him on 1 April, and he gave it unstinted praise, though not without offering cogent criticism. The two‐part structure of WN is discussed in context. Books I and II are analytical and identify the principles, chiefly division of labour, which naturally lead to economic growth where the free‐market system, or something close to it, is adopted. Books III to V are historical and evaluative, focused on what legislators, to whom the book is addressed, have done and should do to promote growth. This second part of WN assesses alternatives to the free‐market system, denouncing mercantilism's injudicious restraints and incentives, and Physiocracy's blindness to the benefits of industry and trade. Smith settles for some restrictions on individual economic freedom, to provide resources for society's chief needs identified as defence, justice, public works, and education, and he manifests grave concern about the mental torpor found in workers subjected to extensive division of labour.
Times of Hardship and Distress
Authors: Ross Ian Simpson
Published: October 2003

In the face of declining strength in the 1780s and grief over the death of his nearest relatives, his mother and his cousin Janet Douglas, Smith strove to leave behind him the works he had already published in the ‘best and most perfect state.’ It fell out that he completed the additions that went into the standard third edition of WN (1784) in a time of political distress. These included the rise and fall of Shelburne as the Prime Minister whose drive to make peace with the Americans was based in part on Smith's free trade teaching; the subsequent collapse of the Fox–North coalition over efforts to reform the East India Company, which is severely criticized in the third edition of WN; and the onset of the administration of Pitt the Younger, who heeded WN's policy advice with regard to smuggling and trade with France. Smith also intensified his fight against the absurdity of the government's mercantile system of encouragements and prohibitions, which thwarted competition in the market place and favoured clamorous producers over consumers.
The Great Change
Authors: Ross Ian Simpson
Published: October 2003

Smith's last illness is described, along with his final order to have his unfinished manuscripts burned shortly before he died on 17 July 1790. His character is summed up as two‐sided: benevolent yet prudent, also firm and decisive, from one point of view; but from another darker one, that of a melancholy or, at times, volatile personality, subject to psychosomatic illness arising from his intense concentration on chains of abstract ideas. Nevertheless, he remained a tireless inquirer into human nature, particularly its emotional range, and into its expressive forms and institutions. His free‐market system showed, he believed, how people in a relatively early phase of commerce and manufacturing might prosper within a framework of justice and equality before the law. He thought that self‐interest was centrally involved in economic transactions, but also held that the happiness of others is necessary to us, and he devoted his last years to moral philosophy, believing that he might help us aspire for virtue rather than wealth, and so become members of a truly civil society.
Understanding Consumption
Authors: Deaton Angus
Published: October 2003

Presents a comprehensive introduction to the study of consumption and saving using theoretical models based on standard microeconomic foundations as well as reviewing the substantial empirical literature on the subject. A number of related topics such as the growth‐to‐saving hypothesis, the impact of interest rates on saving, risk sharing, aggregation, and information are also covered. One main focus of the book is the debate on the permanent income hypothesis and the excess sensitivity of consumption with respect to income. The importance of precautionary saving and liquidity constraints in explaining the observed consumption paths are also discussed in detail.
Theoretical Foundations
Authors: Deaton Angus
Published: October 2003

Reviews the basic micro‐foundations of intertemporal choice under uncertainty, and considers the implications for the macroeconomic aggregates of consumption and savings. It also reviews the practical implications of different utility specifications. It is also shown how to derive the fundamental result that consumption follows a martingale. The chapter concludes by reviewing the relationship between the microeconomic theory and models that work with a representative agent model.
Consumption, Growth, and Interest
Authors: Deaton Angus
Published: October 2003

Presents both theoretical and empirical evidence for the claim that growth in earnings generates higher saving (the growth‐to‐saving hypothesis). It also presents a number of theoretical and empirical models aimed at explaining the connection between interest rates and intertemporal substitution.
The Volatility of Consumption
Authors: Deaton Angus
Published: October 2003

Develops the themes of Ch. 3 by exploring how consumption responds to innovations in income. The focus is on the econometric enquiry and presents insights into how measured income differs from permanent income and how to deal with the non‐stationarity of income. The chapter concludes by looking at how to analyse cases where the agents base their consumption plans on private information that is not available to the econometrician.
Macroeconomics and Microeconomics
Authors: Deaton Angus
Published: October 2003

Reviews the large econometric literature that uses micro data to test the theory of intertemporal allocations and finds it inconclusive. The empirical work that is reviewed focuses on the permanent income hypothesis, excess sensitivity, and measurement error. It argues that short panels are not well suited to testing the key theoretical predictions. The chapter concludes by reviewing evidence that looks for the presence of altruism and risk sharing between households and evaluates the extent to which consumption patterns move together.
New Directions: Beyond Permanent Income
Authors: Deaton Angus
Published: October 2003

Explores two important issues in contemporary consumption theory: the precautionary motive for savings and liquidity constraints. The author shows how to solve simple models with precautionary savings involving isoelastic utility and solve for consumption in the absence of certainty equivalence. The intertemporal consumption choice of liquidity‐constrained consumers is modelled, and simulated paths for income, consumption, and assets are discussed.
Understanding Consumption
Authors: Deaton Angus
Published: October 2003

The author reviews the main issues discussed in the book and places them in the wider context of the evolution of macroeconomic thought. It points out to new theoretical and empirical puzzles raised by research on consumption theory, especially financial puzzles associated with portfolio choice, taxation, and timing of Individual Retirement Accounts (IRAs).
Economic Development in Palanpur over Five Decades
Authors: Lanjouw Peter , Stern Nicholas
Published: October 2003

This book provides an account of economic development in Palanpur, a village in rural north India, based on five detailed surveys of the village over the period 1957 to 1993. These five decades have seen economic well being rise in some important respects, but stagnation and even decline in other areas. The analysis presented here focuses on the reasons behind this uneven progress. The chapters in the book tie in the background issues of the evolution of poverty and inequality and mobility over time with causal factors such as technological progress, demographic and sectoral changes, the operation of markets, and the role of public action. Quantitative and qualitative data covering the entire population of the village yield an analysis, which illuminates questions of direct importance to researchers in a wide variety of disciplines from anthropology to sociology as well as economics and all kinds of development studies. The volume extends and updates the work done by Christopher Bliss and Nicholas Stern in Palanpur: The Economy of an Indian Village (OUP).
Economic Development in Palanpur, 1957–93
Authors: Drèze Jean , Lanjouw Peter , Sharma Naresh
Published: October 2003

Surveys the broad process of economic and social change in Palanpur between 1957 and 1993. Population growth, occupational diversification, and technological change are identified as key forces of change in the village economy. The evolution of asset ownership is studied. Changes in income levels and their distribution are examined. Access to and provision of public services is analysed. The persistence of social inequalities against the backdrop of economic change is highlighted.
Population Growth, Employment Expansion and Technological Change
Authors: Bliss Christopher , Lanjouw Peter , Stern Nicholas
Published: October 2003

Provides a detailed examination of the key forces of change in Palanpur over the survey period. The more than doubling of the village population over the survey period is analysed. The expansion of non‐farm employment opportunities outside the village is documented. The determinants of access to and income from non‐farm sources are studied. Changing agricultural practices are assessed. Agricultural technologies, land‐utilization practices, cropping patterns, and yields are found to have undergone significant change.
The Objects of Social Contracts
Authors: Dasgupta Partha
Published: October 2003

Social contracts theories are discussed in ten sections: (1) rules versus discretion; (2) outcome‐versus resource‐based evaluative principles; (3) political competition and civil liberties; (4) motivation and choice; (5) social systems: a formulation; (6) contractual and optimization theories (of social justice); (7) ex ante equilibria and ex ante contracts; (8) measures of freedom; (9) social well‐being functions; and (10) efficiency, equality, and the problem of implementation.
Well‐Being: From Theory to Measurement
Authors: Dasgupta Partha
Published: October 2003

The theory and measurement of well‐being are discussed in six sections: (1) constituents and determinants of well‐being; (2) income; (3–5) health—anthropometric measures, mortality indices, and morbidity; and (6) education—numeracy and literacy.
The Realization of Well‐Being
Authors: Dasgupta Partha
Published: October 2003

The realization of well‐being is discussed in six sections: (1) citizenship—civil, political, and socio‐economic; (2) intercountry comparison of the quality of life; (3) political and civil liberties versus economic progress from the aspect of a trade‐off between the two; (4) wars and strife; (5) inequalities; and (6) the point of cross‐country studies. The appendix explains the indices of political and civil rights used in the chapter.
Resource Allocation Mechanisms
Authors: Dasgupta Partha
Published: October 2003

The main part of this chapter discusses resource allocation mechanisms in seven sections; (1) resources and property rights; (2) markets and market mechanisms; (3) culture and market transactions; (4) externalities: public goods and common property resources; (5) infrastructure and fixed costs; (6) private and public realms, and private and collective (public) goods; and (7) knowledge, organization, and economic growth. An extra and separate section (designated Chapter *6) gives theoretical presentations on two aspects of public goods and common property resources: (1) the theory of public goods; and (2) the problem of the commons.
Public Goods and Common‐Property Resources
Authors: Dasgupta Partha
Published: October 2003

The main part of this chapter discusses resource allocation mechanisms in seven sections: (1) resources and property rights; (2) markets and market mechanisms; (3) culture and market transactions; (4) externalities: public goods and common property resources; (5) infrastructure and fixed costs; (6) private and public realms, and private and collective (public) goods; and (7) knowledge, organization, and economic growth. An extra and separate section (designated Chapter *6) gives theoretical presentations on two aspects of public goods and common property resources: (1) the theory of public goods; and (2) the problem of the commons.
Land, Labour, Savings, and Credit
Authors: Dasgupta Partha
Published: October 2003

The main part of this chapter discusses the characteristics of the peasant household in terms of land, labour, savings, and credit. It has ten sections: (1) the peasant household (which is normally land owning); (2) credit constraints and the organization of production—using family or hired labour; (3) moral hazard, wage labour, and tenancy (the predominating forms are fixed‐rental contracts and sharecropping or metayage); (4) village enclaves as production units; (5) land, labour, and credit markets: observations on rural India; (6) agrarian relations in sub‐Saharan Africa; (7) consumption as investment; (8) lack of credit among the assetless; (9) consumption smoothing; and (10) unemployment. An extra and separate section (designated Chapter *9) gives theoretical presentations on four aspects of households and credit constraints. These are (1) a model of the peasant household; (2) the precautionary motive for saving; (3) credit, insurance, and agricultural investment; and (4) why may credit be rationed.
Poverty and the Environmental Resource Base
Authors: Dasgupta Partha
Published: October 2003

The main part of this chapter discusses poverty in relation to the environmental resource base. It has ten sections: (1) the resource basis of rural production; (2) the characteristics of environmental resources, which are here treated as renewable natural resources; (3) needs, stress, and carrying capacity: land and water; (4) environmental shadow prices, project evaluation, and net national product (NNP); (5) markets and their failure: unidirectional and reciprocal externalities; (6) property rights on land; (7) public failure and the erosion of local commons; and (8) work allocation among women and children and the desirable locus of environmental decisions. An extra and separate section (designated Chapter *10) gives theoretical presentations on four aspects of the net national product in a dynamic economy: (1) the economics of optimal control; (2) NNP in a deterministic environment; (3) the current‐value Hamiltonian as a measure of sustainable well‐being (sustainable development); and (4) future uncertainty.
Net National Product in a Dynamic Economy
Authors: Dasgupta Partha
Published: October 2003

The main part of this chapter discusses poverty in relation to the environmental resource base. It has ten sections; (1) the resource basis of rural production; (2) the characteristics of environmental resources, which are here treated as renewable natural resources; (3) needs, stress, and carrying capacity: land and water; (4) environmental shadow prices, project evaluation, and net national product (NNP); (5) markets and their failure: unidirectional and reciprocal externalities; (6) property rights on land; (7) public failure and the erosion of local commons; and (8) work allocation among women and children and the desirable locus of environmental decisions. An extra and separate section (designated Chapter *10) gives theoretical presentations on four aspects of the net national product in a dynamic economy: (1) the economics of optimal control; (2) NNP in a deterministic environment; (3) the current‐value Hamiltonian as a measure of sustainable well‐being (sustainable development); and (4) future uncertainty.
Food, Care, and Work: The Household as an Allocation Mechanism
Authors: Dasgupta Partha
Published: October 2003

The main part of this chapter discusses the household as an allocation mechanism. It has eight sections: (1) gender differentials among adults; (2) allocations among girls and boys; (3) bridewealth and dowry; (4) regional patterns of household allocations: the case of India; (5) marriage and inheritance in India; (6) bargaining theory as a framework for household choice; (7) the Nash programme: a formalization; and (8) bargaining versus maximization of well‐being within the household. An extra and separate section (designated Chapter *11) gives theoretical presentations on two aspects of the axiomatic bargaining theory: (1) the Nash bargaining solution; and (2) the Kalai–Smorodinsky bargaining solution.
Strategic Complementarities in Fertility Decisions
Authors: Dasgupta Partha
Published: October 2003

The main part of this chapter discusses the household as a reproductive unit. It has nine sections; (1) income, fertility, and food – a discussion of the inverse relationship between fertility (and mortality) rates and income, and of population growth in relation to the (finite) environmental resource base; (2) the population growth problem; (3) population externalities: household versus societal reasoning; (4) birth control and female education; (5) children as consumer and insurance goods; (6) environmental degradation, and children as producer goods; (7) some special features of sub‐Saharan Africa; (8) modelling fertility decisions; and (9) allocation failure and public policy. An extra and separate section (designated Chapter *12) gives theoretical presentations on two aspects of strategic complementarities in fertility decisions: (1) atmospheric externalities; and (2) Nash equilibria.
Population and Savings: Normative Considerations
Authors: Dasgupta Partha
Published: October 2003

The main part of this chapter discusses normative considerations on population and savings. It has five sections. The first discusses parental concerns on the well‐being of their children in relation to savings. The second discusses the Genesis Problem (which in its purest form asks how many lives there should be, enjoying what standards), and the Repugnant Conclusion (which, in Parfit's formulation states that ‘For any population of at least ten billion people, all with a very high quality of life, there must be some larger imaginable population whose existence, if other things are equal, would be better, even though its members have lives that are barely worth living). Section (3) questions whether the Repugnant Conclusion is repugnant when applied to comparisons of well‐being in the Genesis Problem, and section 4 argues that the Genesis Problem is irrelevant in real life, which addresses actual problems. Section (5) looks at population ethics. An extra and separate section (designated Chapter *13) gives theoretical presentations on classical utilitarianism in a limited world.
Food Needs and Work Capacity
Authors: Dasgupta Partha
Published: October 2003

Food needs are discussed in relation to work capacity in eight sections: (1) complementarities among nutrients; (2) nutrition and infection; (3) energy conservation; (4) energy requirements, nutritional status, and productivity; (5) basal metabolic rates and maintenance requirements; (6–7) special requirements during growth and development, and during pregnancy and lactation; and (8) determinants of work capacity and endurance.
Incentives and Development Policies
Authors: Dasgupta Partha
Published: October 2003

This last chapter of the book addresses incentives and development policies. The aspects covered are: (1) agrarian reform; (2) food subsidies; (3) employment guarantee schemes and rural infrastructure; (4) community participation and credit facilities; and (5) health and education. The last section of the chapter gives a brief overview of the book.
Firms, Contracts, and Financial Structure
Authors: Hart Oliver
Published: October 2003

This book provides a framework for thinking about economic relationships and institutions such as firms. The basic argument is that in a world of incomplete contracts, institutional arrangements are designed to allocate power among agents. The first part of the book is concerned with the boundaries of the firm. It is argued that traditional approaches such as the neoclassical, principal‐agent, and transaction costs theories cannot by themselves explain firm boundaries. The book describes a theory—the incomplete contracting or property rights approach—based on the idea that power and control matter when contracts are incomplete. If the terms of a transaction can always be renegotiated, the incentives of a party to undertake relationship‐specific investments will depend crucially on the ability to control the use of productive assets when renegotiation takes place. Asset ownership becomes an essential source of power. The theory suggests that firm boundaries are chosen to allocate power optimally among the various parties to a transaction. The foundations of incomplete contracting are also discussed.

The remainder of the book applies incomplete contracting ideas to understand the financial structure of closely held and public companies. The analysis illustrates how debt acts as an automatic mechanism to constrain the behaviour of managers or owners of both kinds of companies. In closely held companies, debt can force an entrepreneur to pay out funds to investors rather than to himself. In a public company, ownership is dispersed among small shareholders causing a separation between ownership and control. It is argued that debt and equity choices, capital structure decisions, bankruptcy procedures, corporate governance, and takeovers, play a substantial role in limiting the ability of a (self‐interested) manager to make unprofitable but power‐enhancing decisions.
The Property Rights Approach
Authors: Hart Oliver
Published: October 2003

The neoclassical, principal‐agent and transaction costs theories cannot by themselves explain firm boundaries. This chapter describes a theory—the incomplete contracting or property rights approach—based on the idea that power and control matter when contracts are incomplete. If the terms of a transaction can always be renegotiated, the incentives of a party to undertake relationship‐specific investments will depend crucially on the ability to control the use of productive assets when renegotiation takes place (the hold‐up problem). In this context, asset ownership becomes an essential source of power and different ownership structures will affect the severity of the hold‐up problem. The author presents a model that illustrates the benefits and costs of integration. In the absence of wealth constraints, firm boundaries are chosen to allocate power optimally among the parties to a transaction. An implication of the theory is that, ceteris paribus, a party is more likely to own an asset if he or she has an important investment decision. The theory also predicts that complementarities make integration more likely and, conversely, that independent assets should be owned separately. Finally, the author considers whether the theory's predictions actually match up with observed organizational arrangements.
A Discussion of the Foundations of the Incomplete Contracting Model
Authors: Hart Oliver
Published: October 2003

Discusses the foundations of the incomplete contracting model used in the previous chapters. The first part of the chapter examines the hold‐up problem in more detail. The author considers some natural ways of getting around contractual incompleteness in this set‐up, such as the existence of long‐term contracts, profit‐ and cost‐sharing arrangements, and more sophisticated forms of ownership. It is argued that if parties are unable to provide a detailed contractual description of the various contingencies that may arise and renegotiation is possible, these alternatives do not eliminate the hold‐up problem. The chapter concludes by pointing out that the hold‐up problem is a useful vehicle but not essential for the theory of property rights. What is required for a theory of asset ownership is that there is some inefficiency in the economic relationship, which the allocation of residual rights of control can influence.
Theories of Financial Contracting and Debt
Authors: Hart Oliver
Published: October 2003

Studies the optimal financial contract written by a wealth‐constrained entrepreneur who raises funds from an outside investor to purchase an asset. The models presented assume that the entrepreneur obtains significant (private) benefits from managing a firm and analyse how control rights should be allocated between the parties when contracts are incomplete. The chapter begins with a discussion of the Aghion–Bolton model, which explains shifts in control but not the use of a standard debt contract. Next, a model by Hart and Moore is analysed, which comes closer to explaining the use of a standard debt contract. In these models, debt forces the entrepreneur to pay out funds to investors rather than to himself. Furthermore, the dynamic version of the model sheds light on the maturity structure of debt repayment and the role of collateral in determining whether a project is financed. The Appendix to the chapter reviews an alternative approach to debt contracting, the costly state verification model.