The value of scarce water: Measuring the inefficiency of municipal regulations

Rather than allowing urban water prices to reflect scarcity rents during periods of drought-induced excess demand, policy makers have mandated command-and-control approaches, primarily rationing the use of water outdoors. While such policies are ubiquitous and likely inefficient, economists have not had access to sufficient data to estimate their economic impact. Using unique panel data on residential end-uses of water in 11 North American cities, we examine the welfare implications of urban water rationing in response to drought. Using estimates of expected marginal prices that vary both across and within markets, we estimate price elasticities specific to indoor and outdoor water use. Our results suggest that current policies do target water uses that households, themselves, are most willing to forgo. Nevertheless, we find that rationing outdoor water in cities has costly welfare implications, primarily due to household heterogeneity in willingness-to-pay for scarce water. We find that replacing rationing policies with a market-clearing “drought price” would result in welfare gains of more than 29% of what households in the sample spend each year on water.     

Price volatility and the political economy of resource-rich nations

This paper attempts to understand how price volatility affects the political transition of a resource-rich nation. Two states reflect price volatility: ‘high prices’ and ‘low prices’. We argue that whether or not political transition (i.e., a switch from one regime to another) will take place in a particular state depends critically on the kind of goods a country produces. If the main economic activity in a country is the extraction of “point-source” resources such as oil that demands capital-intensive production, the opportunity cost of switching the existing regime does not alter if the price of the resource changes but the benefit becomes more lucrative. Therefore, the incumbent group is most vulnerable during ‘high prices’. If the main economic activity of the nations is the production of “diffused resources” such as coffee that requires labor, prices do affect the opportunity cost. Nations concentrating in these commodities face acute political crisis during downturns.     

LAND MARKETS AND THE EFFECT OF REGULATION ON FORMAL-SECTOR DEVELOPMENT IN URBAN INDONESIA

Until recently, urban land and housing markets in Indonesia seemed to function well. Informal-sector development provided low-income housing affordably. Through government programs, formal-sector developers could build housing for all but the poor. Since 1989, however, daily conversation pictures land speculation as rampant and formal-sector housing as rising beyond the means of the middle class. Newspapers carry stories of conflicts between small landowners and large developers with government officials in between. This article investigates this situation by addressing two related questions: are urban land prices rising “too fast?”; how do land regulations and development practices affect costs, and who pays these costs? The article includes quantitative estimates of urban land prices, changes in urban land supply, movement of land through the permitting process, and the effect of development regulations on costs. Data come from a literature survey and interviews of some of the largest formal-sector developers in Indonesia. A principal finding concerns a development regulation called a “location permit” and the “social function” of land in Indonesian law. Although helpful as a means of assembling land in Indonesia's highly fragmented land markets, location permits allow formal-sector developers to hold land off the market and pay low prices to small landowners. Ultimately, the “social function” of land under Indonesian law holds down the price formal-sector developers pay for land, but not at the price at which they sell their product. The article concludes by proposing reforms to the regulatory process.     

The invisible hand of Laplace: The role of market structure in price convergence and oscillation

The “invisible hand” of the free market is remarkably effective at producing near-equilibrium prices. This is difficult to quantify, however, in the absence of an agreed model for out-of-equilibrium trade. Short of a fully reductionist model, a useful substitute would be a scaling law relating equilibration time and other market parameters. Even this, however, is missing in the literature.We make progress in this direction. We examine a class of Arrow–Debreu markets with price signaling driven by continuous-time proportional-tâtonnement. We show that the connectivity among the participants in the market determines quite accurately a scaling law for convergence time of the market to equilibrium, and thus determines the effectiveness of the price signaling. To our knowledge this is the first characterization of price stability in terms of market connectivity. At a technical level, we show how convergence in our class of markets is determined by a market-dependent Laplacian matrix.If a market is not isolated but, rather, subject to external noise, equilibrium theory has predictive value only to the extent to which that noise is counterbalanced by the price equilibration process. Our model quantifies this predictive value by providing a scaling law that relates the connectivity of the market with the variance of its prices.     

Cobweb dynamics and price dispersion in illicit drug markets

Extreme price dispersion is a hallmark of illegal drug markets, and this apparent contradiction to the law of one price has long puzzled drug market economists. We propose a novel explanation for this dispersion: the coupling of dealers’ unwillingness to hold inventory with dealers’ imperfect foresight concerning future prices and/or random lead times when “ordering” drugs from higher-level suppliers. Unwillingness to hold inventory means drug markets might operate consistent with a cobweb model. The classic cobweb model was inspired by the observation of cyclic (typically annual) fluctuations in commodity prices. However, with minor changes that make the model more realistic the resulting price trajectories can be highly variable or even chaotic, not just periodic. Cobweb dynamics can also amplify the variability created by supply chain disruptions.     

Speculative Markets and Economic Complexity

The dramatic movements in share prices in the world's stock markets this autumn have provoked unrest among normally enthusiastic advocates of the free-market economy. Ludwig Lachmann, formerly Professor of Economics and Economic History at the University of the Witwatersrand, Johannesburg, and one of the doyens of the Austrian School of economic analysis, suggests that although the defenders of capitalism must not argue away the drawbacks of speculative markets, they should not neglect the advantages of such activity in a reaction against recent volatility.     

On the predictive content of technical analysis

Notwithstanding its widespread use in financial markets and well-documented profitability, technical analysis is still perceived to carry useless information. This paper provides a possible explanation for this puzzle that goes beyond the standard self-fulfilling prophecy argument. If at least some of the asset price fundamentals are not currently observable, the oscillator model is able to infer regime shifts in the process of these variables through past asset prices. From this point of view, technical analysis can be interpreted as a cheap proxy for Bayesian learning.     

The spatial impact of employment centres on housing markets

The spatial impact of employment centres on housing markets. Spatial Economic Analysis. Local economic growth tends to affect neighbourhood house prices unevenly. It has been observed that prime locations experience price hikes far in excess of the surrounding local area. Yet, this phenomenon is not well captured by existing economic models. This research provides a model of spatial and temporal interactions between housing and employment markets. The results show that rapid growth of employment centres increases house prices in neighbouring locations even after adjusting for fundamentals. It is concluded that spatial clustering of companies creates an option value for existing and potential employees that goes beyond ease of access for commuting purposes.     

THE SOCIOLOGICAL APPROACH TO FINANCIAL MARKETS

Abstract.  As a part of the renaissance and growth of economic sociology during the past two decades, and in response to processes such as economic globalization, financial markets have been increasingly scrutinized by sociologists. Their investigation is seen as relevant with respect to understanding the structure and dynamics of advanced societies, the dynamics of social development, as well as fundamental aspects of human behaviour. This paper charts recent developments in the sociology of financial markets; its starting point is the treatment of the concept of information within three sociological orientations: the social-structural approach, sociological neo-institutionalism and the newer social studies of finance. By highlighting their different assumptions about information and market behaviour, I discuss how these approaches conceptualize financial markets, the methodological implications and the ways in which they contribute to the study of financial exchanges.     

Commodity house prices

This paper studies how commodity price movements have affected the local house prices in commodity-dependent economies, Australia and New Zealand. We build a geographically hierarchical empirical model and find that the commodity prices influence local house prices directly and also indirectly through macroeconomic variables. The impacts of commodity price changes are analogous to “income shocks” rather than “cost shocks”. Regional heterogeneity is also observed in terms of differential dynamic responses of local house prices to energy versus non-energy commodity price movements. The results are robust to alternative approaches. Directions for future research are also discussed.     

Social Networks and Economic Sociology

A bstract The social network metaphor is widely used by sociologists to study socioeconomic behavior and processes The use of social networks generally takes place within the ranks of sociology However, a more complete social science would result by combining work being done on social networks within sociology with mainline economic theory The insights from such a research agenda will help us better understand socioeconomic behavior With this in mind, the main objective of this paper is to demonstrate the utility of the network metaphor to economists This objective will be accomplished through developing four basic components of social networks, and using them to navigate through the existing literature in economic sociology Furthermore, topics for future research in which social networks can provide contributions to the explanation of socioeconomic behavior are explored as well     

The CAPITAL in Social Capital: An Austrian Perspective

In recent decades economists started discovering the importance of the social dimension of economic interactions. Contemporary economics has borrowed several sociological concepts for its own use, among the most important being the concept of social capital. However, this transfer within disciplines did not occur without a loss—the nature of social capital in economics remains confused and obscure. The purpose of this article is to clarify it, specify the possibilities for its use, and discuss their limits. It is argued that economics once also possessed a view of human beings that was more “socialized” than the modern neoclassical Homo oeconomicus, and that this more “socialized” view still exists in the Austrian school of economics. Because this tradition of economic thought has also developed an elaborate capital theory, it can serve as an ideal source where we can look for inspiration in the current social capital debate. First, social capital is (re)defined along these lines as an individual's asset connected with recognized reciprocity (as opposed to interactions usually classified as “altruistic”). Then major critical claims about the relation between social and physical capital are answered and the connection between social capital, trust, and social norms is described.     

Market Morality: Robert Nozick and the Question of Economic Justice

A bstract . The study of markets and market prices has been a central feature of economic inquiry since the 18th Century. There have always been lingering questions on the meaning of market prices. Most moderneconomists argue that there are no normative implications to price analysis. The disclaimers of some economists about normative judgments ring hollow in the light of their vigorous advocacy of free market solutions to economic and other problems. Either free market solutions are superior alternatives or they are not; one cannot have a value free analysis and an ideological advocacy at the same time. The philosopher, Robert Nozick, in Anarchy, State, and Utopia , clearly finds meaning in the market place. His entitlement theory is predicated upon free exchange of goods and productive services. The normative use of free markets in general and of Robert Nozick's formulation in particular, it is contended, are inconsistent, illogical, and unscientific.     

The Economic Sociology of Alfred Marshall:An Overview

A bstract The aim of the paper is to present the economic sociology of Alfred Marshall (1842-1924). Three topics are discussed in the paper: Marshall's ideas of how preferences are generated, the theory of action, and finally the introduction of a fourth factor of production, organization. Throughout the paper Marshall's broad perspective is demonstrated. It is argued that Marshall's approach encourages a closer connection between sociologists interested in economic phenomena and economists. This conclusion is strengthened because of the resemblance of Marshall's analysis to those offered by Max Weber and Thorstein Veblen.     

Asymmetric Price Adjustment and Consumer Search: An Examination of the Retail Gasoline Market

This article proposes a new explanation for why retail prices respond more quickly to cost increases than cost decreases. I develop a search model that assumes consumers’ expectations of prices are based on prices observed during previous purchases. This model predicts that consumers search less when prices are falling, which results in higher profit margins and a slower price response to cost changes. I then empirically examine patterns of retail gasoline price response and price dispersion to show that this model predicts observed price behavior better than previously suggested explanations.     

需求驱动下的经济增长及增长中的价格水平波动——基于投资与消费本质属性分析框架的阐释

基于投资与消费本质属性的理论框架和实证分析表明:(1)消费需求是经济增长的最初需求动力,对经济增长的驱动作用由强变弱再变强,受消费需求导向的投资需求对经济增长的驱动作用由弱变强再变弱;(2)均衡增长状态下,产出与投资、消费同步增长,价格水平基本稳定;(3)相对于消费需求而言,投资需求的"投资滞后性"和"投资惯性"的存在使投资常与消费非同步增长,导致经济失衡和价格水平规律性波动,即经济发展早期阶段的价格水平上升多为消费需求拉动,经济发展中后期阶段的价格水平上升多为成本推动,而结构性价格水平上升会随着消费结构升级而成为一种常态;(4)1978年以来,中国经济增长的总体态势良好,但长期高投资率导致的强"投资惯性"致使当前产能过剩及通货膨胀预期并存,对中国经济持续稳定增长形成较大威胁。政府应通过以消费结构升级为导向扩大投资,努力提高农村居民收入水平,推进农村居民消费结构升级和稳定粮食价格等措施进行化解。。     

Spatial aspects of ticket scalping

We develop a simple insurance model of the secondary market for tickets to account for some of the observed spatial patterns of prices. Beyond ticket markets the model draws attention to the existence of subtle insurance fees in market prices that may be incorrectly attributed to breakdown of the law of one price or attributed solely to a cost‐based rationale. Copyright © 2010 John Wiley & Sons, Ltd.     

Hospital performance standards and medical pricing: The impact of information disclosure in cardiac care

A policy concern is that the initiation of Hospital Compare (HC) reporting in Medicare provided leverage to insurers in price negotiations for lowering private sector prices without regard to hospital performance. Using the sequential Nash bargaining framework we provide economic intuition to the contrary: while average hospital prices decline under quality disclosures, hospitals with above‐average quality are able to exert a stronger bargaining position, consequently capturing prices above the market rate. To explore this issue empirically we estimate variants of difference‐in‐difference models, examining the effects of the three main scores (heart attack, heart failure, and combined mortalities) on transaction prices of related hospital procedures. States which had similar mandated reporting systems in place before the initiation of HC form the control group. Analyzing claims data of privately insured patients, we find that HC exerted downward pressure on prices. However, hospitals rated “above‐average” captured higher prices, thereby offsetting the overall policy effect fully or partially. Leads and lags analysis lends further support for our difference‐in‐difference approach. We find that highly ranked hospitals received a quality premium of 8–14%, comparable to price effects found in other health care markets. We conclude that HC was effective at constraining prices without penalizing high performers.     

Futures Finally Refute Keynes

Keynesian economists , such as Lord Kaldor, have argued that the development of futures markets, exchanges based on anticipated prices deflect investment from the capital markets and stunt economic growth. Robert Miller, a Consultant to the London International Financial Futures Exchange, argues that Professor Ludwig Lachmann discovered a fundamental flaw in Keynesian economics which has been confirmed by the development of trading in financial futures.     

中国房地产开发及投资经济效应分析

房地产业在我国国民经济中处于举足轻重的地位,房价的大幅涨跌都会对经济运行造成严重影响。从微观角度,通过对地产开发成本费用的分析,发现以地价和税收为主的整个政府性费用支出占到了房地产开发费用支出的近50%,而房地产开发所得的销售收入中也有近1/3以上的销售收入流向政府。因此,抑制过热的房地产市场,控制不断高涨的房地产价格,政府肩负重要责任。从宏观角度,通过对辽宁省2005年一季度到2010年底二季度的GDP数据以及房地产投资季度数据的定量分析,发现房地产投资与经济增长之间的长期弹性为0.48,存在长期均衡关系。