Forest policy for sustainable commodity wood production: an examination drawing on the Australian experience

This paper presents a policy framework aimed at sustainability in Australia's wood-based industry. It commences with a historical overview to illuminate how culture and environment combined to fast-track Australia's plantation establishment. This maturing estate is now generating new choices about meeting wood needs and the future for native forests. The essence of the forest problem lies in the nature of commodity production where cost reduction, essential for the firm's survival, comes at the expense of native forest ecological integrity. The framework explicitly includes Australia's plantation wood resource that, by definition, is excluded from the ‘multiple use’ approach to managing native forests for wood production. Three systems are identified—native forests as self-regenerating ecosystems, wood production systems to meet human material needs and rural socio-economic systems—and a dual strategy developed to enhance their persistence capacity. This strategy combines shifting commodity wood production from native forests to plantations and adding value by domestic processing. The strategy works in a complementary way across the three systems, meaning that trade-off is avoided at this level. Native forest ecosystems cease to be threatened by the intensification pressures inherent in commodity production and relatively labour-intensive wood products manufacturers enhance their competitiveness by processing agriculturally grown wood. A highly integrated regional industry can enhance the economic viability of wood growing that helps buffer agricultural land against the price-cost squeeze of commodity production. The policy framework may not be economically efficient if, after removing government subsidies and props to the older and less competitive native forest based sector, further measures are required to stimulate investment in plantation processing. Under these conditions, a specific wood industry policy can be argued on environment grounds. Trade-off is between market interventionist industry policy and general economic efficiency—fundamentally different to the native forest conservation versus industry trade-off commonly understood.     

An ‘oil’igopoly theory of exploration

This paper develops a theory of ‘oil’igopoly exploration of an exhaustible resource. Strategic exploration and production are jointly derived in a three period subgame perfect equilibrium. While the ‘oil’igopoly theory of exploration shares many features with non-strategic models of exploration and production, there is one important difference. The ‘oil’igopoly theory of exploration predicts that firms who exhaust their proved reserves before they can convert their unproved reserves into proved reserves have an incentive to over-explore, relative to the Nash equilibrium level of exploration. A simple empirical prediction is that firms holding smaller proved reserves should be observed doing more exploration. This prediction is consistent with country-level production and reserve data in the post-World War II era.     

The knowledge production of ‘R’ and ‘D’

Many studies investigate the relationship between R&D and patents applying knowledge production functions. Using aggregated R&D may underestimate the productivity of ‘R’, as mainly ‘R’ but not ‘D’ leads to patents. Disaggregating ‘R’ and ‘D’ shows a significant premium of ‘R’ towards patenting.     

Growth dynamics in a model of endogenous time preference

We incorporate endogenous time preference in a simple Diamond-type economy with production and analyze the resulting dynamics both for the competitive and command equilibrium. We assume an individual's rate of time preference is decreasing in consumption (decreasing marginal impatience) and show that this intuitively more appealing assumption is consistent with a stable, non-trivial competitive equilibrium. Analysis of the competitive equilibrium indicates that the observed ‘non-convergence’ of cross-country per capita income could partially be explained by cross-country differences in ‘innate patience’. Examination of the local dynamics around the ‘optimal’ solution suggests that this particular preference structure exhibiting diminishing marginal impatience may generate endogenous business cycle phenomenon.     

Closure in risk debates: Pre-assessment of Finnish forest biotechnology

The aim of this paper is to contribute to a more systematic and integrative pre-assessment of risk. The paper argues that although there are many insights into ‘pre-assessment’ within the field of risk studies, it suffers from a lack of robust methodological tools and approaches. A problem with the neglect of such approaches is that factors that set the stage for further steps in the risk-handling chain can remain in a state of implicit assumptions, impose biased interpretation of relevant risk issues and mislead the consideration of active intervention options. The suggestion of this article is that ‘social arena analysis,’ combined with the identification of ‘closure mechanisms,’ can provide a practical and theoretically anchored tool for the pre-assessment of risk. The value of this approach is demonstrated through the analysis of a debate on the future and risks of Finnish forest biotechnology, and in a final discussion on policy options emerging from the analysis.     

Happiness, freedom and control

How do people value freedom of choice? Drawing on economics and psychology the paper provides an hypothesis and empirical evidence on how individuals may value freedom of choice and derive utility from it. It is argued that the degree of perceived control that individuals have over choice – a construct known as the locus of control in psychology – regulates how we value freedom of choice. People who believe that the outcome of their actions depends on internal factors such as effort and skills (the ‘internals’) have a greater appreciation of freedom of choice than people who believe that the outcome of their actions depends on external factors such as fate or destiny (the ‘externals’). We find some evidence in support of this hypothesis using a combination of all rounds of the World and European Values Surveys. A variable that measures freedom of choice and the locus of control is found to predict life satisfaction better than any other known factor such as health, employment, income, marriage or religion, across countries and within countries. We show that this variable is not a proxy of happiness and measures well both freedom of choice and the locus of control. ‘Internals’ are found to appreciate freedom of choice more than ‘externals’ and to be happier. These findings have important implications for individual utility, social welfare and public policies.     

Vertical trading and uneven development

The phenomenon of vertical trading, in which the center exports a good involving a high degree of processing which leads to economy-wide learning and the periphery exports a good which does not generate such effects, is formalized in a simple dynamic model of trade. It is shown that the periphery can ‘lose’ from such trade relations. Conditions under which this can occur are shown to involve parameters of the learning functions, and the ‘sizes’ of the two countries.     

Designing tax policy in federalist economies: An overview

The emerging economic federations of the European Union, Russia, and South Africa, along with the established federations in Australia, Canada, and the United States, confront the task of designing the institutions for federal fiscal policy. This paper reviews the literature on the design of tax policy in federalist economies. We conclude that taxation by lower level governments can lead to significant economic inefficiencies and inequities. The usual ‘assignment’ view of federalis recommends central government policies — for example, resident-based taxation or grants-in-aid — to correct these failures. These recommendations assume that the central government will act as a benevolent social planner. The ‘political economy’ view of federalism suggests that this assumption is in error and that additional federalist institutions must be considered. Alternative legislative structures and constitutional rules are considered.     

Arrow’s theorem as a corollary

Arrow’s Impossibility Theorem is derived from a general result on social aggregation in ‘property spaces’ (S3 convex structures) obtained in prior work. In the derivation, the specific structure of Arrowian aggregation as an aggregation of weak orders plays a purely combinatorial role.     

Local Organic Food Markets: Potentials and Limitations for Contributing to Sustainable Development

The agro-industrial food production is currently facing a number of problems. BSE, GMO and illegal medication of animals caused anxiety among consumers. They are urging producers to rethink common production methods and policy makers to re-evaluate public support schemes. It has already been for decades though that a number of producers and consumers were searching for alternatives by maintaining or re-establishing local food markets because they were dissatisfied with the large scale, regionally concentrated food production, processing and distribution system. Food co-operatives, farmers' markets, community supported agriculture (CSA) groups among others were formed in order to provide consumers with organic and locally grown food. They aim to revitalise local food economies and to protect the environment. Many producers and consumers view local groups and initiatives as promising alternatives to an unsustainable globalising agro-industrial food production system. This paper addresses the question which contributions local food markets are capable of making to sustainable development and where their limitations are in this respect. The analysis focuses on local food markets of the CSA type which are found as a means to increase both responsiveness to consumer needs and sustainability, but of limited reach.     

General instrumental variables estimation under stochastic linear restrictions

This letter extends the Theil-Goldberger ‘mixed’ regression estimator, for models subject to stochastic linear restrictions, to the case of stochastic regressors. A general instrumental variables ‘mixed’ estimator is discussed. The asymptotic distribution of the estimator is obtained, and an asymptotic test of the compatibility of the sample and prior information is presented.     

Different ways of knowing: a communicative turn toward sustainability

Despite the urgency of the ecological crisis the steady continuation of environmental degradation suggests that new ways of interpreting problems and acting with environmental integrity may need to be considered. This paper draws on a broad range of contemporary theory to argue that the conventional conceptualization of environmental problems has remained a largely disciplinary-based exercise that has relied on abstracting the environmental issues from their real-world complexity. A practical articulation of the main environmental narratives reveals self-referential discourses whose disciplinary-based practices have insulated these approaches from a broad range of contemporary theorising and different ways of knowing. The dominance of these approaches in environmental policy development has led to the continued acceleration of environmental degradation despite widespread political and social interest in its abatement. This paper provides a critique of methodologies derived from the assumptions of instrumental rationalism, and contemplates the potential for alternative ‘communicative’ approaches and strategies for dealing with environmental policy development and implementation. It is argued that a communicative approach to planning for sustainability represents a more appropriate strategy for mobilising a currently impotent environmental movement. A communicative approach by explicitly dealing with the assumptions and motivations of contested positions in the sustainability debate, it is argued, offers the most pragmatic way of developing change strategies to deal with the complex issues surrounding environmental policy development and implementation.     

Learning and stakeholder participation in transition processes towards sustainability: Methodological considerations

Global environmental change problems due to their unstructured characteristics, being marked by great uncertainties and a big number of stakeholders, prove to be too difficult to solve in a traditional way alone. They call for a more proactive approach. One of them advocates systems change driven by technological innovations accompanied by institutional and sociocultural transformations. Transition management is a new policy strategy based on this philosophy. It has recently emerged in the Netherlands and has been adopted by the Dutch government as a relevant framework for shaping its policy towards sustainability. The transition management writings emphasise the importance of ‘learning’ in the process of induced change towards sustainability. Although this can indeed be quite a significant means for inducing change, the literature on transition management is not explicit enough about the methodological organisation of the learning process. Since transition management has become an important approach in the Netherlands, we consider it relevant to deploy some learning insights and experience gained in the Dutch Climate OptiOns for the Long-term (COOL) project to analyse and improve the process of transition management. In particular, we look into the first two steps of transition management, i.e., organising a transition arena and making visions.     

The political economics of complexity : From the information economy to the ‘complexity’ economy

The economics of information allows one to distinguish within the national product the real production from the costs of organization. It reveals a continuous inflation of these costs which, per employee and since 1900, has been twice as fast as the increase of productivity. From this, one can conclude that the growth of productivity comes up against a real ‘wall’ when the costs of organization approach 50% of the national product. This is the essential cause of the present crisis. The author subsequently designs an economy of organization structures applicable to complex systems, such as physical, biological or social systems. He shows how the 50% wall is characteristic for centralized structures. Most economic structures are those where social forces and solidarities are distributed justly among all levels of organization, from local to global ones. They tend to establish themselves by self-organization, but a new political economy applying these principles would, aided by information and communication technologies, accelerate this process.     

On shareholder unanimity in the mean-variance model

It is shown that shareholder unanimity in the mean variance model of capital asset markets implies production decisions which maximize the net market value of a firm in a ‘large’ stock market.     

Using justice principles to resolve the ‘Impossibility of a Paretian Liberal’

A simple, but general, possibility result is presented showing how ‘justice’ principles can be effectively used to resolve Amartya Sen's ‘The Impossibility of a Paretian Liberal’ (1970a).     

Overcoming free riding in multi-party computations—The anonymous case

This paper addresses the question of multi-party computation in a model with asymmetric information. Each agent has a private value (secret), but in contrast to standard models, the agent incurs a cost when retrieving the secret. There is a social choice function the agents would like to compute and implement. All agents would like to perform a joint computation, which input is their vector of secrets. However, agents would like to free-ride on others' contribution.A mechanism which elicits players' secrets and performs the desired computation defines a game. A mechanism is ‘appropriate’ if it (weakly) implements the social choice function for all secret vectors. namely, if there exists an equilibrium in which it is able to elicit (sufficiently many) agents' secrets and perform the computation, for all possible secret vectors. We show that ‘appropriate’ mechanisms approach agents sequentially and that they have low communication complexity.     

The allocation of volatile aid and economic growth: Theory and evidence

We analyse, both theoretically and empirically, the growth effects associated with two components of volatile foreign financial assistance: ‘directly productive’ (or ‘tied’) aid and ‘pure’ aid. We find that scenarios in which aid can hurt the recipient's growth rate emerge only in cases where foreign aid is volatile. As a result, we conclude that it is only in conjunction with the presence of aid variability that aid allocation determines whether foreign aid hurts or promotes long-run growth.