The normal, the natural, and the harmonic

Use is made of rigorous definitions for the terms normal, natural, and harmonic to reveal a number of unfamiliar aspects about them. The Gaussian distribution is not sufficient to determine who is normal, and fluctuations above or below a natural-growth curve may or may not be natural. A recipe for harmonically sustained natural growth requires that the overlap during the substitution process must be limited. As a consequence the overall growth process must experience good as well as bad “seasons”.     

The brain, the mind, and the future

Within psychology, brain research, and the sciences generally there has been a greater emphasis on the investigation of phenomena in terms of present and past than in terms of the future. This restriction in time frame has led not only to a fragmentation of theory and research in all the sciences, but also, in a time of great social, political, and economic change, to a failure by social science to provide the kind of guidance through improved prediction that might help ease our passage through this global turbulence. To remedy this situation much more work is needed in the relevant areas of brain research, in a closely wedded psychology of consciousness and the mind as a whole, and eventually in artificial intelligence and systems analysis as a means of testing and advancing theory. This article examines the basis for such an advance in the work of Luria, Pribram, and others with the frontal brain; Sperry, Bogen, and others with brain hemispheric differences; and von Neumann and others in artificial intelligence and systems analysis. It examines the nature of the prediction task philosophically and psychologically, states a model for brain functioning and forecasting suggested by a synthesis of prior research, and reports the supporting evidence for this model from philosophy, psychology, cybernetics, and recent experimental and field studies. It closes with a consideration of needs for continuing research and the implications of advancement in this area for science and society.     

Computers,Input-Output,and the Future

While all regions are exposed to natural hazards, most disasters (such as droughts, earthquakes, extreme temperatures, floods, slides, storms, volcanoes and wildfires) tend to occur in developing regions. Underdeveloped countries and poor people concentrate the un-natural impact of natural hazards, deepening the existent inequalities within and across countries. The paper analyzes the empirical evidence on the incidence of disasters and maps worldwide disaster risks, to then assess the factors as to why disaster risk concentrates on certain people, areas and countries. It uses a conceptual framework on the links among risk, vulnerability, and impacts to understand the multi-dimensionality of disaster effects and the increasing challenges that countries have to overcome in the face of climate change.     

OPEC, rationality, and the macroeconomy

This paper builds a simple two-nation macro-model which includes a large manufacturing economy, such as the OECD and OPEC. Its distinguishing feature is that OPEC is a revenue-maximizing cartel who exploits the imperfectly elastic oil demand curve emerging from the rest of the world's use of imported oil as an intermediate good. Unlike the case of a small open economy facing OPEC, the large open economy is found to have a vertical aggregate supply curve. Consequently, anticipated macro-policies have no effect on real GNP. Moreover, micro-policies which induce the adoption of oil-saving technologies are also found to be neutral.     

Luddites, the industrial revolution, and the demographic transition

Technological change was unskilled-labor-biased during the early industrial revolution, but is skill-biased today. This implies a rich set of non-monotonic macroeconomic dynamics which are not embedded in extant unified growth models. We present historical evidence and develop a model which can endogenously account for these facts, where factor bias reflects profit-maximizing decisions by innovators. In a setup with directed technological change, and fixed as well as variable costs of education, initial endowments dictate that the early industrial revolution be unskilled-labor-biased. Increasing basic knowledge then causes a growth takeoff, an income-led demand for fewer but more educated children, and a transition to skill-biased technological change in the long run.     

Economic Growth, Inequality, Democratization, and the Environment

We augment the Stokey (1998) model by allowingagents to differ with respect to environmentalquality and income in order to analyze theimpact of income and environmental inequality,and of democratization on aggregate pollution.We find that the impact of a more equal incomedistribution depends on the degree ofdemocracy. In a complete democracy a more equalincome distribution generates, ceterisparibus, less pollution, which is consistentwith indirect empirical evidence, whereas theopposite is the case if democratic rights arehighly restricted. Furthermore, ademocratization is argued to typically lowerboth the income and the environmental qualityof the median voter. In this case, if, inutility terms, the fall in environmentalquality is worse than the fall in consumptionthe median voter decides to tightenenvironmental legislation so that aggregatepollution decreases.     

Vicarelli,Keynes, and the unstable nexus between investment,liquidity, and finance

The goal of this article is to reconstruct Keynes’s vision of the unstable nexus between investment, liquidity and finance, as set out by the Italian economist Fausto Vicarelli (1936–1986). As argued in the article, one of Vicarelli’s main contributions consists of explaining the inherent instability of financially sophisticated capitalist economies in terms of the interaction (and double dissociation) between investment, saving, and stock-holding decisions, within a Keynesian framework characterized by the presence of fundamental uncertainty. While Vicarelli’s interpretation of Keynes is best understood in the context of the post-Keynesian literature, its relevance goes beyond that, as its sheds light on current issues related to the post-2008 financial crisis and its policy implications.     

Economic growth,industrialization, and the environment

In this paper, I argue the compositional shift from agricultural to industrial production – industrialization – is a central determinant of changes in environmental quality as economies develop. I develop a simple two-sector model of neoclassical growth and the environment in a small open economy to examine how industrialization affects the environment. The model is estimated using sulfur emissions data for 157 countries over the period 1970–2000. The results show the process of industrialization is a significant determinant of observed changes in emissions: a 1% increase in industry's share of total output is associated with an 11.8% increase in the level of emissions per capita.     

Vacancies, unemployment, and the Phillips curve

The canonical new Keynesian Phillips curve has become a standard component of models designed for monetary policy analysis. However, in the basic new Keynesian model, there is no unemployment, all variation in labor input occurs along the intensive hours margin, and the driving variable for inflation depends on workers’ marginal rates of substitution between leisure and consumption. In this paper, we incorporate a theory of unemployment into the new Keynesian theory of inflation and empirically test its implications for inflation dynamics. We show how a traditional Phillips curve linking inflation and unemployment can be derived and how the elasticity of inflation with respect to unemployment depends on structural characteristics of the labor market such as the matching technology that pairs vacancies with unemployed workers. We estimate on US data the Phillips curve generated by the model. While we can reject the baseline new Keynesian Phillips curve in favor of the search-frictions specification, we show it is still too stylized to fully describe the dynamics of firms’ marginal costs.     

Winners, Losers, and the Nuclear-Waste Dilemma

This paper explores how property-right assignment affects social efficiency when a public program has both “public good” and “public bad” components. We show that when willingness to accept a public bad exceeds the willingness to pay, the net benefit is unambiguously lower when the property right supports the status quo institutional structure. Thus, Kaldor–Hicks efficiency tests tend to favor public programs and mitigation over the status quo even when mitigation negatively affects another group. To illustrate the result, we develop social-cost estimates for moving nuclear waste from current temporary-storage facilities to a permanent central repository at Yucca Mountain, NV, USA. For a representative city with a population of 226,195, the present value of the external cost of shipping waste is $1.42 billion when those living near temporary nuclear-waste storage facilities are assigned the property right to “health and safety.” That number swells to $5.95 billion when those living near the transport route are assigned the property right. Thus, property-right assignment affects the efficient level of nuclear-waste, and thus nuclear energy, produced.     

Pluralism,the Lucas Critique,and the Integration of Macroeconomics and Microeconomics

Mainstream macroeconomics has pursued ‘micro founded’ models based on the explicit optimization by representative agents. The result has been a long and wasteful detour. But elements of the Lucas critique are relevant, also for heterodox economists. Challenging common heterodox views on microeconomics and formalization, this paper argues that (i) economic models should not be based purely on empirically observed regularities, (ii) heterodox economists must be able to tell an integrated story about goal-oriented micro behavior in a specific macro environment, and (iii) relatively simple analytical models have an essential role to play.     

Learning,expectations, and the cobweb model

Conclusions The conclusions which may be drawn from this essay are modest, but they merit reiteration. There are two basic modifications of the simple cobweb model which appear to be useful. On the one hand, the learning-behavior hypothesis serves as a stabilizer. On the other, unilateral coupling provides a method of maintaining fluctuations in an otherwise stable model. When the two are combined, one obtains a modified cobweb which may be both a more useful empirical, and a more suggestive theoretical, model of individual markets. On these grounds, it seems reasonable to suggest that the cobweb may see thirty more years of useful service.With 6 Figures