Imbrication of Representations: Risk and Digital Technologies*

abstract Though emerging from different venues and backgrounds, risk management and digital applications are both based on sophisticated techniques of representation. This paper tracks the multiple overlappings and convergence between these two streams of representations. Initially digital technologies play a background role, as a tool to execute the algorithms of risk calculus. Then, they are useful in managing surveys and data analysis for those areas where risk management needs to store data on, for example, accidents. With the extension of markets for trading risk, computers and networks (or Information and Communication Technologies, ICT) become the tools of choice to allow the efficient functioning of industries like insurance. In other industries, like banking, where ‘the business’ is a vast archipelago of applications running on systems and networks, it is apparent that these integrated systems are inherently exposed to risk. Hence, these humble tools become both the infrastructure of the risk industry, and also the source of new, often incalculable risks; they move from a clear‐cut subordinate relationship (as tool) to that of imbrication. Risk representations become more calculable and formalized, but this is obtained at the price of an incalculability of the risks of the infrastructure itself. The analysis of the multiple patterns of imbrication of representations between risk and digital technologies is applied to a range of empirical domains: from software engineering and information systems (the subservient infrastructure); to operational risk in banking; and finally to the future scenario of the democratization of finance, whereby Global Risk Information Databases (GRIDs), become gigantic machines to represent, compute, and trade all sorts of individual and social risks. ^[1] Overall, the paper seeks to characterize the multiple links between risk and digital technologies in organizations and draws in part on the phenomenology of representation and Heidegger's studies of Care and Concern and his later work on the essence of modern technology.     

Insuring against the shortfall risk associated with real options

We would like to insure against the risk that a geometric Brownian motion, correlated with the price process of a certain traded asset, is in a set E at time T. In this paper it is shown that the best action one can take to insure against this risk is to buy a binary option on the traded asset. We give explicit formulas in the case that E is an infinite interval. The setting of all our investigations is the Black-Scholes model. Mathematics Subject Classification (2000): 91B28, 60J65, 62P05, 91B30, 62F03 Journal of Economic Literature Classification: G31     

Homogeneous semi-Markov reliability models for credit risk management*

Abstract The credit risk problem is one of the most important issues of modern financial mathematics. Fundamentally it consists in computing the default probability of a company going into debt. The problem can be studied by means of Markov transition models. The generalization of the transition models by means of homogeneous semi-Markov models is presented in this paper. The idea is to consider the credit risk problem as a reliability problem. In a semi-Markov environment it is possible to consider transition probabilities that change as a function of waiting time inside a state. The paper also shows how to apply semi-Markov reliability models in a credit risk environment. In the last section an example of the model is provided. Mathematics Subject Classification (2000): 60K15, 60K20, 90B25, 91B28 Journal of Economic Literature Classification: G21, G33     

Public–private partnership in Public Administration discipline: a literature review

Public–private partnerships (PPPs) have become popular tools to deliver infrastructure and public services around the world. As an innovative public procurement approach, PPPs have drawn considerable attention from academic circles. In order to enhance our knowledge of PPPs, the authors conducted a systematic literature review of articles published in international journals of the Public Administration (PA) discipline. Four main topics in this discipline are identified by means of social network analysis, including PPP concept, risk sharing amongst PPP participants, the drivers of PPP adoption, and PPP performance. Seven propositions about the four topics are summarized. Directions for future research are also considered.     

Herding versus Hotelling: Market Entry with Costly Information

Why do businesses such as fast‐food restaurants, coffee shops, and hotels cluster? In the classic analysis of Hotelling, firms cluster to attract consumers who have travel costs. We present an alternative model where firms cluster because one firm is free riding on another firm's information about market demand. One consequence of this free riding is that an informed firm might forego a market that it knows to be profitable. Furthermore, an uninformed firm might earn higher profits when research costs are high, because it can credibly commit to ignorance.     

Value-relevant Sociology: The Analysis of Subjects of Social Consequence, Including Implications for Human Well-being

Abstract . The need for sociology to become socially relevant is now being articulated by professional sociologists. While the doctrine that the discipline should be value-free allows sociologists to serve and promote the social values of others, a vital sociological endeavor requires more. Classic sociology was value-relevant. To be socially relevant, it is essential that the discipline become consciously value-relevant, not value-free. For sociology to distinguish important from unimportant social problems and actions requires judgments of relative social value. What social theory, what social policies, and why? Significant sociology analyzes the consequences of social structure, forces and change. This cannot be done in a value-free context, especially so for sociologists who are interested in matters of social policy.     

Auditor Independence and the Cost of Capital Before and After Sarbanes–Oxley: The Case of Newly Issued Public Debt

An important aim of the Sarbanes–Oxley Act (SOX) was to reduce the cost of capital by enhancing auditor independence. However, prior literature has argued that SOX has been ineffective in meeting this objective. We contribute to this debate by first providing evidence suggesting that auditor independence has increased following SOX. Though we posit an inverse relationship between auditor independence and cost of capital, it is an open question whether this relationship has become stronger or weaker following SOX. An examination of this relationship reveals that auditor independence is more strongly related to bond rating and bond yield premium in the post-SOX period relative to the period before SOX. This evidence suggests greater price sensitivity of corporate debt to the level of auditor independence following SOX. We also show that controlling for the effect of auditor independence and other factors, cost of debt decreased following SOX.     

INSURANCE BY GOVERNMENT OR AGAINST GOVERNMENT? OVERVIEW OF PUBLIC RISK MANAGEMENT POLICIES

In what contexts is it desirable that the government, rather than the private sector, takes on the role of an insurer and helps people reduce risks? Our discussion implies that while in a number of areas individuals benefit from well-designed insurance provided by their government, ill-designed public policies (for example existing pay-as-you-go pension systems) force individuals to insure against their government. It is further discussed how governments could improve their risk managing role in many areas by using income contingent loans, provided the country has high-quality institutions and governance. Such loans to artists, sportspeople, flood victims or collapsing financial institutions would replace the existing nonrepayable transfers, grants, subsidies and bailouts. Using a simple efficiency-equity-sustainability framework for comparing income contingent schemes with conventional public and private insurance policies, we document that this would enable governments to extend their insurance assistance to a greater number of people and institutions – in a way that is not only equitable but also efficient and fiscally sustainable.     

Dynamic prediction of mortality among patients in intensive care using the sequential organ failure assessment (SOFA) score: a joint competing risk survival and longitudinal modeling approach

In intensive care units (ICUs), besides routinely collected admission data, a daily monitoring of organ dysfunction using scoring systems such as the sequential organ failure assessment (SOFA) score has become practice. Such updated information is valuable in making accurate predictions of patients' survival. Few prediction models that incorporate this updated information have been reported. We used follow‐up data of ICU patients who either died or were discharged at the end of hospital stay, without censored cases. We propose a joint model comprising a linear mixed effects submodel for the development of longitudinal SOFA scores and a proportional subdistribution hazards submodel for death as end point with discharge as competing risk. The two parts are linked by shared latent terms. Because there was no censoring, it was straightforward to fit our joint model using available software. We compared predictive values, based on the Brier score and the area under the receiver operating characteristic curve, from our model with those obtained from an earlier modeling approach by Toma et al . [Journal of Biomedical Informatics 40, 649, (2007)] that relied on patterns discovered in the SOFA scores over a given period of time.     

Henry George and Europe: Ireland, the First Target of His Efforts to Spread His Doctrines Internationally, Disappointed Him

Abstract . Henry George made several crusading forays into the British Empire at the time of its zenith. But the first, to Ireland, proved a disappointment. George saw Ireland as an object lesson in the land question and at first It was uppermost in the minds of the 600,000 tenant farmers. But the 20,000 landlords agreed to an amelioration, and for decades, republicanism replaced land reform in Irish social history. George misread the temper of the times; he saw Ireland's political future better served by becoming a self-governing unit of a league of British nations. “Integration” was the trend of the times, the American social philosopher insisted. Ireland (with the exception of Ulster) became a dominion in 1921 but it withdrew from the British Commonwealth in 1949 to become a sovereign republic. George was not wholly wrong in emphasizing economics over politics. In 1955 Ireland, now Eire, entered the United Nations where it wielded influence all out of proportion to its resources and economic development became its over-riding issue.     

Monetary Targets and the World Economy: A Progress Report

The recent changes in the value of the dollar and the talk of an interest rate ‘war’ demonstrate again that the world finds it difficult to cope with rapid exchange rate movements. In some ways the experience - and the reactions to it - are similar to the events of 1978. As now, the world was in a recession (though on a milder scale) and there were fears that exchange rate problems would obstruct economic recovery. The main difference is that in 1978 it was the strength of the Deutschmark which caused concern whereas this time the problems are associated with the rise in the value of the dollar. In a Briefing Paper in Economic Outlook, February 1978, ‘Monetary Targets and the World Economy’ we suggested that the problem arose from inconsistencies between national monetary policies and exchange rate objectives. In general, countries dislike exchange rate changes - in either direction - and there were problems because countries would not accept the exchange rate consequences of their own or other countries' monetary policies. We estimated the required monetary policies for stable exchange rates and suggested specific national monetary targets for 1978 which would at least move the world economy towards consistent monetary policies. In this Economic Viewpoint we return to those ideas. We consider what happened in 1978 and we also revise the underlying monetary rules. More recent experience suggests that although there has been some progress towards the convergence of monetary policies there will continue to be trend changes in exchange rates. It is also clear that there will be short-term fluctuations around these trends. We believe that greater convergence of monetary policies would be desirable but failing that it is important that countries should avoid abrupt changes in monetary policy. It is also important that countries should become accustomed to exchange rate changes. They should direct monetary policy towards their objectives for inflation and should not be diverted from it by temporary or permanent changes in their exchange rates.     

From newsletter to academic journal: creating the European Accounting Review

This paper looks at the evolution of the European Accounting Review as the journal of the European Accounting Association. It provides an historical background to the launch of the journal in 1992, and traces how the European Accounting Review has developed to be a widely accepted academic journal in accounting. The journal tried at one and the same time, and managed with some success, to fulfil several different functions: to be an academic journal, a newsletter for the members and a place for debate on European accounting regulation. It seems that one of the main reasons that this was possible was the way EAR grew out of earlier initiatives by the EAA such as the Newsletter, the annual doctoral colloquium and the EIASM accounting workshops. The journal was thus a product of the development of a community of accounting researchers in Europe. In turn it began to play a constructive role in contributing to the further development of the accounting research community in Europe. During its first decade, the period on which our analysis concentrates, the European Accounting Review has acted to develop the idea of European accounting research in a research environment which has tended, at the international level, to be dominated by the Anglo-Saxon countries. EAR has tried to become a journal for European academics, and to be sensitive to European issues while being published in English. Being published in English, it thus directly competes for submissions and for readers in the global market for accountancy journals. In this way it has acted as one of the catalysts in the process of internationalization of the European academic accounting community. After the reform of 1999, the structure and aims of the journal are now more tightly focused on being a successful academic research journal, and less on playing a role as a forum for information and discussion. In this article we hope that we can contribute to celebrating the 25th anniversary of the EAA and reflect on EAR 's future role in a world where the focus in both research and practice in accounting is more and more at the ‘global’ level.     

Automobile insurance ratemaking in the presence of asymmetrical information

Automobile insurance is an example of a market where multi-period contracts are observed. This form of contract can be justified by asymmetrical information between the insurer and the insured. Insurers use risk classification together with bonus-malus systems. In this paper we show that the actual methodology for the integration of these two approaches can lead to inconsistencies. We develop a statistical model that adequately integrates risk classification and experience rating. For this purpose we present Poisson and negative binomial models with regression component in order to use all available information in the estimation of accident distribution. A bonus-malus system which integrates a priori and a posteriori information on an individual basis is proposed, and insurance premium tables are derived as a function of time, past accidents and the significant variables in the regression. Statistical results were obtained from a sample of 19,013 drivers.     

Why Regenerative Agriculture?

Regenerative agriculture is both an attitude and a suite of practices that restores and maintains soil health and fertility, supports biodiversity, protects watersheds, and improves ecological and economic resilience. It focuses on creating the conditions for life above and below ground and takes its cues from nature, which has a very long track record of successfully growing things. By re-carbonizing soils via photosynthesis and biology, particularly on degraded land, regenerative agriculture can also sequester increasing quantities of atmospheric carbon (CO₂) underground, making it a low-cost “shovel-ready” solution to climate change. Its multiple co-benefits, including the production of healthy, nutritious food, means it will be a critical component of our response to rising climate instability.     

Run length analysis of Shewhart charts applied to drifting processes under an integrative SPC/EPC model

Engineering Process Controllers (EPC) are frequently based on parametrized models. If process conditions change, the parameter estimates used by the controllers may become biased, and the quality characteristics will be affected. To detect such changes it is adequate to use Statistical Process Control (SPC) methods. The run length statistic is commonly used to describe the performance of an SPC chart. This paper develops approximations for the first two moments of the run length distribution of a one-sided Shewhart chart used to detect two types of process changes in a system that is regulated by a given EPC scheme: i) changes in the level parameter; ii) changes in the drift parameter. If the drift parameter shifts, it is further assumed that the form of the drift process changes from a linear trend under white noise (the in-control drift model) into a random walk with drift model. Two different approximations for the run length moments are presented and their accuracy is numerically analyzed. Received: August 1998     

Optimal risk rate in a functional inverse problem

In this note, we will consider the problem of recovering an unknown input function when the output function is observed in its entirety, blurred with functional error. An estimator is constructed whose risk converges at an optimal rate. In this functional model, convergence rates of order 1/n (n is the sample size) are possible, provided that the error distribution is sufficiently concentrated so as to compensate for the ill‐posedness of the inverse of the model operator.     

Projection properties of certain three level orthogonal arrays

Two orthogonal arrays based on 3 symbols are said to be isomorphic or combinatorially equivalent if one can be obtained from the other by a sequence of row permutations, column permutations and permutations of symbols in each column. Orthogonal arrays are used as screening designs to identify active main effects, after which the properties of the subdesign for estimating these effects and possibly their interactions become important. Such a subdesign is known as a ``projection design'. In this paper we have identified all the inequivalent projection designs of an OA(27,13,3,2), an OA(18,7,3,2) and an OA(36,13,3,2) into k=3,4 and 5 factors. It is shown that the generalized wordlength pattern criterion proposed by Ma and Fang [23] can distinguish between most, but not all, inequivalent classes. We propose an extension of the Es² criterion (which is commonly used for measuring efficiency of 2-level designs) to distinguish further between the non-isomorphic classes and to measure the efficiency of the designs in these classes. Some concepts on generalized resolution are also discussed.     

On Schumpeter, Services and Economic Change

Abstract . Joseph A. Schumpeter, the Austrian-American economist, worried about “Can capitalism survive” a generation ago, and so far it has. But his work poses these questions: How do growth and change take place in a free enterprise economy? Can his model for expansion through innovation and creative destruction through the competitive process be a basis for understanding present day industrial economies? He emphasized that capitalism was an evolutionary system and that the very need for newness or rejuventation should insure continual change in it. With respect to declining industries and firms the task of economics was to turn what might have been a rout into orderly retreat. And so he gave a limited blessing to certain monopoly practices deriving from a broader strategy, risk avoidance. Schumpeter's entrepreneurs have disappeared but innovative ability still is exercised, largely through issue-specific consulting services in the burgeoning service sector, services that foster stability as well as change     

Transition towards and of sustainability—Understanding sustainability as performative

Our purpose is to explore the concept of “sustainability” when understood from a performative perspective, i.e. as a concept that is filled with meaning across time. Drawing on a 10 year-long study of the digital footprint of Stockholm Royal Seaport, claimed to be northern Europe's largest sustainable urban development district, we show that “sustainability” emerged as the project became associated with particular places, projects, histories, and technologies. This means that “sustainability” was local in that it was situated in the particular spatial context of the project; temporal in that it was situated in a particular time; and political in that it expressed particular values and perspectives. The study contributes to explaining why “sustainability” remains—and always will remain—a contested concept, which is why sustainability transitions are complex. Consequently, we suggest that the transition towards sustainability always involves the transition of sustainability, something that needs to be acknowledged in order for a transition to actually become sustainable.     

A continuous double implementation of the constrained Walras equilibrium

We provide a continuous and feasible double implementation of the Walras equilibrium. In our game form the set of traders is partitioned intok subsets,k>-2, and for each member of the partition there is an (outside) auctioneer. Also, each agent announces a price-allocation pair so that all agents become price takers. The outcome allocation is defined as the feasible (and budget balanced) allocation which is closest to the aggregate announced allocation. No assumptions are made on the preferences of the traders.