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.     

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.     

Megatrends, the annual report, possibilities

The successful leader and manager have two very important challenges: to scan the horizon and not be thrown into crisis by not seeing predictable surprises, and to recognize the longer, more pervasive trends that are in the distant future. An annual autopsy of the past year and a review of the years ahead will not only fulfill the requirements for an annual report, but will be a learning experience for the team. When we are open to new ideas, lead by inviting dialogue rather than demanding, and openly trust, believe in, and inspire others, the organization will also adopt these values as its operating framework. Our annual plans will then be living documents that create the roadmap for excellence.     

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.     

The effects of the external debts of Mexico,Brazil, Argentina,Venezuela, and the Philippines on the United States

The external debts of developing countries have become a major issue recently, prompting debate among both academicians and policy markers. In this paper, the author describes the origins and history of debt problem, summarizes proposals for policies for creditor nations, and estimates the effects of debt-related austerity in five major debtor nations on US imports, exports, net exports, and output in 1985. He concludes that debt-related austerity was responsible for 11.0% of the US merchandise trade deficit in that year, caused decreases in US net trade in 40 to 61 non-service industries studied and decreases in output in 46 industries, and caused a decrease of 0.5% in GNP.

Neither a borrower nor a lender be;

For loan oft loses both itself and friend,

And borrowing dulls the edge of husbandry.

William Shakespeare (Hamlet, I. iii. 75)     

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.     

Corruption: The good,the bad,and the uncertain

This paper argues that the relationship between corruption and economic growth is dependent upon the uncertainty involved. Employing data on a cross‐section of countries, this paper uses an interaction between the frequency of bribery payments and the uncertainty regarding the delivery of the service in exchange for these bribes to show that corruption has a negative association with growth unless the uncertainty is minimal. Furthermore, the negative association becomes larger in magnitude with higher levels of uncertainty. At extremely high levels of uncertainty a relatively small increase in corruption, equivalent to moving from Sweden to the United States for example, is associated with economically large decreases in economic growth.     

Uncertainty,trust, and the regulation of the banking industry

This paper suggests that, in presence of uncertainty, individual choices are made on the basis of subjective evaluations, and the transmission of information is too expensive, so that the decision-making process must largely be based on other agents’ knowledge. Banks operate by developing a network of personal relationships, based on trust, that allows agents to make use of the subjective knowledge of others. The deregulation process of the financial industry of the 1990s was based on the principle that information disclosure would make the market for securities more efficient, increasing risk diversification, and making the financial system safer. Many innovative financial contracts, however, were not backed by trust and reputation mechanism as traditional banking activities. The shadow banking system emerging from these market-based transactions was thus much more risky and fragile than the traditional one, based on private information and unwritten rules of conduct.     

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.