Accounting for Ecosystems

Millennium Ecosystem Assessment documented the importance of ecosystem services. It is therefore important to include these services in the national system of economic accounts. This requires estimation of “accounting prices” for ecosystems, that is, the marginal value of a change in the size of the system. This raises a number of questions: What do we mean by the “size” of the system? What is the dynamics of the system? How do we quantify the impacts on services from a change in the size of the system and finally how do we value these impacts? We discuss these questions in a few examples of ecosystems, and valuation as such is not the major problem. The major problem is the lack of information of the appropriate dynamic model for most systems. We therefore suggest that economists and ecologists should set priorities on which ecosystems should be the first objects for study for these; we should test the possibilities of estimating the accounting prices.     

Changes in social welfare and sustainability: Theoretical issues and empirical evidence

We analyze the time derivative of a Ramsey-Koopmans social welfare function (R-K SWF), as an indicator of genuine investment and current change in social welfare (CSW) conditions, when feedback or arbitrary rules are used for selecting policy variables in non-optimizing economies. When policy variables are selected arbitrarily, their accounting prices should determine current CSW in addition to the accounting prices of the economy's assets and genuine investment should be adjusted accordingly. We use our theoretical framework to characterize CSW conditions for non-optimizing economies, based on direct estimation of accounting prices. We use our theoretical model to provide empirical evidence regarding the CSW conditions for the Greek economy.     

Sustainable energy prices and growth: Comparing macroeconomic and backcasting scenarios

How do results from the sustainability research world of backcasting relate to the macroeconomic scenarios used for policy evaluation and planning? The answer is that they don't, mostly — they come from different scientific traditions and are not used in the same contexts. Yet they often deal with the same issues. We believe that much can be gained by bringing the two systems of thinking together. This paper is a first attempt to do so, by making qualitative comparisons between different scenarios and highlighting benefits and limitations to each of them.Why are the pictures we get of the energy future so different if we use a macroeconomic model from when using a backcasting approach based on sustainable energy use? It is evident that the methods for producing those two kinds of scenarios differ a lot, but the main reason behind the different results are found in the starting points rather than in the methods. Baseline assumptions are quite different, as well as the interpretations and importance attached to signals about the future. In this paper, it is discussed how those two types of scenarios differ and how they approach issues such as energy prices and growth.The discussion is based on a comparison between Swedish economic and sustainability scenarios. The economic scenarios aim at being forecasts of the future and are used as decision support for long-term policies. But are the assumptions in the economic scenarios reasonable? The sustainability scenarios are explicitly normative backcasting scenarios. They do not take the issue of growth and consumption fully into account. Could they be developed in this respect? The comparison between the scenarios is also used to look closer at the issue of energy prices in a society with sustainable energy use. One of the questions raised is if a low energy society calls for high energy prices. Moreover, the effects of tradable permits versus energy taxes is analysed in the context of how energy use could be kept low in a growing economy.     

Exporters in cross‐section: Direct versus intermediated trade

How do producers that export their goods directly differ from those that export through trade intermediaries? We take a standard model of trade with heterogeneous firms and add heterogeneity in quality to the usual heterogeneity in productivity. Modeling trade intermediaries as increasing marginal costs but decreasing fixed costs of exporting, we find that only firms with the highest quality‐adjusted productivity levels choose to export directly. Under certain parameter restrictions, the model shows that direct exporters tend to be larger and charge higher prices for their goods. In contrast to the literature, using Chinese customs data, we confirm that direct exporters do charge higher prices for their goods.     

Issues in the Hidden Economy—A Survey*

This paper discusses a number of questions concerning the so-called hidden economy. What is the hidden economy? How big is it? Is it really growing? Does it matter? What should we do about it? The paper is not an exhaustive survey of the literature on the hidden economy. Its objective is more modest - namely to present an overview of the state of research, identify the major themes and issues and provide a framework for further work.     

A CONCEPT OF SATELLITE ACCOUNT IN THE REVISED SNA

Within the last two decades, national accountants wondered whether they were able to solve problems that in many respects were of the squaring the circle type: how could they embellish their representation of the economy without having their instrument grow heavier and less flexible? How could they elaborate synthetic frameworks in fields of collective concern that could both be specific and insure a dialogue with macroeconomics? How to keep consistent with the central framework and at the same time experiment with some freedom and flexibility. Satellite accounts are an answer to these questions. Much experience has been accumulated on satellite accounts in both national statistical offices and in international organisations. This paper provides a survey of this work. After an introduction (Part 1) devoted to stating the question, we try to propose a classification for the different types of satellite accounts (Part 2). Then we show their common characteristics (Part 3). However, this exercise would still remain abstract if we did not present samples of currently produced accounts. That is what we do in Part 4 with four examples. These examples have purposely been chosen in fields where many countries and international organizations have heavy investments, thus insuring the specific results will be obvious.     

基于可计算一般均衡模型的能源价格变动对新疆经济的影响

基于通用可计算一般均衡(CGE)平台,探讨了能源价格变动对新疆地区宏观经济的影响。模拟结果显示:(1)煤炭价格和天然气价格分别上涨10%以后,新疆地区的GDP、各部门的产出和居民消费变动不大,说明提高煤炭和天然气价格不会对新疆经济造成大的波动,未来新疆地区能源价格改革应从煤炭和天然气入手。(2)油价上涨10%后,新疆地区部门产出和居民消费变化较大,因此未来新疆地区在提高油价时应考虑社会稳定,避免产生大的经济波动。值得注意的是提高油价后,城乡收入差距缩小。总体来说提高油价所产生的影响是积极的。     

Accounting Price of an Exhaustible Resource: Response and Extensions

Wei (Environ Resour Econ 60:579–581, 2015) presents a novel derivation of the accounting price for an exhaustible resource in a non-optimal economy subject to an allocation mechanism. We show that Wei (2015) and Hamilton and Ruta (Environ Resour Econ 42:53–64, 2009) are in fact employing different and mutually exclusive allocation mechanisms for the economy, and this explains the differences between the respective accounting prices. Because accounting prices must be defined subject to the allocation mechanism for the economy, the prices derived in the two papers are equally valid within their respective allocation domains. Further analysis shows that if there is declining marginal product of factors, a ‘Hartwick investment rule’ for the model economy (set investment just equal to depletion, valued at the accounting price) will lead to declining consumption for the Wei (2015) accounting price, and increasing consumption for the Hamilton and Ruta (2009) accounting price. This result is extended to consider the accounting standards recommended in the UN SEEA (System of environmental-economic accounting 2012: central framework. United Nations, European Commission, Food and Agriculture Organization of the United Nations, International Monetary Fund, Organisation for Economic Co-operation and Development, World Bank, 2012), as well as accounting for environmental externalities from resource use.     

COMPTABILITE NATIONALE A PRIX CONSTANTS ET A PRODUCTIVITE CONSTANTE

The problem of national accounting “at constant prices” is in fact a problem of comparability of time series, as changes in the price structure preclude any direct comparison of economic flows. If such accounts are established they will make it possible directly to compare the same flow at two different times in the economy as a whole, and this without leaving the influence of other flows out of account. This makes it possible both to synthesize and to undertake analytical comparisons. The accounts could then be used for the study of time series, for projections or for structural studies (e.g. the mechanisms underlying the changing pattern of income distrubution). The first part of this report sets out to study the main problems of compiling accounts at constant prices and to examine what conventions should be adopted. The second part of the report considers how productivity gains can be explicitly shown in the national accounts. The proposed study plan restores the symmetry between price and productivity. As in the accounts at constant prices, gap variables are introduced to measure productivity gains. These variables can be interpreted in terms of surplus; the concept of surplus used here, however, is not the one adopted for the accounts in constant prices, but its dual. Setting up an accounting system “at constant productivity” therefore makes it possible to complete the information provided by an accounting system “at constant prices.” These two systems can of course be integrated: this leads to the introduction of the concept of an accounting system “at constant prices and constant productivity.” Such an accounting system makes it possible to show, in the same accounting framework, the respective contributions of price changes and improved productivity to the gains realised by the different economic agents. It therefore gives a complete picture of “transfers” between the agents. At the same time, the data on price and productivity can be integrated with each other.     

Policy distortions and aggregate productivity with heterogeneous establishments

We formulate a version of the growth model in which production is carried out by heterogeneous establishments and calibrate it to US data. In the context of this model we argue that differences in the allocation of resources across establishments that differ in productivity may be an important factor in accounting for cross-country differences in output per capita. In particular, we show that policies which create heterogeneity in the prices faced by individual producers can lead to sizeable decreases in output and measured total factor productivity (TFP) in the range of 30 to 50 percent. We show that these effects can result from policies that do not rely on aggregate capital accumulation or aggregate relative price differences. More generally, the model can be used to generate differences in capital accumulation, relative prices, and measured TFP.     

Are natural gas spot and futures prices predictable?

We answer two questions concerning natural gas spot and futures prices. The first is: Can natural gas futures prices predict natural gas spot prices? The second is: Are natural gas spot and futures prices weak form efficient or can they be predicted based on examination of historical data? To answer these questions, we use daily data for Henry Hub natural gas spot and futures prices. Our answer to the first question is that natural gas futures prices do not predict the magnitude of future natural gas spot prices any better than what would be predicted by a random walk model. This result has important implications for many financial analysts and policy institutions that have used commodity futures prices to predict movements in spot prices. The answer to the second question is that when we apply a unit root test that allows for heteroskedasticity and two structural breaks, natural gas spot and futures prices are predictable. We then simulate a contrarian trading strategy for spot and futures prices to show under what circumstances trading in spot and futures prices are also profitable. The results point to the need to accommodate heteroskedasticity when applying unit root tests to model energy spot and futures prices with high-frequency data, such as daily data.     

Diverse beliefs and time variability of risk premia

Why do risk premia vary over time? We examine this problem theoretically and empirically by studying the effect of market belief on risk premia. Individual belief is taken as a fundamental primitive state variable. Market belief is observable; it is central to the empirical evaluation and we show how to measure it. Our asset pricing model is familiar from the noisy REE literature but we adapt it to an economy with diverse beliefs. We derive equilibrium asset prices and implied risk premium. Our approach permits a closed form solution of prices; hence we trace the exact effect of market belief on the time variability of asset prices and risk premia. We test empirically the theoretical conclusions. Our main result is that, above the effect of business cycles on risk premia, fluctuations in market belief have significant independent effect on the time variability of risk premia. We study the premia on long positions in Federal Funds Futures, 3- and 6-month Treasury Bills (T-Bills). The annual mean risk premium on holding such assets for 1?C12?months is about 40?C60 basis points and we find that, on average, the component of market belief in the risk premium exceeds 50% of the mean. Since time variability of market belief is large, this component frequently exceeds 50% of the mean premium. This component is larger the shorter is the holding period of an asset and it dominates the premium for very short holding returns of less than 2?months. As to the structure of the premium we show that when the market holds abnormally favorable belief about the future payoff of an asset the market views the long position as less risky hence the risk premium on that asset declines. More generally, periods of market optimism (i.e. ??bull?? markets) are shown to be periods when the market risk premium is low while in periods of pessimism (i.e. ??bear?? markets) the market??s risk premium is high. Fluctuations in risk premia are thus inversely related to the degree of market optimism about future prospects of asset payoffs. This effect is strong and economically very significant.     

NATIONAL ACCOUNTING AS A PLANNING TOOL IN LESS DEVELOPED COUNTRIES: LESSONS OF EXPERIENCE

This paper is directed at the following question: How far is the national accounting system as developed in the industrially advanced countries and recommended by the United Nations applicable and useful to countries at an early stage of development? In order to examine the suitability of this tool, the nature of economic policy decisions and their dependence on macro-statistical constructs are analysed, the emphasis being on planning as actually undertaken in the field or going to be undertaken in the near future and not on planning activities as possibly ought to be attempted. The conclusion reached, based upon personal experience in Africa, the Caribbean area, Brazil and Venezuela, both as “producer” and “user” of data, is that planning is mainly limited to the public sector. Comprehensive plans, prepared with the assistance of foreign consultants, were generally forgotten soon after publication, the driving force behind those plans being external pressure by bilateral donors and international agencies and propaganda-prestige motives. Real over-all economic management or consistent medium term planning of the whole economy never appeared to be an important factor in the decision-making process, possibly because those concepts are far too abstract and do not have short-term impact. The role of national accounting should therefore be limited to the provision of a general framework and factual support for public sector planning activities. In practice the United Nations system has been found far too complicated and ambitious, not sufficiently development planning oriented, and not suitable to the limited statistical resources available in the developing countries. The paper recommends the publication of several detailed “case studies” in national accounting, hoping that those studies might help to identify types of accounting systems appropriate to different existing constellations. In the meantime a drastic scaling down of the United Nations system should be undertaken; we should try to equate demand and supply of relevant information. In the final part, the paper considers planning requirements (timetable and flexibility, information required for a general assessment of the economy, crucial role of the publicsector, relative precision), statistical requirements (resources, data available, priorities, international reporting) and decision-makers’requirements (compactness, simplicity, background information, wishes of external aid donors) and recommends, as an interim measure, a simplified system of national accounts consisting of eight main tables.     

On persistent disequilibrium

Consider a standard model of a Walrasian economy where the time derivative of price change is a sign preserving function of excess demand. The only steady states of such a system are the Walrasian equilibria. For if the system is not at a Walrasian equilibrium then there must be excess demands or supplies in some market and thus those prices must be changing. Walras' law implies that all prices cannot change in the same direction, and thus relative prices must change.However, it seems that in real world economies there have been states of persistent disequilibrium. How can this be? How can there be stationary states of an economy that are not Walrasian equilibria?The answer presented in this paper goes something like this: the demands actually presented to the market, i.e., the demands that affect price movements, are not the Walrasian demands. Rather, these demands, the effective demands, are a function of both price and quantity signals. There is no reason why there cannot be equilibria of the effective demand system that are not equilibria of the Walrasian demand system.In this paper, I present a simple abstract model of effective demand systems and given a condition for this system to have non-Walrasian equilibria. I also present a simple example of this phenomena. Finally I discuss the real world implications of this model. Related concepts of effective demand are discussed in [A1H], [2], [3], [L5], and [L6].     

If at First You Don't Succeed…: Profits,Prices, and Market Structure in a Model of Quality with Unknowable Consumer Heterogeneity*

Why are higher quality niches seen as intrinsically more profitable in business circles? Why do high quality products sometimes have a low real price, whereas it is unusual to see low quality products with high real prices? Can markets have quality differentiation as well as quality bunching? How does the rate at which fixed costs change with quality affect market structure? In this article we develop a new model of quality that casts light on such issues.     

The Credibility of the PRC Commitment to a Market Economy in Hong Kong: Hypotheses and Evidence

How credible is China's commitment to a market economy in Hong Kong after 1997? Events signaling changes in commitment and the movement of time closer to 1997 should reduce the relative prices of immobile assets if commitment is not fully credible. Several factors may offset these effects: anticipatory adaption, growing dependence on China-related trade, and Chinese investment in Hong Kong. Analysis of data on incorporation and investment decisions, the relative sensitivity of the stock prices of firms with different asset mobility to political events, and the market for office space most strongly support hypotheses about credibility, adaption, and demand augmentation.     

Non-parametric counterfactual analysis in dynamic general equilibrium

In this paper, we examine non-parametric restrictions on counterfactual analysis in a dynamic stochastic general equilibrium model. Under the assumption of time-separable expected utility and complete markets all equilibria in this model are stationary. The Arrow-Debreu prices uniquely reveal the probabilities and discount factor. The equilibrium correspondence, defined as the map from endowments to stationary (probability-free) state prices, is identical to the equilibrium correspondence in a standard Arrow-Debreu exchange economy with additively separable utility. We examine possible restriction on this correspondence and give necessary as well as sufficient conditions on profiles of individual endowments that ensure that associated equilibrium prices cannot be arbitrary. Although restrictions on possible price changes often exist, we show that results from a representative-agent economy usually do not carry over to a setting with heterogeneous agents.     

Cyberspace as a medium for terrorists

Given that terrorists are quickly acquiring technical skills that increase the utility of cyberspace to an effective distributed organizational network and the likelihood of potential attacks on U.S. critical infrastructure and defense systems, we consider the value of cyberspace to terrorists. To this end, it is necessary to address the following questions pertinent to the attributes of cyberspace to examine why and how terrorists may utilize cyberspace to advance their goals: (1) What is cyberterrorism? (2) Is cyberterrorism warfare? (3) Why would terrorists use cyberspace? (4) What do we know or anticipate that terrorists want to do in cyberspace? (5) How do we deal with terrorists in cyberspace? We conclude with an assessment of the cyberterrorism threat facing the U.S. today and recommendations that address increasing technical capabilities and security measures for intelligence gathering, digital control and supervisory control and data acquisition (DC/SCADA) systems, and emergency response systems.     

A general equilibrium analysis of the evolution of Canadian service productivity

Can the slowdown in total factor productivity (TFP) that we have experienced since the mid-seventies be ascribed to the increasing importance of services, or do we instead observe an improvement of productivity in the service sectors by way of learning-by-doing or specialization? We feel that such questions are best answered within a general equilibrium analysis of the whole economy, i.e. a structural view of the whole economy. We maximize the level of domestic consumption subject to commodity balances and endowment constraints. The Lagrange multipliers associated with the endowment constraints measure the marginal productivities of labor and capital. We declare these shadow prices to be the factor productivities. The main empirical contribution of this paper is a reexamination of the services paradox. In Canada, the sluggish productivity in services is limited to finance, insurance and real estate, and to business and personal services. Any attempt to resolve the services paradox may focus on these two sectors. Transportation, trade, and to a lesser extent communication are progressive sectors.