How We Invest

In this chapter from their new book, Climate of Hope: How Cities, Businesses, and Citizens Can Save the Planet, the founder of Bloomberg LP and former mayor of New York City collaborates with the former executive director of the Sierra Club in showing how the pursuit of profit by companies and their investors is playing an important role in the battle against global warming. Climate change is shown as posing a series of discrete, manageable challenges—such as accelerating the transition from fossil fuels to clean energy—that have spurred a search for solutions that promise to make our society healthier and stronger. National governments, the authors argue, are not the best places to create or carry out these solutions. Rather, it is the mayors, CEOs, entrepreneurs, activists, concerned citizens, and other local actors who have the strongest incentives as well as the power and means to win the battle against climate change—and in ways that have already begun to generate economic growth and improve public health. State governors and mayors of cities around the U.S., in red and blue states alike, have been responsible for much of this progress. Cities and states have negotiated contracts with local utilities to provide greater amounts of clean energy, and used combinations of public and private capital to fund rapid transit, waste‐water treatment, and other infrastructure programs. But an equally important if not larger role is now being played by business. Companies large and small, with the backing of a growing number of environmentally conscious but resolutely profit‐seeking investors, are finding ways to reduce waste and strengthen worker protection and morale throughout supply chains that are providing increasingly climatefriendly products and services. The authors' bottom line, then, is that preventing climate change will require more than goodwill and government regulation. It will take the profit motive, a force that that many environmentalists have long viewed with suspicion. While acknowledging the past efforts of socially responsible investment funds that have shown a willingness to sacrifice returns, the authors conclude that the enlightened self‐interest of value‐seeking investors may well prove more effective than the “beneficence” of social investors and philanthropists in producing investments of sufficient scale and practical efficacy to meet the challenges of global warming.     

Distinguishing Errors in Measurement from Errors in Optimization

Typical econometric production practices under duality ignore the source of disturbances. We show that, depending on the source, a different approach to estimation is required. The typical approach applies under errors in factor input measurement rather than errors in optimization. An approach to the identification of disturbance sources is suggested. We find credible evidence in U.S. agriculture of errors in optimization compared to errors of measurement, and thus reject the typical specification.     

The Market Structure–Performance Relationship in the International Insurance Sector

This article tests the applicability of the structure–conduct–performance (SCP) hypothesis in the international nonlife insurance marketplace. We employ a panel data regression methodology that includes 23 nations (developed and developing countries) over the time period of 1996 to 2003. The results reveal that the interaction of market liberalization and market concentration shares a complex relationship with market profitability. Our results show that the expectations associated with the SCP hypothesis are supported when the levels of liberalization are low. However, for markets that are highly liberalized the presence of foreign insurers significantly alters the dynamics of nonlife insurance markets.     

Foreign Share, Insurance Density, and Penetration: An Analysis of the International Life Insurance Market

Recent trends toward liberalization and deregulation have sparked significant interest in the topic of international insurers' participation in foreign markets. This research develops a profile of foreign national market characteristics that attract international life insurer participation and additionally, empirically assesses the value that international participation has to the host market. Characteristics that are found to be statistically significant with respect to international participation include high levels of trade liberalization and/or low insurer market share concentration, high levels of national wealth, and high levels of government expenditure on social security retirement benefits. With respect to the benefits such participation provides, we see that the presence of international life insurers share positive relationships with both life insurance consumption and the magnitude of the role life insurance plays within the broader national economy of those host markets.     

Inger L. Stole. Advertising on Trial: Consumer Activism and Corporate Public Relations in the 1930s

If advertising was on trial in the 1930s, as Inger Stole maintainsin her closely researched and vigorously argued study, so toowas the consumer movement that opposed it. Corporate interestsand their allies pursued advertising's critics and fought themon all fronts. Public relations specialists and lobbyists soughtto discredit opponents of commercial persuasion and to shapeconsumer legislation to fit business needs. Stole contends thatthe battle lines of     

Stock Market Reaction to the Appointment of Outside Directors

This paper examines the UK stock market's reaction to the appointment of outside (non‐executive) board members. Tests conducted using a sample of 714 appointments reported by EXTEL between 1 July, 1993 and 31 December, 1996, indicate a strong interaction between appointee characteristics and the magnitude of the agency problem: the share price reaction to outside director appointments is significantly more favourable when board ownership is low and the appointee possesses strong ex ante monitoring incentives. In contrast, the appointment of independent and manager‐affiliated outside directors does not appear to benefit shareholders on average, even in the presence of serious agency problems.