The Evolution of the Social Contract

Two transitions in the evolution of the social contract are considered, the first from the dominance hierarchies of the great apes (used as a proxy for our prehuman ancestors) to the egalitarian political structure of non-sedentary hunter-gatherer bands, and the second, to the reintroduction of hierarchical institutions of governance, primarily a result of living in fixed settlements after the inception of agriculture. The first transition was a product of biological and cultural evolution, which brought about big brains, language, higher consciousness, and a lower rate of time preference that enabled early man to sustain an egalitarian social contract and thereby escape the domination that confronted his prehuman ancestors. The second transition was a product of cultural evolution alone. The high costs of enforcing the hunter-gatherer social contract caused it to break down and be replaced by hierarchy when the domestication of plants and animals gave rise to a sedentary existence and increased populations. However, it is shown that the very biological and cultural adaptations that made hunter-gatherer egalitarianism possible were a necessary foundation for the spontaneous creation of complex culture and the evolution of institutions that would once again eventually make freedom possible and economic prosperity possible.     

Temporary controls on capital inflows

During the past decade a number of countries imposed capital controls that had two distinguishing features: they were asymmetric, in that they were designed principally to discourage capital inflows, and they were temporary. This paper studies formally the consequences of these policies, calibrates their potential effectiveness, and assesses their welfare implications in an environment in which the level of capital inflows can be sub-optimal. In addition, motivated by the fact that these types of controls have often been left in place after the dissipation of the shock that lead to the controls being implemented, the paper evaluates the welfare cost of procrastination in removing these types of controls.     

Shopping from a List: International Studies of Consumer Online Experiences

In response to the growth of online shopping, consumer groups from around the world participated in two mystery shopping exercises. These exercises, conducted during the Christmas holiday seasons of 1998 and 2000, involved buying a variety of products from web sites located both domestically and abroad. A number of serious problems were identified within the research, especially lack of disclosure of key consumer information and failures in delivering goods and refunding consumers when goods were returned. The research has been used by consumer organizations to enhance consumer education and to lobby governmental and self-regulatory bodies for greater consumer protection in the online environment.     

A Study of Arbitrage Efficiency Between the FTSE‐100 Index Futures and Options Contracts

Despite the importance of the London markets and the significance of the relationship for market makers, little published research is available on arbitrage between the FTSE‐100 Index futures and the FTSE‐100 European index options contracts. This study uses the put–call–futures parity condition to throw light on the relationship between options and futures written against the FTSE Index. The arbitrage methodology adopted in this study avoids many of the problems that have affected prior research on the relationship between options or futures prices and the underlying index. The problems that arise from nonsynchroneity between options and futures prices are reduced by the matching of options and futures prices within narrow time intervals with time‐stamped transaction data. This study allows for realistic trading and market‐impact costs. The feasibility of strategies such as execute‐and‐hold and early unwinding is examined with both ex‐post and ex‐ante simulation tests that take into consideration possible execution time lags for the arbitrage trade. This study reveals that the occurrence of matched put–call–futures trios exhibits a U‐shaped intraday pattern with a concentration at both open and close, although the magnitude of observed mispricings has no discernible intraday pattern. Ex‐post arbitrage profits for traders facing transaction costs are concentrated in at‐the‐money options. As in other major markets, despite important microstructure differences, opportunities are generally rapidly extinguished in less than 3 min. The results suggest that arbitrage opportunities for traders facing transaction costs are small in number and confirm the efficiency of trading on the London International Financial Futures and Options Exchange. © 2002 John Wiley & Sons, Inc. Jrl Fut Mark 22:31–58, 2002     

Measuring Market Orientation: Exploring a Market Oriented Approach

This paper demonstrates that applications of existing approaches to measuring market orientation are myopic, non-comparative and over-reliant on the views of single respondents. Consequently, a multi-perspective, multi-informant approach for measuring market orientation is generated which focuses on gauging customers', competitors' and intra-organizational members' perceptions of the market orientation of an organization. To evaluate the psychometric properties of this approach an application of this design in a survey of manufacturing industry is subjected to tests for inter-rater reliability, scale reliability, content validity, criterion-related validity and construct validity. The conclusion of this evaluation is that the developed measure is both a reliable and valid means of gauging market orientation. The paper concludes with a series of implications for both theorists and practitioners.     

Rural Population Growth, 1950–1990: The Roles of Human Capital, Industry Structure, and Government Policy

Human capital raises rural incomes, but this effect is swamped by higher returns to human capital in urban markets. This leads to "brain drain" from rural areas. Populations grow more rapidly in rural counties that have a diversified employment base. Farm population grows faster (or declines more slowly) in counties with relatively high farm income, and nonfarm populations grow faster in counties with relatively high nonfarm income. However, higher farm incomes lead to slower nonfarm population growth and vice versa. Rural county government services financed by local taxes or debt have neutral or negative effects on population growth.     

The Determinants of Stock Option Compensation: Evidence from Finland

A new, long, and rich panel data set consisting of all Finnish publicly traded firms is used to study how firm characteristics and stock market developments influence the adoption and targeting of stock option compensation. Stock option adoption is found to be a procyclical phenomenon. Findings from firm‐level econometric analysis often corroborate those based on U.S. data, but important differences also emerge. Findings include: (i) firms with higher market value per employee are more likely to use stock option compensation; (ii) share returns from the past year affect the adoption of targeted stock options, but not broad‐based plans; (iii) our results are consistent with the hypothesis that selective and broad‐based plans arise as solutions to differing monitoring difficulties. Broad‐based schemes are observed when production is human capital‐intensive and employee performance is hard to monitor, while selective schemes are adopted when ownership is dispersed and therefore owners may have weak incentives to monitor management.     

Exchange Rate Pass‐through and Currency Invoicing: Implications for Monetary Integration in East Asia

Exporter's price‐setting behaviour and currency invoicing play a key role in the literature on the new open‐economy macroeconomics. This paper estimates exchange rate pass‐through coefficients for the exports of four ASEAN countries: Indonesia, Malaysia, the Philippines and Thailand. In addition, previous estimates of pass‐through as well as invoicing behaviour in East Asia are discussed in the context of regional integration. The new pass‐through coefficients are estimated under two alternate specifications for up to 34 goods for each of the four ASEAN countries destined for up to 13 major markets. The results suggest: (a) little pass‐through is occurring in Southeast Asia and (b) this lack of pass‐through is more likely attributable to the fact that they are small countries in a relatively integrated market, rather than evidence of pricing to market. The implications for regional monetary integration of this apparently low degree of pass‐through are detailed.     

Revisiting the Roots of Japan's Economic Stagnation: The role of the Japanese corporation

For a long period in the 20th century, the development of the Japanese corporation appeared congruent with the development of the Japanese economy. The growth-maximising behaviour of the Japanese corporation and the preference for internal growth over acquisitions (see Odagiri, 1992) appeared to suit the long-term ambitions of Japan. Now, that formerly clear connection between the ambitions of corporate Japan and the Japanese public interest is no longer so clear. Increasingly, the global ambitions of the corporation appear as an impediment to Japan's economic development. By favouring the development of large-scale transnational corporations, Japanese industrial policy-making appears to have contained a fundamental flaw. Japan is now dominated by large-scale organisations with global ambitions, controlled by corporate elites. It is unlikely that their strategic decisions will correspond with the wider public interest, which raises the possibility that Japan is now afflicted with 'strategic failure'. Other examples from around the world suggest that Japan is not unique in this respect. Alternative ways forward are suggested.