Is There an Optimal Constitution?

The optimal constitution is one that protects people from politicians' thirst of power and preserves citizens' civic virtues. This paper presents a model that blends David Hume's (1741) consideration that in politics every man ought to be supposed a knave, with John Stuart Mill's (1861) conception of self-interested politicians. The optimal constitution is proved to be feasible. However, there are two possible equilibria, the Frey and Brennan-Buchanan equilibrium. It is shown that Bruno Frey's (1997) crowding-in and crowding-out analysis is a particular case of our model. In the Brennan-Buchanan equilibrium there is a long-run neutrality of enforcement on citizens' performance. In general, a trade-off is expected between the optimal number of laws and enforcement. The comparison between the equilibria shows that the Frey equilibrium is the best option to enhance the civic virtues of citizens, while the Brennan-Buchanan equilibrium is the best way to deter the ambitions of self-interested politicians.     

Reappraising Austrian Economics' Basic Tenets in the Light of Aristotelian Ideas

This paper sustains that reappraising Austrian economics in the light of Aristotelian ideas is not only possible but also fruitful. First, I draw a sketch of the essential features of Austrian economics. Next, I argue about the necessity for a thorough analysis of the notion of freedom, and I analyze Mises' conception. Next, I expose Aristotle's social, epistemological and economic thought related to Austrian main traits. An account of how the exercise of Aristotelian virtues may be synergic with economic coordination and a sketch of the consequences of the proposal on the teaching of economics are then provided. Finally, the conclusion shortly sums up the content and relevance of Aristotle's contribution.     

A system approach for measuring the euro area NAIRU

This paper addresses the issue of measuring the NAIRU for the euro area and assessing the robustness and precision of the obtained estimates. The empirical framework adopted is based on systems combining an Okun-type relationship between cyclical unemployment and the output gap with a Phillips curve and stochastic laws of motion for the NAIRU and potential output. Such systems have been estimated using Kalman-filter techniques. The results obtained point to an estimate of the area-wide NAIRU that is robust to changes in the underlying models. This robustness is shown to hold both in terms of the mean – i.e., the shape of the resulting NAIRU – and the variance of the process. The latter is derived through bootstrap exercises using the models alone or pooled together. The evidence found suggests that the increase in the aggregate NAIRU that took place in the early part of the sample period has come to a halt and may be about to be reversed.Jel classification: C11, C15, E31, E32The opinions expressed in this paper are those of the authors and do not necessarily reflect the views of the Institutions they belong to. The authors are grateful to Per Jansson for providing parts of the econometric RATS code and to Gonzalo Camba-Mendez and Frank Smets of the ECB for useful comments. Comments and recommendations by two anonimous referees are also gratefully acnowledged. All the remaining errors are the authors responsibility. All correspondence to Ricardo Mestre.First version received: January 2002/Final version received December 2002     

Formulating Hypotheses Graphically in Social Research

This article explores the proposition that the appropriate use of suitable forms of graphic communication can improve the formulation and presentation of hypotheses in quantitative social science research. The creative nature of scientific diagrams is discussed and the technological advances in computer graphic media are seen as part of a visual revolution which is markedly changing not only the way we see things but also the way we think and do things today. Brief historical views on the use of hypotheses and diagrammatic languages in science are given. The restricted use of graphic communication tools in social research academic documents is discussed and the importance of using well-designed data graphics in the production and transmission of scientific knowledge is highlighted. Hypotheses are conceptualised and their importance within social research is emphasised. A methodological approach for formulating hypotheses graphically is proposed based on the use of three types of language: notation, statement (ordinary language) and diagram. Some criteria are suggested for the selection of diagram type dependent on the related variables. Several examples are given covering the different models proposed.     

Income and religion: a heterogeneous panel data analysis

A recent empirical literature has addressed the relationship between income and religion, but most of the studies are based on microdata. Macroeconomic analysis of the issue has largely ignored the potential heterogeneity between countries. Using retrospective data on church attendance rates for a panel of countries between 1925 and 1990, we apply heterogeneous panel data estimators and reveal that the effect of participation in religious activities on income per capita is mostly non-significant. This is consistent with some of the recent research that casts doubt onto the influence of religion on income, once causality is taken into account.     

The use of Fx derivatives and the cost of capital: Evidence of Brazilian companies

Large corporations have been using derivative instruments as a tool to protect their indirect exposure, as FX risks. A sample with 47 non-financial Bovespa Listed Brazilian companies from 2004 and 2010 was used to test the hypothesis that use of derivatives as a risk management policy tool reduces companies' cost of capital. In contrast to other countries, results rejected this hypothesis, showing that in Brazil there is a positive relationship between using these tools and cost of capital. However, a more in-depth analysis based on the TACC model for a Brazilian company, this hypothesis was not rejected after the 2008 crisis.     

Social structures that promote change in a complex world: The complementary roles of strangers and acquaintances in innovation

In this paper we offer insights about the type of societies that are more likely to generate and promote innovation. In particular, we present results from a study of innovation through computational social simulations to focus on a structural aspect of societies: their degree of separation and how this social characteristic may be related to what, how and why new ideas and solutions can replace existing wide-spread practices in a society. We focus on the work of design practitioners and sustainable design as an example to illustrate these insights.     

Investment, credit, and endogenous cycles

This paper presents a general-equilibrium dynamic Ramsey-type model that can generate endogenous cycle. We assume two different representative agents, borrowers and lenders, and financial intermediaries with inside and outside money. We investigate under which conditions this model presents a cyclical relationship between capital and loans. The sources of endogenous fluctuations in this model come from a credit restriction in the representative-borrower problem.     

The connectivity of infrastructure networks and the urban space of São Paulo in the 1990s

This article explores the strategic importance of information systems for social control of networked services on urban and regional scales, and the nature of the information required for that purpose. The standard indicators of infrastructure coverage – by and large based on the number and encompassment of connections – no longer respond to the real conditions of supply and consumption. The technological and managerial innovations in flow control and dispatch, along with the effects of combined access to multi‐mode networks, render the evaluation of services’ connectivity considerably more complex than it used to be in the past. Private domination over the supply structure of these services tends to make the political struggle for equitability more dependent on the technical reliability of information than it could have been under the model of state supply. Networked services’ management has evolved to a more demand‐oriented structure, but this structure has so far reproduced the structural inequalities of Brazilian society in favor of powerful stakeholders, e.g. large consumers. The potential for more democratic control associated with this new balance between supply and demand in networked services can only evolve if more vulnerable social groups have access to sound technological and managerial information. To support this idea the article shows the importance of connectivity indicators in determining the effective access to networked utilities in the Metropolitan Area of São Paulo, in contrast to the traditional indicators of services’ coverage. Cet article explore l’importance stratégique des systémes d’information pour le contrôle social des services de réseaux au niveau urbain et régional, et la nature de l’information nécessaire pour cela. Les indicateurs habituels du niveau d’information sur l’infrastructure – généralement basés sur le nombre et la compréhension des relations – ne répondent plus aux conditions réelles de provision et de consommation. Les nouveautés de technologie et de gestion dans le contrôle du mouvement et dans les expéditions, ainsi que les effets de l’accés joint aux réseaux à modes multiples, rendent l’évaluation des liens entre les services beaucoup plus complexe que précédemment. La domination de la structure de provision de ces services par le domaine privé a tendance à rendre la lutte politique pour la justice plus dépendante de la fiabilité des informations qu’elle aurait pu l’? tre dans le modéle de provision par l’état. La gestion des services de réseaux a évolué vers une structure orientée vers la demande, mais jusqu’à présent cette structure a reproduit les inégalités structurelles de la société brésilienne qui favorise des détenteurs de pouvoir, par exemple les gros consommateurs. Les possibilités d’un contrôle plus démocratique associéà cet équilibre nouveau entre la provision et la demande dans les services de réseaux ne peut se développer que si les groupes sociaux les plus vulnérables ont accés à une information technologique et gestionnaire fiable. Pour soutenir cette opinion, l’article démontre l’importance des indicateurs de rapports pour déterminer des conditions d’accés efficaces aux entreprises de service de réseaux dans la région métropolitaine de Sao Paulo, au contraire des indicateurs traditionnels de l’information des services.