Anatomy of a financial crisis

This paper provides an asymmetric information framework for understanding the nature of financial crises. It provides the following precise definition of a financial crisis: A financial crisis is a disruption to financial markets in which adverse selection and moral hazard problems become much worse, so that financial markets are unable to efficiently channel funds to those who have the most productive investment opportunities. As a result, a financial crisis can drive the economy away from an equilibrium with high output in which financial markets perform well to one in which output declines sharply. The asymmetric information framework explains the patterns in the data and many features of these crises which are otherwise hard to explain. It indicates that financial crises have effects over and above those resulting from bank panics and therefore provides a rationale for an expanded lender-of-last-resort role for the central bank in which the central bank uses the discount window to provide liquidity to sectors outside of the banking system.     

Feudalism as an economic system

This review essay discusses recent books on feudalism by Perry Anderson, John Critchley, Rodney Hilton, and Witold Kula. Its purpose is to provide an overview to a number of approaches toward the economic aspects of feudalism and to indicate promising directions in this field for comparative economists. To this end, four major questions are discussed: What is feudalism? How and why did the feudal economic system emerge? What are the short-term economic mechanisms within a feudal economy? And how and why did the feudal economic system decline?     

Profit rates and structural variables in French manufacturing industries

In this paper, the authors apply the theory of industrial organization to the French manufacturing sector. Profit rates of industries and firms are related to concentration on the product market, differentiation, economies of scale, absolute capital cost requirements and to firm sizes. The analysis suggest that concentration on the seller's side may lead to misallocation of resources in industries in which barriers to entry are high. They also suggest that large firms may be less efficient than smaller firms. These results call into question the industrial policy of the French government over the last ten years.     

An international perspective on land scattering

Statistical tests of a number of hypotheses concerning the degree of land scattering are carried out using a worldwide sample of 35 nations for the period around 1960. Such cross-national evidence provides some support for the proposition that scattering is brought about by production scheduling problems occurring with short growing seasons and the ensuing difficulties in obtaining nonfamily labor at critical periods without high transaction costs. Little support is obtained for other propositions linking scattering to risk, partible inheritance, striving for equality, or joint production. These empirical results have relevance for the debate about the economic forces underlying the West European common field system during the Middle Ages.     

The UK telecommunications monopoly: An independent view

The author assesses how much of the UK Post Office monopoly is ‘natural’, and how much is purely statutory and could be replaced by conditions of free and open competition. He also considers the historical reasons behind the PO's purely statutory monopolies, and the extent to which they remain desirable from the point of view of the public interest at a time of rapid technological change. Finally, he examines the implications for the health of the European computer, telecommunications and electronic industries of the growing divergence between European leased communications line costs and costs in North America.     

On the Opportunity Cost of Crop Diversification

Distance functions are increasingly being augmented, with environmental goods treated as conventional outputs. A common approach to evaluate the opportunity cost of providing an environmental good is the exploitation of the distance function's dual relationship to the value function. This implies that the opportunity cost is assumed to be non‐negative. This approach also requires a convex technology set. Focusing on crop diversification for a balanced sample of 44 cereal farms in the East of England for the years 2007–2013, this paper develops a novel opportunity cost measure that does not depend on these strong assumptions. We find that the opportunity cost of crop diversification is negative for most farms.     

Ethical Ideology and the Ethical Judgments of Marketing Professionals

The present study extends the study of individuals' ethical ideology withinthe context of marketing ethics issues. A national sample of marketing professionals participated. Respondents' ethical ideologies were classified as absolutists, situationists, exceptionists, or subjectivists using the Ethical Position Questionnaire (Forsyth, 1980). Respondents then answered questions about three ethically ambiguous situations common to marketing and sales. The results indicated that marketers' ethical judgments about the situations differed based on their ethical ideology, with absolutists rating the actions as most unethical. The findings are consistent with those of two earlier studies that utilized samples of business students (Barnett et al., 1994, 1995). The results suggest that personal moral philosophy is an important influence on ethical decision making that should be considered in empirical studies of business ethics. The results also support the utility of the Ethical Position Questionnaire (Forsyth, 1980) as a means for researchers and practitioners to assess individuals' ethical ideology.     

Education Subsidies, Social Security and Growth: The Implications of a Demographic Shock

We develop a three-period overlapping-generations model in which individual decisions about education are the engine of growth. In this setting, we investigate the normative role of education subsidies and old age pensions. Calibrating this model on empirical data, it is shown that the case for positive pension benefits is rather weak on the optimal path. An important part of education subsidies should be financed by lump-sum taxes on retirees. We also examine how these transfers should be adjusted in the presence of a baby boom-baby bust demographic shock. It turns out that an appropriate policy could be to increase education when the baby-boom generation is at work. Labor productivity will then be higher when aging peaks so that the pension bill can be financed without reducing welfare for the baby-bust generations.
JEL classification : O 41; J 24; E 62