Pigou on philosophy and religion

Abstract

This article discusses a group of essays on ethical issues written by Pigou between 1900 and 1908. It is argued that they contain the foundations of his economic philosophy. Pigou's research on the meaning and content of the good merged into his definition of welfare, and his interest in religion as a subjective experience resurfaced in the subjective framework of his economics. A methodological pragmatism informed his economics as well as his ethics; moreover, the endorsement of interpersonal comparisons of the good in the ethical texts was consistent with Pigou's adoption of utility comparisons in welfare economics. Pigou's philosophical pessimism was reflected in his analysis of the economic evils of society, eventually leading to his advocacy of governmental intervention to foster economic welfare. The article contends that Pigou's philosophy derived not only from Sidgwick, as commonly believed, but also from G.E. Moore's Principia Ethica.     

Stationarity without degeneracy in a model of commodity money

We develop a model of macroeconomic heterogeneity inspired by the Kiyotaki–Wright (J Polit Econ 97:924–954, 1989) formulation of commodity money, with the addition of linear utility and idiosyncratic shocks to savings. We consider two environments. In the benchmark case, the consumer in a meeting is chosen randomly. In the auctions case, the individual holding more money can be selected to be the consumer. We show that in both environments socially optimal trading decisions (that are individually acceptable) are stationary and solve a tractable static optimization problem. Savings decisions in the benchmark case are remarkably invariant to mean-preserving changes in the distribution of shocks. This result is overturned in the auctions case.     

Life cycle employment and fertility across institutional environments

In this paper, we formulate a dynamic utility maximization model of female labor force participation and fertility choices and estimate approximate decision rules using data on married women in Italy, Spain and France. The estimated decision rules indicate that first-order state dependence is the most important factor determining female labor supply behavior in all three countries. We also find that cross-country differences in state dependence effects are consistent with the order of country-level measures of labor market flexibility and child care availability. Counterfactual simulations of the model indicate that female employment rates in Italy and Spain could reach EU target levels were French social policies to be adopted in those countries.     

Sequential Markets: An Experimental Investigation of Clower's Dual-Decision Hypothesis

Countless experimental studies have shown that markets converge quickly and efficiently to the competitive outcome under many trading institutions, particularly the double auction mechanism. This creates difficulties for Keynesian stories of unemployment creation—which suggest a noncompetitive outcome in an essentially competitive world. Such stories were popular in the late 1960s and 1970s. One of these stories—the dual decision hypothesis of Clower—was seen then as the beginning of a story of unemployment. This article reports the results of an experiment designed to test this hypothesis. Specifically, we set up an experiment in which there are two sequential double-auction markets, in the first of which one good (labour) is traded, after which the second market (goods) is opened and the second good traded. We compare the outcome of our experiment with that of the competitive theory. One general finding is that not enough trade takes place in the two markets. In other words, the usual finding that competitive equilibrium is achieved in double-auction markets is not replicated in this sequential setting. This revised version was published online in August 2006 with corrections to the Cover Date.     

Structural VAR and financial networks: A minimum distance approach to spatial modeling

In this paper, I interpret a time series spatial model (T-SAR) as a constrained structural vector autoregressive (SVAR) model. Based on these restrictions, I propose a minimum distance approach to estimate the (row-standardized) network matrix and the overall network influence parameter of the T-SAR from the SVAR estimates. I also develop a Wald-type test to assess the distance between these two models. To implement the methodology, I discuss machine learning methods as one possible identification strategy of SVAR models. Finally, I illustrate the methodology through an application to volatility spillovers across major stock markets using daily realized volatility data for 2004–2018.     

CEO performance-based grants’ vesting provisions and debt contracts: Evidence from GAAP,Non-GAAP and KPI metrics

We examine the influence of CEOs’ equity and cash grants’ vesting provisions that are based on (i) accounting performance metrics prepared under US generally accepted principles (GAAP), (ii) non-GAAP performance metrics and (iii) key performance indicators (KPIs) on debt contracts. We find that grants with vesting provisions based on GAAP metrics and KPIs lead to a lower cost of debt, a lower likelihood of collateral requirements and less restrictive covenant terms. In contrast, performance-based grants with non-GAAP vesting provisions lead to a higher cost of debt, a higher likelihood of collateral requirements and more restrictive covenant terms. Supplementary analyses reveal that our results are incremental to other debtholder-friendly features in the CEO contracts, such as grants with debt-related performance measures and CEOs’ inside debt holdings, and robust to alternative variable definitions and specifications. Overall, our results suggest that debtholders understand the differing incentives associated with GAAP, non-GAAP and KPI-based performance measures, and incorporate these differences into debt contracts.     

Systemic liquidity contagion in the European interbank market

Systemic liquidity risk, defined by the International Monetary Fund as “the risk of simultaneous liquidity difficulties at multiple financial institutions,” is a key topic in financial stability studies and macroprudential policy-making. In this context, the complex web of interconnections of the interbank market plays the crucial role of allowing funding liquidity shortages to propagate between financial institutions. Here, we introduce a simple yet effective model of the interbank market in which liquidity shortages propagate through an epidemic-like contagion mechanism on the network of interbank loans. The model is defined by using aggregate balance sheet information of European banks, and it exploits country and bank-specific risk features to account for the heterogeneity of financial institutions. Moreover, in order to obtain the European-wide topology of the interbank network, we define a block reconstruction method based on the exchange flows between the various countries. We show that the proposed contagion model is able to estimate systemic liquidity risk across different years and countries. Results suggest that our effective contagion approach can be successfully used as a viable alternative to more realistic but complicated models, which not only require more specific balance sheet variables with high time resolution but also need assumptions on how banks respond to liquidity shocks.

     

Capturing Entrepreneurial Opportunities in the Romanian Equine Sector: an Fs-Qca Approach

The paper proposes an analysis of entrepreneurial intentions in the equine sector in Romania and the identification of the variables influencing economic growth in this field. The equine sector plays a strategic role in the development of durable, sustainable and social entrepreneurship. The combination of equine services can ensure a business's survival during a crisis, and businesses involving horses can be considered complex. The equine sector is constantly changing: it is affected by politics, the social environment and new competitors. Changing customer requirements make it a difficult area in which to develop a sustainable start-up ecosystem. The present study is important in drawing attention to the main impediments faced by Romanian entrepreneurs in the development of the equine sector, a sector which—because of the emotional and physical benefits that horses offer—has great potential. The horse industry needs true "enthusiastic entrepreneurs" who have the management knowledge and skills to make their business more professional and profitable. It was found that the firm's organisation method is an important factor in predicting business continuity, in achieving medium- and long-term objectives, and in ensuring business success.

     

Rethinking Accounting,Accountability, and Accounting Regulation: Concerns about the Proposed Canadian Sustainability Standards Board*

This paper expands on a letter recently submitted by a group of Canadian business academics to the Independent Review Committee on Standard Setting in Canada (IRCSSC) in response to the committee's proposed Canadian Sustainability Standards Board. We highlight sections of the IRCSSC's Consultation Paper that we find problematic and draw on accounting and other research to explain why it fails to live up to its potential. Chief among the problems we identify is that the IRCSSC appears to be wedded to the same narrow, investor-based focus promoted by the International Sustainability Standard Board. We also draw attention to the rushed nature of the process, its exclusion of lay experts, the IRCSSC's ambiguous use of the term public interest, and its inattention to alternative understandings of value and the environment (including the people within it). Finally, we problematize the IRCSSC's sidestepping of the issues of power, culture, and conflict; its neglect of monitoring and enforcement; and its surprising disregard of the Global Reporting Initiative. Along with a number of suggestions for improving the process and its outcome, this paper also contributes to ongoing debates on standard setting and the question of whether accounting is currently equipped to provide the necessary tools for sustainability reporting.