The production economics of economics production

How is new economic knowledge produced over time? That depends on how the expertise of authors is managed within economic journals. Using data from 41 major economics journals spanning 21 years (1994–2014), we find that both the intensive margin (article length) and extensive margin (article number) of the discipline have been growing. In particular, the extensive margin has outgrown the intensive margin, such that each article produces absolutely more but relatively less knowledge. This pattern is highly consistent with a model of within‐journal specialization. As predicted by the model, the share of an individual article shrinks less in general interest journals and in more prestigious journals, where expertise is less substitutable across topics.     

The decentralization tradeoff for complementary spillovers

In this article, we examine how centralization and decentralization internalize positive spillovers of local public expenditures when a spill-in from foreign spending is not a substitute, but a complement to domestic spending. Specifically, we assume the production of two district-specific public goods out of two complementary district-specific inputs in a taste-symmetric two-district setting. We compare equilibria in non-cooperative decentralization and cooperative centralization for different spillovers, degrees of complementarity and cost-division rules, and control for the effects of strategic delegation and the feasibility of cross subsidies to the input in the foreign district. We find that centralization welfare-dominates decentralization in most institutional settings and for a wide range of parameters. Yet, we also identify conditions for decentralization to welfare-dominate centralization even in our setup where preferences are homogenous. The setup features three structural novelties: Strategic delegation improves provision and welfare in decentralization. In the absence of cross-district transfers, decentralized provision and welfare increase in spillovers. Welfare in centralization is generally non-monotonic in spillovers.     

The economics of markets and platforms

Advances in the study of both markets and platforms contribute to economics. Platforms are typically digital markets, although platforms can designate markets generally. So, the economics of markets and the economics of platforms are one and the same. Platforms show the critical role of intermediaries in endogenous price adjustment and market clearing. The platform model remedies problems with general equilibrium analysis by combining and extending the basic Walrasian and Marshalian market models. The analysis of platforms provides explanations for the bid–ask spread, including market power, search costs, matching costs, adverse selection, and moral hazard. The study of platforms demonstrates the importance of participation and coordination in the formation of markets. The discussion emphasizes that platforms have significant implications for the theory of the firm. The analysis further considers how platforms affect innovation and entrepreneurship.     

The interpenetration of politics and planning

This paper argues that judgement on the wider claims of systems planning should be suspended until a fuller evaluation has been completed. As part of this evaluation, it is argued that the relation between the activities of politics and of planning will remain ambivalent so long as the two concepts retain their elastic definitions. In this context this paper examines the British literature on systems planning and concludes that conflicts generated in the formulation of goals cannot be imploded, from the political arena into planning and resolved there through the application of deductive logic. It is argued that goal formulation needs to be reconceived as an activity where the deductive logic of systems planning and the interactive logic of politics interpenetrate and permeate each other. It is argued that neither is it desirable that deductive logic should dominate political activity, nor is it feasible that the interactive logic of politics should dominate the activity of planning.Interpenetration may be seen in the activity of representation, where although the represented are capable of acting, their representatives act for them (not instead of them) in other arenas. It is argued that ultimately, though politics is a logically prior activity and though planning is instrumental, they need to be conceived as interdependent but semi-autonomous activities, linked by the process of formulating desirable goals which are also feasible.     

Corruption, decentralization and yardstick competition

Several empirical studies have found a negative relationship between corruption and the decentralization of the powers to tax and spend. In this paper we explain this phenomenon using a model of Yardstick Competition. Using data on federal corruption-related convictions in U.S. states, we also provide new evidence that points to the existence of a spatial autoregressive component to explaining corruption. We interpret this as consistent with the theoretical findings.     

Non-Walrasian decentralization of the core

We show that in large finite economies, core allocations can be approximately decentralized as Nash (rather than Walras) equilibrium. We argue that this exercise is an essential complement to asymptotic core equivalence results, because it implies that in some approximate sense individual attempts to manipulate the decentralizing prices cannot be beneficial, which fits precisely the interpretation of asymptotic core convergence, namely the emergence of price taking.     

The economics and ethics of Hurricane Katrina

How might free enterprise have dealt with Hurricane Katrina and her aftermath. This article probes this question at increasing levels of radicalization, starting with the privatization of several government “services” and ending with the privatization of all of them.     

The economics of retail firms

This paper identifies retail firms as an economic institution which delivers explicit products or services to consumer together with a variety of distribution services that determine the levels of distribution costs experienced by consumers in their purchase activities. The demand for the retailer's product is derived from a household production model in which the levels of distribution services provided by the retailer play the role of fixed inputs in the household's production functions. The supply of the retailer's product is derived from a joint cost function which is non-decreasing in the levels of distribution services provided. Profit-maximizing behavior in monopolistically competive markets shows that retail firms have special economic incentives to become complex organizations by integrating backwards, offering multiple explicit products and operating in more than one market. In addition, monopolistically competitive retail firms in long-run equilibrium will exhibit excess capacity, price dispersion and product choice in distribution services.     

University planning,decentralization and resource allocation

This paper proposes a system of resource allocation in universities which addresses both the problem of useful simulation of alternatives and efficient substitution of resources. It is the authors' view that the reasons why various university planning models proposed in the last few years have not been found useful in practice is that they take inadequate account of the decentralized nature of decisionmaking within universities. In this regard the three main points of the paper are: (1) university planning models should have flexible aggregation categories which can be determined and re-adjusted by the decisionmaker as he uses it; (2) resource constraints in university planning models should be flexible and negotiable, and negotiation over resources should be part of the analyst's domain of inquiry; (3) planning in universities must take into account the problem of introducing incentives which cause the behavior of individuals within the university to be directed to the needs of the institution's clienteles.     

Fiscal decentralization under free mobility

In this paper it is shown that, under the proper convexity assumption, any efficient allocation of an economy subdivided into locationally separated regions can be sustained by means of fiscal decentralization with profit maximizing local governments. For that to be true, however, a system of intergovernmental grants is needed. Without such grants, fiscal decentralization and Tiebout equilibria are closely related concepts. Since a Tiebout equilibrium generally fails to exist [Bewley (1981)], these grants play an important role not only for redistribution but, in the first place, to make fiscal decentralization a feasible allocation mechanism.     

Complementarity,fiscal decentralization and economic growth

Theories of the voluntary provision of public goods and development economics have clarified that complementarity in the production process is a crucial ingredient to understanding how alternative economic environments affect economic performance. This paper examines how the structures of intra- and inter-regional complementarity affect the relationship between economic growth and fiscal decentralization. We provide a theory that describes how fiscal decentralization affects economic growth under various structures of regional complementarity. Our empirical analysis, based on a panel data set of the fifty states of the United States over the period of 1992–1997, supports our theoretical specification of the production function. Also, we observe a hump-shaped relationship between fiscal decentralization and economic growth that is consistent with our theoretical result. Our analysis also shows that the optimal degree of fiscal decentralization conducive to economic growth is higher than the average of the data in some cases, and hence further decentralization is recommended for economic growth. The previous version of the paper was presented at the 59th Congress of the International Institute of Public Finance (University of Economics in Prague, Prague), the 2003 Fall Meeting of the Japanese Economic Association (Meiji University, Tokyo), the 60th Annual Meeting of the Japanese Institute of Public Finance (Kansai University, Osaka), and in seminars at Yokohama National University and the University of California, Irvine. The authors acknowledge the comments and discussions by people including Timothy Goodspeed, Kiyoshi Mitsui, Motohiro Sato, Etsuro Shioji, Tsunao Okumura, and Craig Parsons. We are also grateful for the comments by the Editor (Amihai Glazer) and two anonymous referees. The usual disclaimer applies. Nishimura acknowledges the financial support from JSPS (Japan Society for the Promotion of Science) Postdoctoral Fellowships for Research Abroad.     

The economics of public school closings

A community containing a fixed number of schools is assumed to close a school. A model is developed which traces the impact of the closing upon transportation costs, tax liability, quantity of education, and utility of the individuals residing in the city. The analysis suggests three explanatory variables that will affect a school closing decision by an optimizing school administrator. A test of the significance of these variables in predicting school closure decisions is conducted for the school district in Madison, Wisconsin.     

The welfare economics of city bigness

Money wages will vary among cities in an economy with perfect labor mobility, due to differences in costs of producing nontraded goods. Commuting costs contribute to making money wages higher in large cities. Increasing negative technological externalities, such as pollution and congestion, also make money wages higher in larger cities. Such externalities tend to make big cities too big, because marginal is greater than average externality. Internalizing the externalities would be likely to make a city larger if the externalities emanate from production of nontraded goods, but might make the city smaller if the externalities emanate from export production.     

The public economics of self control

This paper analyzes self-control problems in intertemporal consumption of a sin good where current consumption imposes a negative externality on one’s future selves due to the existence of present-biased preferences. We introduce the negative externality dubbed ‘internality’, which is augmented by the cumulative distribution function of the sum of previous consumption. We show that the shot-run self with self-control problem over consumes the sin good compared to that of the long-run self without present-biased preferences. Further, we investigate the effectiveness of self-bargaining with the presence of an external control devise as possible punishment. The short-run self faces three possible options: do nothing, accept the long-run self’s offer, or reject the offer. In the latter case an external control devices is implemented. It is shown that successful self-bargaining depends on the efficiency of the control device.

The economics of nonprofit organisations' governance

We determine theoretically when we can expect agency problems amenable to shirking agents to arise in nonprofit organisations and derive the conditions for governance measures to remedy these. Agents' private benefits of shirking need to be considered combined with the effect of their efforts on the probabilities of being successful in fundraising and production. If this effect is large, agency problems can more easily be avoided. Sufficient conditions for governance measures to reduce agency problems are derived. The empirical literature fits a number of the results derived and shows important gaps, especially w.r.t. the role of success probabilities.