Does growing wealth influence hedge funds’ development? An empirical analysis

Alternative investments, such as hedge funds, have, in last years, become an integral part of the investment portfolios of the wealthy. The article’s goal is also to answer the following research question: Does the global wealth of the world have impact on the global value of the hedge funds’ assets? We also try to forecast the value of the hedge funds’ assets for the next years 2015–2017. The results from this study would also be valuable to investors and other stakeholders, such as the regulators and the creditors of the hedge funds.     

Wealth and sensibility. The historical outcome of better living conditions for all according to Adam Smith

In this paper, I argue that Smith's commercial society is characterised more by restraint of self-command than by restraint of emotions through self-command, as usually stated. According to Smith, the appropriate degree of self-command varies with historical circumstances: better living conditions for all favour relaxation of self-command and lead people to express their sentiments more freely. I thus highlight a crucial link in Smith's thought between variations in general economic conditions and variations in moral judgement on the expression of emotions, or, in other words, between The Theory of Moral Sentiments and the Wealth of Nations.     

An Economic Definition of the Middle Class

The concept of a middle class is prevalent in both common parlance and the social sciences; concern is frequently expressed that the middle class is shrinking, and politicians often position themselves as champions of the middle class. Yet the phrase “middle class” is extremely ambiguous; no consensus exists on either the upper bound or the lower bound separating the middle class from other classes. The present paper employs the government’s official poverty line as the demarcation between the poor and the middle class, and develops an equivalent distinction to separate the middle class from the wealthy. Based on the new definition, the paper provides some rough empirical estimates of the size of the American middle class over the 1989–2004 period.

Rethinking the Links between Human Relationships and Economic Efficiency Using Local Institutions: The Case of Two Emerging Economies

Emerging countries around the world have been growing fast over the last thirty years, with most of these countries basing their economic development on a state capitalism. Within these countries, there is a concentration of wealth in the hands of a few people. This fact confirms the analysis of Thorstein Veblen (1898 Veblen, Thorstein. “Why Is Economics Not an Evolutionary Sciences?” Quarterly Journal of Economics 12, 2 (1898): 373–397.[Crossref] , [Google Scholar]) who shows the gap that exists between the vested interest of the rich and the unmet needs of the poor. The world happiness report (Helliwell, Layard and Sachs 2016 Helliwell, John F., Richard Layard and Jeffrey Sachs, eds. World Happiness Report 2016. World Happiness, 2016. Available at http://worldhappiness.report/wp-content/uploads/sites/2/2016/03/HR-V1_web.pdf. Accessed December 1, 2016. [Google Scholar]) also shows for the emerging economies a gap between the world rank in economic growth and in wellbeing. I propose a new paradigm of development for two emerging economies, Brazil and South Africa, by putting human development in the center of economic development and by using different approaches in economics and psychology. My analysis links the theories of Carl Shapiro and Joseph E. Stiglitz regarding “efficiency wages” (1984 Shapiro, Carl and Joseph E. Stiglitz. “Equilibrium Unemployment as Worker Disciplines Devices.” American Economic Review 74, 3 (1984): 433–444.[Web of Science ®] , [Google Scholar]) with the complexity approach (Le Moigne 1995 Le Moigne, Jean-Louis. La modélisation des systèmes complexes. Paris, France: Dunod, 1995. [Google Scholar]). This approach combines the results of positive psychology (Kahneman 2011 Kahneman, Daniel. Thinking, Fast and Slow. London, UK: Penguin, 2011. [Google Scholar]) with the role of local institutions for improving the economic development of emerging economies (Deaton 2016 Deaton, Angus. La grande évasion: Santé, richesse et origine des inégalités. Paris, France: PUF, [2015] 2016. [Google Scholar]). In the first section of the article, I examine definitions of economic and human wealth. In the second section, I analyze the gaps that exist between the standard-of-living ranking and the wellbeing ranking for both Brazil and South Africa in order to present meso-happiness indexes linking the micro- and macro-levels of human wealth. In the last section, I analyze the way local institutions in Brazil and South Africa could create dynamic links for these countries’ efficient functioning in the world economy.     

Consumer Debt and the Measurement of Poverty and Inequality in the US∗

This paper argues that interest on consumer debt must be taken into account when measuring poverty and inequality. These interest payments cannot be used to support household living standards. This makes middle- and low-income households worse off. Recent increases in consumer debt means that this deterioration in living standards is not captured by conventional government statistics. Using the Survey of Consumer Finances, we make estimates of poverty and inequality that take into account rising interest payments on consumer debt and discuss some of the implications of these estimates.     

Inequality of Happiness in the U.S.: 1972–2010

It is well accepted that a country's GDP may not fully reflect its level of well‐being. In recent years, happiness has emerged as an alternative indicator of well‐being, and research has mainly focused on determining the level of happiness. While it is important to look at the level, the distribution of happiness is also a salient aspect in any evaluation of inequality. There has been a growing interest in the distribution of happiness, although the ordinal nature of the data makes the use of standard inequality measures problematic. Our paper contributes to the literature by exploring the distributions for the U.S. from 1972 to 2010. Based on new methods developed for ordinal data, we are able to overcome the problems associated with ordinality and obtain unambiguous rankings of happiness distributions. We also compute the level of happiness inequality using existing measures based on median centred approaches. Further, we decompose the median based inequality measures of happiness by gender, race, and region.     

An Economic Definition of the Middle Class

The concept of a middle class is prevalent in both common parlance and the social sciences; concern is frequently expressed that the middle class is shrinking, and politicians often position themselves as champions of the middle class. Yet the phrase “middle class” is extremely ambiguous; no consensus exists on either the upper bound or the lower bound separating the middle class from other classes. The present paper employs the government’s official poverty line as the demarcation between the poor and the middle class, and develops an equivalent distinction to separate the middle class from the wealthy. Based on the new definition, the paper provides some rough empirical estimates of the size of the American middle class over the 1989–2004 period.     

Inequality amongst the wealthiest and its link with economic growth

In this article, we correlate the key features of the distribution of wealth of the 500 wealthiest individuals in the Netherlands with economic growth and stock market returns for the period 1998 to 2009. We show that each year the distribution obeys a power law and that the key parameter measures the degree of inequality. Our main finding is that more inequality amongst the wealthiest is associated with higher economic growth.     

Intergenerational Wealth Mobility in France, 19th and 20th Century

This paper examines intergenerational wealth mobility between fathers and children in France between 1848 and 1960. Considering wealth mobility in the long run requires taking into account not only positional mobility (that is, how families move within a given distribution of wealth), but also structural mobility induced by changes in the distribution of wealth. Such changes are related to two structural phenomena: in the nineteenth century, the rising number of individuals leaving no estate at death and, after World War I, the decline in the number of the very rich who could live off their wealth. The paper studies the movements between these groups and estimates the intergenerational elasticity of wealth, taking into account the persistence at the bottom and at the top.     

Constructing Clinical Use: An Activity-Theoretical Perspective on Implementing New Technology

Abstract

The paper presents recent insights from the ongoing FORLEARN project, which aims to develop Foresight theory and practise by supporting the sharing of experience (‘mutual learning’) in Europe. Six functions of Foresight for policy-making are elaborated on:

• (1)?Informing policy: generating insights regarding the dynamics of change, future challenges and options, along with new ideas, and transmitting them to policymakers as an input to policy conceptualisation and design.

• (2)?Facilitating policy implementation: enhancing the capacity for change within a given policy field by building a common awareness of the current situation and future challenges, as well as new networks and visions among stakeholders.

• (3)?Embedding participation in policy-making: facilitating the participation of civil society in the policy-making process, thereby improving its transparency and legitimacy.

• (4)?Supporting policy definition: jointly translating outcomes from the collective process into specific options for policy definition and implementation.

• (5)?Reconfiguring the policy system: in a way that makes it more apt to address long-term challenges.

• (6)?Symbolic function: indicating to the public that policy is based on rational information.

The relationship between these functions and the tensions that can arise when a Foresight exercise attempts to address more than one function are discussed. Possible approaches for Foresight practice to better achieve the targeted impact on policy-making are outlined and emerging guidelines for improving Foresight practice are presented.     

Chinese economy in the new era

The “new era”, a term introduced by President Xi Jinping, may also be identified as the Xi era, during which China will be transformed from a moderately well‐off to a strong and wealthy nation. In the new era, the Chinese Government will deepen economic reform, widen economic opening and enhance the quality of economic growth. / Our projections show that by 2020, Chinese real GDP per capita, in 2017 prices, will exceed US$10,000, an economic development milestone. By 2031, Chinese real GDP will surpass US real GDP (US$29.4 trillion vs US$29.3 trillion), making China the largest economy in the world. However, Chinese real GDP per capita will still lag behind the US significantly, amounting to only one‐quarter of that of the United States. By 2050, Chinese real GDP will reach US$82.6 trillion, compared to US$51.4 trillion for the United States. However, in terms of real GDP per capita, China will still lag significantly behind, at US$53,000, slightly less than the current level of US real GDP per capita, compared to US$134,000 for the United States.     

MOVE MORE,GAIN LESS: EFFECT OF A RECREATIONAL TRAIL SYSTEM ON CHILDHOOD BMI

We investigate the effect of residential proximity to recreational trails on childhood body mass index (BMI). We find that children living within 0.5 miles of recreational trails have BMI z‐scores that are 0.0412 to 0.0507 standard deviations lower than those who do not live within 0.5 miles of trails. We also find that living nearby trails reduces the probability of becoming obese by 1.6 percentage points. The impact for BMI z‐score is larger for children qualifying for free or reduced‐price meals and for Hispanic children. These findings suggest that improving neighborhood amenities conducive to physical activity may help reduce disparities in childhood obesity. (JEL I10, R10)     

Child Schooling and Work Decisions in India: The Role of Household and Regional Gender Equity

Abstract

This paper tests three hypotheses about how mothers' autonomy in India affects their children's participation in school and the labor market. To do so it extends the concept of mothers' autonomy beyond the household to include the constraints imposed by the extent of gender equity in the regions in which these women live. This study began with the expectation that increased autonomy for Indian mothers living in heterosexual households would increase child schooling and decrease child work. However, the results are mixed, indicating that mother's autonomy can be reinforced or constrained by the environment. The paper concludes that mothers and fathers in India make different decisions for girls vis-à-vis boys and that the variables reflecting mothers' autonomy vary in their impact, so that mothers' level of education relative to fathers' is not often statistically significant, while mothers' increased contributions to household expenditure decrease the probability of schooling and girls' work.     

Men,Women, Money,and Morality: The Development of China's Sexual Economy

This paper focuses on men and women engaged in China's sexual economy, which is dominated by the exchange between wealthy and politically influential men and unmarried young women who trade their femininity and sexuality for material wealth and financial security from these men. Drawing on analyses of the popular 2009 television serial, Woju (Dwelling Narrowness), coupled with recent ethnographic studies, the paper shows how this sexual economy thrives in the increasingly competitive and commercial urban landscape of present-day China. The study then examines the impact of commodification and materialism on men and women. The paper places these gender dynamics within the context of socioeconomic changes during the last thirty years and investigates how gender inequality became assimilated into both official and popular discourses of Chinese life, thereby facilitating the ascendancy and power of the sexual economy.     

The breakdown of the IS–LM synthesis: implications for post-Keynesian economic theory

The monetarist and the new classical economics attack routed the IS–LM version of Keynesian theory and the large scale econometric models from the centre of macroeconomic research. However monetarism and the new classical economics were more successful as a critique of the IS–LM orthodoxy than as a basis for fruitful research and policy analysis.

Post-Keynesian economists also attack the IS–LM orthodoxy, mainly because it misspecified ‘… the economic society in which we actually live’. Post-Keynesians that emphasized financial and labour markets argued that properties of the real world economy made instability normal results ofmarket interactions.

The vacuum in main line theory that developed as the shortcomings of monetarism became evident led to a revival of interest in basic Keynesian propositions. This has spawned what is now labeled a new Keynesian economics. New Keynesian economists conform to the modeling standards set by the new classical rational expectations school but claim to get Keynesian results. To a degree these results are compatible with propositions of post-Keynesian economics.

It is suggested that a convergence between the new and the post-Keynesian economics can be expected, and the result is likely to be fruitful.     

Inequality,financialization, and economic decline

The objective of this article is to argue that the labor productivity slowdown experienced in recent years by several advanced countries can be explained, following a Kaldorian-Classical approach, by a weak gross domestic product (GDP) performance and by a decline in the wage share. Moreover, drawing inspiration from recent post Keynesian literature, the authors identify the ongoing worsening in income equality and the increase in the degree of financialization as other major explanatory factors of sluggish productivity. The article will provide a brief literature review concerning nonmainstream attempts to endogenize labor productivity, beginning from the famous Verdoorn-Kaldor law (Verdoorn, 1949 Verdoorn, P.J. “Fattori che Regolano lo Sviluppo della Produttività del Lavoro.” L’Industria, 1949, 1, March, 3–10. [Google Scholar]) and the Kaldor technical progress function (Kaldor, 1961 Kaldor, N. “Capital, Accumulation and Economic Growth.” In F.A. Lutz and D.C. Hague (eds.), The Theory of Capital. New York: St. Martin’s Press, 1961, 177–222.[Crossref] , [Google Scholar]) and including Sylos Labini’s productivity equation (Sylos Labini, 1984 Sylos Labini, P. The Forces of Economic Growth and Decline. Cambridge, MA: MIT Press, 1984. [Google Scholar], 1999 —. “The Employment Issues: Investment, Flexibility and the Competition of Developing Countries.” BNL Quarterly Review, 1999, 52 (10), 257–280. [Google Scholar]). The authors will then discuss how labor flexibility and shareholder value orientation, one of the main aspects of financialization, can negatively affect equality and labor productivity. Finally, they propose an extended version of the Sylos Labini’s equation, where productivity growth is claimed to depend positively on GDP rate of growth and the wage share, and negatively on income inequality and financialization. They submit to empirical scrutiny their extended productivity equation; the results of their estimations provide support to their theoretical argument.     

THE 2005 LAWRENCE R. KLEIN LECTURE: EMERGENT CLASS STRUCTURE*

This article presents a model of the emergent class structure, in which a society inhabited by inherently identical households may be endogenously split into the rich bourgeoisie and the poor proletariat. For some parameter values, the model has no steady state where all households remain equally wealthy. In this case, the model predicts emergent class structure or the rise of class societies. Even if every household starts with the same amount of wealth, the society will experience “symmetry‐breaking” and will be polarized into two classes in steady state, where the rich maintain a high level of wealth partly due to the presence of the poor, who have no choice but to work for the rich at a wage rate strictly lower than the “fair” value of labor. The nonexistence of the equal steady state means that a one‐shot redistribution of wealth would not be effective, as wealth inequality and the class structure would always reemerge. Thus, the class structure is an inevitable feature of capitalism. For other parameter values, on the other hand, the model has the unique steady state, which is characterized by perfect equality. In this case, the model predicts dissipating class structure or the fall of class societies. Even if the society starts with significant wealth inequality, labor demand by the rich employers pushes up the wage rate so much that workers will escape from the poverty and eventually catch up with the rich, eliminating wealth inequality and the class structure in the long run. In an extension, we introduce self‐employment, which not only provides the poor with an alternative to working for the rich, but also provides the rich with an alternative to investment that creates jobs. Due to this dual nature of self‐employment, the effects of self‐employment turn out to be quite subtle. Yet, within the present framework, it is possible to offer a complete characterization of the steady states even in the presence of self‐employment.     

The Theory of the Individual in Economics: Identity and Value

Fundamental to social provisioning is ensuring that community members have access to employment opportunities that pay living wages and sustain the environment. In a previous study, two of us (Underwood, Friesner and Cross 2014 Underwood, Daniel, Dan Friesner and Jason Cross. “Toward an Institutional Legitimation of Sustainability.” Journal of Economic Issues 48, 3 (2014): 870–885. [Google Scholar]) presented criteria for sustainable community economic development, a three-fold test to comparatively assess economic development policies: ecological holism, community centeredness, and institutional legitimacy. Applying this test generates an iterative, evolutionary process of economic development. Absent from these criteria is the concept of intention, as policy options are not “given,” but rather designed by self-interested groups to manipulate interpretations of these test criteria in advancement of their vested interests — outcomes which can be juxtaposed to the “interests of community.” Here, we integrate two additional principles: economic diversity and solidarity. Economic diversity emphasizes living wages in numerous industries to stabilize exogenous economic shocks. Solidarity, as a unit of socio-economic interdependence, stresses commonality of wellbeing within communities. Integrating solidarity and economic diversity into the criteria for sustainable community economic development improves policy design and outcomes that sustain the environment, while also providing living wage employment for community members.     

Financially Unstable Households

One of Hyman Minsky’s most important contributions is the Financial Instability Hypothesis (FIH), which explains why capitalist economies experience periods of optimism (booms) and pessimism (bust). At the beginning of a cycle, businesses take on more debt, but they are conservative, and the principal is easily paid back (a hedge position). As optimism grows, so does risk-taking and businesses take on more debt. At some point they can only afford to pay interest on that debt (speculative position). In the most extreme case, businesses take on so much debt that they can neither pay the principal nor make interest payments (Ponzi position). Minsky wrote about financial instability (e.g., 1975 Minsky, Hyman. 1975. John Maynard Keynes. New York: Columbia University Press.[Crossref] , [Google Scholar], 1982 Minsky, Hyman. 1982. Can “It” Happen Again?: Essays on Instability and Finance. Armonk, NY: M.E. Sharpe. [Google Scholar]) before U.S. households had taken on large levels of debt. Minsky focused on businesses since they were the debt drivers. Today household debt is at record levels, so it makes sense to understand how financially unstable U.S. households are and what this means for the economy. We begin the article by arguing that Minsky’s categories should be applied to households; then we operationalize them using the Federal Reserve’s Survey of Consumer Finances. This enables us to measure changes in household financial instability using a Minsky-inspired framework and draw some conclusions.     

α‐SERIAL MECHANISMS FOR THE PROVISION OF AN EXCLUDABLE PUBLIC GOOD

We present a new class of “α‐serial mechanisms” for the provision of an excludable public good. Those mechanisms have a similar structure to the serial mechanism, but may let the non‐consumers pay a positive cost. They inherit desirable properties such as anonymity, envy‐freeness, Maskin monotonicity, and population monotonicity from the serial mechanism. We calculate the “maximal efficiency loss” and “maximal manipulation” of α‐serial mechanisms and point out a trade‐off between these two properties.