Rehabilitating the guilds: a reply

This article examines Epstein's attempt to rehabilitate pre-modern craft guilds by criticizing my German case study. It demonstrates that his criticisms are baseless and his assertions about European guilds unsupported. Long survival does not establish the efficiency or aggregate economic benefits of any institution. Contrary to rehabilitation views, craft guilds adversely affected quality, skills, and innovation. Guild rent-seeking imposed deadweight losses on the economy and generated no demonstrable positive externalities. Industry flourished where guilds decayed. Despite impairing efficiency, guilds persisted because they redistributed resources to powerful groups. The 'rehabilitation' view of guilds is theoretically contradictory and empirically untenable.     

The two sterling crises of 1964: a reply to Oliver

Oliver's Comment on my recent article challenges my argument that there were two sterling crises in the autumn of 1964. He argues that there was one only and that the Labour government mishandled it. Oliver has, however, reached these conclusions on the basis of a partial reading of the evidence and a failure to grasp how the changing international context imposed constraints on national economic sovereignty.     

Profit: The entrepreneurial view

Summary The economic developments leading to the actual profit squeeze are described. A marked decline is found in the share of other income (which includes capital income) and also in returns on capital employed in various manufacturing industries between 1954 and 1978. The minimum profit rate, defined as critical profitability, is analysed. For companies wishing to maintain a 50/50 ratio between own capital and loan capital, a critical profit rate of 13% for December 1979 was calculated. This figure is based on an earnings yield of 14.5% on share capital (price/earning ratio 6.9%) and an interest rate on government bonds of 9.3%. This profit rate is the minimal required to attract capital at the rates demanded by the investors. The present critical profit rate is much higher than the average return on capital employed as calculated in this article.The author is Chairman of the Managing Board of Bank Mees & Hope N.V., but wrote this article under his personal responsibility. He owes a debt of gratitude to Drs. P. A. Geljon, Head of the Economic and Securities Research Department of Bank Mees & Hope N.V. for his contribution to the preparation of this article. Any shortcomings remain of course for the author's own account.     

The frequency of wars: reply to Gleditsch and Pickering

We show that the frequency of bilateral militarized conflicts between independent states has indeed been rising steadily over the last century. We show that this finding is not driven by any selection bias in our data but a fact that needs to be explained. Finally we highlight our main contribution, namely that state formation and the capacity to fight are at the heart of the observed upward trend in conflicts.     

Process and product R&D by a multiproduct monopolist: a reply to Lin

With reference to Lambertini (2003), Lin correctly points outthat, if R&D efforts for process innovation are endogenous,then process and product R&D are strategic complements.Then, he also proves that the opposite holds when spilloversare nil. Objecting to Lin's second claim, I show that monopolyprofits are everywhere increasing in the extent of informationsharing within the firm. Consequently, the full internalisationof spillovers restores the complementarity between process R&Dand product proliferation.