Can Anchoring and Loss Aversion Explain the Predictability of Housing Prices?

We offer an explanation of why changes in house price are predictable. We consider a housing market with loss‐averse sellers and anchoring buyers in a dynamic setting. We show that when both cognitive biases are present, changes in house prices are predicted by price dispersion and trade volume. Using a sample of housing transactions in Hong Kong from 1992 to 2006, we find that price dispersion and transaction volume are, indeed, powerful predictors of housing return. For both in and out of sample, the two variables predict as well as conventional predictors such as the real interest rate and real stock return.     

Party Politics and the Political Economy of Ghana’s Oil

Ghana’s status as a new oil producer raises questions about the developmental effects of resources, and the role of political institutions in these processes. The conundrum this paper addresses is the rather limited impact of oil exploitation in Ghana despite the country’s strong democratic record and internationally acclaimed oil governance legislation. The reasons for this lie in the nature of elite-based political coalitions and we root our analysis of Ghana’s hydrocarbons in the political settlements literature, which moves us beyond the ‘good governance’ approaches so often linked to ‘resource curse’ thinking. We also move beyond the instrumentalism of political settlements theory to examine the role political ideas play in shaping resource governance. We argue that inter-coalitional rivalry has generally undermined the benefits of Ghana’s oil but that a crude interests-based interpretation is insufficient to explain differences between these coalitions.     

The Tunisian Mise à Niveau Programme and the Political Economy of Reform

This article explores the homogenising pressures of globalisation and institutional change in the state-led model of capitalism, within the purview of the ‘varieties of capitalism’ literature. In light of the observation that the national political economies which are the exemplars of the state-led model have undergone a more fundamental change towards the liberal market model than the other non-liberal variant (namely, the coordinated market model), the article asks what systemic (structural-institutional) factors make the state-led model less resilient in the face of pressures for change. Focusing on corporate governance in South Korea as an illustrative case study, the article argues that the absence of the kind of institutional complementarity (that is, mutually reinforcing link) between the key capitalist sub-systems found in the coordinated market model can help to explain the profound, and even path-shifting, change in the state-led model.     

Jevons's Theory of Political Economy and the ‘Marginalist Revolution’ *

Very many statements have been made about the (non-)existence and characterisation of the ‘marginal revolution’ but it is urged here that detailed study of the relevant texts is far more valuable than the making of grand statements about such matters. In particular, a close reading of Jevons's Theory of Political Economyis proposed as an antidote to over-easy generalisation. Jevons by no means rejected all elements of classical theory. He did not propose a catallatic revolution; he attributed such an emphasis to earlier authors and himself stressed the role of production. It is shown that Jevons was very aware of the necessarily general equilibrium nature of his theory but that he was simply not able to cope with it satisfactorily; it is suggested that this explains, at least in part, his fluctuating and apparently inconsistent statements relating utility and labour to value. Jevons certainly attempted to sketch a complete marginal productivity theory of distribution, even if he was far from successful in providing one.     

Carbon Peaking,Carbon Neutrality and Green and Low-Carbon Development of China’s Economy

The successively proposed carbon peaking and carbon neutrality have not only set new goals for the green and low-carbon development of China’s economy, but also demonstrated China’s further determination and sense of responsibility for a greater contribution to address global climate change. Considering the importance of carbon peaking and carbon neutrality in the course of achieving the Second Centenary Goal (1949-2049), it is necessary for China to make scientific planning for the roadmap of carbon emission reduction, carbon peaking and carbon neutrality to ensure building a great modern socialist country under carbon constraints. More specifically, the optimization and realignment of energy structure, industrial structure, production and consumption structure, the rational planning of afforestation, and the vigorous development of global carbon emissions trading will be the core strategies for boosting green and low-carbon development of China’s economy.     

Market Inertia and the Introduction of Green Products: Can Strategic Effects Justify the Porter Hypothesis?

If, according to Porter’s hypothesis, a “greener” strategy is more profitable, why may its implementation need regulatory intervention? We present a repeated Cournot duopoly where the market may exhibit inertia towards the adoption of even cost-efficient environmental goods. With consumers recognizing that a product is green only with a time lag, if a firm unilaterally adopts the green product initially loses profit due to (a) increased costs (direct effect) and (b) reduced market share (strategic effect). By imposing simultaneous adoption, regulation eliminates (b), thus enhancing long-run profitability. Through a similar mechanism a government can increase its domestic firms’ international market share and profits by forcing them to simultaneously adopt the green product.     

To Shock or Not to Shock? Economics and Political Economy of Large-Scale Reforms

This paper studies the economics and political economy of optimal scale of reforms. The aim of the reform is to replace inefficient existing institutions by the more efficient new ones. The optimal scale of reform, in general, differs from a shock therapy that replaces the old institutions all at once. Furthermore, if agents in the economy are heterogeneous in terms of their subjective discount rates, the politically-determined reform speed may be lower in a democracy than in an economy with a benevolent dictator.     

The China＇s Mode Reform Process of Market Economy System and the Level of Marketization

During the new epoch of reform, the discussion and practice launched by the government and the Communist Party of China （CPC） has experienced 4 stages. Since 1992, China has entrenched formally establishing the Socialist Market Economy System, which is a so-called China＇s Mode development way led by the Deng Xiaoping＇s theory. This paper tries to set up an index system to evaluate the development level of China＇s market economy from 1992 to 2001.     

Do Price Barriers Exist in the European Carbon Market?

It is generally thought that psychological prices in markets primarily traded by professional participants should play a limited role. The authors investigate the existence of key reference points in the European Carbon Market, which can be considered as a market with highly qualified stakeholders. They document the presence of key levels and barrier bands around European Union Allowances (EUA) prices. It appears that traders tend to consider these price levels as resistances in upward movements and as supports in downward movements. Furthermore, the authors have observed that the existence of price barriers affects both return and volume dynamics. Therefore, the results indicate that there exist certain EUA prices that do, in fact, modify the behavior of European Carbon Market participants.     

Stanfield’s Concepts of Social and Political Economy: Introduction to the Special Issue

This paper examines the contributions of James Ronald Stanfield to social and political economy. We start the analysis with Stanfield’s contribution to institution building through his education of PhD students, building a graduate program in political economy, and through the associations of social and political economy. Then we go on to scrutinise his creative developments and applications of the notions of economic surplus and social reproduction. This is followed by his extensive work on Karl Polanyi and the disembedded economy. Finally we explore his path-breaking analysis of the great capitalist restoration, the nurturance gap and love. Stanfield was one of the greatest institutionalists and social economists of the last hundred years, and these four areas of energetic creativity are his prime achievements in the area.     

How Much Does the State of the Economy Influence the Popularity of Austrian Parties? An Empirical Investigation

We estimate popularity functions for the Austrian parties Austrian People’s Party (ÖVP), Social Democrats (SPÖ) and Austrian Freedom party (FPÖ) between 1987 and 2010 (using annual data) as well as vote functions for the same Austrian parties in the 86 election districts in the national elections in 1999, 2002, 2006 and 2008. In most cases we find a statistically significant and theoretically predicted influence of three economic variables, namely the unemployment rate, inflation rate and growth rate of income, on both popularity and voting behavior. However, this influence is not robust and shows a tendency to decline over time.     

Depoliticisation,the Management of Money and the Renewal of Social Democracy: New Labour's Keynesianism and the Political Economy of ‘Discretionary Constraint’

Pointing to its radical underpinnings in so-called ‘Open Marxism’ and its theory of the state (one that subsumes the state in the capital relation), this article critically scrutinises Peter Burnham's thesis of ‘depoliticisation’ as a dominant accumulation strategy and regime. The article identifies ambiguities around Burnham's depiction of New Labour in power as committed to depoliticisation. It addresses these by drawing a distinction between regime of accumulation and mode of regulation, characterising New Labour's political economy in terms of the latter as a form of depoliticised Keynesianism framed by ‘discretionary constraint’. Contra-Burnham, the article points to the continued efficacy of Keynesian and social democratic political agency in the context of a dialectic of depoliticisation and repoliticisation focused on the role and power of the state. This dialectic is symptomatic of the contested regulation of capitalism around the defence of the value of money, on the one hand, and its broader management and redistribution, on the other.     

Political transition and bank performance: How important was the Arab Spring?

Using data for 2000–2012, the article utilizes the natural experiment of the Arab Spring to examine its impact on the risk and returns of MENA banks. The analysis indicates that the Arab Spring lowered bank profitability by roughly 0.2% and raised bank risk by 0.4% points. As well, the evidence appears to suggest that there were no differential effect of the political conflict on the performance and stability of Islamic banks.     

An Exploration of the Greek Shadow Economy: Can Its Transfer into the Official Economy Provide Economic Relief Amid the Crisis?

We explore the determinants of the Greek shadow economy, its interaction with the official economy, and its relationship with corruption. In doing so, we undertake — for the first time — an interdisciplinary review of economic and political studies on the size and determinants of the shadow economy, tax evasion, undeclared work and, moreover, of their relation with corruption in Greece in order to reveal the extent and complexity of these phenomena. We estimate the size and determinants of the shadow economy via a multiple-indicators-multiple-causes (MIMIC) approach. Our findings indicate that the important determinants are factors related to macroeconomic conditions, such as unemployment and GDP growth, and institutional factors, such as tax morale and the rule of law. We also indicate that the shadow economy and corruption are complementary and that the official and the shadow economy substitute each other over the business cycle. An adoption of policy based on these findings would lead to a successful transfer of part of the shadow economy to the official economy, would boost government revenue, and would eventually lead the Greek economy out of the depression that emerged as a result of the sovereign debt crisis.     

How Can US Schools Desegregate After the End of Busing?

The end of busing of primary and secondary school students has been a major setback for integration of public schools in the USA. The purpose of this paper is not to offer an alternative to busing; regrettably, no obvious alternative stands out. Rather, it is to offer some social, legal and economic background to help the reader consider, and perhaps propose, realistic alternatives that would reduce both racial and economic segregation in our schools and society. The paper is divided into three sections. The first offers background information useful for better understanding and evaluating the end of busing and school resegregation. The second section focuses on an important parallel between racial and economic discrimination. The closing section introduces considerations important for anticipating reactions to, and the costs and benefits of, alternatives to busing for reintegrating schools, as well as several recommendations to which those considerations can be applied.

A Short‐Cut Method of Estimating Capital Stocks: When Can It be Used and How Well Does It Work?

Relatively few countries currently publish estimates of capital stocks because of the difficulty of applying the Perpetual Inventory Method. A short‐cut method which we term the Steady Growth Model (SGM) can produce plausible capital stock estimates provided certain conditions are met. Starting with a database covering 146 countries we conclude that the SGM can legitimately be used to calculate capital stocks for 53 of them. The 53 include equal numbers of high‐income and low‐income countries. The SGM requires only data on gross fixed capital formation for the base year, information about past growth rates of real GFCF, and assumptions about rates of depreciation. Despite its apparent simplicity, we show that our SGM stock estimates compare well with official stock estimates generated by the PIM. Other tests on capital–output ratios and capital‐stocks per head confirm the plausibility of stock estimates generated by SGM.     

Using Market Prices to Regulate the Costs of a Utility‘s Inputs

This paper analyzes the problem of determining allowable cost of a utilitys inputs when the price of these inputs may be highly volatile and when hedging and long-term contracting are the norm in the supply of these inputs. In such an environment, benchmarks based upon the observable market price of an input are natural regulatory mechanisms to consider. This paper studies such incentive-based regulation. The first section uses contingent claims analysis to investigate a representative contract currently in place. The analysis indicates that this regulation may impose an important monitoring role on the regulator in order to prevent the utility from taking extremely risky positions in fuel markets. Further investigation of benchmark-based regulation is undertaken in a principal-agent framework in which the utility has the dual role of choosing a fuel portfolio and undertaking expenditures to reduce fuel costs. In this setting, it is shown that benchmark-based compensation is, at best, ineffective. Within the same setting, contracts based upon cost sharing are studied and found to be superior at obtaining a tradeoff between risks and cost reduction.     

How Feasible is Carbon Sequestration in Korea? A Study on the Costs of Sequestering Carbon in Forest

In recent years, carbon sequestration has become a more attractive policy in Korea due to the increasing trend of marginal cropland and enhanced public awareness on adverse climate change phenomena. This study aims to calculate the unit costs of carbon sequestration programs through afforestation in Korea and examine the cost-effectiveness of programs. The basis of our simulation is an econometric land use share model, and province level of aggregated panel data are used for model estimation. Four scenarios are considered depending on whether the program includes the harvest and which tree species are planted. The approach of sequestration program is to pay the landowners to convert their lands to forest for a period of time in exchange of fixed annual payment in addition to tree establishment cost. Our results show that the unit cost varies from $122 to $486 per ton of carbon stored depending on the scenarios and payment levels. We found that the carbon sequestration can be a cost-effective mitigation policy in Korea although it is not the least cost option.     

Can the ECB be Truly Independent? Should It Be?

Most of the literature on the independence of the Central Bank assumes only one policy instrument is available: monetary policy. If we introduce fiscal policy as well, when preferences may differ among policy-makers, the situation is radically different. In this case fiscal policy will substantially weaken the impact of the Central Bank's actions, and may annihilate them altogether. The Stability Pact may then be a liability, instead of an asset, because it renders both policies impotent (even if credible). We examine whether there is any incentive to retain monetary policy independence; and whether accountability can and should be used to ensure fiscal and monetary policies support each other, rather than undermine each other.