The methodology of profit maximization: An Austrian alternative

Conclusion While the MR=MC profit-maximizing model that is used almost religiously by the economics profession has been challenged over the years, it still remains the dominant model to explain firm behavior. However, its popularity does not mean that the model accurately describes what actually occurs in firm decision making. Given that modern mainstream neoclassical economists have failed (through omission or commission) to examine their models through the lens of time, they have lost that component that presents accuracy and enrichment to their arguments. This paper has incorporated challenges to the dominant neoclassical model that were fashioned by Rothbard and, to a much lesser extent, Baumol. In examining the work of both economists, we conclude that the Rothbard model is more complete, as it factors time into the model, where Baumol’s does not, which renders it fatally incomplete. Both authors, however, make a solid point that if one is to analyze the workings of the firm in the real world, other models such as revenue maximization must be taken into account if we are to assume that firms attempt to maximize profits. To be sure, there is much work to be done in the creation of alternative theories of the firm. Klein and others have attempted to build upon the work of Mises and Rothbard to construct a theory of the firm that can stand up to intellectual scrutiny and explain the various aspects of the decision making process within the firm. We attempt through this paper to add to this alternative theoretical construct.     

A simple model of the theory of money prices

Conclusion The goal of this paper is not to present a comprehensive restatement of the theory of money prices as it developed in the Austrian tradition from Menger to Mises and Rothbard. Rather it is to formulate a heuristic device that facilitates a concise delineation of the theory’s main points and helps in illustrating a few of its major implications. This endeavor is crucial to disseminating the theory to a broader audience and stimulating further interest in refining and advancing it. editor of the Quarterly Journal of Austrian Economics     

A critique of mises’s theory of monopoly prices

Conclusion Built on Rothbardian insights, our attempt to show the peculiarities of Misesian monopoly theory results in a few conclusions. First of all, in Mises’s theory of monopoly two of the three conditions for the emergence of monopoly prices belong to different realms of scientific inquiry. On the one hand, Mises points out the idea of a counterfactual comparison between competitive price and monopoly price; on the other hand, he stresses the importance of an empirical method to discover monopoly prices. The latter, even if it describes a true statement about market conditions, i.e., the entrepreneurs do not know (beforehand) the market demand curve, does not help us to identify the monopoly price on market. Second, Mises erroneously founds his welfare arguments on value theory. His utilitarian endeavor to show that “consumers’ sovereignty” is infringed by monopolistic restriction of production does not succeed. He based his arguments on nonscientific interpersonal and intertemporal comparisons of utility. Third, Mises is not consistent in the use of a standard of comparison for “monopoly prices”: on the one hand, the market prices are not distinguishable from “monopoly prices”; on the other hand, the transfer of the discussion to the equilibrium framework does not help us either, as we try to explain real market phenomena. Thus, Mises’s attempts to incorporate the neoclassical concept of monopoly price into the framework of the market process, as depicted by Austrians, do not succeed. Our inquiry supports the largely shared opinion among Austrian economists that monopoly price (at least in its present definition) does not exist on the free market; it appears only, and is logically identifiable, as a result of a privilege given by the State.     

Deflation: When Austrians become interventionists

Conclusion The aforementioned six Austrian economists, especially Rothbard, refute most arguments that mainstream economists mention against deflation. To differing degrees they are much less deflation-phobic than the mainstream. Nevertheless, when it comes to deflation, they diverge very much and do not staunchly champion the free market. In contrast to their laissez-faire views on most other subjects, in order to fight deflation, they come up with an arsenal of state interventions, like government bailouts, redistribution of gold, amnesty and privileges for the banking system, government-planned monetary reforms, public works, credit expansion, and inflation. Curiously, with these interventions they want to prevent the liberating deflation, i.e., the free market reaction to an abstention of all government interventions into the monetary system, especially the fractional reserve banks’ privileges and amnesty. They fail to see that deflation is a fast, smooth, direct, and ethical way to a sound financial system.     

Aid-for-trade facilitation

‘Aid for Trade’ is an ongoing and high-profile discussion associated with the Doha negotiations of the World Trade Organization. It also relates to questions of how best to achieve the Millennium Development Goals. Questions remain, however, about whether foreign aid spent on trade facilitation increases trade flows of developing countries. Does it work differently from aid in general? Using detailed data on aid flows from the OECD, the analysis here estimates the relationship between specific types of aid and trade flows, both globally and of the aid recipients. The findings indicate that aid spent on promoting trade is positively associated with global trade. For most types of such aid-for-trade facilitation, it is relatively more strongly associated with recipient exports than their imports. In contrast ‘other’ types of aid are more strongly associated with recipient imports. Based on elasticities estimated over 16 years of trade and aid data for 40 donor countries and about 170 country trading pairs, our results suggest that a 1% increase in aid-for-trade facilitation (of about US220 million in 2008) correlates to about US 220 million in 2008) correlates to about US 290 million of additional exports from the aid receiving countries.     

Exports and Productivity Growth: First Evidence from a Continuous Treatment Approach

A recent survey of 54 micro-econometric studies reveals that exporting firms are more productive than non-exporters. However, previous empirical studies show that exporting does not necessarily improve productivity. One possible reason for this result is that most previous studies are restricted to analysing the relationship between a firm’s export status and the growth of its labour productivity, using the firms’ export status as a binary treatment variable and comparing the performance of exporting and non-exporting firms. In this paper, we apply the newly developed generalised propensity score (GPS) methodology that allows for continuous treatment, that is, different levels of the firms’ export activities. Using the GPS method and a large panel data set for German manufacturing firms, we estimate the relationship between a firm’s export-sales ratio and its labour productivity growth rate. We find that there is a causal effect of firms’ export activities on labour productivity growth. However, exporting improves labour productivity growth only within a sub-interval of the range of firms’ export-sales ratios. JEL no.  F14, F23, L60     

Cantor’s diagonal argument: An extension to the socialist calculation debate

Conclusion The standard view of the socialist calculation debate is that Mises and Hayek at best demonstrated the practical impossibility of socialist economy, but that the mathematical solution of economists such as Dickinson showed that “in principle” planners could achieve a rational use of resources without private ownership of the means of production. In the present paper I hoped to show that this view is incorrect, because (if seriously implemented) a socialist planning board would need to publish a list containing an uncountably infinite number of prices. As Cantor’s diagonal argument from set theory shows, it is demonstrably impossible to construct such a list. Therefore, socialist economy is truly impossible, in every sense of the word.     

农村土地权益流转的预期收益目标与社会补偿机制建设

加强农村土地权益流转的目的是要提高农民土地产权收益、实现城乡要素平等交换、促进城乡统筹一体化发展。虽然当下的农村土地权益流转要具有"实现社会保障"与"满足经济效益"双重预期收益目标,但是因土地权益流转分类的性质不同,预期收益目标各有侧重。我们要确保农村土地权益流转的相关预期收益目标的满足,除了让市场在土地资源配置中起决定性作用外,还必须全面构建由政府主导的农村土地流转社会补偿机制。通过市场之手和政府之手,以法治方式确保农村土地权益的充分流转和相关主体的利益维护。     

How Do Female Spouses’ Political Interests Affect Male Spouses’ Views About a Women’s Issue?

This paper explores how the degree of female spouses’ political interest affects male spouses’ views about women’s empowerment using individual level data in Japan. Controlling for unobserved area-specific fixed effects, results show that males are likely to consider women’s empowerment important if their spouses are interested in politics. This spouse effect is observed for conservative males but not for progressive-neutral males. Results were unchanged when the endogeneity bias caused by spouses’ political interests were controlled for. These findings suggest that female family members’ political interests and views play an important role in determining male views regarding women’s issues.     

Germany’s Stalling Economic Engine – How to Get it Running Again

Summary The German economy, once the powerhouse in Europe, is stalling. Unemployment has ratcheted upward since 1970, the social security systems can no longer be financed (even if the population were not ageing) and with an average annual GDP growth rate of 1.2 per cent since 1995, the economy almost stagnates. This paper analyses and suggests solutions to Germany’s three main challenges. To undo the adverse incentives with respect to unemployment, the institutional design for wage formation should be decentralized, the reservation wage adjusted and the tax on labour reduced. To make the social security systems sustainable, the level of social absorption has to be lowered. And, finally, to achieve a more dynamic economy, new stimuli for growth have to be unleashed, including human capital formation and innovation, which are vital for the knowledge society. The role of government has to be rethought and the German social market economy redefined. Jelle Zijlstra Professorial Fellow at the Netherlands Institute for Advanced Study during September 2004–January 2005, Agip Professor in International Economics at Johns Hopkins in Bologna and President-Emeritus, Kiel Institute of World Economics. The paper is a revised version of the Jelle Zijlstra Lecture, held on January 13, 2005 at the Free University of Amsterdam.     

论行业组织内部行政行为可诉性

现代行业组织是经济领域中解决"政府失灵"与"市场失灵"的一项必然选择。宪政的宗旨和目的是保障人权,任何组织和个人都不得有超越宪法和法律的特权,各种行政行为,包括内部行政行为都不能侵犯公民权益。     

Stand der strategischen Planung in kleinen und mittleren Unternehmen (KMU) in der BRD

Zusammenfassung  Verfolgt man heute die Berichterstattung zum Thema strategische Unternehmensplanung in den Medien wie auch in der ?ffentlichen und wissenschaftlichen Diskussion, so wird zumeist über Gro?unternehmen berichtet. Auch im Fokus der betriebswirtschaftlichen Forschung im deutschsprachigen Raum nimmt die Erforschung strategischer Unternehmensplanung in Gro?unternehmen breiten Raum ein. Andererseits werden Fragen der Strategiefindung und -entwicklung kleiner und mittlerer Unternehmen bisher nur wenig beleuchtet, obwohl kleine und mittlere Unternehmen einen wichtigen Wirtschaftsfaktor in der BRD wie auch in Europa bilden. Dieser Sektor gewinnt auch in der betriebswirtschaftlichen Forschung zunehmend an Bedeutung. Im vorliegenden Beitrag wird auf Basis einer empirischen Untersuchung der aktuelle Entwicklungsstand und die Entwicklungstendenzen der strategischen Planung kleiner und mittlerer Unternehmen in der BRD beschrieben sowie relevante Unterschiede zwischen kleinen und gro?en KMU’s sowie inhabergeführten und nicht-inhabergeführten KMU’s analysiert. Nicht zuletzt ist es Ziel der vorliegenden Studie, Anhaltspunkte zur Verbesserung der strategischen Planungsqualit?t in KMU’s zu generieren.

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Summary  Analysing the coverage of the topic of strategic planning in the media as well as in the public opinion, most of the reports refer to the planning behaviour of large entities. The same is true for scientific research in German speaking countries. On the other hand research on the process of strategy development and the strategic planning behaviour of SME’s are widely neglected by current research although small and medium sized companies are representing a powerful force in German and European economy. Even in scientific research this sector gains an increasing importance. Based on the an empirical investigation the presented paper describes the current status of strategic planning procedures in SME’s in Germany and it concentrates on the differences between smaller and larger SME’s as well as the impact of different forms of ownership on their strategic planning behaviour. Last but not least the paper provides an informative basis for improvements in strategic planning in small and medium sizes companies.

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Prof. Dr. Klaus Deimel lehrt seit 1999 Betriebswirtschaftslehre, insbes. Controlling, an der Fachhochschule Bonn-Rhein-Sieg. Seine Interessenschwerpunkte liegen auf dem Gebiet Mergers & Acquisitions, Existenzgründung/Unternehmensnachfolge, der wertorientierten Unternehmensführung wie auch der Unternehmensstrategie, insbesondere von kleinen und mittleren Unternehmen (KMU).     

On the empirical distribution of the Balassa index

On the Empirical Distribution of the Balassa Index. — The concept of revealed comparative advantage as measured by the Balassa index is widely used in practice to determine a country’s weak and strong sectors. Interpreting the Balassa index is difficult, however, in view of the limited knowledge to date on the distribution of this index. We analyze theempirical distribution of the Balassa index and its stability and properties over time, using Japan-European Union trade data. It appears that the distribution is relatively stable over time and that the widely used rule that “a Balassa index above one” identifies a strong sector, selects about one-third of all industries. On the other hand, the distribution appears to differ markedly across countries.     

Is there an Anglo-American corporate governance model?

This paper questions the existence of an Anglo-American model of corporate governance and capitalism. Significant differences between the UK and US models of corporate governance are identified. The UK is a principles orientated system based more on voluntary codes operated on a ‘comply or explain’ basis, whilst the US system is more rules based and litigious. The UK focuses more on ex ante protection of ‘outside’ shareholders, whilst the US focuses on ex post protection of share traders. Institutional investors are expected to play a more prominent and wide ranging role in corporate governance in the UK than the US, though the evidence on their voting behaviour and wider ‘engagement’ activity is not readily available. The explosion of private equity led leveraged buy-out activity in the mid 2000s challenges the efficiency of both models and could be a harbinger of a ‘new capitalism’; relying more on incentive compatible remuneration packages and less on public disclosure and market discipline. Alternatively, it could simply be driven by the tax advantages currently enjoyed by debt over equity, the special deferred capital gains (‘carried interest’) tax treatment enjoyed by private equity, low (long as well as short term) real interest rates (‘cheap money’), and rising equity prices.     

It is Time for National Action to Reach the Lisbon Goals

Summary During the second half of 2004, the Netherlands held the Presidency of the European Union. One of the conferences during the Presidency was titled ‘More people at work: Policies to activate Europe’s labour potential’. It was organised on October 25 and 26, 2004 at the Beurs van Berlage in Amsterdam. The conference focused on four particular areas: the reconciliation of work and family life, activating social security systems, mobility and training. As a starting point for the discussions during the conference, academics who are experts in the specific policy areas were asked to write a paper. In this special edition of ‘De economist’ you will find a presentation of three of their papers. In my contribution I will explain why I have put the focus of this conference on increasing labour supply and more in particular why these four themes have been chosen as relevant for Member States and the Union. As time has not stopped after the Netherlands’ Presidency I will also take this opportunity to show that the conclusions of the conference have become an integrated part of the revitalised Lisbon strategy.     

Struggling against apartheid: The use of economic sanctions on South Africa

Conclusion It is clear that the United States is in a dominant position in relation to South Africa’s economy, which has an economic climate working against its decision to be isolated from world opinion. The apartheid policies have produced an economy that is severely distorted by its having a restricted market for its industrial products, a critical shortage of skilled labor, a high level of structural unemployment, a high and increasing military budget, and by its support of an economically unviable Bantustan system. These distortions, combined with record balance of payments deficits and a net disinvestment of foreign funds, have resulted in currency outflows that were covered by the United States providing decisive support for a $1.1 billion loan from the IMF. Contrary to the impression that has been promoted by the South African government, S.A. mineral exports are not crucial to the United States. However, South Africa does depend upon the United States for its export market of these minerals, which are essential for providing the necessary funds for governmental expenditures and foreign exchange that are needed in order to support its high import content industries. The large percentage that exports have in S.A.’s gross national product increases this vulnerability. Thus, if we look at the evidence, it is clear that the United States has viable sanctions that it can implement against South Africa’s inhuman political and social policies. Although the United States has these leverages it refuses to utilize them, even though it would be in its interest to do so. It is vital that those persons who are genuinely concerned about human rights and the apartheid system apply whatever pressure is necessary to force the U.S. government to immediately utilize these leverages in the form of sanctions that would force the S.A. government to change its policies. The black community must take the responsibility for leading this effort.     

Decomposition of GDP Growth in Some European Countries and the United States

Summary  The composition of economic growth can be analyzed in two different ways. In the ‘traditional method’ for the decomposition of GDP growth, total imports are deducted from exports. This approach underestimates the importance of exports for the growth in GDP, and overestimates the importance of domestic expenditure categories. In the alternative methodology proposed in this paper, imports are allocated to all expenditure categories. Although this ‘import-adjusted method’ is more complex than the ‘traditional method’, it has the considerable advantage that the contributions of the expenditure categories to GDP growth provide a better understanding of why GDP growth decelerates or accelerates. The methodology and data requirements for calculating the import content of final demand, and the implications for the decomposition of real GDP growth, are discussed. For six European countries and the United States, the paper shows that applying the alternative methodology provides rather a different economic story.      

Japanese Banks’ monitoring activities and the performance of borrower firms: 1981–1996

We construct an index measure that quantitatively describes the monitoring activities of Japanese banks. Using micro data on Japanese banks and borrower firms, we examine the effects of bank monitoring on the profitability of borrower firms. We find significant positive effects in the periods 1986–1991 and 1992–1996, although there is no significant effect in the period 1981–1985. We also examine how banks’ monitoring affects borrowers. The results show that the positive effects of banks’ monitoring on borrowers’ profitability are mostly caused by screening effects, not performance-improving effects.

Market Access Asymmetry in Food Trade

Using a bilateral trade equation derived from a monopolistic competition model, we investigate market access reciprocity in food trade among the United States, Canada, the European Union and Japan. We explore country- and industry-specific market access asymmetry through a border effect approach. Our findings reveal marked asymmetries in reciprocal border effects, both across countries and industries. Trade policy measures, particularly non-tariff barriers (NTBs), the degree of product differentiation and a ‘home bias’ in preferences, are important factors in explaining levels in border effects. Asymmetries in border effects are mainly explained by trade policies. JEL no.  F13, F14, Q17