<Emphasis Type="Italic">Private Governance</Emphasis> and the three biases of political philosophy

Private Governance shows that philosophers, political and legal theorists, and social scientists mistakenly believe in legal centralism, the view that order in the world depends upon and is made possible by state law. In fact, most governance not only happens to be private, but must be private. This paper extends Edward Stringham’s argument by claiming that philosophers tend to suffer from three biases. Diffidence bias means they are overly pessimistic about people’s willingness and ability to cooperate without state enforcement. Statism bias means the overestimate the degree to which cooperation is secured by the state. Guarantee bias means they overestimate the value and need for legal guarantees.     

Moments of truncated <Emphasis Type="Italic">t</Emphasis> and <Emphasis Type="Italic">F</Emphasis> distributions

Truncated distributions commonly arise in economics and related areas, see, for example, Lee (Econ Lett 3:165–169, 1979), Lien (Econ Lett 19:243–247, 1985; Econ Lett 20:45–47, 1986), Burdett (Econ Lett 52:263–267, 1996), Sercu (Insur: Math and Econ 20:79–95, 1997), Abadir and Magdalinos (Econom Theory 18:1276–1287, 2002), and Horrace (J Econom 126:335–354, 2005). In this note, we consider the most commonly encountered truncated distributions with heavy tails: the truncated t distribution and the truncated F distribution. For each of these distributions, we derive explicit expressions for the moments and estimation procedures by the method of moments and the method of maximum likelihood. An application is illustrated to a popular data set in the econometric literature.      

<Emphasis Type="Italic">Resourceship</Emphasis>: An Austrian theory of mineral resources

Economists inside and outside of the Austrian-school tradition have formulated a subjectivist theory of mineral resources. While von Mises (1940) presented a rudimentary theory, institutionalist Zimmermann (1933 and after) provided an in-depth mind-centered approach distinct from the objective, neoclassical theory for minerals developed by Jevons (1865, 1866), Gray (1913), and Hotelling (1931). A full-fledged Austrian theory identifies the fixity/depletionism view of minerals as incompatible with entrepreneurship. Mineral resourceship, praxeologically akin to manufacturing, or the making of capital goods, demotes the distinction between depletable and nondepletable resources for the sciences of human action. Instead of nonreproducibility, the interplay of geography and institutions becomes the locus of mineral-resource theory, given the nonuniform distribution of deposits. An Austrian-institutional theory is more robust for explaining changes in mineral-resource scarcity than neoclassical depletionism, and offers a wide research agenda for current debates over resource production, usage, and future availability.

The <Emphasis Type="Italic">Acting</Emphasis> Person: Social Capital and Sustainable Development

Ron Stanfield has had a long and distinguished career as a social economist and commentator on the social economy. Of special concern to us in this article are Stanfield’s interests in social capital, sustainable development, and nurturance which we refer to as caring. We also take up several other virtues including sympathy, benevolence, and generosity that have been part of the economics literature from the time of Smith’s Moral Sentiments along with the associated vices of heartlessness, insensitivity, meanness, greediness, and others. This article attempts to show that (1) adding social capital to the machine-like individual of mainstream economics results in the acting person of personalist economics who becomes more fully a human person through social interactions that foster the development of several virtues or less fully a human person through other interactions that instill certain vices; and that (2) in matters relating to sustainability, becoming more fully a human person calls especially for the practice of the virtues of justice and moderation. In addition we have suggested a framework for thinking about sustainable development in terms of actuating and limiting principles and for developing critical values or performance standards for sustainable development that are person-centered.     

Experimental evolution of color preference for oviposition in <Emphasis Type="Italic">Drosophila melanogaster</Emphasis>

Preferences are the foundation of economics. Preferences are taken by economists as fixed by some implicitly biological process. In recent decades, behavioral economics has documented the divergence between the nature of human preferences and the assumptions of standard economics. In this study, we use the tool of experimental evolution to study the evolution of color preferences in fruit flies (Drosophila melanogaster). In particular, we select for a preference for laying eggs on the color aqua. We find that the flies evolve to lay more than twice as many eggs on aqua. However, this evolution occurs entirely because the flies lay more eggs overall. The flies in this study, do not evolve to lay a higher percentage of eggs on the selected color, aqua.     

The knowledge problem,determinism, and <Emphasis Type="Italic">The Sensory Order</Emphasis>

The arguments presented in Hayek's The Sensory Order suggest that the mind/brain is a decentralized spontaneous order. The decentralized nature of decision-making and the central role of classification in perception, cognition, and action, are solutions to the knowledge problem that confronts the system. The nature of this decentralized complex system suggests that the ordering is deterministic and that free will in the sense of a decision-maker being able to stand outside the circle of cause and effect is an illusion. If determinism is correct, how can we hold individuals responsible for their actions? It is argued that the evolution of responsibility, blame and credit are the products of a second Hayekian spontaneous order. Responsibility and the allocation of credit and blame are part of an implicit social contract that facilitates cultural evolution, political freedom, and economic growth. It is responsibility, not the existence of free will, that makes freedom possible.     

Rank based cointegration testing for dynamic panels with fixed <Emphasis Type="Italic">T</Emphasis>

In this paper, we show that the cointegration testing procedure of Binder et al. (Econom Theory 21:795–837, 2005) for Panel Vector Autoregressive model of order 1, PVAR(1) is not valid due to the singularity of the hessian matrix. As an alternative we propose a method of moments based procedure using the rank test of Kleibergen and Paap (J Econom 133:97–126, 2006) for a fixed number of time series observations. The test is shown to be applicable in situations with time-series heteroscedasticity and unbalanced data. The novelty of our approach is that in the construction of the test we exploit the “weakness” of the Anderson and Hsiao (J Econom 18:47–82, 1982) moment conditions. The finite-sample performance of the proposed test statistic is investigated using simulated data. The results indicate that for most scenarios the method has good statistical properties. The proposed test provides little statistical evidence of cointegration in the employment data of Alonso-Borrego and Arellano (J Bus Econ Stat 17:36–49, 1999).     

A note on spurious significance in regressions involving <Emphasis Type="BoldItalic">I</Emphasis>(0) and <Emphasis Type="BoldItalic">I</Emphasis>(1) variables

We demonstrate that t ratios (the F statistic) for I(1) regressors in a model with an I(0) dependent variable will generally be oversized. This indicates that spurious significance occurs in a situation where it was not previously identified. We also compare the asymptotic rejection rates of t ratios for various combinations of I(1) and I(0) variables in the two-variable linear regression model. These rejection rates systematically increase with the degree of autocorrelation, yielding spurious significance, when both variables are either positively or negatively autocorrelated. In contrast, when one variable is negatively autocorrelated and the other is positively autocorrelated the rejection rates systematically fall and are undersized.     

Spatially Uniform <Emphasis Type="Italic">versus</Emphasis> Spatially Heterogeneous Compensation Payments for Biodiversity-Enhancing Land-Use Measures

The importance of compensation payments for biodiversity-enhancing land-use measures has grown over the past decade, particularly in connection with agri-environmental policy. Given that both the costs and the benefits of biodiversity-enhancing land-use measures are subject to spatial variation, the criterion of cost-effectiveness calls for spatially heterogeneous compensation payments. However, when deciding whether to implement uniform or heterogeneous compensation payments, the regulator has to compare the disadvantage of uniform payments in terms of cost-effectiveness with the disadvantages of spatially heterogeneous payments. To help resolve this issue, this paper provides a simple ecological-economic model that allows the reduced cost-effectiveness associated with uniform payments for biodiversity-enhancing land-use measures to be assessed for different types of benefit and cost functions.JEL classification: Q20     

Symposium introduction to Hayekian themes in <Emphasis Type="Italic">The Order of Public Reason</Emphasis>

This introduction provides an overview of the papers in the symposium on Hayekian themes in The Order of Public Reason.     

<Emphasis Type="Bold">Monopsony in Motion - Imperfect Competition in Labor Markets.</Emphasis>

Book Review

Monopsony in Motion - Imperfect Competition in Labor Markets.