Increasing returns and the share economy

Under imperfect competition, profit maximization by firms results in the market price exceeding the marginal cost of production; Weitzman terms this “excess supply” Weitzman wishes to replicate in the cost function (in terms of labor) the properties of the revenue function (in terms of output), thus generating “excess demand” for labor. A revenue-sharing scheme will achieve this if and only if there are decreasing returns to scale. Hence increasing returns apparently play no role in Weitzman's analysis.     

On optimality in collective institutional choice

Conditions are investigated under which democratic choice of the division of land between collective and “private” use and of the distribution of collective income between “needs” and “work” payments will produce a Pareto-optimal land allocation and optimal collective labor incentives. Sen's optimal rule for the degree of “needs” distribution is found to result from self-interested voting on this parameter when the distribution of labor inputs is unskewed or when votes are weighted by labor contributions. This in turn increases the optimality of land allocation, which can be further improved by a simple rental scheme. J. Comp. Econ., Dec. 1981, 5(4), pp. 392–403. Brown University, Providence, Rhode Island.     

Conceptions of the dual economy

Due to the current labor market problems and to the increase in personal “free time,” the “other half” of the economy is attracting increased attention: the household economy, the informal sector, black labor, the shadow economy, etc. The purpose of this paper is to summarize the current terminology and conceptual diversity in this field, in order to clarify the notions and thus the theoretical approaches which are a prerequisite for further work at the present stage of research.     

Perpetual youth and endogenous labor supply: A problem and a possible solution

In the “perpetual youth” overlapping-generations model of Blanchard and Yaari, if leisure is a “normal” good then some agents will have negative labor supply. We suggest a solution to this problem by using a modified version of Greenwood, Hercowitz and Huffman’s utility function. The modification incorporates real money balances, so that the model may be used to analyze monetary as well as fiscal policy. In a Walrasian version of the economy, we show that increased government debt and increased government spending raise the interest rate and lower output, while an open-market operation to increase the money supply lowers the interest rate and raises output.     

Can the share economy cure our macroeconomic woes? Probably not

This paper introduces the major ideas in Martin Weitzman's The Share Economy. It notes that a “share” economy is one in which the marginal cost of labor is less than the average cost of labor; moreover, this condition can be induced by sharing revenues or profits. According to share theory, such contracts will lead firms to create more vacancies and thereby lower the average unemployment rate. Weitzman proposes to induce more share arrangements by giving a tax preference to share-type income.     

Topological games at Princeton, a mathematical memoir

The games of the title are “Nash” (or Hex), “Milnor” (or Y), “Shapley” (or Projective Plane) and “Gale” (or Bridg-It) all of which were discovered (or re-discovered) in Princeton in 1948–1949. After giving the basic topological connections, I will discuss more recent ramifications related to computational complexity theory. A recurrent theme will be non-constructive proofs, or how we can know something can be done without having the slightest idea of how to do it.     

Afterword on the Five-Year Outlook: Problems and promises

The editors offer a synthesis that reflects the motivations and concerns that underlie this volume and present “some reasonably tempered hopes and future prospects”. Among the former, they discuss “political/ institutional issues” impinging on the Outlook—its purpose, production, users, and feedback—as well as “technical/intellectual” ones. Among the latter, they note that for Outlook reports beyond the second, current signals are that the science policy community will be involved more substantially, and that contributions in general will be decentralized. They foresee the Outlook evolving into a forum for discussion and advocacy of future science-technology priorities.     

Can Japan succeed in “Chigyo-ka” (intelprise-formation)?

There are two aspects in today's information revolution that started in the late 1970s. The first is an aspect referred to as “the third industrial revolution,” which triggers the transition to the “21st century system of Industrialization.” The information revolution in this sense brings the creation of new “breakthrough industries (new multimedia industries).” And the second aspect of the information revolution possesses the characteristics of both a technological revolution and a social revolution and brings about the arrival of the third phase of the historical evolutionary process of the modern civilization, which proceeds through three phases, namely “militarization, industrialization, and then informatization.”If the bearers of modern industrialization are a “group of enterprises” that have been engaged in the race in order to gain “wealth” (generalized means of exchange/exploitation power), and if these enterprises' activities have been exercised in the world market where their products have been sold, then it is appropriate to call the bearers of informatization a “group of intelprises.” They will be engaged in the race to gain “wisdom” (generalized means of persuasion/induction power), then stages of their activities can be called a “global intelplace” where “sharables,” that is, information and knowledge, will be disseminated. And now, toward the 21st century, the third phase of modernization, which can be called the “informatization/intelprise formation” or the “wisdom game” (intellectualism), is about to begin.Japan's “ie society (a society based on the ie principle—literally, it means “house” but here it is interpreted as cultural principle for organizing a society), which has been going through the process of evolution on the Japan Archipelago, has developed a network-based organization with little stratification within its infrastructure. In this sense, Japanese society can be characterized as a “network-oriented society” in which intelprises and an intelplace in the broad sense have functioned as the essential components of the society since Middle Ages. In general, an intelplace and intelprises that operate actively within this framework serve as the flexible bases for different types of social relations and institutions, such as states and markets and eventually integrate these into the society to a certain extent. In fact, it took place quite regularly during the modernization “in the narrow sense,” or Westernization of Japanese society after the Meiji Restoration. There exist some problems, however. Some of the characteristics found in Japanese society may become obstacles to activities aimed at the sharing and promotion of information and knowledge in the global intelplace and Japanese participation in the “wisdom game.” Badly needed are serious efforts for Japanese intelprise-formation to reduce these obstacles as much as possible.     

Explaining the economic trajectories of civilizations: The systemic approach

A civilization constitutes a durable social system of complementary traits. Some of the complementarities of any given civilization are between elements of “material” life and ones commonly treated as integral to “culture.” Identifying the mechanisms responsible for a civilization's observed trajectory involves, therefore, causal relationships that cross the often-postulated “cultural–material” divide. Complementarities make it difficult to transplant institutions across civilizations on a piecemeal basis. They imply that reforms designed to jump-start an economy will fail unless they are comprehensive. Civilizational analysis can benefit, therefore, from attention to institutional complementarities, including ones involving both cultural and material variables.     

Conflict in the labor market: Seniority rules and unemployment

This paper examines the macroeconomic implications of two labor-market institutions that play an important role in worker-management interactions: seniority-based layoffs and majority voting on wage proposals. Together, these make the median worker, rather than the marginal worker, the important decision maker for wage and employment outcomes. Since he is risk-averse, he will trade off higher wages for greater security of employment; therefore, the equilibrium level of unemployment will be much less than 50%, but higher than the conventional natural rate of unemployment. Median-worker behavior helps to explain both the greater frequency of excess supply than excess demand (59.4% versus 40.6% of the time since 1890) and the wage concessions of 1981–1983. A new Phillips curve is derived which incorporates systematic influences of the size of the labor force (to correct for the inappropriate measure of excess supply) and Tobin's “q” variable (to measure the risk of unemployment for the median worker). With U.S. data for 1957–1983, this new Phillips curve has a higher explanatory power than the traditional one. Additional forces that influence wages and employment in this setting are identified: firms have an incentive to bargain actively over wages rather than accept union demands passively and senior workers have a “social contract” with junior workers that reduces the extent to which the former exploit the latter.     

The ghost of financing gap: testing the growth model used in the international financial institutions

The Harrod–Domar growth model supposedly died long ago. Still today, economists in the international financial institutions (IFIs) apply the Harrod–Domar model to calculate short-run investment requirements for a target growth rate. They then calculate a “financing gap” between the required investment and available resources and often fill the “financing gap” with foreign aid. The financing gap model has two simple predictions: (1) aid will go into investment one for one, and (2) there will be a fixed linear relationship between growth and investment in the short run. The data soundly reject these two predictions of the financing gap model.     

The fading 1990s in Japan: Driving forces behind the unemployment upsurge

This paper sheds new light on the causes of the unemployment upsurge in Japan during the “fading 1990s”, an unprecedented period of structural crisis. We estimate a labor market model and identify the main macroeconomic determinants of labor demand and labor supply decisions in the last decades. We then conduct dynamic simulations and assess the relative contribution of these determinants to the evolution of unemployment from 1990 to 2002. Beyond the leading role exerted by the decline in productivity growth, we find the active and expansionary measures undertaken by the government had an overall negative effect on the labor market.     

Imitation processes with small mutations

This note characterizes the impact of adding rare stochastic mutations to an “imitation dynamic,” meaning a process with the properties that absent strategies remain absent, and non-homogeneous states are transient. The resulting system will spend almost all of its time at the absorbing states of the no-mutation process. The work of Freidlin and Wentzell [Random Perturbations of Dynamical Systems, Springer, New York, 1984] and its extensions provide a general algorithm for calculating the limit distribution, but this algorithm can be complicated to apply. This note provides a simpler and more intuitive algorithm. Loosely speaking, in a process with K strategies, it is sufficient to find the invariant distribution of a K×K Markov matrix on the K homogeneous states, where the probability of a transit from “all play i” to “all play j” is the probability of a transition from the state “all agents but 1 play i, 1 plays j” to the state “all play j”.     

A Primer on Logistic Growth and Substitution: The Mathematics of the Loglet Lab Software

This article describes the mathematics underlying the Loglet Lab software package for loglet analysis. “Loglet analysis” refers to the decomposition of growth and diffusion into S-shaped logistic components, roughly analogous to wavelet analysis, popular for signal processing and compression. The term “loglet” joins “logistic” and “wavelet.” Loglet analysis comprises two models: the first is the component logistic model, in which autonomous systems exhibit logistic growth. The second is the logistic substitution model, which models the effects of competitions within a market. An appendix describes the current status of the software.     

Share contracts and macroeconomic externalities

Weitzman's analysis of the share economy contrasts fixed-wage and fixed-share contracts; this paper notes that neither is an optimal labor contract, rendering the comparison suspect. Given this comparison, though, share contracts may be superior to wage contracts in an economy characterized by a “macroeconomic externality,” whereby firm-level employment decisions affect the demand for other firms' goods.     

Influence of decision styles on use of decision models

This article discusses how the “decision style” of an administrator influences the adoption and use of particular decision models. Several “interactive” and “analytical” decision models often used to guide decision making are described and critiqued to point out their virtues and deficiencies. Propositions are suggested that contend that “systematic,” “judicial”, “speculative”, and “intuitive” styles have clear-cut preferences for a particular decision model. This model seems to be used, even when another would be more suitable. Effective decision makers are postulated to adapt their styles, or at least to see the benefits of different styles. Mixed-mode models are proposed that seem to simulate the behavior of successful decision makers.     

Player Types and Self-Impression Management in Dictatorship Games: Two Experiments

Recent experimental research on dictatorship games shows that many dictators share their outcomes with unknown, anonymous others. The data suggests that dictators can be “typed” as rational (taking the maximum), equal (splitting outcomes equally), or “other.” This paper experimentally tests the self-impression management model, which predicts that individuals act to show themselves in a positive light, even when they are the only observer of their own behavior. The model predicts that the “other” type of dictator will avoid being greedy by taking more only as their choices are increasingly restricted. Results from two experiments support the model's predictions. The conclusion advocates differentiating basic psychological motivations in modeling individual behavior. Journal of Economic Literature Classification Numbers: C78, C91, D63.     

The cost of labor adjustment: Inferences from the gap

This paper studies the aggregate implications of micro-level labor adjustment costs. Caballero and Engel [Caballero, R., Engel, E., 1993. Microeconomic adjustment hazards and aggregate dynamics. Quarterly Journal of Economics 108, 313–358] find a dependence of aggregate employment growth on the cross sectional distribution of “employment gaps.” This paper uses those results as moments in an indirect inference procedure to infer the underlying labor adjustment costs. We specify a dynamic optimization problem at the plant level, allowing for both convex and non-convex adjustment costs. Consistent with evidence at the micro level, our findings indicate that non-convex adjustment costs are necessary to match these aggregate moments.     

At the crossroads of “futurism” and “prospective”: Towards a Canadian synthesis?

North American “future studies” and the French concept of “prospective” have been integrated to provide the basis for an attempted “Canadian Synthesis” in the approach developed by the Montreal-based think-tank, the Gamma Institute. In this paper the founding president of Gamma outlines the four stages of the approach in a conceptual framework entitled the “Chronospace” and illustrates its applicability by referring to some of Gamma's projects in the last 12 years.