National Policy Interests in the Duty-Free Market

In 1999 the EU abolished duty-free on intra-EU travel. OtherEuropean countries and many countries outside Europe still retainduty-free shopping for international travellers, as does theEU in relation to external travel. This paper looks at nationalpolicy interests in the retention, or further abolition, ofduty-free. We note that these will relate closely to the structureof competition in the duty-free market, and to the tax levelson high-street sales in different countries. The existence ofduty-free trade requires that countries have reasons both toadmit duty-free goods and to permit their sale to departingpassengers. We argue that low-tax countries might be more likelyto perceive gains from unilateral abolition of duty-free salesto departing passengers, while high-tax countries would onlybenefit from concerted action to abolish duty-free. (JEL D4,H2, H87)     

Environmental self-auditing: setting the proper incentives for discovery and correction of environmental harm

Many firms conduct 'environmental audits' to test compliancewith a complex array of environmental regulations. Commentatorssuggest, however, that self-auditing is not as common as itshould be, because firms fear that what they find will be usedagainst them. This article analyzes self-auditing as a two-tieredincentive problem involving incentives both to test for andto effect compliance. After demonstrating the inadequacy ofconventional remedies, we show that incentives can be properlyaligned by conditioning fines on firms' investigative effort.In practice, however, the regulator may not be able to observesuch effort. Accordingly, we propose and evaluate the use ofthree observable proxies for self-investigation: the mannerin which the regulator detected the violation; the firm's owndisclosure of violations; and the firm's observed correctiveactions. Each method has its own efficiency benefits and informationalrequirements, and each is distinct from EPA's current auditpolicy.     

The ontology of 'the economic': an Aristotelian analysis

Tony Lawson's and Uskali Mäki's respective realist projectsrely on an ontology of the economy. This paper will not focuson these research projects but will instead try to shed lighton them by introducing an ontology of the economy accordingto Aristotle. Oikonomiké, the seminal term used by him,is not a noun but an adjective. For Aristotle, nouns expressentities or beings, both self-sufficient beings and accidentalproperties. Adjectives almost always express accidents. Whatkind of being is ‘the economic’? This analysis willsuggest some conclusions about the constraints of economic scienceand the need for institutions according to the peculiar ontologicalcondition of ‘the economic’ as conceived by Aristotle.     

Institutions for Fiscal Stability

This paper reviews the controversy over Europe's Stability andGrowth Pact and offers a proposal for its reform. It arguesthat Europe would be best served by focusing on the fundamentalcauses of unsustainable debts — public enterprises thatare too big to fail, unfunded public pension schemes that aretoo big to ignore, inefficient and costly labor market and socialwelfare problems, and budget making institutions that createcommon pool and free-rider problems — rather than on arbitrarynumerical indicators like whether the budget deficit is aboveor below 3 percent of GDP. It proposes defining an index ofinstitutional reform with, say, a point each for reform of budgetmaking arrangements, reform of public pension schemes, and reformof labor markets and unemployment insurance. Countries receivingthree points would be exempt from the Pact's numerical guidelines,since there is no reason to think that they will be prone tochronic deficits. The others, whose weak institutions renderthem susceptible to chronic deficits, would in contrast stillbe subject to its warnings, sanctions and fines.(JEL E0, F4)     

Breaking the mould: an institutionalist political economy alternative to the neo-liberal theory of the market and the state

The paper criticises the currently dominant neo-liberal discourseon the role of the state and proposes an alternative approachthat will allow us to overcome its shortcomings, especiallyits inadequate analyses of the role of institutions and politics.It argues that the central problem with the neo-liberal frameworklies not in its excessively anti-interventionist policy conclusions,as some of its critics believe, but in the very ways it envisagesthe modus operandi of the market, the state, institutions andtheir interrelationships. The paper then discusses how we mayconstruct the alternative approach of ‘institutionalistpolitical economy’.     

Commentary. An alternative stability pact for the European Union

This paper proposes an alternative stability and growth pactto the one which accompanied the introduction of the euro inJanuary 1999. The latter is part of the third stage of economicand monetary union and, will govern the economic policies ofthe member countries which have joined the single currency andstrongly constrain the policies of those who do not join. Thealternative proposed in this paper is a Full Employment, Growthand Stability Pact and would have a number of features, themost important of which is the creation of new institutionalarrangements, including the creation of an investment bank.     

Turkey and the EU: Politics and Economics of Accession

This paper discusses political and economic aspects of Turkishaccession. Under present rules, Turkey would have the greatestnumber of council votes within twenty years, and receive thelargest budget transfer. Free migration may increase the Turkishimmigrant population in Germany from 2 to 3.5 million in thirtyyears. Most of the economic effects will be felt by Turkey,particularly in agriculture. The main obstacles to accessionare not economic, but political. Historical experience stopsTurkey from eliminating the decisive political role of the military,giving Kurds and other minorities cultural rights and upholdingbasic human rights.(JEL F02, F15, F22)     

A Methodological Note on Long-Period Positions

This brief paper seeks to overcome a number of methodologicaldisagreements among economists who use the long-period methodof analysis. In particular, it attempts to clarify the key distinctionsbetween convergence and stability, convergence and gravitationand chronological and theoretical persistence. The conclusionis that the theoretical soundness of the long-period methoddepends on the convergence of actual magnitudes towards theirlong-period counterparts, an empirical issue to which theoreticalconsiderations of stability are irrelevant.     

The stock market and investment: another look at the micro-foundations of q theory

This paper introduces a novel distinction between real q andfinancial q. The paper examines three versions of financialq developed by Brainard and Tobin, Minsky and Hayashi, respectively.These theories differ regarding the nature of stock market pricedetermination and their use of marginal productivity theory.It is shown that non-profit maximising behaviour by managersdoes not invalidate q theory. It is also shown that if managersand shareholders have different profit expectations, this leadsto an equilibrium value of q that differs from unity. Lastly,the implicit claims in q theory regarding the efficient roleof stock markets as regulators of capital accumulation are shownto depend on assumptions about stockholder behaviour.     

On the Role of Labour Market Reform for the Enlargement of a Monetary Union

This paper studies the incentives to join a monetary union,and the incentives to reform within a monetary union and withinthe candidate countries, respectively. We present some "ordersof magnitude" evidence on the size and balance of the incentiveeffects for joining and being joined, and on the desirabilityof reform in and out of the existing EMU in Europe. It is foundthat countries will only want to join a monetary union wherethere has been sufficient labour market reform, and where labourmarkets are more flexible than their own. But existing memberswill want the same properties of their new partners as well.(JEL F02, F15, F33, F 42)     

Labour employed in production and labour commanded: a Ricardian conjecture

This paper explains the origin of some important ambiguitiesin the analysis of value and prices put forward by Smith inhis Wealth of Nations by considering the possibility that theyreflect a previous draft of the book where the quantity of labouremployed in production was indicated as the sole determinantof real price and exchange ratios. This conjecture is evidencedindirectly by the way in which Smith presented his own analysisat the end of Book I, Chapter IV; by some passages containedin Book I and Book II which suggest that the quantity of labouremployed in production should play a crucial role within theanalysis of exchangeable value; and by the important modificationsintroduced by Smith in Book I, Chapter VI, after the first editionof the Wealth of Nations was published.     

Formal and Informal Labour Markets: Challenges and Policy in the Central and Eastern European New EU Members and Candidate Countries

The paper aims at comparing the formal and informal labour marketsin the Central and Eastern European new EU Member States andcandidate countries of the European Union. First, the currentsituation of the labour market is described, focusing on therecent developments since the breaking up of the East. Thenthe policy design of these labour markets is depicted and itseffects on formal and informal labour markets. The most importantchallenges for employment policy as well as the effects of enlargementon the labour markets are analysed. The paper ends with a shortsummary. (JEL J21, J23, H26, H11, O17, O57)     

Sraffa's path to Production of Commodities by Means of Commodities. An interpretation

The present article provides a reconstruction of the path followedby Sraffa in the long journey (begun in the late 1920s) whichbrought him to his 1960 book. The starting point of Sraffa'sresearch was the formulation of his cost-price equations, whichsurprisingly enough appear to have been derived neither fromRicardo's theory of value, nor from Marx's ‘transformationof values into prices of production’, but rather fromMarx's reproduction schemes, published in volume II of Capital,to which Sraffa was almost certainly brought by his study ofMarx's interpretation of Physiocratic theory in volume I ofTheories of Surplus Value. The main device that Sraffa usedin his attempts to bring to light the existence of solutionsto his system and their properties, which basically meant buildinga consistent wage–profit–price relationship, wasthat of somehow cutting out the prices from this relationship.The paper shows that different routes were attempted by Sraffato achieve this end, and that the main influences on these attemptswere Ricardo and Marx, in particular Ricardo's corn-ratio theoryof profits, and the related conception of a maximum rate ofprofits. In the course of his research, Sraffa was helped bysome distinguished mathematicians, in particular Frank P. Ramseyand Abram S. Besicovitch. Of Ramsey's contribution there areimportant traces, but no more than traces, while ample recordsremain of the relationship between Sraffa and Besicovitch, andthey will play an important part in the story told in this paper.     

Educating Europe: Should Public Education be Financed with Graduate Taxes or Income-contingent Loans?

The mobility of labor reduces national incentives to investin internationally applicable education. The European Unioncould overcome this by allowing member states to institute graduatetaxes or income-contingent loans, collected also from migrants.Graduate taxes or income-contingent loans result in higher welfarethan financing education with employment-based taxes. (JEL H24,H52, I28, F22)