THE LIBERAL DEMOCRATS AND SUPPLY‐SIDE ECONOMICS

The coalition has given the Liberal Democrats the opportunity to demonstrate their support for – or opposition to – supply‐side economics. The person who has done most on the supply side is Ed Davey, in the Department of Business, Innovation and Skills. In a remarkable legislative achievement for a Parliamentary Under Secretary in under two years in office, Davey ensured that the privatisation of Royal Mail reached the statute books, liberalised the terms and conditions for Post Office counters, and liberalised employment and retirement laws.     

DISASTROUS ANTI‐ECONOMICS AND THE ECONOMICS OF DISASTERS

This article surveys and synthesises some of the research on the political economy of natural disasters. While people tend to support government intervention to reduce prices or otherwise aid disaster recovery, research shows that government organisations are often corrupt and ineffective. Further, since people tend to mis‐identify the causes of (for example) gasoline price increases after natural disasters, government intervention after a disaster is likely to do more harm than good.     

SHIFTING BOUNDARIES IN ECONOMICS: THE INSTITUTIONAL COGNITIVE STRAND AND THE FUTURE OF INSTITUTIONAL ECONOMICS

This paper aims at contributing to the debate on the future of institutional economics and of the field as a whole by starting from the literature that discusses the relationship between Old‐Original Institutional Economics and New Institutional Economics. It suggests that the process of reunifying OIE and NIE (and evolutionary economics) prompted by part of the literature could be improved by the contribution of the Cognitive Institutional Economics. The paper follows a two‐stage pathway: first, it frames the debate on the relationships between NIE and the OIE and it concentrates on a subset of the literature that shows that NIE's recent developments complicate the distinction between NIE and OIE, and it explores the possibility that NIE and OIE may merge so that an amalgam of NIE, OIE and Evolutionary Economics becomes the next economic paradigm. Secondly, the paper argues that a step forward in the direction outlined by the literature has been made by CIE, which is a research stream that developed from cross‐fertilization among NIE, OIE and the Hayekian contributions to the analysis of institutions. In the concluding remarks, the possible emergence of a single institutional paradigm is discussed in the light of the literature about change in economics.     

THE EMERGENCE OF LIBERAL SOCIALISM IN CONTINENTAL EUROPE1

Socialism has repeatedly failed to match the accomplishments of capitalism, and yet it refuses to die. At the beginning of the twenty‐first century, a new type of socialism, ‘liberal socialism’, is growing in Europe. The rise of liberal socialism has been marked by the erosion of two key institutions of capitalism, private property rights and the freedom of exchange. Unlike communism, which used brute force to replace private property rights and free exchange with state ownership and central planning, liberal socialism focuses on redistributing wealth, creating entitlement programmes, supporting labour unions and promoting ‘fair’ trade.     

BEHAVIORAL ECONOMICS AND BEHAVIORAL FINANCE: A BIBLIOMETRIC ANALYSIS OF THE SCIENTIFIC FIELDS

The aim of the study is to conduct a bibliometric analysis of the scientific field of Behavioral Economics and Behavioral Finance. The research was conducted using the Web of Science database, which returned 2617 articles, revealing that the amount of research within these fields has grown over time. Furthermore, the results also prove the relevance of the works of Daniel Kahneman and Amos Tversky for the field of Behavioral Economics and Finance, and Steven Hursh to Behavioral Economics. It is still possible to note that the field of Behavioral Economics encompasses subjects that connect human behavior with demand, consumption and price, with investments and with managerial decisions, as well as with the role played by heuristics and cognitive biases in decision‐making processes. In turn, the field of Behavioral Finance is more focused on the study of errors of judgment and of decision‐making characteristics in financial investments. Additionally, it is inferred that the field of Behavioral Economics is more wide‐ranging than the field of Behavioral Finance, as the latter is a byproduct of Behavioral Economics. Finally, a conclusion is then reached, demonstrating that the fields of Behavioral Economics and Finance have turned into an important field of study.     

VARIATIONS ON THE THEME OF CONNINGa IN MATHEMATICAL ECONOMICS

Abstract The mathematization of economics is almost exclusively in terms of the mathematics of real analysis which, in turn, is founded on set theory (and the axiom of choice) and orthodox mathematical logic. In this paper I try to point out that this kind of mathematization is replete with economic infelicities. The attempt to extract these infelicities is in terms of three main examples and one general discussion: dynamics, policy and rational expectations and learning are the examples; a game theory without ‘subjectivism’, based on the axiom of determinateness, is discussed in general terms. The focus is on the role and reliance of standard fixed‐point theorems in orthodox mathematical economics.     

THE RISE AND DECLINE OF ECONOMIC POLICY AS AN AUTONOMOUS DISCIPLINE: A CRITICAL SURVEY

After Adam Smith's statement of market virtues, the process of gestation of economic policy as a rational set of rules for public agenda has been rather slow. Until not so long ago, economic policy as a discipline was often confined to prescribing practical rules intended to explain technical procedures of government intervention. Economic policy– as a coherent and to some extent autonomous discipline–only emerged in the late 1950s in Scandinavia, the Netherlands and Italy, when solid foundations indicating not only microeconomic but also macroeconomic market failures and a theory about the conditions for policy effectiveness and design were consistently developed. This paper intends to explain the reasons for the emergence of the discipline, the circumstances that favoured its diffusion, the reasons for its apparent setback and some factors that could facilitate its diffusion in the next years     

THE ECONOMICS OF COMMUTING AND THE URBAN LABOUR MARKET

ABSTRACT. The spatial distribution of households and firms, or urban spatial structure, is a core element of the study of urban economics and the crucial determinant of commuting patterns. This paper examines developments in the analysis of urban spatial structure and commuting are related to the urban labour market—that is the analysis of labour supply and labour demand in a spatial context. These developments have been overlooked in the traditional approach to urban structure and commuting where most attention has been devoted to the markets for land and housing rather than the market for labour. Yet a little reflection suggests that the labour market might have a great deal to do with the location decisions of households and firms, and hence with commuting patterns. We argue that much criticism of the economic analysis of urban structure and commuting can be addressed by explicit incorporation of the labour market into the conventional model of urban location. This criticism includes findings that the theory cannot explain the tendency for richer households to live farther from the central business district and commute farther to work (Wheaton, 1977) and findings of substantial unexplained or 'wasteful' commuting according to conventional theory (Hamilton, 1982). The paper begins by outlining the basic model of residential location and commuting (Section 2). We then consider extensions that involve the introduction of labour supply decisions and which determine the value of commuting time (Section 3). More recent extensions involve the introduction of decentralized workplaces (Section 4) and, logically, the issues of job search and migration (Section 5). We conclude with a summary of the progress in incorporating labour market behaviour into the analysis of urban structure and commuting and our suggestions for further research in this area.     

EMERGENT COMPLEXITY IN AGENT‐BASED COMPUTATIONAL ECONOMICS

Abstract In this paper, we shall review two kinds of emergent complexity in agent‐based computational economics (ACE). The first kind is based on the complex systems initiated in the 1980s or even earlier by mathematicians and physicists, whereas the second kind is based on the idea of complex adaptive systems composed of autonomous agents, for which many representative works have been collected in Rosser. For the latter, we shall go further to examine the two elements which have just recently been incorporated in agent‐based economic modelling, namely, intelligence and modularity. This augmentation leads to the development of neurocognitive software agents, which can guide the generation and direction of future ACE studies with a multistage ‘brain/behaviour‐to‐emergency‐to‐brain/behaviour’ approach.     

THE ECONOMICS OF ABSENCE: THEORY AND EVIDENCE

Abstract. Worker absenteeism constitutes a significant loss of work-time and therefore has important implications for both household income and firm productivity. Despite this, the economics profession has been somewhat laggard relative to other disciplines in addressing the phenomenon. The situation is, however, changing, with recent years witnessing a mild flurry of activity. The aim of this paper is to maintain, and if possible, enhance this momentum. We do this firstly by developing some basic theoretical ideas which we consider to be central to an economic analysis of absence. In particular, we address the often cited claim that observed absence is unequivocally inefficient. Second, by reviewing some of the key contributions, we attempt to assess where the literature on the economics of absence stands at present, as well as suggesting some potentially fruitful lines of future enquiry.     

COPENHAGEN,CANCÚN AND THE LIMITS OF GLOBAL WELFARE ECONOMICS

The rise of a global welfare economics directed at the environmental challenges facing our planet represents a new policy phenomenon. This paper examines the most ambitious attempt so far to put such economics into practice via the Kyoto Protocol and more specifically the Clean Development Mechanism of the Protocol. The Copenhagen and Cancún climate change conferences have put an end to hopes of the Protocol serving as an effective tool in the mitigation of global warming. This failure of the new global welfare economics is the result of flawed principles, not just defective implementation.     

A SURVEY OF THE HOLD‐UP PROBLEM IN THE EXPERIMENTAL ECONOMICS LITERATURE

This paper reviews experimental studies on the so‐called “hold‐up problem.” Common features in the experimental design and results are summarized. Most experimental studies show evidence of the hold‐up problem, but to an extent less severe than what standard self‐interest model predicts. Hold‐up occurs at the individual level, but exhibits a less severe pattern than theoretically predicted at the aggregate level. A positive correlation is found between the investment stage decisions and subsequent bargaining behavior. Social preferences largely influence the results in hold‐up games. Remedies that enhance the effect of social preferences can effectively alleviate the hold‐up problem. These laboratory findings are also relevant to real‐life hold‐up situations, but differences in the specific institution and environment may require more variations in the experimental design.     

RISE OF THE THERAPEUTIC STATE: NEW CHALLENGES FOR TWENTY‐FIRST‐CENTURY MEDICINE

In recent history, the politics of health has drifted inexorably towards a paradigm in which it is the responsibility of the state rather than of individuals to manage their health. What were once considered private health matters for individuals are now attributed with society‐wide importance. This has given rise to a strident ‘therapeutic state’ which pays obsessive interest in its citizens’ eating, drinking, smoking, exercise and sexual habits. However, many of the therapeutic state's own recommendations are poorly evidenced and doctrinaire. The lack of accountability and adverse incentives which creeping state intrusiveness brings will ultimately disconnect the health system from the needs of citizens and treat their personal information with inexcusable carelessness.     

A REVIEW OF THE RECENT LITERATURE ON THE INSTITUTIONAL ECONOMICS ANALYSIS OF THE LONG‐RUN PERFORMANCE OF NATIONS

This paper reviews the recent (post‐2000) literature that assesses the importance of institutions as a factor determining cross‐country differences in growth rates or in the contemporary level of “prosperity.” It first sketches how institutional economics has evolved. It then examines critically the methods of analysis employed in the recent literature. The paper finds that this literature has made a major contribution to the analysis of the causes of economic growth but the relative importance of institutions as a determinant of long‐run growth and prosperity is still a wide open question.     

THE ECONOMICS OF CORPORATE SOCIAL RESPONSIBILITY: A FIRM‐LEVEL PERSPECTIVE SURVEY

This paper analyzes the economics of Corporate Social Responsibility (CSR), as a private response to market imperfections in order to satisfy social preferences. Depending on whether they affect regulation, competition or contracts, market imperfections driving CSR decisions are classified in three categories: public goods and bads and altruism; imperfect competition; and incomplete contracts. We successively present these drivers of CSR decisions and highlight the nature of incentives (external or internal) at work and the testable (and tested) hypotheses in the reviewed studies. We finally review the link between CSR and financial performance, as well as between CSR and social and environmental performance. A twofold discrepancy appears in the literature, opening future research paths: a disconnection between our understanding of CSR drivers and CSR impacts; and a knowledge gap between CSR financial and social consequences, the latter having received little attention.     

THE ECONOMICS OF HEALTH AND SAFETY AT WORK: AN INTERDICIPLINARY REVIEW OF THE THEORY AND POLICY

Abstract This paper engages in an interdisciplinary survey of the current state of knowledge related to the theory, determinants and consequences of occupational safety and health (OSH). It first describes the fundamental theoretical construct of compensating wage differentials, which is used by economists to understand the optimal provision of OSH in a perfectly competitive labour market. The plethora of incentives faced by workers and firms in job and insurance markets that determine the ultimate level of OSH are discussed in detail. The extensive empirical evidence from the hedonic wage and stated choice approaches used to assess the value of OSH is reviewed. The causes of inefficiency and inequity in the market for OSH, such as externalities, moral hazard in compensation insurance, systematic biases in individual risk perception/well‐being and labour market segregation are subsequently examined. The implications of government intervention and regulation for tackling the aforementioned inefficiencies in OSH are then considered. Finally, the survey identifies areas of future research interests and suggests indicators and priorities for policy initiatives that can improve the health and safety of workers in modern job markets.     

META‐ANALYSIS OF ECONOMICS RESEARCH REPORTING GUIDELINES

Meta‐regression analysis (MRA) can provide objective and comprehensive summaries of economics research. Their use has grown rapidly over the last few decades. To improve transparency and to raise the quality of MRA, the meta‐analysis of economics research‐network (MAER‐Net) has created the below reporting guidelines. Future meta‐analyses in economics will be expected to follow these guidelines or give valid reasons why a meta‐analysis must deviate from them.     

CROSS‐COUNTRY RANKINGS IN INTERGENERATIONAL MOBILITY: A COMPARISON OF APPROACHES FROM ECONOMICS AND SOCIOLOGY

Abstract This paper summarizes research on the relative level of intergenerational mobility – whether classified by income, education or social class. The literatures on education and income mobility reveal a similar ranking with South America, other developing nations, southern European countries and France tending to have rather limited mobility although the Nordic countries exhibit strong mobility. Estimates of mobility based on social class point to rather different patterns, and we demonstrate that these differences are most likely generated by intergenerational earnings persistence within social classes. The second part of the paper looks for explanations for the differences in earnings and education persistence and finds that mobility is negatively correlated with inequality and the return to education but positively correlated with a nation's education spending.     

20 YEARS AFTER: THE FALL AND RISE OF SOCIALISM IN EAST GERMANY

Twenty years after the fall of the Berlin Wall, public opinion in East Germany is dominated by a deep hostility towards free markets and an uncritical attitude towards state intervention. This article argues that the mistakes that have been made in the economic transformation of East Germany continue to have an effect to this day. Supporters of the free economy failed to explain why the grievances people faced were not caused by allegedly 'unbridled' markets, but by false policies. Hopefully, a future reunified Korea will avoid repeating these mistakes.