Workfare,welfare, agency,and well-being

Workfare programs are state-instituted programs that require able-bodied persons with children of school age who wish to claim welfare payments to participate in job training programs, and, eventually, to enter the work force. The philosophy of workfare is based on the value of work and the goal of self-determination. However, as a mandatory program for welfare recipients, workfare requires of those recipients certain duties which, according to those who challenge workfare, interfere with the freedom to choose what one will do with one's life. Whether some form of workfare will be adopted as part of our national welfare system remains to be seen. What the debate about such a program suggests is that welfare, in itself, by ignoring the necessity of security and education for full human agency, neither satisfies basic needs nor prepares its recipients for any life other than that of dependency. With all its difficulties workfare nevertheless presents an alternative to welfare that, at least in theory, more closely identifies its purpose with the values of our society.     

Externalities, Indivisibility, Nonreplicability, and Agglomeration

In this paper we argue that the impact of external scale economies and diseconomies on city size is not nearly as clear-cut as it is tacitly believed in urban economics. Similarly, city-size distortions are not caused by externalities alone. Indivisibility and nonreplicability, which prevent establishing the “right” number of cities, may represent a source for city-size distortions which can be stronger than the standard resource misallocation resulting from external scale economies and diseconomies. It follows that a direct population dispersion policy is not just an inferior substitute to Pigouvian taxes and subsidies but rather a useful complement.     

Indifference,indecision, and coin-flipping

This article operationalizes a non-empty relation as implied if strict preference and indifference jointly do not completely order the choice set. Specifically, indecision is operationalized as a positive preference for delegating choice to a least predictable device.     

Debt,equity, and information

Most firms issue financial assets such as debt or equity (e.g. bonds or stock) to outside investors. While these financial assets differ greatly in their characteristics, their diversity has received little attention in the literature. Filling this important gap in the literature, this paper views debt and equity as financial contracts, and asks why they are optimal instead of other financial contracts. By endogenizing the bankruptcy process, this paper shows how debt and equity arise as a consequence of an optimal allocation of cash-flow rights and monitoring rights, and how equity leads to dividend signaling.     

Debt,deficits, and inflation

This article sketches the theory of debt finance and cites historical evidence on the sustainability of debt. If it is accepted that the future should under the current circumstances of COVID‐19 help to alleviate the problems of the present, then debt finance is in principle appropriate. It need not lead to an explosive rise in the debt‐to‐GNP ratio. British history shows that the theory can work in practice. A satisfactory outcome, however, depends on government being reliable, honest, and competent. Trust is easily lost and hard to restore.     

Skills,core capabilities,and the choice between merging,allying, and trading assets

We analyze two firms’ choice between merging, allying, and trading assets. We consider a setting in which firms have assets, skills, and core capabilities; skills are the component of organizational capital that increases in the course of joint operations, core capabilities the component that does not. We find that the two firms trade assets for them to operate separately in case the two firms have high initial skills; the two firms merge in case they have similar core capabilities; they ally where there is little equilibrium double moral hazard. We compare the times to dissolution in the alliance with those to divesture or post-merger integration in the merger; for all but the last jointly operated asset, we find that joint operations cease earlier in the alliance than in the merger.     

Volatility, growth, and welfare

This paper constructs an endogenous growth model driven by self-fulfilling expectation shocks to explain the stylized fact that the average growth rate of GDP is related negatively to volatility and positively to capacity utilization. The implied welfare gain from further stabilizing the U.S. economy is about a quarter of annual consumption, which is consistent in order of magnitude with estimates based on the empirical studies of Ramey and Ramey (1995) and Alvarez and Jermann (2004). Hence, policies designed to reduce fluctuations can generate large welfare gains because smaller fluctuations are associated with permanently higher rates of growth.     

Acyclicity,anonymity, and prefilters

We analyze the decisiveness structures associated with acyclical collective choice rules. In particular, we examine the consequences of adding anonymity to weak Pareto, thereby complementing earlier results on acyclical social choice. Both finite and countably infinite populations are considered. As established in contributions by Donald Brown and by Jeffrey Banks, acyclical social choice is closely linked to prefilters in the presence of the weak Pareto principle. We introduce the notion of a conditional prefilter and use it to generalize their results. In the finite-population case, adding anonymity implies that the collection of decisive sets is a special case of a conditional prefilter. We then identify the decisiveness structure that results from adding anonymity to the weak Pareto principle. Moving to infinite populations, we obtain the decisive set that consists of the entire population as a possibility, along with a new class of prefilters that we refer to as symmetric free Fréchet prefilters. The choice of the term Fréchet prefilter is motivated by the observation that they share a defining property with the well-known Fréchet filter—namely, that all sets in the requisite collection are such that their complement is finite.     

Prediction,Estimation, and Attribution

The scientific needs and computational limitations of the twentieth century fashioned classical statistical methodology. Both the needs and limitations have changed in the twenty-first, and so has the methodology. Large-scale prediction algorithms—neural nets, deep learning, boosting, support vector machines, random forests—have achieved star status in the popular press. They are recognizable as heirs to the regression tradition, but ones carried out at enormous scale and on titanic datasets. How do these algorithms compare with standard regression techniques such as ordinary least squares or logistic regression? Several key discrepancies will be examined, centering on the differences between prediction and estimation or prediction and attribution (significance testing). Most of the discussion is carried out through small numerical examples.     

Offshoring,globalization, and welfare

We investigate the issue of offshoring in a general-equilibrium model of two countries and one sector of increasing returns to scale. Our model uncovers that offshoring occurs and endogenously evolves in a bell-shaped pattern when trade costs decline, explaining some stylized facts in developed countries. Furthermore, this simple framework can be applied to examine the welfare issue. We find that a fall in offshoring costs benefits the high-wage country but hurts the low-wage country. On the other hand, the low-wage country benefits with trade liberalization. The impact of falling trade costs on the welfare of the high-wage country depends on the values of offshoring freeness.     

Investment, expropriation, and unionization

In this paper, I examine an economy where output is produced from labor, capital and public services, and where firms and labor unions bargain over labor conditions and lobby the government over union bargaining power and public services. I compare three institutional cases: (a) competitive wage settlement, (b) bargaining over wages and employment, and (c) bargaining over wages only. I show that in cases (a) and (b) the government expropriates investment rents, but right-to-manage bargaining (c) protects investors from this expropriation.      

Risk,jumps, and diversification

We test for price discontinuities, or jumps, in a panel of high-frequency intraday stock returns and an equiweighted index constructed from the same stocks. Using a new test for common jumps that explicitly utilizes the cross-covariance structure in the returns to identify non-diversifiable jumps, we find strong evidence for many modest-sized, yet highly significant, cojumps that simply pass through standard jump detection statistics when applied on a stock-by-stock basis. Our results are further corroborated by a striking within-day pattern in the significant cojumps, with a sharp peak at the time of regularly scheduled macroeconomic news announcements.     

Impatience, pollution, and indeterminacy

This paper examines an equilibrium growth model in which production activities generate environmental pollution that has a negative welfare effect and in which individual households' subjective discount rate is a function of individual consumption, which is internal to each household, and of total pollution, which is an external factor to the individual agents. It is shown that there may exist multiple steady states and that the dynamic equilibrium may display indeterminacy, depending on the properties of the discount-rate function, the pollution-capital relationship in production technology, and the pollution-consumption relationship in instantaneous utility. The long-run effects of tighter environmental policy are subsequently examined, and the results are also found to be dependent on the above factors.     

Streets, Malls, and Supermarkets

We develop a model of competition between shopping centers, comparing competitive outcomes in three alternative modes of retail organization, namely: streets (in which neither developers or retailers internalize agglomeration effects between products); malls (in which developers internalize); and supermarkets (in which both developers and retailers internalize). For a fixed number of centers: (i) converting streets to malls intensifies developer (but not retailer) competition, which increases product range (i.e., the number of shops built by the developers) and consumer surplus, reduces profits, and has ambiguous effects on welfare; (ii) converting streets to supermarkets intensifies retailer and developer competition, has ambiguous effects on product range (number of shops), reduces profits, and increases social welfare. With free entry both conversions reduce the number of centers and, if there is excess entry, conversion to supermarkets (but not malls) unambiguously increases welfare.     

Profit,productivity, and profit-sharing

This study is an investigation of the effect of profit-sharing on labor productivity. When monitoring labor performance is costly for management, a regular wage/salary contract is insufficient to induce profit-maximizing behavior from the worker. The authors demonstrate that when this profit-maximizing behavior can be induced only through profit-sharing, a linear profit-sharing program will increase productivity and the welfare of both management and labor. The benefit from profit-sharing is increasing up to the point where the utility of additional income is offset by the negative utility of extraordinary effort (working harder or providing higher quality work). The income effect, i.e., the change in negative utility of extraordinary effort given a change in income, can potentially either increase or decrease the point at which the income-effort tradeoff-reaches zero.     

Packaging,business, and society

The objective of this paper is to present the impact of packaging material on sustainability. The article analyzes the size of the problem that arises from the use of packaging and the effect of various types of packaging material on waste management. The data on solid waste from the United States and the European Union reinforce that the problem is not only huge but also requires immediate attention. The research found that paying attention to packaging has the potential to improve economic, environmental, and social sustainability. Reducing packaging in supply chains improves profitability for organizations, reduces environmental impact, and helps societies in lowering the cost of disposal. The cost of packaging materials and the costs of disposal and landfill, are borne by the end consumers. Suggested approaches to minimizing the generation of packaging waste include concerted efforts for reducing packaging throughout supply chains where elimination of packaging is not feasible, the formation of a global policy on the use and disposal of packaging materials, and educating consumers.     

Delegation, Committees, and Managers

Attempts to economize on decision-making time imply that groups of peers may delegate authority to a small committee of managers even though this means that the information and preferences of the uninvolved players are neglected. Decisions are more likely to be delegated to players with better information and more representative preferences. The possibility of ex post protests may force managers to take the preferences of others into account but may also give them incentives to ignore their private information. The argument may explain employees' willingness to let bosses decide, and thus throw some light on the theory of the firm.