Alternative Modelle und Hypothesen der Konsum- und Sparentscheidung(1)

Summary For the analysis of the allocation of personal disposable income to the different consumption goods and savings, an indirect-addilog-expenditure-system (IAES) has been constructed. Compared to the linear-expenditure-system (LES) the IAES to far more flexible and is not based upon the idea of minimum-consumption- or minimum-saving-quotas. On the other hand, marginal income shares are not fixed parameters. The IAES allows the derivation of a systematic savings- and consumption-function and supplies consistent income elasticities. But it will be shown that consistent demand systems are only restrictively able to consider all major determinants of the decision-problem consumption or saving. The derived system does not only neglect the effects of wealth on consumption and savings but also the results of real income fluctuations due to the business cycle. Also phenomena like unemployment and uncertainties regarding estimates of the future or inflation are neglected. With the help of an adjustment-procedure a part of these disadvantages has been eliminated. The adjustment with regard to the entire private consumption and savings supplied income elasticities which lead to an almost constant consumption- and savings-share in the period under investigation.     

Finance,investment and innovation: A theoretical and empirical comparative analysis

The paper compares the relative efficiency of country models in the relationship between finance and investments. Results, confirmed under three different panel data estimates (Arellano-Bond GMM method, random and fixed effect estimates) suggest that: i) the UK thick market reduces informational asymmetries for large firms and for those firms providing good signals to shareholders; ii) the Japanese vertical (between firms and banks) integration and horizontal (among firms) integration almost eliminates financial constraints (the horizontal integration effect) and equates agency costs across firms (the vertical integration effect). These results are consistent with the short-termist hypothesis which assumes that the Japanese economic system can process information more efficiently reducing managerial myopic behaviour and thereby determining positive effects on long term growth.     

From “tax state” to “debt state”

The paper is motivated by Joseph A. Schumpeter's The Crisis of the Tax State. It inquires whether the buildup of government debt in peacetimeprosperity is a threat to the stability, existence or creation of viable tax states. The paper begins by setting out Schumpeter's conception of the tax state and the nature of recent political-economic events which have reinvigorated the concept. Next the paper sets out some simple debt dynamics and sketches a debt-induced business cycle arising from heavy reliance on debt finance in peacetimeprosperity. Finally, the paper assesses threats to the tax state in light of recent work on path dependence and positive feedback. An attempt is made to throw some light on whether the plethora of new, and often small, states spawned by the demise of communism can be viable tax states.Essay on Government, the Tax State and Economic Dynamics submitted to the Third Schumpeter Prize Competition.     

“Buy Domestic” Campaigns and Optimal Tariffs

This paper attempts to analyze the strategic use of optimal tariffs and to examine the effects of national bias on the optimal trade policy and social welfare in a two-country, two-good, price competition model derived from Neven et al. (1991). The major findings are as follows. (1) If all consumers prefer the domestic good, then buy domestic campaigns will decrease the prohibitive tariff rate and increase local welfare. (2) If at least some consumers prefer the foreign good, but not to a great extent, then buy domestic campaigns will not change the optimal tariff rate, but may improve local welfare. (3) When all consumers greatly prefer the foreign good, then promotion of buy domestic decreases the optimal tariff rate, but it cannot improve social welfare. With this framework, we also prove that buy domestic campaigns serve as a substitute for tariffs with respect to a strategic trade policy.     

Power,luck and the right index

Summary We have pointed out the theoretical drawbacks of the traditional indices for measuring a priori voting power inasmuch as they are implied in considering the coalition value a private good. This criticism caused us to view the coalition outcome as a public good. From this aspect and additional considerations with respect to power, luck, and decisiveness, we obtained a story describing the characteristics of an adequate measure of a priori voting power. These characteristics were found to be fulfilled by an index presented by Holler (1978). Through the above analysis this index has received its theoretical justification. An independent view of this index was then provided by means of an axiomatic characterization. This characterization makes possible abstract comparison of the index with previously established private good indices.While we have restricted our attention to simple games, the index presented can be generalized to provide a value on games in characteristic function form. We leave this topic for future conideration.     

Artificial worlds and economics,part II

This paper continues the discussion of artificial worlds (AWs) begun in Lane (1993b). Here, the focus is on two kinds of AWs. The first, classifier systems, can be used to represent agents that are capable of generating complex behaviors in response to intermittent rewards from an environment of which they are a part. A collection of such agents, engaging in economic interactions with one another, produces another kind of AW, in which such interesting aggregate behaviors as the formation of bubbles and crashes and technical trading in an artificial stock market, may arise. The second kind of AW considered in this paper is artificial economies. These AWs can provide a dynamic, nonequilibrium, microfounded account of such aggregate-level or macroeconomic phenomena as stable growth paths, business cycles, and Pareto firm-size distributions.     

Marktstruktur und Preisverhalten in der österreichischen Industrie

Summary Being part of a larger investigation concerning forms and intensity of competition in the Austrian economy this paper deals with the characteristics of market structure and pricing behaviour in the industrial sector. Mainly based on a detailed questionnaire this study is representative for the group of larger Austrian industrial enterprises (sales of more than 100 Mill. AS) which produced more than two thirds of total industrial ouput. According to this study the dominant market structure of the Austrian industry is that of a close oligopoly. The subjective estimation of the price elasticity of demand by the firms participating in our survey was generally very pessimistic, being the lower the larger the market share of the respective firm.The most common principle of price formation for new products in the Austrian industry is a system of flexible full cost pricing, meaning cost orientation plus variable profit margins. Our study also shows that a large majority (60% resp. 80%) of the enterprises under investgation use discount, i.e. price differentiation in their pricing policies. These aspects indicate that-in line with marginalistic theories — demand situations obviously exercise a substantial influence on pricing behaviour. Considering the causes for price changes, however, cost oriented influences were clearly dominating. This stresses the great importance of the Austrian pricecontrol mechanism, the Paritätische Kommission, the institutionalized form of incomes policy in Austria.An econometric analysis of the process of price formation in the Austrian industry showed that the main factors of price changes were changes in labour costs and in international price levels, especially in the level of export prices. Our investigation also dealt with the question, whether differences in market-structure result in different, responses to demand fluctuations. Considering both the concepts of actual and potential competition it can be shown that enerprises in a more competitive situation react towards changes in demand conditions in a more stabilizing way that monopolistic firms: The reduce prices earlier in recession and they react to boom periods by expanding their capacities rather than by raising prices. Market structure and the intensity of competition thus seem to influence the position of the Phillips-curve in an economy.     

Negative externalities and welfare improving preference changes

When the over-consumption of open access resources and congestible public goods generate negative externalities and social welfare losses, many individuals and environmental advocacy organizations offer as an alternative nongovernmental solution the adoption of new ecology sustaining preferences. This paper shows that exogenously inducing a change in preferences and the adoption of new externality internalizing preferences, which increase an individual's marginal rate of substitution between a private good and a good whose consumption imposes external costs on others, not only reduces the aggregate output of the negative externality but also produces an economic state that is socially superior to the initial state. Because it is based on both the initial and new preferences, the social superiority welfare criterion makes possible meaningful welfare comparisons of economic states generated by preference changes. A computational general equilibrium model is then used to simulate preference changes and to calculate the resulting allocative and welfare effects. The computer simulations reveal that important factors in the attainment of a socially superior state include (i) the particular characteristics of an individual's negative externality reaction function, (ii) the magnitude of the preference change, and (iii) the number of individuals changing preferences.     

Convention, Social Order, and the Two Coordinations

The word coordination has two meanings, and thesemeanings are often conflated. One meaning, associated with ThomasSchelling, is seen in situations like choosing whether to driveon the left or the right; the drivers must coordinate to eachother's behavior. The other meaning, associated with FriedrichHayek, means that a concatenation of activities is arranged soas to produce good results. Along with the Schelling sense ofcoordination comes the notion of convention, such as drivingon the right. Some conventions are consciously designed; othersemerge without design (or are emergent). Along with the Hayeksense of coordination comes the notion of social order. Somesocial orders, such as the skeleton of activities within thefirm or within the hypothetical socialist economy, are consciouslyplanned. Other social orders, such as the catallaxy of the freesociety, function without central planning (or are spontaneous).Distinguishing between the two coordinations (and, in parallelfashion, between convention and social order) clarifies thinkingand resolves some confusions that have arisen in discussionsof coordination and spontaneous order. The key distinctionsare discussed in the context of the thought of, on the one hand,Menger, Schelling, David Lewis, and the recent path-dependencetheorists, and, on the other hand, Smith, Hayek, Polanyi, Coase,and the modern Austrian economists. The paper concludes witha typology that encompasses the several distinctions.     

Der Weg zur Konvertibilität

Ohne ZusammenfassungVortrag, gehalten am 26. Mai 1955 in der Nationalökonomischen Gesellschaft in Wien.     

Mutually Destructive Bidding: The FCC Auction Design Problem

In general, synergies across license valuations complicate the auction design process. Theory suggests that a simple (i.e., non-combinatorial) auction will have difficulty in assigning licenses efficiently in such an environment. This difficulty increases with increases in fitting complexity. In some environments, bidding may become mutually destructive. Experiments indicate that a properly designed combinatorial auction is superior to a simple auction in terms of economic efficiency and revenue generation in bidding environments with a low amount of fitting complexity. Concerns that a combinatorial auction will cause a threshold problem are not borne out when bidders for small packages can communicate.     

Individual Decision Making in a Negative Externality Experiment

The experimental treatments analysed in this paper are simple in that there is a unique Nash equilibrium resulting in each player having a dominant strategy. However, the data show quite clearly that subjects do not always choose this strategy. In fact, when this dominant strategy is not a focal outcome it does not even describe the average decision adequately. It is shown that average individual decisions are best described by a decision error model based on a censored distribution as opposed to the truncated regression model which is typically used in similar studies. Moreover it is shown that in the treatments where the dominant strategy is not focal dynamics are important with average subject decisions initially corresponding to the focal outcome and then adjusting towards the Nash prediction. Overall, 66.7% of subjects are consistent with Payoff Maximization, 27.8% are consistent with an alternate preference maximization and 5.6% are random.     

Hugging Trees: Claiming de Facto Property Rights by Blockading Resource Use

This paper explores conflicts between two groups,the industry and theenvironmentalists, over whether an indivisible resource (e.g., an ancient tree) should be harvested or preserved. In a complete information war ofattrition the environmentalists' willingness to blockade harvest attemptsmay control resource use as effectively as if they held property rights. Optimal government intervention will override this ability for somebenefit/cost combinations but may augment it for other combinations.Introducing uncertainty about the environmentalists' benefits results inextended disputes and consequent lack of efficiency. Governmentintervention for welfare reasons generally reduces these efficiencylosses.     

Existence of an equilibrium in first price auctions

Summary We study the first price auction game with an arbitrary number of bidders when the bidders' valuations are independent from each other. In technical words, we work within the independent private value model. We show that if the supports of the valuation probability distributions have the same minimum and if this minimum is not a mass point of any of these distributions, then a Nash equilibrium of the first price auction exists. We then modify the first price auction game by adding a closed interval of messages. Every bidder has to send a message with the bid he submits. These messages are used in the resolution of the ties. The winner of the auction is chosen randomly among the highest bidders with the highest value of the message among the highest bidders. In the general case, we prove the existence of a Nash equilibrium for this augmented first price auction.I wish to thank Mamoru Kaneko and a referee for their comments on an earlier draft.     

The “Dorfman Steiner” rule

Conclusion When this research was started, it was guessed that the Dorfman-Steiner rule would lose its relevance in an intertemporal setting. This belief has turned out to be false: along the optimal paths ofp (t) ands (t), and must be equal. The only difference with the Dorfman-Steiner result is that they will be different from unity.The author is chargé de cours at the Faculté Universitaire Catholique de Mons (Belgium). He has greatyl benefited from comments by M. Beuthe and J. J. Lambin.     

Vertical and Horizontal Trust Networks in Bureaucracies: Evidence from the Third Reich

In a seminal contribution to the literature on bureaucracy, Breton and Wintrobe (The Logic of Bureaucratic Conduct: An Economic Analysis of Competition, Exchange, and Efficiency in Private and Public Organization. New York, NY: Cambridge University Press, 1982) develop a model wherein subordinates and superiors in a bureaucratic structure trade with each other to advance the objectives of the superiors. The success of such an organizational arrangement (for superiors) is based upon the development of vertical trust networks in a way that facilitates the promise of informal payments by superiors in return for informal services provided by their subordinates. Breton and Wintrobe [Journal of Political Economy 94 (1986) 905] also provide a theoretical application of their model by describing the Nazi bureaucracy as a conglomeration of competing agencies that zealously carried out the Final Solution to the Jewish question. As an extension, this note develops two compelling empirical examples of vertical and horizontal trust networks within the Nazi regime: Einsatzgruppen As (Special Action Detachments) attempt to liquidate all Lithuanian Jews after the German invasion of the U.S.S.R. in 1941 and the 20 July 1944 attempt to assassinate Adolf Hitler.JEL Classification: D23, D73.     

Economics as mechanism: The mind as machine in Hayek's sensory order

InThe Sensory Order, Friedrich A. Hayek describes the human mind as an apparatus of classification that evolves through experience and that reaches decisions by modeling the alternative courses of action that are available to it. Hayek's mechanistic conception of mind argues aginst the possibility of central planning and against the cogency of any rule that denigrates subjective decision making by employers or other economic agents. As implied by Gödel's proof, no brain, human or mechanical, can ever be sufficiently complex to explain itself. There will therefore always be certain knowledge and rules that cannot be articulated to the satisfaction of a central planner or tribunal.     

Economic and political competition in neoclassical and evolutionary perspective

Neoclassical welfare economics still looms large in the discipline of public choice. Particularly, by constructing analogies of political competition fundamental shortcomings of old neoclassical paradigms found their way into a new theory of political economy. Especially the failure to deal with the problem of limited knowledge and with the role of institutions obscured fundamental differences between political and economic systems of coordination and control. Hence, I propose a non-neoclassical perspective, using Hayekian concepts like competition as a discovery procedure or spontaneous order to develop an alternative agenda for many fields of public choice. I shall first outline a critique of neoclassical equilibrium settings in economics and in similarly constructed models of democracy. Then various properties of economic and political institutions, the competition of ideas and institutional competition among jurisdictions will be discussed in an evolutionary perspective. Not surprisingly, these applications reveal some similarities to central themes of constitutional political economy.     

Land use, biodiversity, and sustainability

We focus on the effects of deforestation for agricultural purposes on biodiversity. This topic has been dealt with in the recent literature where forested land and biodiversity are treated as synonyms. In contrast to that, this paper distinguishes between forested land and forest itself, the latter being interpreted as a measure of biodiversity. The regenerative capacity of forests is modeled as a function of the own stock and of the habitat size. In particular, the threat of a given minimum viable population to be achieved in the course of the reduction of habitats is taken into account. The corresponding structure of a sustainability indicator is elaborated.     

On designing economic agents that behave like human agents

This paper explores the idea of constructing theoretical economic agents that behave like actual human agents and using them in neoclassical economic models. It does this in a repeated-choice setting by postulating artificial agents who use a learning algorithm calibrated against human learning data from psychological experiments. The resulting calibrated algorithm appears to replicate human learning behavior to a high degree and reproduces several stylized facts of learning. It can therefore be used to replace the idealized, perfectly rational agents in appropriate neoclassical models with calibrated agents that represent actual human behavior. The paper discusses the possibilities of using the algorithm to represent human learning in normal-form stage games and in more general neoclassical models in economics. It explores the likelihood of convergence to long-run optimality and to Nash behavior, and the characteristic learning time implicit in human adaptation in the economy.