An empirical approach to distributive justice

This paper starts from the idea that it would be interesting to complement the deductive reasoning about economic justice with an empirical approach which tries to describe and interpret the actual value judgements held by the economic agents. We present results from a pilot study with 180 subjects. Factor analysis indicates that it makes sense to work with desert and compensation criteria, as most economists and philosophers do. We then illustrate that it is possible to operationalise equity judgements, estimating for each subject separately an equation describing his perception of the equitable compensatory income variation. We use the factor analysis results to construct a ‘compensation’ and a ‘desert’ index. All coefficients can be nicely interpreted and interesting patterns of interindividual variation emerge.     

Reconciling economic and biological modeling of migratory fish stocks: Optimal management of the Atlantic salmon fishery in the Baltic Sea

The paper puts forward a model of the Atlantic salmon fishery in the Baltic Sea that integrates the salient biological and economic characteristics of migratory fish stocks. Designed to be compatible with the framework used for actual stock assessments, the model accounts for age-structured population dynamics, the seasonal harvest and competing harvesting by commercial and recreational fishermen. It is parameterized for the Simojoki River stock. The socially optimal policy for maximizing discounted net benefits from the fishery within an uncertain environment is determined using a dynamic programming approach and numerical solution method. Our results indicate that substantial economic benefits could be realized under optimal management without compromising stock sustainability.     

Sustainability and its relation to efficiency under uncertainty

Evaluating the long-run consequences of present actions, as in the context of sustainability, requires information about the actions’ outcomes and about future preferences that is often uncertain. We analyze a risk-based criterion of sustainability and a corresponding efficiency concept that cover these uncertainties. We derive several properties of these criteria and formally characterize the trade-off between sustainability and efficiency. Furthermore, we show that maximizing the probability of ex post efficiency under a sustainability constraint provides an interesting choice rule and that, for a special case, this rule is connected to portfolio theory. We are indebted to an anonymous referee whose comments helped substantially to improve the article.     

Cost-effective compensation to avoid carbon emissions from forest loss: An approach to consider price-quantity effects and risk-aversion

Analyses were carried out on financial compensation to avoid loss of tropical forests and related carbon (C) emissions when marginal financial yield declined for land-use options with extended areas, and when a risk-averting perspective (modeled according to financial theory around the capital asset pricing model) is assumed. The approach in this study was to consider natural forest, forest plantation, pasture, and cropland simultaneously to investigate how an optimized land-use distribution may reduce the amount of compensation necessary to avoid C emissions from forest loss.The financial compensations derived were as high as US$ 176 per hectare per year when comparing natural forests only with the most profitable alternative (croplands). However, compensation decreased to US$ 124 for risk-neutral decision-makers, who would strive for optimized land-use allocation, and to only US$ 47 per hectare per year for risk-avoiders, who would look to maximize the reward-to-variability ratio. Sensitivity analyses indicated that the compensation under risk-aversion increased much less than under risk-ignoring when increased productivity of agricultural land-use or growing demand for agricultural products was simulated. It was concluded that considering appropriate diversification strategies and the well documented human behavior to avoid risks is an important step in developing cost-effective compensation policies.     

Climate change as a threat to biodiversity: An application of the DPSIR approach

Climate change and its consequences present one of the most important threats to biodiversity and the functions of ecosystems. The stress on biodiversity is far beyond the levels imposed by the natural global climatic changes occurring in the recent evolutionary past. It includes temperature increases, shifts of climate zones, melting of snow and ice, sea level rise, droughts, floods, and other extreme weather events. Natural systems are vulnerable to such changes due to their limited adaptive capacity. Based on an analysis using the DPSIR framework, this paper discusses some of the important socio-economic driving forces of climate change, with a focus on energy use and transportation. The paper also analyses observed and potential changes of climate and the pressures they exert on biodiversity, the changes in biodiversity, the resulting impacts on ecosystem functions, and possible policy responses. The latter can be divided into mitigation and adaptation measures. Both strategies are needed, mitigation in order to stabilise the greenhouse gas concentrations in the atmosphere, and adaptation in order to adjust to changes that have already occurred or cannot be avoided. One mitigation option, increased biofuel production, which is also a response to oil depletion, would change land use patterns and increase human appropriation of net primary production of biomass, thereby threatening biodiversity. By considering the first order and second order impacts of climate change on biodiversity when developing policy measures, it will be possible to integrate ecosystem and biodiversity protection into decision-making processes.     

Bio economic modeling for a sustainable management of biodiversity in agricultural lands

For several decades, significant changes in farmland biodiversity have been reported in Europe. Agriculture is a major driver of these modifications. Taking into account these environmental impacts, agriculture nowadays aims at a more sustainable way of producing which would reconcile its economic and ecological functions. The objective of this paper is to give insights into the impact of public policies on both conservation of biodiversity and farming production. We develop a macro-regional model combining community dynamics of 34 bird species impacted by agricultural land-uses and an economic decision model. The ecological dynamic model is calibrated with the STOC (French Breeding Bird Survey) and AGRESTE (French land-uses) databases while the economic model relies on the gross margins of the FADN (Farm Accountancy Data Network). We investigate the scenario based on subsidies and taxes. We show that simple economic instruments could be used to establish scenarios promoting economic performances and bird populations. It is pointed out how the sustainability of the policies is sensitive to the ecological and economic indicators used by the planner. The bio-economical analysis shows several solutions for the ecology-economy trade-off. These results suggest that many possibilities are available to develop multi-functional sustainable agriculture.     

An empirical procedure to evaluate monetary management under exogenous changes in the money supply

This article proposes an empirical procedure to evaluate central banks’ monetary management in a presence of exogenous changes in the money supply. Monetary shocks deviate the market interest rate from the target, and the monetary authority decides its optimal intervention in the money market, bearing in mind the benefits and costs of re-establishing its target interest rate. According to monetary management theory, typically a central bank will allow for variation in the interest rate within a range around the target interest rate, thereby intervening in the money market when the interest rate trends toward a point outside that range. In this context, we develop an empirical strategy to analyse central bank’s reactions to exogenous money changes by making a statistical comparison of the actual and the estimated intraday shift in the money supply. We also employ our method to test the reactions of the Brazilian Central Bank to liquidity shifts caused by changes in the Treasury Single Account (TSA) balance. Using different metrics of analysis, the applications of our procedure confirms the predictions of the optimal monetary management theory.     

A portfolio approach to the optimal mix of funded and unfunded pensions

ABSTRACT

In this paper, we address the optimal funding of pensions by means of portfolio choice approach. Considering the unfunded (Paygo) pension system as a ‘quasi-asset’ with hedging and diversification properties, we derive the optimal portfolio mix of funded and Paygo systems within a mean variance and Bell linear exponential models. Our analysis involves both analytical computations and empirical estimations of optimal values using real long-term data for equity, bonds and the Paygo asset for several OECD countries and several time periods covering the time span 1897–2016. We find that in most cases a mix of both systems is desirable with a larger magnitude of Paygo system in the case of the Bell framework as we capture attitudes towards asymmetry and tail risks that are typical to equity markets.     

How to improve scenario analysis as a strategic management tool?

Scenarios are claimed to support strategic decision makers. They are especially effective in dealing with uncertainties. This paper addresses some drawbacks of the conventional scenario method, which is especially directed at handling these uncertainties, and indicates possible avenues for methodological adaptations. We take the approach, which rests in the Shell tradition, as exemplary for our discussion on the mainstream scenario methodology. This approach has some limitations when it comes to dealing with simultaneous trends and countertrends, and trends or clusters of trends that are not thought of beforehand, especially the methodological requirements of causality and consistency, which might be limiting factors in this respect. This paper indicates alternative ways for scenario construction. It discusses the use of either recombinant scenarios, context scenarios, or inconsistent scenarios and/or combinations of these scenarios. These options explicitly incorporate the notion of ‘paradoxical trend’ as the codriver of future developments into the methodology.     

A risk index to model uncertain portfolio investment with options

This paper models the portfolio investment performance with options by using a risk index, which is defined as the average loss below the risk-free interest rate. Using a risk-free interest rate as the uniform reference rate for all portfolios, the risk index offers an easier-to-compare loss value than the value-at-risk return, where portfolio specific references are used to calculate the average losses. Besides, uncertainty theory is used in the paper to derive the portfolio decision when stock prices are subject to experts' estimations. By analytical computation and empirical analysis, we find that portfolios considering options generate better return than the ones without options. The empirical analysis reveals that the options can effectively hedge the risk, and the call option with a higher exercise price offers higher return per unit of option premium. Furthermore, our proposed model produces higher expected return in most cases than the model where the risk is measured by the chance of the total return failing to reach the threshold level of return.     

Ecological and economic sustainability in fishery management: A multi-agent model for understanding competition and cooperation

Recent studies have shown that many marine ecosystems are experiencing an accelerating loss of population and biodiversity. It is apparent that there is a growing disparity between the available supply of fish and the desire of the growing world population to catch them. Although studies have begun to question the ecological sustainability of managed fishery systems, they often omit the corresponding effects on the economic sustainability of fishery industries. This is particularly important in rural coastal areas where the fishing industry is often a dominant employer. In this article, we analyze the interactions between economic and ecological dynamic systems using a multi-agent dynamic model of fishery management. Multiple agents (fishers) harvest multiple fish species and adapt the amount and allocation of their effort to their value functions, which are given as net profits of the fish harvest sold for a market price. This is largely unique in fishery models, since many econometric studies view fishers as represented by homogenous ‘average’ agents. We introduce and compare two different decision rules governing the behavior of fishers engaged in a competitive market. We demonstrate a situation where both behaviors lead to a decline of all fish stocks, as well as profits for most fishers. As an alternative, we introduce a cooperative approach in which fisheries jointly set sustainable limits for total harvest and effort that are then distributed to the fishers according to distribution rules. The simulation reveals that fish stocks and profits can stabilize at significantly higher levels in the cooperative case, leading to a continuous accumulation of capital for all fishers. This model demonstrates key aspects of overfishing conflicts that can be overcome through planned fishing quotas and cooperative market mechanisms. It also demonstrates a novel approach for simulating the dynamic behavior of heterogeneous fishers.     

An empirical investigation of complexity and its management in new product development

New product development (NPD) programmes are increasingly complex and difficult to manage. The consequences of poorly managed development complexity can be highly visible and even lead to project failure. To effectively screen new product proposals and manage NPD projects more efficiently, NPD teams need to be equipped with the capacity to identify development complexity and possess the knowledge to manage it. Unfortunately, there have been few studies which specifically illuminate the challenges and experiences product developers face in dealing with complexity. Our research attempts to help fill this gap. Our study is based on exploratory field interviews with 32 project leaders and team members. We first focus on identifying the specific complexity issues encountered in NPD. We then identify what NPD teams actually do to minimise the potential adverse consequences of complexity. Finally, we examine whether a company's development process reduces or increases the complexities NPD teams encounter. Based upon our research, we present our results and conclude by offering several recommendations for complexity management as well as suggestions for future research.     

Agent-based modeling of the diffusion of environmental innovations — An empirical approach

This paper presents an agent-based model of the diffusion of water-saving innovations. The empirical foundation of this model is a study, which was carried out for that specific purpose. As an example case, the diffusion of three water-related innovations in Southern Germany was chosen. The model represents a real geographic area and simulates the diffusion of showerheads, toilet flushes, and rain-harvesting systems. Agents are households of certain lifestyles, as represented by the Sinus-Milieus® from commercial marketing. Agents use two different kinds of decision rules to decide upon adoption or rejection of the modeled innovations: A cognitively demanding deliberate decision rule and a very simple decision heuristic. Thus, the model integrates concepts of bounded rationality. The overall framework for decision-making is the Theory of Planned Behavior, which has been elaborated using innovation characteristics from diffusion research. The model was calibrated with empirical data stemming from a questionnaire survey and validated against independent data. Scenarios for the nearer future show that water-saving innovations will diffuse even without further promotion, and different promotion strategies that relate specifically to both innovations and lifestyles can be pointed out.     

Operationalising a resilience approach to adapting an urban delta to uncertain climate changes

Climate change may pose considerable challenges to coastal cities, particularly in low-lying urban deltas. Impacts are, however, associated with substantial uncertainties. This paper studies an uncertainty-robust adaptation strategy: strengthening the resilience of the impacted system. This approach is operationalised for the city of Rotterdam, using literature study, interviews, and a workshop. Potential impacts have been explored using national climate statistics and scenarios and a set of ‘wildcards’ (imaginable surprises). Sea level rise, particularly in combination with storm surge, and enduring heat and drought are the most relevant potential stresses in the area. These can lead to damage, loss of image, and societal disruption. Unclear responsibilities enhance disruption. ‘Resilience principles’ made the concept of resilience sufficiently operational for local actors to explore policy options. Useful principles for urban resilience include: homeostasis, omnivory, high flux, flatness, buffering, redundancy, foresight and preparedness/planning, compartmentalisation, and flexible planning/design. A resilience approach makes the system less prone to disturbances, enables quick and flexible responses, and is better capable of dealing with surprises than traditional predictive approaches. Local actors frame resilience as a flexible approach to adaptation that would be more suitable and tailored to local situations than rigid top-down regulations. In addition to a change in policy, it would require a more pro-active mentality among the population.     

Using Monte Carlo analysis to investigate the relationship between overconsumption and uncertain access to one's personal utility function

The failure of income and subjective well-being to correlate strongly beyond subsistence levels has been well documented. This is an important observation from an environmental perspective because it suggests that some excess consumption could be curbed without leading to a decline in subjective well-being. At the same time, there is evidence that access to one's internal utility function is imperfect, indicating that choices may approximate utility maximization but that the correspondence is unlikely to be exact. Here I use a Monte Carlo model to incorporate findings from hedonic psychology to investigate the question of how imperfect access to one's utility may lead to negatively affective overconsumption through asymmetries in how people are able to budget their time. According to the model, consumer debt leads to a compounding of this issue. Although it cannot return well-being to the ideal level, some hedonic costs of this overconsumption can be partially mitigated through required vacation in excess of what individuals would chose themselves in a fully functioning market, perhaps along the line of the European model.     

An analysis of the efficient production frontier in the fishery: implications for enhanced fisheries management

The transformation relationship between factor inputs and outputs - the efficient production frontier (EPF)- contains important information for fisheries managers. A directional technology distance function model of the harvesting technology is used to measure changes in the EPF over time. Frontier shifts are summarized with input- and output-based frontier indicators that are interpreted as measures of bioeconomic productivity change. The model is applied to the Mid-Atlantic surf clam and ocean quahog fishery.     

Technological progress and market growth: An empirical study based on the quality-ladder approach

This paper develops an extended version of the quality-adder model by allowing for heterogeneous markets. Based on this model, it presents an empirical analysis of innovation-based growth at the market level using a technometric measurement concept. It can be shown that a growth-promoting effect due to technological progress in a particular single year is observed after between 2 and up to 7 years. This is true not only for highly innovative markets but also for those in which fewer R&D resources are invested.     

An empirical test of purchasing power parity in selected developing countries: a panel data approach

Abstract

This paper examines the empirical validity of Purchasing Power Parity (PPP) for certain large developing economies by using a panel unit root methodology. The test results show that a long run real exchange rate depreciation trend exists in certain developing countries. Without considering this depreciation trend, it is hard to verify the stationarity and to explain the existence of the extremely long half-lives of the real exchange rates. When a linear time trend is included in the tests, the results tend to support the stationarity of the underlying real exchange rate processes, and the half-lives are significantly shorter and their range can be explained by transitory disturbances.     

An agency model to explain trade credit policy and empirical evidence

This article explains trade credit policy based on the agency theory. According to this theory, we have developed an agency model based on the adverse selection and moral hazard phenomena arising from the relation between sellers and buyers. This model has been estimated by using panel data methodology applied to UK companies. Our findings strongly support the model proposed. We find that smaller firms, those with a smaller proportion of fixed assets, and those that are less profitable extend more trade credit, whereas firms with a high proportion of variable costs and high percentage of bad debts extend less.     

An ambient tax approach to invasive species

Invasive species have become an issue of increasing concern in recent years. Invasive species are species that are not native to an area but are imported either intentionally or unintentionally and become established. A primary pathway for introduction is the ballast water of ships. Although not all imported species become invasive, those that do cause extensive damage to ecosystems and have been blamed for the endangerment of numerous native species. In many cases, release of non-native species can be prevented, either through open-ocean ballast water exchange, retention of ballast water, or other biosecurity measures. However, policies designed to encourage such actions face several specific challenges. The difficulty of linking an invasion to a specific vessel and of monitoring individual vessels' care makes using standard environmental liability plans difficult if not impossible. In this paper, we present an alternative policy option, that of an ambient tax. Building on the work of Segerson [Segerson, Kathleen, 1988. Uncertainty and incentives for nonpoint pollution control. Journal of Environmental Economics and Management, 15: 87-98.], we show that an ambient tax can ensure socially optimal behavior in both the short-run and the long-run with minimal vessel specific information.