Optimal dynamic environmental policies of a profit maximizing firm

In this paper we study the optimal environmental policy of the firm for different scenarios dependent on (costs of) production technologies, financing costs, and governmental policy. The governmental instruments to be considered are:

Liberalisation and de-regulation of the public sector in the transition from plan to market

The above analysis allows several conclusions to be drawn:

The challenge of akrasia for the theory of rational choice

The phenomenon of akrasia, in which an actor makes a choice she regrets even while choosing it, appears problematic for theories of rational choice, which assume that an agent prefers any chosen course of action. The apparent possibility of akratic action presents a challenge to rational choice theorists, either to demonstrate that it is illusory or to show that akratic action does not violate the axioms of rational choice. The problematic status of akrasia is exhibited most sharply when set against the backdrop of praxeology. Therefore, this paper will explore whether the idea of akratic action can be reconciled with the fundamental principles of praxeology.

Micro foundations for meso and macro economic theory

The natures of rational thought and rational lives are described as the basis of an adaptive economizing theory which presents an alternative microeconomic foundation contrasting with but complementary to optimal control theory for modeling mesoeconomic order. Contrastingly, that micro foundation seems to imply the inappropriateness of representing macro data as an optimal economic agent. Rather, direct representation of the emergent causal order in the macroeconomic data is suggested.

The concept of choice: why and how innovative behaviour is not just stochastic

The goal of this paper is to highlight the importance of the concept of choice. To do so, a synopsis of the most important contributions to this topic—featuring an eclectic set of scholars across disciplines—is provided. As central to the argument, John von Neumann’s contributions, game theory and simulation techniques on von Neumann machines, are identified. Innovation (economic and theoretic) as the driving force behind human evolution seems to head for a new scientific paradigm based on von Neumann’s ideas.

Cournot competition and endogenous firm size

The paper studies the dynamics of firm size in a repeated Cournot game with unknown demand function. We model the firm as a type of artificial neural network. Each period it must learn to map environmental signals to both a demand parameter and its rival’s output choice. However, this learning game is in the background, as we focus on the endogenous adjustment of network size. We investigate the long-run evolution of firm/network size as a function of profits, rival’s size, and the type of adjustment rules used.

Fiscal-monetary policy coordination and debt management: a two-stage analysis

We study interactions between two policymakers, central bank and government, in managing public debt as the result of a two-stage game. In the first stage, the institutional regime is established. This determines the equilibrium solution for the second stage, in which a differential game is played between the two policymakers. It is shown that, if the policymakers can communicate before the game is played (multiple-equilibrium), coordination problems can be solved by using the concept of correlated equilibrium.

Are voters rationally ignorant? An empirical study of Portuguese local elections

The application of the rational choice postulate to a political context invariably leads to the conclusion that most voters are ill informed when making the decision on whom to vote for. In this paper, the authors conduct an empirical evaluation of the rational ignorance theory, based on the model developed by (Rogoff and Sibert Rev Econ Stud LV:1–16, (1988) and by considering that better informed voters reward political candidates who show better performances. The levels of performance are established through the construction of an empirical frontier using the Data Envelopment Analysis (DEA) methodology. According to our results, based on the 1997 Portuguese local elections, even though swing voters do not necessarily behave as rationally ignorant voters, a large majority of voters are rationally ignorant.

Constitutional Interpretation: Burke and Buchanan and their 18th Century Intellectual Roots

There is a respectable tradition of Burkean constitutional interpretation in legal scholarship whereas Edmund Burke is a relatively neglected figure in constitutional political economy. A comparison of the constitutional interpretations of constitutional political economy and Burkean legal scholarship provides a potentially fruitful outcome for both. This is particularly so given the 18th century intellectual roots of each. An examination of the Burkean tradition demonstrates why it is methodologically inductive, evolutionary and pessimistic, compared to the deductive, individualistic and optimistic approach of the Smithian tradition of constitutional political economy. Interestingly, these sharp distinctions in method produce similar results.

What is specific about evolutionary economics?

Ever since an “evolutionary” perspective on the economy has been suggested, there have been differing, and partly incommensurable, views on what specifically this means. By working out where the differences lie and what motivates them, this paper identifies four major approaches to evolutionary economics. The differences between them can be traced back to opposite positions regarding the basic assumptions about reality and the proper conceptualization of evolution. The same differences can also be found in evolutionary game theory. Achievements of the major approaches to evolutionary economics and their prospects for future research are assessed by means of a peer survey.

The Contribution of Privatization to Welfare

The primary focus of this work is on the nature of the privatization debate rather than on an attempt to explore the truth or validity of each of the many claims and counterclaims that have been made for the practice of privatization. The main objective is to discover why the issues remain controversial and whether there are prospects for reconciliation. The results obtained from the evidence examined suggest there is no well-formed theory of privatization, and no well-formed opposing theory. In the absence of a convincing theory, the authors conclude they expect the debate to continue on the lines of competition, free markets and choice versus complaints about unfulfilled promises and unexpected costs, corruption scandals and disadvantages to the poor, and suggest possible ways forward.

On good government

Besley’s treatment of principled agents is a major contribution to public choice and political economy. By focusing on politics as an agency problem, he has shown the way to a new generation of research on the interface of politics and economics.

The curious destiny of a heterodoxy: The Austrian economic tradition

The Austrian School has had a curious destiny: while contributing many concepts to contemporary economic theory, it is either ignored or criticised by much of modern economic literature. This article discusses possible reasons for this institutional sidelining and the main futures of a renewal of Austrian thought.

The Social Economics of Globalization

There is general agreement on the moral values that globalization should serve. These are widespread prosperity and economic growth, ecological sustainability, and cultural diversity. Proponents believe that neoliberal globalization will achieve these goals, while the critics believe that globalization undermines them. An institutionalist theory that recognizes the reality of economic power and choice posits that globalization enhances the power of the business sector at the expense of the government and moral–cultural sectors. Policies for redressing this imbalance are discussed.

Corporate social responsibility and the ‘game of catallaxy’: the perspective of constitutional economics

The paper examines the issue of corporate social responsibility (CSR) from the perspective of constitutional economics, focusing on the distinction between a political community’s constitutional choice of the rules of the “market game,” and the market players’ sub-constitutional choice of strategies within these rules. Three versions of CSR-demands are identified and discussed, a “soft,” a “hard”, and a “radical” version. The soft version is concerned with the issue of how “socially responsible” corporations ought to play the market game within existing rules. The hard version is about how the rules of the market ought to be changed in order to induce “socially responsible” corporate behavior. And the radical version questions the compatibility of CSR and the logic of the market game, calling in effect for adopting some alternative economic regime.

Urbanizing economics

Action takes place at a given time and place. As a science of human action, economics is, therefore, just as much about the spaces where real action occurs as it is about real time. The implications of real time for social order is better recognized than the significance of “action space.” The living city is the principal locus of action space and enabler of social change as well as the source of fundamental concepts in economic theory. Just as a loss of density and diversity in cities tends to retard dynamic discovery and development, the turn in economic theory in the mid-20th century toward static equilibrium reflected a move from an urban-based to a plantation-based conception of the economy—from the city to the farm. Some recent developments in network theory, game theory, and geography, however, can be interpreted as a re-urbanization of economics.

Transaction tax and stock market behavior: evidence from an emerging market

This study examines the impact of a stamp tax rate increase on market behavior, using data from two stock exchanges in China. We find that when the tax rate increases from 0.3 to 0.5% (which implies that the transaction cost increases by about 1/3) trading volume decreases by 1/3. This implies an elasticity of turnover with respect to a stamp tax of −50% and an elasticity of turnover with respect to transaction cost of −100%. The markets’ volatility significantly increases after the increase in the tax rate. Furthermore, the change in the volatility structure indicates that the markets become less efficient in the sense that shocks are less quickly assimilated in the markets.

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Information Disclosure Policies: When Do They Bring Environmental Improvements?

There has been a growing interest among policy makers on the use of information disclosure policies for pollution control. This paper theoretically assesses the consequences of information disclosure policies and identifies the conditions under which such policies are likely to bring environmental improvements. Based on a dynamic game framework, the paper shows that both eco-labeling and more general full information disclosure policies may not always result in pollution reduction. Full information disclosure policies are likely to be effective if the product is not heavily polluting and if the minimum quality standard is set quite low. The paper also identifies the conditions under which all consumers are strictly better off with information disclosure policies.

Liberty and national security in Adam Smith’s possible world

Thomas P. M. Barnett argues that globalization’s spread presents the United States and other liberal democracies with two unprecedented national-security problems, and proposes an ambitious military strategy for their solution. This work argues that a successful strategy to solve one of these problems must also include rational policy, public policy that makes Adam Smith’s simple system of natural liberty a reality. Thus, Barnett’s military strategy and rational policy become complementary elements of a more comprehensive strategy to solve this national-security problem. Knowledge that Smith’s simple system of natural liberty moves the world toward peace can create a need for rational policy among voters.

Constitutional interests in the face of innovations: how much do we need to know about risk preferences?

In constitutional political economy, the citizens’ constitutional interests determine the social contract that is binding for the post-constitutional market game. However, following traditional preference subjectivism, it is left open what the constitutional interests are. Using the example of risk attitudes, we argue that this approach is too parsimonious with regard to the behavioral foundations to support a calculus of consent. In face of innovative activities with pecuniary and technological externalities in the post-constitutional phase, the citizens’ constitutional interests vary with their risk preferences. To determine what kind of social contract is generally agreeable, specific assumptions about risk preferences are needed.