Adam Smith and the division of labour: is there a difference between organisation and market?

The paper claims that, in The Wealth of Nations, the divisionof labour refers simultaneously to two different things: a socialdivision of labour and an organisational division of labour.The central point is that the organisation of work (the organisationaldivision of labour) in the firm is the logical counterpart ofthe social division of labour, and that these reflect two inseparableaspects of the process of the division of labour. Smith is thusconcerned with organisations as well as with markets, each functioningaccording to the same principle. Hence, Smith does not believethat the organisational and the social divisions of labour arefundamentally different, although he does recognise some variationbetween them and describes different states of the divisionof labour within the firm, liberal and capitalist.     

The stock market and investment: another look at the micro-foundations of q theory

This paper introduces a novel distinction between real q andfinancial q. The paper examines three versions of financialq developed by Brainard and Tobin, Minsky and Hayashi, respectively.These theories differ regarding the nature of stock market pricedetermination and their use of marginal productivity theory.It is shown that non-profit maximising behaviour by managersdoes not invalidate q theory. It is also shown that if managersand shareholders have different profit expectations, this leadsto an equilibrium value of q that differs from unity. Lastly,the implicit claims in q theory regarding the efficient roleof stock markets as regulators of capital accumulation are shownto depend on assumptions about stockholder behaviour.     

Hicks on monetary theory and history: money as endogenous money

Hicks was never tired of saying that monetary theory is in history.What he meant was that monetary theory is intrinsically relatedto real events, and more importantly that monetary issues needto be analysed in a dynamic sequential context in which timeplays an essential part. He went on developing a particularsequential analysis: the study of what happens within a singleperiod (‘single-period theory’) and the study ofthe linkages between a succession of those periods (‘continuationtheory’). It is suggested that this distinction providesa useful lesson for modern endogenous money theorists.     

The Dahrendorf hypothesis and its implications for (the theory of) economic policy-making

The sociologist R. Dahrendorf has recently suggested that thereis no and there ought to be no convergence of economic policiestowards some common ideal model. On the contrary, he statesthat ‘diversity is [...] at the very heart of a worldthat has abandoned the need for closed, encompassing systems’.It is shown in this paper that the Dahrendorf hypothesis isdifficult to reconcile with orthodox economic approaches toeconomic policy-making. A perspective on policy-making thatintroduces either fundamental uncertainty or endogenous policypreferences or both is, however, shown to be consistent withthe Dahrendorf hypothesis.     

Environmental self-auditing: setting the proper incentives for discovery and correction of environmental harm

Many firms conduct 'environmental audits' to test compliancewith a complex array of environmental regulations. Commentatorssuggest, however, that self-auditing is not as common as itshould be, because firms fear that what they find will be usedagainst them. This article analyzes self-auditing as a two-tieredincentive problem involving incentives both to test for andto effect compliance. After demonstrating the inadequacy ofconventional remedies, we show that incentives can be properlyaligned by conditioning fines on firms' investigative effort.In practice, however, the regulator may not be able to observesuch effort. Accordingly, we propose and evaluate the use ofthree observable proxies for self-investigation: the mannerin which the regulator detected the violation; the firm's owndisclosure of violations; and the firm's observed correctiveactions. Each method has its own efficiency benefits and informationalrequirements, and each is distinct from EPA's current auditpolicy.     

A materialist development of some recent contributions to the labour theory of value

The paper offers a novel interpretation and affirmation of theopening arguments of Capital, answering the fundamental butneglected question of why labour is the substance of value.Marx's arguments require that two philosophical threads, oftenseparated in the literature on value, be woven together. Theargument that value is the intrinsic ‘content’ makingcommodities exchangeable employs the thread of realism. Theargument that abstract labour is the emergent ‘socialsubstance’ of value employs the thread of dialectics.This interpretation develops the materialist and dialecticalphilosophy of E.V. Ilyenkov and deepens the approach to valuetheory initiated by Ben Fine.     

The status of economics as a naturalistic social science

Naturalistic social science is held frequently to be the mosteffective means of discovering social reality (e.g., Kincaid,H. 1996. Philosophical Foundations of the Social Sciences: AnalyzingControversies in Social Research, Cambridge, Cambridge UniversityPress; McIntyre, L. 1996. Laws and Explanation in the SocialSciences, Boulder, CO, Westview). This paper evaluates economicsas such a science. From Kincaid (1996), criteria for naturalismin social science are identified. The focus here is whetherrational, objective empirical methods exist for choosing economictheories; whether fair, cross and independent tests exist fortheories, assumptions and methodological norms; and whethereconomic theories chosen in these ways have public policy relevance.Examples from economics are related to each of these naturalisticcriteria. These encompass the relevance of econometrics to testingeconomic theories, the complications the non-natural-kind qualityof economic variables impose on testing, and the question ofwhether naturalistic methods reveal economic reality. The paperconcludes that the practice of economics does not, and is notable to, rely on naturalistic methods.     

Does Partisan Heritage Matter? The Case of the Federal Reserve

Received evidence suggests that changes in appointer- and overseer-preferencesinfluence monetary policy (i.e., partisan heritage matters).Evidence presented here, on the other hand, is consistent withchanges in the cost of pursuing a common preference influencingpolicy. I draw this evidence from a panel of Federal Open MarketCommittee (FOMC) votes and find support for the following conclusions:(1) Federal Reserve Board (FRB) governors who were nominatedand confirmed by the same party (Republican or Democrat) prefersignificantly looser policy than do other FOMC members. (2)Monetary policy is significantly looser when either party controlsthe oversight mechanism (i.e., the presidency and Senate) thanwhen control is split. (3) Oversight acts less forcefully ondistrict bank presidents than on FRB governors. In short, thepresent evidence suggests that political agents from both partiesprefer loose money and pursue this preference more efficientlywhen their parties are aligned.     

Lessons of the 1999 Abolition of Intra-EU Duty Free Sales for the New EU Member States

The abolition of intra-EU duty free was critically discussedand accompanied by a vigorous and well-financed lobbying campaignby the duty free industry. The opponents of this resolutionargued that such a tax-free sales sector created jobs and hardlyreduced the value added and excise tax revenue of individualcountries. In their opinion, the duty free trade not only contributedto the reduction of the travel fare but also could be characterisedas a supplement to the normal retail trade for some products.The challenges for some specific industries led by the abolitionof duty free shopping appear to be considerable in the short-term.However, theoretical and empirical examinations made in thisstudy suggest: (a) intra-EU duty free shopping disturbs theallocation neutrality guaranteed in the single market, (b) macroeconomicsignificance of duty free shopping is rather negligible, and(c) some background studies made for the lobbyists exaggeratethe negative impacts of eliminating intra-EU duty free shopping.These three important arguments, which can also be applied tothe new EU Member States, justify the abolition of intra-EUduty free shopping. (JEL F10; F15; F18; E62; P20)     

The role of the state and the hierarchy of money

This paper uses Minsky's definition of money as a two-sidedbalance sheet phenomenon to challenge many common positionson the nature, evolution and role of money. His definition isapplied to two opposing theories in the history of monetarydebates, and it is shown that the Chartalists (as opposed tothe Metallists) developed a general theory of money that canbe applied equally convincingly to the entire era of state money.This theory is then used to show that the state's power to makeand enforce tax laws renders its money the most acceptable formof debt within what can be considered a 'hierarchy' of monies.This leads to some important policy implications as well asa strengthening of the endogenous money position.     

Labor Market Institutions, Wages, and Investment: Review and Implications

Labor market institutions, via their effect on the wage structure,affect the investment decisions of firms in labor markets withfrictions. This observation helps explain rising wage inequalityin the US, but a relatively stable wage structure in Europein the 1980s. These different trends are the result of differentinvestment decisions by firms for the jobs typically held byless skilled workers. Firms in Europe have more incentives toinvest in less skilled workers, because minimum wages or unioncontracts mandate that relatively high wages have to be paidto these workers. I report some empirical evidence for investmentsin training and physical capital across the Atlantic, whichis roughly in line with this theoretical reasoning. (JEL E22,E24, J23, J24, J31)     

Court of Public Opinion: Government Accountability and Judicial Independence

Using a simple model of policy making in a system characterizedby formal separation of powers, judicial dependence on governmentsupport, asymmetric information between voters and the government,and political accountability of the policy branch, I show conditionsunder which rational voters force the government to cede powerover legislative decisions to the courts. Specifically, thepublic uses its ability to hold the elected branches of governmentaccountable to enforce a judicial veto when judicial oppositionto legislation provides more reliable information to votersthan government support for legislation does. The model thusprovides a theoretical justification for, and suggests importantlimits to, the common assumption that disregard for judicialdecisions is politically costly for elected politicians. Themodel also demonstrates how other observed patterns in judicialpolitics—including judicial rubber-stamping of governmentdecisions and government "passing the buck" to courts—canarise as equilibria in the same simple framework.     

A Methodological Note on Long-Period Positions

This brief paper seeks to overcome a number of methodologicaldisagreements among economists who use the long-period methodof analysis. In particular, it attempts to clarify the key distinctionsbetween convergence and stability, convergence and gravitationand chronological and theoretical persistence. The conclusionis that the theoretical soundness of the long-period methoddepends on the convergence of actual magnitudes towards theirlong-period counterparts, an empirical issue to which theoreticalconsiderations of stability are irrelevant.     

National Policy Interests in the Duty-Free Market

In 1999 the EU abolished duty-free on intra-EU travel. OtherEuropean countries and many countries outside Europe still retainduty-free shopping for international travellers, as does theEU in relation to external travel. This paper looks at nationalpolicy interests in the retention, or further abolition, ofduty-free. We note that these will relate closely to the structureof competition in the duty-free market, and to the tax levelson high-street sales in different countries. The existence ofduty-free trade requires that countries have reasons both toadmit duty-free goods and to permit their sale to departingpassengers. We argue that low-tax countries might be more likelyto perceive gains from unilateral abolition of duty-free salesto departing passengers, while high-tax countries would onlybenefit from concerted action to abolish duty-free. (JEL D4,H2, H87)