Economics in Institutional Perspective,Memorial Essays in Honor of K. William Kapp

In the past, the standard discussions of market failures in economics textbooks confined themselves to issues involving externalities, public goods, and common property (open access). Subsequent to George Akerlof’s famous article “The Market for ‘Lemons,’” discussions of the problems created by asymmetric information gradually became standard fare, but the issues raised by thinking of asymmetric information in economic matters extend far beyond the used car and health insurance markets that are normally used as the paradigm cases. In fact, consideration of the problems of information will inevitably lead to an examination of the problems of market manipulation and fraud, especially in light of the 2008 financial crisis. Akerlof has travelled this path himself as indicated by his recent book with Robert Shiller, Phishing for Phools (2015). Akerlof and Shiller provide a litany of examples of manipulation and deception in advertising and in many markets including financial markets. They also have a chapter on “The Resistance and its Heroes” that highlights some of the people and agencies that have worked to expose and reduce phishing, but this chapter is remarkably sparse. What this article attempts to do is to fill out some of this history by focusing on the work of American institutional economists from Veblen to Galbraith, who critically examined the issues of manipulation and deception in advertising, salesmanship, and finance. Some general considerations relating to the problem of fraud are also discussed.     

保险监管的经济学动因——保险市场失灵及其表现

政府对保险业实施监督管理有其经济学动因。后危机时代,保险监管呈现出了全球性的特征。从国际宏观角度进行保险监管的微观经济基础的探讨,必将有利于我国保险监管事业的迅速稳固发展。公共利益监管理论认为,政府监管的存在是为了修正低效率或不公正的市场行为。本文根据经济学的框架,探讨了政府与市场的关系,分析了目前我国保险市场上存在的四种市场失灵的表现,即市场支配力、外部性、公共物品和信息不对称问题,从而阐释了保险监管存在的经济学动因,认为合理的政府干预对于维护市场机制正常运行、及时纠正市场缺陷、防范各类风险是十分必要的。     

Tax Rate Variability and Public Spending as Sources of Indeterminacy

We consider a constant returns to scale, one sector economy with segmented asset markets of the Woodford type. We analyze the role of public spending, financed by labor income and consumption taxation, on the emergence of indeterminacy. We find that what is relevant for indeterminacy is the variability of the distortion introduced by government intervention. We show that the degree of public spending externalities in preferences affects the combinations between the tax rate and its variability under which indeterminacy occurs. Moreover, we find that consumption taxes can lead to local indeterminacy when asset markets are segmented.     

Taxation,insurance, and precautionary labor

We examine optimal taxation and social insurance with adverse selection in competitive insurance markets. In a previous literature, it has been shown that, with perfect insurance markets, social insurance improves welfare since it is able to redistribute without creating distortions. This result has been taken as robust to the introduction of adverse selection as this would only provide additional justifications for social insurance. We show, however, that adverse selection can weaken the case for social insurance compared to a situation with perfect markets. Whenever social insurance mitigates private underinsurance, it also causes welfare-reducing effects by decreasing precautionary labor supply and hence tax revenue. In addition, adverse selection may reduce the redistributive potential of social insurance. We illustrate our general results using different equilibrium concepts for the insurance market. Notably, we derive conditions under which a complete renunciation of social insurance is optimal and the government only relies on income taxation to achieve its redistributive objectives.     

Adoption externalities as public goods

A public good problem arises naturally in situations characterized by positive externalities or negative externalities. For positive externalities, agents furnish a public good by taking an action. Similarly, for negative externalities, agents furnish a public good by not taking an action. We examine these externalities in a binary choice problem, i.e. adoption externalities. In each case, there is a potential role for government intervention, even when equilibrium transfers are not allowed, since one equilibrium Pareto dominates all others. We analyze the positive and normative features of equilibria in these models, and we explore the possibility of useful government intervention.     

The effects of government intervention on the market for corporate terrorism insurance

Nine OECD countries presently have national terrorism insurance programs based on some type of public–private risk sharing. While such arrangements have helped provide the necessary insurance capacity in the post-September 11, 2001 era, little is known about the effect of such governmental intervention on terrorism insurance markets. This paper focuses on the United States, where the Terrorism Risk Insurance Act of 2002 (TRIA) provides insurers with no cost federal reinsurance up to an industry-wide loss of $100 billion. We present an empirical analysis to compare how insurers' diversification behavior varies between property coverage (no governmental intervention) and terrorism coverage (with government intervention). We find evidence that insurers in the U.S. are much less diversified for terrorism coverage than they are for property lines of coverage. We interpret these findings as tentative evidence for moral hazard caused by the governmental intervention under TRIA.     

Optimal Complementary Auctions*

This paper considers the situation where two products are sold by the same seller, but to disjoint sets of potential buyers. Externalities may arise from each market outcome to the other. The paper examines the nature of the seller's optimal mechanism, and, for example in the case of positive externalities, it is shown that the allocation decision in either market depends on the highest types in both markets. The optimal mechanism can be implemented by an indirect mechanism that essentially charges winning bidders for the value of their externalities. The analysis is applied to the sale of public sector franchises including exploration and development rights for oil and gas tracts.     

农业保险的经济学属性分析

本文从经济学的角度，分析了农业保险的性质，指出农业保险具有风险系统性、信息不对称性以及外部性的特殊属性。针对这三大属性，作者认为再保险、相互组织和政府干预是解决农业保险市场失灵的主要措施。     

Emission Trading with Fiscal Externalities: The Case for a Common Carbon Tax for the Non-ETS Emissions in the EU

A government is fiscally constrained if it is unable to raise sufficient tax revenue to finance the first-best level of public spending. When involved in emission trading, a fiscally constrained government will potentially seek to close its fiscal gap through emission permit sales. This fiscal incentive therefore generates a fiscal externality in the permit market that is endogenous to the extent of fiscal constrainedness among the participating countries. Our theory explains how, and when, fiscal externalities may be expected to arise. Moreover, we show that in a permit market equilibrium with fiscal externalities, the initial allocation of emission permits between countries will affect: (1) the price of emission permits, (2) the global distribution of abatement effort, and (3) total greenhouse gas mitigation costs. This is contrary to the textbook model of emission permit markets. Our findings are especially relevant for the EU which is about to allow for trading in emission rights between EU member countries for all emissions outside the European Emissions Trading System.     

Social security and endogenous fertility: pensions and child allowances as siamese twins

This paper analyses public pensions and child support in a model with endogenous fertility. We show that the individual fertility choice may not coincide with the social optimum, due to the existence of external effects of children on society as a whole. The market outcome without government intervention is efficient, however, as the externalities exactly cancel out in that case. If the government wants to redistribute towards the old, it cannot replicate the command optimum by merely applying lump-sum transfers, but rather needs a child allowance scheme to effectively alter the number of offspring. Finally, we analyse whether a Pareto-improving social security reform is possible. It is shown that merely reducing the PAYG-scheme cannot be Pareto-improving, but the introduction of a child allowance scheme can be.     

PROFIT SHARING AND EMPLOYEE OWNERSHIP: POLICY IMPLICATIONS

Various arguments extol public encouragement of profit sharing and Employee Stock Ownership Plans (ESOPs). Generally, advocates of public intervention cite externalities (market failure), provision of merit goods, or social transformation as bases for their arguments. To the extent that profit sharing and ESOPs increase productivity or reduce employer costs, no case exists for public intervention, since such advantages are internalized. Although Congress views retirement saving as a merit good, deferred profit sharing and ESOPs are no more deserving of public subsidy on that basis than are other forms of saving, such as pensions. Finally, the notion that ESOPs promote a social transformation by redistributing equity is untenable. One can make a case for government efforts to spread data and information about these plans. The potential macro stabilizing effects of profit sharing—but not ESOPs—provide a rationale for a tax subsidy to the former.     

COMPETITION AND CROWDING OUT IN THE MARKET FOR OUTPATIENT SUBSTANCE ABUSE TREATMENT*

U.S. markets for outpatient substance abuse treatment (OSAT) include for‐profit, nonprofit, and public clinics. We study OSAT provision using new methods on equilibrium market structure in differentiated product markets. This allows us to describe clinics as heterogeneous in their objectives, their responses to exogenous market characteristics, and their responses to one another. Consistent with crowding out of private treatment, we find that markets with public clinics are less likely to have private clinics. In markets with low insurance coverage, low incomes, or high shares of nonwhite addicts, however, public clinics are relatively likely to be the sole willing providers of OSAT.     

Public versus private risk sharing

Can public income insurance through progressive income taxation improve the allocation of risk in an economy where private risk sharing is incomplete? The answer depends crucially on the fundamental friction that limits private risk sharing in the first place. If risk sharing is limited because insurance markets are missing for model-exogenous reasons (as in Bewley (1986) [8]) publicly provided risk sharing improves on the allocation of risk. If instead private insurance markets exist but their use is limited by limited enforcement (as in Kehoe and Levine (1993) [23]) then the provision of public insurance interacts with equilibrium private insurance, as, by providing risk sharing, the government affects the value of exclusion from private insurance markets and thus the enforcement mechanism of these contracts. We characterize consumption allocations in an economy with limited enforcement and a continuum of agents facing plausible income risk and tax systems with various degrees of progressivity (public risk sharing). We provide conditions under which more publicly provided insurance actually reduces total insurance for agents (excess crowding-out), or under which more public insurance increases total insurance (partial crowding-out).     

POLICY UNCERTAINTY,ELECTORAL SECURITIES,AND REDISTRIBUTION*

This article investigates how uncertainty about the adoption of a redistribution policy affects political support for redistribution when individuals can trade policy‐contingent securities in the stock market. In equilibrium the support for redistribution is smaller than where no “policy‐insurance market” is available. This implies that in economies with well‐developed financial markets redistribution decreases with the level of participation in these markets and with income inequality. Furthermore, the existence of a policy‐insurance market may lead to a less equal distribution of income than where no insurance is available even if a majority of individuals are redistributing resources through private transfers.     

治理环境污染的经济制度安排

环境问题的外部性和环境资源的公共财产属性,决定了解决环境污染问题不能单纯依靠市场机制,需要政府的必要调控和干预,政府干预包括有关法规的制定和经济制度的安排。经济制度具有不可替代的效率作用,且应针对不同的情况安排与市场机制相沟通的不同制度形式,如“排污收费”,“治污收费”,“开征环境税”和“排污权交易”等,将环境保护由过去的政府行为转变为一种由政府调控与经济利益机制驱动相结合的市场行为和企业行为。     

退耕还林:私人承包与政府规制

本文在一种委托—代理框架下研究了退耕还林工程在实施过程中所面临的激励不相容问题。文章首先探讨了退耕还林私人承包的社会理性。然后 ,文章给出了一个双重任务委托—代理模型 ,解释市场冲击如何会使农户的自利性经营行为偏离社会生态目标。接着 ,文章以陕西省退耕还林现状为研究背景对退耕还林工程实施中的激励不相容问题做出了进一步的经验分析。最后 ,文章从政府规制的角度提出了若干公共政策建议 ,以期提高退耕还林工程的实施效率。     

农业保险理论研究述评及展望

农业保险问题一直是保险学和农业经济学领域关注的热点问题,国内外学者对此做了大量研究。国外文献研究了农业保险市场失灵、政府介入农业保险市场的原因和农业保险需求,国内文献主要研究了农业保险的政策属性、财政补贴、农业保险需求和供给。这表明农业保险研究仍局限于新古典经济学的研究范式,把农业保险组织视为黑箱。本文在梳理国内外文献的基础上提出了一个新的研究视角——组织视角,并构建了农业保险组织研究的理论框架。     

巨灾保险:内涵、市场失灵、政府救济与现实选择

巨灾保险问题是一个全球性的问题,是保险业正在拓展的一个新领域,也是保险理论研究的一个新课题。深刻剖析巨灾风险的特殊内涵,明确指出目前巨灾保险存在的“市场失灵”问题,并提出政府干预是解决该问题的根本方法,从而为我国巨灾保险制度建立和完善提供现实选择。     

中国人寿保险公司人力资源竞争力外部影响因素分析

我国保险业的发展自改革开放以来十分迅猛,寿险业的增长更是快于GDP和人均可支配收入的增长,也快于非寿险业的增长,我国寿险市场蕴藏的巨大发展潜力不容小觑。对于中国人寿保险公司来说,解决如何适应当前的保险市场竞争环境,如何在明确公司优劣势的前提下进一步提升自身的人力资源竞争力问题,具有十分重要的意义。就此,从影响人力资源竞争力外部影响因素的角度如政府法律法规、市场环境、行业规则、行业诚信制度等方面进行分析和论述。     

Should Governments Subsidise Inward Foreign Direct Investment?

What happens when a government has incentives to subsidise inward FDI when labour markets are imperfectly competitive? Contrary to the traditional assumption in the literature, we allow the production in the multinational firm to either complement or substitute for local production. A new result is that the wage in the host country may decrease when production is moved to this country. The reason is that the union in the host country internalises product market externalities between the firms. Furthermore, it is shown that when a single country subsidises inward FDI, total world welfare might increase.