Project Evaluation and Uncertainty in Practice: A Statistical Analysis of Rate-of-Return Divergences of 1,015 World Bank Projects

This article analyzes the World Bank's experience with projectevaluation for a sample of 1,015 projects by comparing estimatedrates of return at appraisal with reestimated rates of returnwhen construction works are completed, usually 5 to 10 yearsafter appraisal. The analysis highlights the high degree ofuncertainty in project analysis. A wide range of variables hasbeen introduced to explain the observed divergence in appraisaland reestimated rates of return, but only a relatively smallpart of the divergence can be explained, even with the benefitof hindsight. Project analysis thus has to cope with a largedegree of uncertainty, which the traditional methods of projectevaluation and selection have not been able to reduce.     

Obsoleszenz — ein Synonym für die Konsumgüterproduktion in entfalteten Marktwirtschaften

Zusammenfassung Wie im Titel angedeutet, gehen die Verfasser davon aus, daß sich hinter dem Obsoleszenz-Phänomen keine besondere Absatzstrategie der Unternehmen und daher kein eigenständiges Erkenntnisobjekt verbirgt. Die von bürgerlichen und marxistischen Kritikern vielfach geäßerte Ansicht, mit zunehmender Vermachtung/Monopolisierung der Märkte seien die Waren schlechter geworden, wird nicht geteilt. Nach wie vor werden bei uns sehr viele «gute» sowie «schlechte» Konsumgüter hergestellt, je nach dem wie die Produktivkräfte sowie die Konkurrenz um die zahlungskräftige Nachfrage es erlauben. Was die bekannten gesamtgesellschaftlichen Probleme (Umweltbelastung, Rohstoffknappheit etc.) verursacht und die Wissenschaften auf dem Plan gerufen hat, ist nicht die abnehmende Qualität der Waren, sondern die erweiterte Reproduktion kapitalistischen Wirtschaftens schlechthin. Die «ungeheure Warenansammlung» kann wissenschaftlich nicht zerlegt werden in eine unanfechtbare Normalität (=technischer Fortschritt) und moralisch abzulehnende Auswüchse (=Obsoleszenz); ebensowenig signalisieren Obsoleszenzstrategien die allgemeine Dekadenz des Monopolkapitals. Der Reichtum an Konsumgütern ist vielmehr zu begreifen als dialektisches Resultat einer Erwerbsgesellschaft, die-beispielhaft konkretisiert-überdimensionierte Fernsehgeräte zum Kauf anbietet, nachdem sie zuvor technisch ausgereifte Geräte entwickelt hat.

---

As indicated by the title the authors are convinced that obsolescence is no special marketing strategy. Therefore the phenomenon should not be regarded as a subject worthy of study by itself. The authors reject the hypothesis that product quality is eroded by increasing monopolization, a position taken by bourgeois as well as marxian critics. In market economies there will always be production of good and bad consumer goods depending on productive capacity and sellers' competition for effective demand. The well-known social problems (pollution, shortage of raw materials, etc.) are not caused by decreasing product quality but are due to the need for reproduction of capital on a larger scale.The enormous production of goods cannot be separated by scientific methods into (a) an economic normality (technical progress) and (b) a perverse exaggeration not acceptable on moral grounds (obsolescence). Neither do the strategies of obsolescence indicate the decadence of monopolistic capitalism. Instead the abundance of consumer goods should be interpreted as a dialectic result of a society's profit maximization. To give an example: After well-equipped television sets with a high technical standard had been developed, the system starts supplying units of a hypertrophic size and capacity.

     

Marion G. Müller,International University Bremen

Ohne Zusammenfassung     

A look into the factor model black box: Publication lags and the role of hard and soft data in forecasting GDP

We derive forecast weights and uncertainty measures for assessing the roles of individual series in a dynamic factor model (DFM) for forecasting the euro area GDP from monthly indicators. The use of the Kalman smoother allows us to deal with publication lags when calculating the above measures. We find that surveys and financial data contain important information for the GDP forecasts beyond the monthly real activity measures. However, this is discovered only if their more timely publication is taken into account properly. Differences in publication lags play a very important role and should be considered in forecast evaluation.     

Recursive Nash bargaining over a productive asset

We propose an equilibrium concept (the recursive Nash bargaining solution) that describes the outcome of repeated negotiations between two rational agents under the assumptions that the state of the economic system under consideration changes according to the actions of the players and that neither party can make binding commitments to future behavior. This equilibrium is dynamically consistent but typically not Pareto-efficient. As an application, we compute the recursive Nash bargaining solution in a model of two heterogeneous agents bargaining over the use of a productive asset with constant gross rate of return and study how the time-preference rates and the elasticities of substitution affect the solution.     

FISCAL POLICY AND OPTIMAL TAXATION: EVIDENCE FROM A TAX SMOOTHING EXERCISE

Testing the tax smoothing hypothesis for the EU‐15, we hypothesise that the introduction of the 3%‐deficit rule of the Maastricht Treaty in 1993 may have inhibited tax smoothing as European Union (EU)‐member states are no longer capable of letting the deficit grow as much as implied by expected decreases in government expenditure. Our results show that for some countries this fiscal rule may have indeed changed the validity of the tax smoothing hypothesis, thus implying that EU accession has caused welfare losses.     

The treatment of seasonality in error correction models as unobserved component: a case study for an Austrian consumption function

This paper deals with an alternative approach to treating seasonality in error correction models for consumption with a parsimonious parameterization as proposed by Harvey and Scott. We introduce an unobserved seasonal component into an error correction model for Austrian consumer expenditures on nondurables and services and compare the results with different approaches. The use of stochastic seasonal results in a definite improvement of the estimated model. First version received: October 1997/Final version received: May 2000     

Decomposing desert and tangibility effects in a charitable giving experiment

Several papers have documented that when subjects play with standard laboratory “endowments” they make less self-interested choices than when they use money they have either earned through a laboratory task or brought from outside the lab. In the context of a charitable giving experiment we decompose this into two common artifacts of the laboratory: the intangibility of money (or experimental currency units) promised on a computer screen relative to cash in hand, and the distinct treatment of random “windfall” gains relative to earned money. While both effects are found to be significant in non-parametric tests, the former effect, which has been neglected in previous studies, has a stronger impact on total donations, while the latter effect has a greater impact on the probability of donating. These results have clear implications for experimental design, and also suggest that the availability of more abstract payment methods may increase other-regarding behavior in the field.     

The association between two random elements: A complete characterization and odds ratio models

For random elements X and Y (e.g. vectors) a complete characterization of their association is given in terms of an odds ratio function. The main result establishes for any odds ratio function and any pre-specified marginals the unique existence of a corresponding joint distribution (the joint density is obtained as a limit of an iterative procedure of marginal fittings). Restricting only the odds ratio function but not the marginals leads to semi-parmetric association models for which statistical inference is available for samples drawn conditionally on either X or Y. Log-bilinear association models for random vectors X and Y are introduced which generalize standard (regression) models by removing restrictions on the marginals. In particular, the logistic regression model is recognized as a log-bilinear association model. And the joint distribution of X and Y is shown to be multivariate normal if and only if both marginals are normal and the association is log-bilinear.Acknowledgements The author thanks both referees for their helpful comments which improved the first draft of the paper.