Social Structure in Economic Theory

This paper investigates the factors that drive ruler decision making under democracy. By dividing politicians’ actions into two distinct domains and exploring their compositions, we construct a fuller and more realistic picture of politician decision making. In the non-discretionary domain, the politician’s actions are clearly limited by voter desires; in the discretionary domain the politician is free to make choices as he chooses without voter repercussions. Standard neoclassical models of political behavior suggest that when votes don’t matter, monetary income drives ruler behavior. While monetary pursuit may explain some ruler decisions, it leaves many other observed choices unexplained. Our non-discretionary/discretionary dichotomy highlights the up-to-now neglected role that psychic income plays in explaining otherwise unexplained ruler decisions. The case studies considered support this view.     

The Fable of the Allegory: The Wizard of Oz in Economics

L. Frank Baum's The Wonderful Wizard of Oz has become popular as a teaching tool in economics. It has been argued that it was written as an allegory of Populist demands for a bimetallic monetary system in the late 19th century. The author argues that Baum was not sympathetic to Populist views and did not write the story as a monetary allegory.     

On the Endogeneity of the Mean-Variance Efficient Frontier

The endogeneity of the efficient frontier in the mean-variance model of portfolio selection is commonly obscured in the portfolio selection literature and in widely used textbooks. The authors demonstrate this endogeneity and discuss the impact of parameter changes on the mean-variance efficient frontier and on the beta coefficients of individual assets.     

Valuing GM technologies using real options: the case of drought tolerant wheat in Australia

ABSTRACT

In this article we seek to estimate the value of a partially-developed crop technology from the perspective of the firm developing the technology. Firms need this value estimation to decide whether their technology will earn a sufficient return in the market to justify investing in it. However, determining the (ex-ante) value of the technology before it is commercialised is challenging as the technology is not yet in the market and hence the demand function has not yet been defined. An alternative valuation method is required. We use risk premiums, Monte Carlo simulation and real options analysis and we demonstrate this combination of valuation tools on wheat that is currently being developed in Australia to be drought tolerant. The results indicate that this drought tolerant wheat variety is likely to be adopted by farmers in most regions and has a pre-commercialisation value that justifies continued investment in its development. We also identified South Australia as a region in which the new variety would not be sufficiently valuable to farmers to see them adopt it and we consider possible explanations for this outcome.     

Why strategists shun technologists

A model of computer-integrated manufacturing as the integration of strategy, implementation and innovation is presented. Strategy emphasizes a clear understanding of the objectives and goals of the organization. Strategy can be understood in terms of the interaction between product and process strategies, critial success factors and product life-cycle. Implementation stresses an iterative incremental process based on strategy, user involvement and tolerance. Innovation is the result of a successfully implemented strategy. It is both organizational learning and change.     

Structure,agency and causality in post-revival Austrian economics: tensions and resolutions

Abstract

This paper aims to illustrate the benefits that accrue from critical realism's sustained, explicit reflection about ontological issues. The paper pursues this aim by examining the work of radical subjectivist Austrian economists as it has developed since the post-1974 revival in the fortunes of the Austrian school, focusing in particular on their account of the generation of socio-economic order in decentralized market economies. Ambiguities and tensions can be discerned in the radical subjectivist account of the causal forces at work in the market process. It is argued that the conceptual resources required for resolving those tensions and ambiguities are to be found in critical realism. The final section of the paper draws out some of the broader implications of the suggested resolution for radical subjectivist Austrian economics.     

On the Tobin Tax

Abstract

This paper clarifies why a transaction tax, such as the Tobin Tax, can stabilize financial markets. In markets that are already fairly deep, relatively small changes in trading volume are unlikely to have any impact (positive or negative) on volatility. Thus, a Tobin Tax can potentially have a stabilizing effect on international currency markets not because it reduces the excessive volume of transactions of speculators, but because it can slow down the speed with which market traders react to changes in prices of currencies. Moreover, it can lower their elasticity of future price expectations with respect to current price changes, which also has a stabilizing effect. Thus, to the extent that a Tobin Tax causes traders in financial markets to delay their decisions, a few ‘grains of sand in the wheels of international finance’ can indeed be stabilizing. Whether or not that is sufficient to prevent speculative attacks on currencies is a different matter.     

"All Decisions Are Top-Down:" Engendering Public Expenditure in Vietnam

Between October 1999 and June 2000 a joint government-donor working group undertook a public expenditure review in Vietnam that was supposed to use "gender issues" as a cross-cutting theme. The article discusses ways in which a gender analysis could have been incorporated into a review of public expenditure, and examines why this did not happen in the end. Flaws in the process reduced the scope of gender analysis. Institutional constraints on the part of both the government and the World Bank weakened the commitment to a gender analysis. More fundamentally, however, it is argued that the methodological approach of the World Bank rendered it incapable of investigating possibly unquantifiable macrostructural and mesoinstitutional determinants of individual behavior. It is further argued that the conceptualization of social institutions offered by the World Bank with regard to gender relations fails to adequately express the extent to which social institutions are gendered.     

Purchasing power parity over two centuries: trends and nonlinearity

In two recent contributions Lothian and Taylor, and Cuddington and Liang, produced empirical evidence that annual data for the dollar-sterling real exchange rate spanning two centuries exhibited a non-linear deterministic trend. This trend could be proxying Harrod-Balassa-Samuelson effects. Lothian and Taylor showed that a linear stationary autoregressive mode, which embodied a cubic trend, implied much faster mean reversion of the real exchange rate to shocks than a model that excluded the trend. This article shows that both non-linearity and a deterministic trend can be allowed for in a theoretically appealing manner and that the fitted models provide a parsimonious explanation of both the dollar-sterling and franc-sterling real exchange rates over the two centuries of data. Generalized impulse response function analysis of the models demonstrates that the speed of adjustment to shocks can be even faster when trends are considered.     

Dynamic almost ideal demand systems: an empirical analysis of alcohol expenditure in Ireland

This paper presents a dynamic form of the Almost Ideal Demand System (AIDS). Three versions of the static AIDS model are employed to determine the preferred long-run equilibrium model and represents the short-run dynamics by an error correction mechanism. This estimation procedure is then applied to alcohol expenditure in Ireland. The estimated point elasticities are consistent with previous studies and a priori expectations. Beer and spirits are found to be price inelastic in both the short and long run. While wine is price inelastic in the short run and price elastic in the long run.