On a historical note: the legacy of Thomas Hodgkin

Physicians in the practice of insurance medicine are exposed to an unbelievable spectrum of pathology. This series of short biographies is intended to give the reader a quick overview of the history of diseases encountered in our everyday practice and to see "the face behind the name." In the first article of this series, I wish to pay homage to one of the "great men of Guy's," Dr. Thomas Hodgkin.     

Fallout from the Mutual Fund Trading Scandal

In September 2003, several prominent mutual fund companies came under investigation for illegal trading practices. Allegations suggested these funds allowed certain investors to profit from short-term trading schemes at the expense of other investors. Surprisingly, regulatory authorities have known for more than two decades of the potential for such abuses, yet have taken limited steps to correct the problem. We explore investor reaction to the scandal by measuring assets under management, stock returns, and performance. Mutual funds managed by investigated firms show a substantial decline in post-announcement assets under management. These firms also experienced significantly negative announcement-period returns. Finally, we discuss several policy suggestions to prevent future trading abuses and provide direction for future research.     

The Effects of Integration on R&D Incentives in Systems Markets

We consider a systems market where two complementary components must be used in combination to provide valuable services. The market for the first component is monopolized whereas the market for the second is potentially served by multiple firms. We show that integration of the monopolist into the competitive complementary market may distort incentives for R&D, reducing total economic welfare.     

Will Bank Bailouts Bust Budgets? Fiscalisation of the East Asian financial crisis

East Asia has returned to a position of relative financial stability and modest economic growth seven years since the onset of the East Asian financial crisis, but the long-range impact of the crisis is still unclear, especially regarding fiscal ramifications. Thailand and Indonesia were two of the hardest hit economies and each had exemplary fiscal policies before the crisis. Since the crisis, both countries have maintained prudent fiscal policies, keeping budget deficits relatively small, managing debt burdens effectively and limiting exposure to contingent liabilities. Both countries have addressed the short-term triggers of the financial crisis admirably and continue to monitor vigilantly their external vulnerabilities. Thus, if either country experiences a fiscal crisis, it will be the result of other factors—bank bail-outs will bust budgets only if banks have to be bailed out once again due to incomplete or insufficient financial sector reform.     

The Provision of (Two-way) Converters in the Transition Process to a New Incompatible Technology

This paper analyzes the dynamic provision of converters in the transition process between two incompatible technologies. I derive the equilibrium behavior in the provision of converters and compare it to the socially optimal outcome. I find that there can be two types of market inefficiency in the provision of converters. First, converters can be supplied by the “wrong” group. Second, the timing of provision may be too late since the providers of converters ignore the positive externality that their provision would confer on the users of the rival technology.     

Cash value health insurance: one answer to the crisis

To address the demand managed care has created and bring the health care economy closer to market equilibrium, we must find a way to balance value and cost, by both using new tools and looking at critical issues in a different way. Although the concepts of consumer-driven health care described in this article are not the only health care cost-management solution, they are surely a next logical step.