On some criticisms of critical realism in economics

Methodological comments on critical realism in economics haveproliferated over the past decade—typically focusing onTony Lawson's Economics and Reality and Reorienting Economics,which constitute the core of this project. In the present paperwe select a series of important, mostly very recent argumentsagainst critical realism in economics and assess their meritsand demerits.     

Forecasting banking crises with dynamic panel probit models

Banking crises are rare events, but when they occur, their consequences are often dramatic. The aim of this paper is to contribute to the toolkit of early warning models that is available to policy makers by exploring the dynamics and exuberances embedded in a panel dataset that covers 22 European countries over four decades (from 1970Q1 to 2012Q4). The in- and out-of-sample forecast performances of several (dynamic) probit models are evaluated, with the objective of developing common vulnerability indicators with early warning properties. The results obtained show that adding dynamic components and exuberance indicators to the models improves the performances of early warning models significantly.     

The Theory of Optimal Law Enforcement

The economic literature on optimal law enforcement is very recent. Becker's seminal paper on crime and law enforcement dates from 1968 and most papers which are the focus of this survey have been published in the last ten years.The core result presented by Becker is the following: the probability and the severity of punishment deter crime. Therefore, the fine should be maximal since it is a costless transfer whereas the probability of detection and conviction is costly. Much of the recent work has attempted to show why Becker's result may not hold.     

A case study on obstacles to the growth of biotechnology

Why has a biotechnology industry developed much faster in some countries than in others? Studies indicate that public funding for research is not sufficient for the establishment of a strong biotech industry. What should countries and regions do then, in order to become globally competitive in the area? In this paper I concentrate on the upstream section of biotech growth - the creation of new biotechnology companies - and take a closer look at the case of Portugal, a country where the industry has long been at an embryonic stage. It becomes apparent from the analysis that generalist, top-down measures to stimulate general technological development may not be appropriate to foster a sector composed of many unique characteristics. Evidence from several countries suggests that there is a group of specific factors which all have to be in place simultaneously to allow the emergence of a biotech industry. A careful analysis of the Portuguese example - when set against the background of European and Global biotech - may help regions such as southeast Asia and southern Europe define their paths to bio-competitiveness.     

US‐style contingent fees and UK‐style conditional fees: agency problems and the supply of legal services

Under contingent fees, the attorney gets a share of the judgment; under conditional fees, the lawyer gets an upscale premium if the case is won which is, however, unrelated to the adjudicated amount. We compare conditional and contingent fees in a principal–agent framework where the lawyer chooses unobservable effort after she has observed the amount at stake. Contingent fees provide better incentives than conditional fees independently of whether upfront payments are restricted to be non‐negative or not. Under contingent fees, the attorney uses her information about what is at stake more efficiently. Copyright © 2006 John Wiley & Sons, Ltd.     

An assessment of Portuguese banks’ efficiency and productivity towards euro area participation

This paper analyses the production technology of Portuguese banks during the 1992–2006 period through the estimation of a translog cost frontier. This period is of major interest because it covers Portugal’s euro area accession and its impact on the banking system. Hence, critical factors impacting the banking system are identified against the background of increasing financial integration prior to the financial crisis that started in 2007 and later translated into strains in some European sovereign debt markets. Banks are modelled as firms which produce loans and other earning assets, choosing the cost minimizing combination of labour, capital and interest bearing debt, subject to holding a predetermined level of equity. According to the results of this study, technological progress has shifted the cost frontier downwards throughout the period under consideration, whereas the distance at which banks have operated from the frontier seems to have remained constant. Further, increases in production under scale economies have also contributed to the recorded increase in productivity.     

Friending the taxman: On the use of social networking services for government eID in Europe

The provision of identities online continues to be a fiercely debated topic in policy circles, with proposals emerging for public sector organizations to leverage pre-existing social networking services for their own identity management purposes. Within the broader context of private sector organizations springing up as identity providers, this article explores — from a socio-legal perspective — the merits and drawbacks of using social networking services for government eID in Europe. It then reviews the present and future European policy environment concerning official use of social networking credentials. We focus specifically on legislative measures currently being proposed in the EU to facilitate the Identification, Authentication and Signature policy, within the scope of the ongoing Electronic Signatures Directive revision process and the launch of the proposed Electronic Trust Services Regulation.     

Scoping river basin management issues with participatory modelling: The Baixo Guadiana experience

This paper details the design and implementation of a participatory modelling process in the Baixo Guadiana River Basin, in Portugal. A group of stakeholders was involved in a causal mapping exercise that lead to the development of a shared view of the problems, pressures and impacts characterizing the river basin. A simulation model was also developed to support experimentation with alternative management scenarios for the area. The paper looks critically at the evaluation of the participatory modelling outcomes, both at the individual and group levels, discussing the role of this approach in supporting the scoping stages of river basin planning and management processes. On the downside, the unstable group composition seems to have hindered the chances of producing a higher impact in the functioning of the group, and subsequently the capacity to sustain the level of collaboration required to achieve the strategic river basin objectives established during the participatory modelling process. The paper discusses the issue of group stability as well as some options to overcome the limitations of unstable participant groups. The strengths of participatory modelling, as underlined by the Baixo Guadiana experience, include the flexibility to adapt the method to different contexts and participatory designs and the capacity to structure the active involvement of stakeholders, providing an open and shared language for collaborative policy design, fostering learning and knowledge integration.     

Euro money market spreads during the 2007–? financial crisis

In the paper we investigate the empirical features of euro area money market turbulence during the recent financial crisis. By means of a novel Fractionally Integrated Heteroskedastic Factor Vector Autoregressive model, we find evidence of a deterministic level factor in the EURIBOR-OIS (OIS) spreads term structure, associated with the two waves of stress in the interbank market, following the BNP Paribas (9 August 2007) and Lehman Brothers (16 September 2008) “shocks”, and two additional factors, of the long memory type, bearing the interpretation of curvature and slope factors, respectively. The unfolding of the crisis yields a significant increase in their persistence and volatility. We also find evidence of a declining trend in the level and volatility of OIS spreads since December 2008, associated with ECB liquidity policies.