A theory of sequential reciprocity

Many experimental studies indicate that people are motivated by reciprocity. Rabin [Amer. Econ. Rev. 83 (1993) 1281] develops techniques for incorporating such concerns into game theory and economics. His theory is developed for normal form games, and he abstracts from information about the sequential structure of a strategic situation. We develop a theory of reciprocity for extensive games in which the sequential structure of a strategic situation is made explicit, and propose a new solution concept—sequential reciprocity equilibrium—for which we prove an equilibrium existence result. The model is applied in several examples, and it is shown that it captures very well the intuitive meaning of reciprocity as well as certain qualitative features of experimental evidence.     

Persistence of Shocks to Output in Austria and Theories of Economic Growth

The paper analyzes the degree of output persistence in GDP in order toempirically discriminate between the Solow growth model, the perfect competition endogenous growth model and the imperfect competition endogenous growth model for the case of Austria. Wefind that a shock in the growth rate of output induces a permanent and larger effect on the level of GDP. This leads us to refute the Solow growth model and the perfect competition model of endogenous growth.We may not reject the imperfect competition growth model.     

Valuing ecosystem goods and services: a new approach using a surrogate market and the combination of a multiple criteria analysis and a Delphi panel to assign weights to the attributes

A new approach to valuing ecosystem goods and services (EGS) is described which incorporates components of the economic theory of value, the theory of valuation (USappraisal), a multi-model multiple criteria analysis (MCA) of ecosystem attributes, and a Delphi panel of experts to assign weights to the attributes. The total value of ecosystem goods and services in the various tenure categories in the Wet Tropics World Heritage Area (WTWHA) in Australia was found to be in the range AUD$188 to $211 million year⁻¹, or AUD$210 to 236 ha⁻¹ year⁻¹ across tenures, as at 30 June 2002. Application of the weightings assigned by the Delphi panelists and assessment of the ecological integrity of the various tenure categories resulted in values being derived for individual ecosystem services in the World Heritage Area. Biodiversity and refugia were the two attributes ranked most highly at AUD$18.6 to $20.9 million year⁻¹ and AUD$16.6 to $18.2 million year⁻¹, respectively.     

Assessing Preference Change on the US Supreme Court

The foundation upon which accounts of policy-motivated behaviorof Supreme Court justices are built consists of assumptionsabout the policy preferences of the justices. To date, mostscholars have assumed that the policy positions of Supreme Courtjustices remain consistent throughout the course of their careersand most measures of judicial ideology—such as Segal andCover scores—are time invariant. On its face, this assumptionis reasonable; Supreme Court justices serve with life tenureand are typically appointed after serving in other politicalor judicial roles. However, it is also possible that the worldviews,and thus the policy positions, of justices evolve through thecourse of their careers. In this article we use a Bayesian dynamicideal point model to investigate preference change on the USSupreme Court. The model allows for justices' ideal points tochange over time in a smooth fashion. We focus our attentionon the 16 justices who served for 10 or more terms and completedtheir service between the 1937 and 2003 terms. The results arestriking—14 of these 16 justices exhibit significant preferencechange. This has profound implications for the use of time-invariantpreference measures in applied work.     

Toward a Phylogenetic Reconstruction of Organizational Life

Synopsis Classification is an important activity that facilitates theory development in many academic disciplines. Scholars in fields such as organizational science, management science and economics and have long recognized that classification offers an approach for ordering and understanding the diversity of organizational taxa (groups of one or more similar organizational entities). However, even the most prominent organizational classifications have limited utility, as they tend to be shaped by a specific research bias, inadequate units of analysis and a standard neoclassical economic view that does not naturally accommodate the disequilibrium dynamics of modern competition. The result is a relatively large number of individual and unconnected organizational classifications, which tend to ignore the processes of change responsible for organizational diversity. Collectively they fail to provide any sort of universal system for ordering, compiling and presenting knowledge on organizational diversity. This paper has two purposes. First, it reviews the general status of the major theoretical approaches to biological and organizational classification and compares the methods and resulting classifications derived from each approach. Definitions of key terms and a discussion on the three principal schools of biological classification (evolutionary systematics, phenetics and cladistics) are included in this review. Second, this paper aims to encourage critical thinking and debate about the use of the cladistic classification approach for inferring and representing the historical relationships underpinning organizational diversity. This involves examining the feasibility of applying the logic of common ancestry to populations of organizations. Consequently, this paper is exploratory and preparatory in style, with illustrations and assertions concerning the study and classification of organizational diversity.     

Uncertainty and sustainability in the management of rangelands

We analyze a dynamic and stochastic ecological-economic model of grazing management in semi-arid rangelands. The ecosystem is driven by stochastic precipitation. A risk averse farmer chooses a grazing management strategy under uncertainty such as to maximize expected utility from farming income. Grazing management strategies are rules about which share of the rangeland is given rest depending on the actual rainfall in that year. In a first step we determine a myopic farmer's optimal grazing management strategy and show that a risk averse farmer chooses a strategy such as to obtain insurance from the ecosystem: the optimal strategy reduces income variability, but yields less mean income than possible. In a second step we analyze the long-run ecological and economic impact of different strategies. We conclude that a myopic farmer, if he is sufficiently risk averse, will choose a sustainable grazing management strategy, even if he does not take into account long-term ecological and economic benefits of conservative strategies.     

Uncertain lifetimes and the welfare enhancing properties of annuity markets and social security

This paper explores the implications of social security programs and annuity markets through which agents, who are characterized by different distributions of length of lifetime, share death-related risks. When annuity markets operate, a non-discriminatory social security program affects only the intragenerational allocation of resources. In the absence of private information regarding individual survival probabilities, such a program will lead to a non-optimal intragenerational allocation of resources. However, the presence of adverse selection considerations gives rise to a Pareto improving role for a mandatory non-discriminatory social security program.     

Gold,liquidity and secured loans in a multistage economy Part I: Gold as money

This work relates to Department of the Navy Contract N00014-86-K0220 issued by the Office of Naval Research under Contract Authority NR 047-006. However, the content does not necessarily reflect the position or the policy of the Department of the Navy or the Government, and no official endorsement should be inferred. Revised with support of NSF contract SES-8812051.The United States Government has at least a royalty-free, non-exclusive and irrevocable license throughout the world for Government purposes to publish, translate, reproduce, deliver, perform, dispose of, and to authorize others so to do, all or any portion of this work.     

The recent failure of U.S. monetary policy

Summary The very slow growth of the broad money supply has been a primary source of U.S. economic weakness in 1990 through 1992. The velocity link between M2 and the subsequent level of nominal GDP has not declined. But changes in bank reserves brought about by open market operations have had much less effect onM2 than the Fed anticipated for two reasons: (1) reserve requirements now apply to only a small fraction of totalM2; and (2) the new bank capital requirements limit some banks ability to lend. The Federal Reserve failed to appreciate the importance of these conditions and misjudged the strength of the monetary policy stimulus that it was providing.Professor of Economics, Harvard University, and President of the National Bureau of Economic Research.Sixth Tinbergen Lecture delivered on October 2, 1992, in The Hague for the Royal Netherlands Economic Association.