Worker Appropriation as Responsibility and Right

Discussion of worker rights often focuses on the right to associate freely and bargain collectively. Such rights may not be achievable in globalized labor markets when workers do not appropriate the value they add. Relationships in which workers either participate in the management of the enterprise or directly appropriate their own surplus are more common than is generally understood. Recent work in economic philosophy provides an inalienable right for workers to collectively appropriate the fruits of their labor. Given the general failure of existing corporate governance systems, the case for worker appropriation as both responsibility and right is both practical and strong.     

Using simulation as a tool in selecting a retirement age under defined benefit pension plans

This paper examines how simulation modeling can be used to select a retirement age under defined benefit pension plans. This approach construes the variables affecting pension benefits as probabilistic variables. Simulations are then run to generate probabilistic values for the real value of pension benefits for alternative retirement ages. By construing variables affecting pension benefits as probability distributions, this approach reflects the uncertainty facing individuals contemplating retirement. By generating estimates of retirement benefits as probability distributions rather than as single deterministic values, the model provides individuals with a more realistic and complete frame of reference for making the retirement decision. The author is grateful to an anonymous referee and Joachim Zietz. JEF editor, for helpful comments.     

Is group selection necessary? An alternative interpretation of homogeneous Middleman groups: Comments on Janet Landa’s paper

This article critiques the efforts by Janet Landa, David Sloan Wilson and others to use group selection paradigms to explain the success of homogenous middlemen groups (HMGs). It argues that group selection theory cannot explain the conflicts of interests that arise within HMGs or why they dissolve in certain occasions. Landa’s earlier explanations, which stressed the combination of genetic (kinship) and social bonds in the creation of trust and cooperation in the extension of credit and the creation of local public goods, better predicts both the strength and weaknesses of HMGs.      

Viewpoint: Option prices, preferences, and state variables

Abstract.  This paper surveys recent developments in the theory of option pricing. The emphasis is on the interplay between option prices and investors' impatience and their aversion to risk. The traditional view, steeped in the risk‐neutral approach to derivative pricing, has been that these preferences play no role in the determination of option prices. However, the usual lognormality assumption required to obtain preference‐free option pricing formulas is at odds with the empirical properties of financial assets. The lognormality assumption is easily reconcilable with those properties by the introduction of a latent state variable whose values can be interpreted as the states of the economy. The presence of a covariance risk with the state variable makes option prices depend explicitly on preferences. Generalized option pricing formulas, in which preferences matter, can explain several well‐known empirical biases associated with preference‐free models such as that of Black and Scholes (1973) and the stochastic volatility extensions of Hull and White (1987) and Heston (1993) .