The empire strikes back: Adam Smith,John Stuart Mill,and the Robust Political Economy of empire

Recent scholarship regarding the idea of a U.S. Empire has raised serious questions as to the feasibility and desirability of imperial ambitions. This paper traces the debate over the net-benefit of empire back to the Classical economists. Adam Smith argued that the British Empire was a net cost while John Stuart Mill concluded the same empire was a net benefit. Contemporary arguments about a U.S. Empire map neatly to the divergent views of Smith and Mill. In addition to engaging in an exercise in history of thought, we use Smith’s political economy as a means of adjudicating between the different claims regarding the feasibility of empire. In doing so, we subject the claims of proponents of American Empire against the standard of robust political economy, which holds that intervention must generate desirable outcomes where less than ideal incentive and epistemic conditions hold. In doing so, we conclude that many of the claims made by proponents are fragile under less than ideal conditions.     

The more others care,the more you share? – Social contagion as a stardom trigger of social media superstars –

Emerging superstars on social media platforms reshape the media landscape. This research analyses social contagion as a stardom trigger of social media superstars (SMS). We argue that in addition to serving as a quality indicator, the number of observed consumers of SMS performances also indicates the suitability of discussing the SMS performances with others. We experimentally manipulated the number of previous views of a YouTube video and find that a high number of previous views significantly increases the perceived quality and the video’s discussion suitability even when holding all objective video characteristics constant. We discuss implications for aspiring SMS and (online) marketers.     

INSURANCE‐INDUCED MORAL HAZARD: A DYNAMIC MODEL OF WITHIN‐YEAR MEDICAL CARE DECISION MAKING UNDER UNCERTAINTY

This study quantifies the moral hazard effect of health insurance on medical expenditure by estimating a dynamic model of within‐year medical care consumption that allows for insurance selection, endogenous health transitions, and individual uncertainty about medical care prices in an environment where insurance has nonlinear cost‐sharing features. The results suggest that moral hazard accounts for 53.1%, on average, of total annual medical expenditure when insured. This estimate is significantly different, and generally larger, than that produced by an alternative model that is representative of the annual medical care decision‐making models commonly found in the literature.     

STABILIZATION POLICY AT THE ZERO LOWER BOUND

We construct a monetary economy with aggregate liquidity shocks and heterogeneous idiosyncratic preference shocks. In this environment, not all agents are satiated at the zero lower bound (ZLB) even when the Friedman rule is the best interest‐rate policy the central bank can implement. As a consequence, central bank stabilization policy, which takes the form of repo arrangements in response to aggregate demand shocks, temporarily relaxes the liquidity constraint of impatient agents at the ZLB. Due to a pecuniary externality, this policy may have beneficial general equilibrium effects for patient agents even if they are unconstrained in their money balances.     

Global instability in experimental general equilibrium: the Scarf example

Scarf (Int. Econ. Rev. 1 (1960) 157) proposed a model of dynamic adjustment in which the standard tatonnement price adjustment process orbits around, rather than converges to, the competitive equilibrium. Hirota (Int. Econ. Rev. 22 (1981) 461) characterized the price paths. We explore the predictions of Scarf's model in a non-tatonnement experimental double auction. The average transaction prices in each period do follow the path predicted by the Scarf and Hirota models. When the model predicts convergence the data converge; when the model predicts orbits, the data orbit in the direction predicted by the model. Moreover, we observe a weak tendency for prices within a period to follow the path predicted by the model.     

Joining the World Trade Organization: What is the Impact?

Research has called into question the impact of the World Trade Organization (WTO) on trade. This research, however, has been called into question on both modeling grounds for and failing to utilize comprehensive fixed effects. Others have found that when these factors are accounted for, imports rise by significant amounts. This paper seeks to reconcile these findings. I find that the WTO has a larger, though uneven, impact on exports than imports. The results indicate that the WTO frequently causes imports and exports to move in opposite directions negating any increase in overall trade. The regressions with and without fixed country effects generally demonstrate pattern consistency for generalized results that are robust to change. Owing to the finding that imports rise modestly or even fall without country effects while exports rise, the results imply that countries may not be as interested in liberalizing trade as selling to the world.     

Spectral Welfare Cost Functions

If preferences are not time-separable, economic agents care not only about the magnitude of fluctuations in consumption but also about the persistence and other temporal characteristics of those fluctuations. This paper extends and develops the theory of spectral utility functions, which measure utility frequency by frequency, to illustrate the interaction between consumption volatility and time-non-separable preferences. To highlight the economic implications of the interaction, spectral welfare cost functions are developed to provide a quantitative measure of the importance to economic agents of the temporal delivery of consumption volatility.