Consumers' Freedom of Choice

The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes. The bearing of the foregoing theory on the first of these is obvious (Keynes, 1936, p. 372).     

Commercial Mortgage Pricing with Unobservable Borrower Default Costs

This paper develops a pricing model for commercial real estate mortgage debt that recognizes the influence of default transaction costs on the borrower's default decision. These costs are heterogeneous across borrowers and largely un-observable to the lender/investor at the time of origination or loan purchase. A recognition of these unobservable costs can explain why borrower default decisions may differ from those predicted by "ruthless" mortgage-default pricing models. We address the determinants of default choice and timing by replacing sharp default boundaries found in the ruthless models with "fuzzy" boundaries that account for investor uncertainty with respect to evaluating borrower default decisions. To implement our model, we estimate probabilities of default as a junction of time and net equity in the property. Then, given that default occurs, loss severities are modeled based on expected property value recovery net of foreclosure costs and time until the asset is actually sold. Under reasonable parameter value choices, resulting Monte Carlo simulations produce numerical mortgage price estimates as well as component default frequency and severity levels that realistically reflect default premiums and loss levels observed in the marketplace.     

The impact of jump risks on nominal interest rates and foreign exchange rates

This article investigates the relationship between the nominal interest rate and inflation and also the forward exchange rate under a general specification of the underlying processes govering the foreign exchange rate. There are three distinct risks that affect the relation between the real rate of interest and the nominal rate namely, consumption risk, diffusion risk, and the existence of jump risks of inflation. Jump risks lower the nominal interest rate because of jump hedging of a nominal bond. The forward exchange rate depends on the expected depreciation of the domestic currency as well as these three risks. As the domestic jump risks increase, the domestic nominal interest rate decreases and the forward exchange rate decreases.     

Consumer Behavior, Public Policy, and Country-of-Origin Labeling

Recent work by agricultural economists has failed to adequately identify why consumers desire country-of-origin labeling, a key piece of information needed to determine whether a market-failure exists. This paper brings to the attention of agricultural economists a sizable body of literature on country-of-origin effects from the marketing and business disciplines. Based on this literature, we draw a distinction between several consumer motivations for origin labels and we identify which of these is cause for public policy. We propose several research questions that require answers if the consequences of country-of-origin labeling policy are to be fully understood.     

ACCOUNTING FOR CONTRIBUTED SERVICES: AN IDENTIFICATION OF ISSUES*

The purpose of this paper is to identify the main issues of accounting for contributed services in not-for-profit organisations. The AICPA position on accounting for contributed services is reviewed. The findings of a survey of not-for-profit organisation's use of and accounting for the contributed services of voluntary workers are reported.     

Book and Film Reviews

Economic theory as applied to the family should increase our understanding of the phenomena we are studying, and allow us to implement fruitful intervention in cases where we are not satisfied with what is occurring. Much if not all of the theory of the family fails to achieve these aims. Examples are given from the most recent edition of Gary Becker's Theory of the Family, where the analysis leads to conclusions that are, on their face, preposterous. This kind of theorizing leads, as does almost all neoclassical theory, to a conclusion that the institutions depicted are benign, and that government intervention would be useless at best and probably harmful. But it isn't necessarily so.     

Kids and cars: Environmental attitudes in children

This article aims to supplement scarce research on the children's attitudes to cars and the environment. Assuming that attitudes to cars develop in childhood, this article draws upon the writing assignments and interviews exploring the upper-elementary school children's attitudes to cars. The study was conducted in Amsterdam, The Netherlands, between January and December 2010. Briefly examining existing research on children's environmental attitudes in general, and in relation to cars in particular, the author argues that in-depth qualitative research is essential to the understanding of the factors that explain present attitudes and perhaps predicting the behavior of the future users of the means of transportation. In conclusion, the author makes a recommendation for the development of a curriculum addressing the development of children's awareness of sustainable transportation.