Normative and positive theories of public finance: contrasting Musgrave and Buchanan

This paper assesses James M. Buchanan's claim of following a positive approach in stark contrast to the normative approach to public finance of Richard A. Musgrave. The goal of this paper is to shed light on the foundations of modern American public finance by analysing one aspect of the methodology of its two most prominent fathers. I show (1) that it is difficult to distinguish Musgrave's and Buchanan's theories of public goods along the positive/normative dividing line and (2) that Buchanan's theory can also be considered normative. In the first three parts, I follow the Weberian methodological tradition in looking for value judgements in the theories, and by reflecting on the nature of ideal types. In the last part, I propose a broader interpretation of Buchanan's methodological stance within the academic context of the 1960s.     

A data driven binning strategy for the construction of insurance tariff classes

We present a fully data driven strategy to incorporate continuous risk factors and geographical information in an insurance tariff. A framework is developed that aligns flexibility with the practical requirements of an insurance company, the policyholder and the regulator. Our strategy is illustrated with an example from property and casualty (P&C) insurance, namely a motor insurance case study. We start by fitting generalized additive models (GAMs) to the number of reported claims and their corresponding severity. These models allow for flexible statistical modeling in the presence of different types of risk factors: categorical, continuous, and spatial risk factors. The goal is to bin the continuous and spatial risk factors such that categorical risk factors result which captures the effect of the covariate on the response in an accurate way, while being easy to use in a generalized linear model (GLM). This is in line with the requirement of an insurance company to construct a practical and interpretable tariff that can be explained easily to stakeholders. We propose to bin the spatial risk factor using Fisher’s natural breaks algorithm and the continuous risk factors using evolutionary trees. GLMs are fitted to the claims data with the resulting categorical risk factors. We find that the resulting GLMs approximate the original GAMs closely, and lead to a very similar premium structure.     

Population ageing,time allocation and human capital: A general equilibrium analysis for Canada

This study explores the long-term impact of population ageing on labour supply and human capital investment in Canada, as well as the induced effects on productive capacity. The analysis is conducted with a dynamic computable overlapping generations model where in the spirit of Becker [Becker, Gary (1965), A theory of the allocation of time, The Economic Journal, Vol. 75, pp. 493–517.] and Heckman [Heckman, James (1976), A life-cycle model of earnings, learning and consumption, The Quarterly Journal of Economics, Vol. 84, pp. 511–544], leisure has a quality-time feature and labour supply and human capital investment decisions are endogenous. The role of human capital in the growth process is based on the framework used by Mankiw et al. [Mankiw, N. Gregory, Romer, David and Weil, David N. (1992), A contribution to the empirics of economic growth, Quarterly Journal of Economics, Vol. 107, no. 2, pp. 407–437]. The paper indicates that population ageing creates more opportunities for young individuals to invest in human capital and supply more skilled labour at middle age. Consequently, the reduction in labour supply of young adults initially lowers productive capacity and exacerbates the economic costs of population ageing. However, current and future middle-age cohorts are more skilled and work more, which eventually raises productive capacity and significantly lowers the cost of population ageing. Finally, these results suggest that the recent increase in the participation rate of older workers might be the beginning of a new trend that will amplify over the next decades.     

Teaching proactivity in the entrepreneurial classroom

Abstract

This article examines the extent to which a proactive attitude can be considered a component of the entrepreneurial mindset and can be learned in the entrepreneurial classroom. We test the impact on students’ proactive attitude of two different teaching methods: a teacher-directed approach and a self-directed learning approach. We include group potency and emotions as variables that may moderate proactivity learning outcomes. Our sample is composed of 281 Master students in a French business school. Using a mixed methodological approach, the results demonstrate that the proactive attitude can be learned and that collaborative teamwork, a creative team spirit and positive emotions contribute to its development. We offer guidelines for the pedagogical design of EM education, an alternative tool to assess its impact, and a better understanding of emotional factors associated with group potency in student entrepreneurial teams.     

A genealogy of the concept of merit wants

This paper proposes a genealogy of the concept of merit wants coined by Richard A. Musgrave in his Theory of Public Finance (1959). The concept of merit wants can only be understood as a complement to the concept of public goods. I suggest that Musgrave invented the concept to apprehend some considerations that have been left out in the process of consolidation of the concept of public good. The narrow definition of the latter could not account for important state responsibilities that have been asserted by many economists.

I attempt to reconstruct Musgrave's intellectual background. First, I select examples of arguments for state intervention from authors influential in Musgrave's formative period (J.S. Mill, H. Sidgwick, E. Sax, H. Ritschl, G. Cassel, A. Wagner). Second, I argue that the invention of the concept in the 1950s reflected contemporary concerns for redistributive policies. I show that critics of the New Welfare approach (G. Colm, A. Hansen, W. Heller, H. Bowen) have held similar views, which were also in line with the liberal policy spirit of the post-war era in the United States.     

The Normative Problem of Merit Goods in Perspective

Abstract

In his Theory of Public Finance (1959), Musgrave invented the concept of merit wants to describe public wants that are satisfied by goods provided by the government in violation of the principle of consumer sovereignty. Starting from Musgrave’s mature discussion (1987), I construct two categories to classify the explanations of merit goods. The first strand of thought attempts to justify merit goods within the New welfare economics, by modifying its assumptions to accommodate irrationality, uncertainty, lack of information, and psychic externalities. The second category encompasses more radical departures from consumer sovereignty, drawn from philosophical critiques of economics. In the third part of the paper, I argue that the two strands might be represented by a non-individualistic social welfare function. I also show how this solution echoes Musgrave’s early views on public expenditures before he coined the concept of merit wants. From an historical perspective, the survival of the concept highlights the persistence of a social point of view in welfare economics.     

Which statistical technique should i use? a survey and marketing case study

Mini and microcomputers are putting an even larger number of powerful statistical analysis techniques at the disposal of the researcher. This paper uses a case study approach to show how to use the original objectives and purpose of a research project to design the study, organize the data collection and select the most appropriate multi-variate technique. Multiple regression, correlation analysis, principal component and factor analysis, discriminant analysis, causal link analysis, cluster analysis, analysis of variance including automatic interaction detection, and canonical correlation analysis are among the models and statistical techniques described in terms of their requirements, underlying hypotheses, limits, advantages. The use of these techniques is illustrated by the study of the “enjoyment” of the tourists who visited the province of Quebec in 1975.     

The Profit–Investment Nexus in an Era of Financialisation,Globalisation and Monopolisation: A Profit-Centred Perspective

ABSTRACT

During recent decades, the link between profits and domestic investment has weakened in the largest high-income economies. In this article, we explore this attenuation of the profit–investment nexus through a profit-centred perspective. Focusing on the impact of the origins and uses of profits, we study the investment behaviour of non-financial corporations in relation to their profits at the macro level since 1970, a period marked by financialisation, globalisation and, more recently, monopolisation. We contrast and discuss four competing hypothese—the revenge of the rentiers, the financial turn of accumulation, globalisation and monopolisation—and related stylised facts for France, Germany, Japan, the United Kingdom and the United States.