Material progress and the challenge of affluence in seventeenth-century England

In the later seventeenth century, material progress was first identified in England as a recent achievement with boundless future promise, and it was welcomed despite fears about the threats that it was perceived to present to national and personal well-being. The article investigates the roots of that confidence, and finds them in political economy and other intellectual developments that shaped interpretations of changing standards of living. The civic and moral 'challenge of affluence' was fully recognized but never resolved. Progress was accepted, and had to be defended in war-time, as the route to general happiness, 'ease', and plenty.     

Resource Allocation Auctions within Firms

There is growing interest in the use of markets within firms. Proponents have noted that markets are a simple and efficient mechanism for allocating resources in economies in which information is dispersed. In contrast to the use of markets in the broader economy, the efficiency of an internal market is determined in large part by the endogenous contractual incentives provided to the participating, privately informed agents. In this paper, we study the optimal design of managerial incentives when resources are allocated by an internal auction market, as well as the efficiency of the resulting resource allocations. We show that the internal auction market can achieve first‐best resource allocations and decisions, but only at an excessive cost in compensation payments. We then identify conditions under which the internal auction market and associated optimal incentive contracts achieve the benchmark second‐best outcome as determined using a direct revelation mechanism. The advantage of the auction is that it is easier to implement than the direct revelation mechanism. When the internal auction mechanism is unable to achieve second‐best, we characterize the factors that determine the magnitude of the shortfall. Overall, our results speak to the robust performance of relatively simple market mechanisms and associated incentive systems in resolving resource allocation problems within firms.