Specialists and citizens all: A reply to Boettke,Koppl, and Holcombe

Peter Boettke (2007) argues that economists need not act pluralistically in order for pluralism to thrive in the marketplace of economic ideas. From a market process perspective, Boettke sees intellectual diversity and openness as catallactic outputs, not inputs—emergent by-products of academic specialization and trade. To expect individual scholars to behave in a pluralistic manner is unnecessary and “completely inappropriate” since it detracts from their central task: “to commit themselves to an approach and pursue it doggedly, even in the face of great doubt and resistance by one’s peers” (Boettke 2007). This paper proposes a Smithian revision of Boettke’s position. The author argues that scholarly pluralism is best understood as a constitutional rule of academic life—a virtue ethic that promotes learning and intellectual freedom by mitigating tyranny and autarky in the republic of science. Drawing from the writings of Adam Smith, Friedrich Hayek, Deirdre McCloskey, Bruce Caldwell, James Buchanan, Don Lavoie, and Boettke himself, the author argues that scholarly pluralism has been, and continues to be, a necessary condition for the flourishing of Austrian economists as free, responsible, efficacious thinkers.     

On the entrepreneurial genesis of new markets: effectual transformations versus causal search and selection

The generation of new markets is an emerging area of interest among researchers working in the traditions of evolutionary economics. And true to those traditions, the current study incorporates empirical evidence from psychology and cognitive science to develop micro-foundations for evolutionary theories of new market generation. In this paper we present an in-depth analysis of how expert entrepreneurs use effectual logic to conceptualize the creation of new markets. Our results challenge received wisdom based on search and selection processes and move beyond combinatorial ideas to develop instead a “transformational” view of market genesis.     

Islam-based legal language and state governance: democracy,strength of the judiciary and human rights

Constitutional Political Economy - States embracing Islam-based laws are frequently seen as struggling with establishing democratic institutions, jeopardizing human rights and encouraging executive...     

Critical factors in computing externalities for electricity resources

The New York State Environmental Externalities Cost Study and computerized externality model (EXMOD) are used to examine the specification of methods design and application factors in the computation of electricity externalities. We report the sensitivity of externality estimates with alternative specifications for 15 different factors in the analysis, including the selection of facility type, site, and operating characteristics; air emission assumptions and air modeling procedures; dose-response assumptions; economic valuation assumptions; and other modeling procedures and assumptions. Many of the factors that most influence externality computations can be well specified in the analysis, such as the facility type, age, characteristics, emission rates, whether there is SO₂ trading, and the inclusion of long range impacts. Most significant among the factors for which there remains significant scientific uncertainty are the selection and application of air dispersion models, selection of air pollution thresholds for health impacts, reduced life span risks associated with ozone exposure and with long-term exposure to PM₁₀, values for CO₂ damages, and the value to be applied to increased risks of reduced life span for individuals age 65 or older.     

PUBLIC ENTERPRISE IN THE MODERN WESTERN WORLD: AN HISTORICAL ANALYSIS

ABSTRACT: The aim of this article is to explain the pattern of public enterprise in Western Europe, Japan and the USA in the late 20th century, just before the onset of privatization. This requires an examination of the origins which date from the early 19th century. A common misconception is that public enterprise was a device for overcoming problems of natural monopoly and/or a socialist instrument for mitigating worker exploitation. It is argued that the former was mainly dealt with by arms’ length regulation and that socialist forces were limited. Public enterprise was common in grid networks everywhere and, in manufacturing, more common in Germany, Spain, Italy than elsewhere. Why also were the USA and UK (up to 1939) different and what does the privatization experience tell us about public enterprise? The answer is that public enterprise was often an instrument for promoting social and political unification, securing national defence and related strategic considerations, increasingly in the 20th century for promoting economic growth, with regulatory failures and socialist pressures playing a more subsidiary and/or occasional role.     

Information-constrained optima with retrading: An externality and its market-based solution

This paper studies the efficiency of competitive equilibria in environments with a moral hazard problem and unobserved states, both with retrading in ex post spot markets. The interaction between private information problems and the possibility of retrade creates an externality, unless preferences have special, restrictive properties. The externality is internalized by allowing agents to contract ex ante on market fundamentals determining the spot price or interest rate, over and above contracting on actions and outputs. Then competitive equilibria are equivalent with the appropriate notion of constrained Pareto optimality. Examples show that it is possible to have multiple market fundamentals or price-islands, created endogenously in equilibrium.     

The distributional impact of large dams: Evidence from cropland productivity in Africa

We examine the distributional impact of large dams on cropland productivity in Africa. As our unit of analysis we use a hydrology based spatial breakdown of the continent that allows one to exactly define regions in terms of their upstream/downstream relationship at a highly disaggregated level. We then use satellite data to derive measures of cropland productivity within these areas. Our econometric analysis shows that while regions downstream benefit from large dams, no beneficial effects accrue to cropland within the vicinity. Moreover, we find that the productivity enhancing impact of upstream dams is dependent on the local climate. Overall our results suggest that upstream dams have quantitatively on average provided up to 12% of the minimum daily per capita amount of kilocalorie needs in downstream communities and increased agricultural production by 1%.     

STOCK MARKET CRASH AND EXPECTATIONS OF AMERICAN HOUSEHOLDS

This paper utilizes data on subjective probabilities to study the impact of the stock market crash of 2008 on households' expectations about the returns on the stock market index. We use data from the Health and Retirement Study that was fielded in February 2008 through February 2009. The effect of the crash is identified from the date of the interview, which is shown to be exogenous to previous stock market expectations. We estimate the effect of the crash on the population average of expected returns, the population average of the uncertainty about returns (subjective standard deviation), and the cross-sectional heterogeneity in expected returns (disagreement). We show estimates from simple reduced-form regressions on probability answers as well as from a more structural model that focuses on the parameters of interest and separates survey noise from relevant heterogeneity. We find a temporary increase in the population average of expectations and uncertainty right after the crash. The effect on cross-sectional heterogeneity is more significant and longer lasting, which implies substantial long-term increase in disagreement. The increase in disagreement is larger among the stockholders, the more informed, and those with higher cognitive capacity, and disagreement co-moves with trading volume and volatility in the market.     

Mutual advantage, conventions and team reasoning

This paper proposes a conception of mutual advantage as a motivation for cooperative behaviour. This motivation is contrasted with the ‘emotional’ reciprocity that is represented in current theories of social preferences. The paper explores parallels between mutual advantage and Humean analyses of convention and between mutual advantage and theories of team reasoning.     

Valuing ecosystem services: A shadow price for net primary production

We analyze the contribution of ecosystem services to GDP and use this contribution to calculate an empirical price for ecosystem services. Net primary production is used as a proxy for ecosystem services and, along with capital and labor, is used to estimate a Cobb Douglas production function from an international panel. A positive output elasticity for net primary production probably measures both marketed and nonmarketed contributions of ecosystems services. The production function is used to calculate the marginal product of net primary production, which is the shadow price for ecosystem services. The shadow price generally is greatest for developed nations, which have larger technical scalars and use less net primary production per unit output. The rate of technical substitution indicates that the quantity of capital needed to replace a unit of net primary production tends to increase with economic development, and this rate of replacement may ultimately constrain economic growth.