A Theory of Menu Federalism: Decentralization by Political Agreement

This paper analyzes agreements between governments that determine the division of policy-making power between central and regional governments. Our analysis demonstrates that initial circumstances and political risks affect the degree of centralization that will be adopted, and that asymmetric forms of federalism are often consequences of ongoing negotiations between regional and central governments over the assignment of policy-making authority. We analyze three settings where gains from constitutional exchange may exist: (i) the under-centralized state, (ii) the over-centralized state, and (iii) the constitutional convention. In each case, an asymmetric form of federalism is the predicted outcome, although the degree of asymmetry differs according to starting point. Modern and historical examples are used to illustrate the relevance of our analysis.     

Big Players in Slovenia

The subjectivism of Austrian economics helps to explain the statistical fact of long memory in asset prices. The theory of Big Players is an Austrian approach to understanding the effects of discretionary policymaking in markets. It leads to implications that can be tested with statistics. In particular, Big Players induce herding and, thereby, an increase of persistence in asset prices. A recent episode in Slovenian monetary theory provides a case study. This case study adds to a set of similar studies, all tending to support the theory of Big Players.     

Product differentiation and the gains from trade under Bertrand duopoly

Abstract.  In the literature on the welfare effects of free trade under imperfect competition, one important case seems to have been overlooked, and that is the Bertrand duopoly model with differentiated products. Although many authors have analysed the welfare effects of free trade under Cournot duopoly and demonstrated the possibility of losses from trade, there has been no thorough analysis of the welfare effects of free trade under Bertrand duopoly. In this article we present a thorough analysis of the welfare effects of free trade under Bertrand duopoly with differentiated products, and it is shown that there are always gains from trade. JEL Classification: F12     

The dark side of individual blockholder philanthropy

We examine the market reaction to charitable pledges by individual blockholders of public firms. As this philanthropy may signal a weakening preference for wealth maximization and may be indicative of distraction or relaxed monitoring, these agency costs may overwhelm any reputation benefits. We find decreased firm value and lower pay-for-performance sensitivity, the effects of which are most severe where monitoring needs are high, the blockholder is a director, or when the firm has ex ante high corporate social responsibility ratings. Our results are robust to controlling for prior charitable foundation involvement, busy director–blockholders, dual-class share structures, blockholder exit, and pre-pledge firm sentiment.     

A re-examination of the “zero is enough” hypothesis in the emergence of financial stylized facts

In recent years, a growing literature has claimed that the market microstructure is sufficient to generate the so-called stylized facts without any reference to the behaviour of market players. Indeed, qualitative stylized-facts can be generated with zero-intelligence traders (ZITs) but we stress that they are without any quantitative predictive power. In this paper we show that in most of the cases, such qualitative stylized facts hide unrealistic price motions at the intraday level and ill-calibrated return processes as well. To generate realistic price motions and return series with adequate quantitative values is out-of-reach using pure ZIT populations. To do so, one must increasingly constrain agents?? choices to a point where it is hard to claim that their behaviour is completely random. In addition we show that even with highly constrained ZIT agents, one cannot reproduce real time series from these. Except in a few cases, first order moments of ZITs never equal real data ones. We therefore claim that stylized facts produced by means of ZIT agents are useless for financial engineering.     

Real Existing Regionalism: The Region between Talk,Territory and Technology

In this essay, we propose the notion of real existing ‘lived’ regionalism as a rejoinder to the normative and ideological debates around new regionalism. Regional forms have shown little convergence in this age of globalized regionalization. Instead of an ideational construct or set of predictable practices, we argue that regionalism is a contested product of discourses (talk), territorial relationships (territory) and technologies (material and of power). The concept of real existing regionalism confronts the tensions between the discursive constructions and normative interventions characterizing much current regionalist debate and the territorial politics and technologies reflecting, generating and directing new state spatial strategic choices. The essay demonstrates the utility of the real existing regionalism framework through an analysis of the greenbelt, transport planning and post‐ suburbanization in Southern Ontario. We argue that regulatory institutions capture the Toronto region in a mix of rhetorical and technological change that complies with neither preconceived notions of regionalization nor the pessimism of total regional dysfunctionality. Rather, the lived experience of regionalization illuminates the emergent assemblages, multiplicity of everyday flows and ongoing multiscalar negotiations of diverse communities that produce the real existing region.     

The Governance of Networks and Economic Power: The Nature and Impact of Subcontracting Relationships

Abstract.  Current debate on networking focuses on network structures and firm strategies. In this perspective, theoretical analysis has been concerned with allocative issues. This essay proposes a different interpretation. Starting from the existing theoretical framework, we emphasise the nature and the implications of different types of networks with respect to socio‐economic development from a distributional point of view. Within this context, we develop the analysis of subcontracting starting from the concept of economic power. We then provide an analysis of governance in production by considering the attitudes and the nature of the actors involved. The externalisation of activities by large transnationals, which characterises current corporate restructuring, is often related to the search for greater flexibility, but also for greater power over governments, labour, and subcontractors. Differently, networks based on the mutual dependence of actors, which are not necessarily built around a large firm, could – under particular conditions – reach large production scales or more complex scopes without breaking the links with territorial systems, thus including local objectives in the strategic decision‐making process. Our conclusion is that the impact of subcontracting networks varies enormously. This is crucial to an understanding of future trends and possibilities. Not least, firms and public policy agencies need to understand the implications of different forms of subcontracting network and how those forms actually differ in practice.     

A Theory of Constitutional Standards and Civil Liberty

Why would potentially intolerant majorities in a democracy protect the rights of unpopular groups? This paper models the formation of legal standards that determine the extent of civil liberty in a society. It is shown that tolerant legal standards emerge over time, despite all individuals having intolerant preferences. Each period citizens choose activities that have social consequences. A majority vote determines which of these activities are legally protected. Because of errors in interpreting the symbolic content of these activities, voters from the majority will not impose excessively intolerant standards, otherwise they may end up severely punishing members of their own group by mistake.
Extending this framework to a dynamic model, we examine Markovian equilibria of the game when government improves with time in its ability to correctly interpret citizens' activities. These improvements allow an unchanging majority to impose increasingly intolerant standards over time. It is shown that societies with high political turnover due to population changes are apt to choose tolerant legal standards. Societies with low turnover are more apt to choose more intolerant and unstable ones. Each group seeks to prevent auditing capabilities of government from improving too much over time in order to prevent future majorities from successfully enforcing more intolerant standards.     

Performance Measurement in Government Service Provision: The Case of Police Services in New South Wales

The NSW Government is implementing a financial framework which is designed to encourage government service providers to become more efficient and effective. NSW Treasury is using Data Envelopment Analysis (DEA) to measure the efficiency of major government service providers, such as police, courts and hospitals. This paper outlines the progress in implementing the new financial framework and illustrates the way NSW Treasury will use DEA to help improve the efficiency of government service providers by describing an analysis of the NSW Police Service. The results suggest that NSW police patrols (local police districts) could, on average, reduce input usage by 13.5 percent through better management, and by 6 percent if the patrols could be restructured to achieve the optimal scale. Results also indicate that differences in operating environments, such as location and socioeconomic factors, do not have a significant influence upon the efficiency of police patrols.