Spoilage with a Production Function

The traditional accounting for spoilage has been somewhat ad hoc since there has been no general theory of how spoilage occurs or can be controlled. This paper uses an economic analysis to model the determinants of spoilage in the production process and to show how normal spoilage can be chosen in a cost minimisation program. The model also generates an expanded variance analysis of spoilage which provides guidance in the investigation and interpretation of abnormal spoilage. It is argued that this approach results in both optimal and flexible product decisions.     

THE GROWTH AFTERMATH OF NATURAL DISASTERS

This paper traces the yearly response of gross domestic product growth—both aggregated and disaggregated into its agricultural and non‐agricultural components—to four types of natural disasters: droughts, floods, earthquakes, and storms. The paper uses a methodological approach based on pooling the experiences of various countries over time. It consists of vector autoregressions in the presence of endogenous variables and exogenous shocks (VARX), applied to a panel of cross‐country and time series data. The analysis finds heterogeneous effects on a variety of dimensions. First, the effects of natural disasters are stronger on developing than on advanced countries. Second, not all natural disasters are alike in terms of the growth response they induce, and some can even have positive effects on economic growth. Third, severe disasters often carry much worse effects than moderate effects do. Fourth, the timing of the growth response varies with both the type of natural disaster and the sector of economic activity. Copyright © 2011 John Wiley & Sons, Ltd.     

An evaluation of incentive regulation for electric utilities

This empirical study examines the determinants and impacts of incentive regulations introduced by utility commissions in the late 1970s and early 1980s. Rewards for generating plant utilization and low heat rates were found to have been introduced in states whose firms exhibited relatively high managerial slack (or relatively higher costs). However, the empirical results did not find that the introduction of specific cost component incentives improved overall operating cost performance.     

Bayesian comparison of several continuous time models of the Australian short rate

This paper provides an empirical analysis of a range of alternative single‐factor continuous time models for the Australian short‐term interest rate. The models are nested in a general single‐factor diffusion process for the short rate, with each alternative model indexed by the level effect parameter for the volatility. The inferential approach adopted is Bayesian, with estimation of the models proceeding through a Markov chain Monte Carlo simulation scheme. Discrimination between the alternative models is based on Bayes factors. A data augmentation approach is used to improve the accuracy of the discrete time approximation of the continuous time models. An empirical investigation is conducted using weekly observations on the Australian 90 day interest rate from January 1990 to July 2000. The Bayes factors indicate that the square root diffusion model has the highest posterior probability of all models considered.     

Regulation of State-Owned and Privatized Utilities: Ukraine Electricity Distribution Company Performance*

Both ownership and regulation affect the behavior of utility managers. Private ownership rewards managerial decisions that enhance shareholder value. Regulatory incentives reward behavior that affects profits and costs. An empirical analysis of 24 Ukraine electricity distribution companies from 1998 to 2002 indicates that privately owned firms do respond to incentives that add to net cash flows (associated with reducing commercial and non-commercial network losses). However, they also respond more aggressively than do state-owned distribution utilities to mark-up (cost-plus) regulatory incentives that increase shareholder value but decrease cost efficiency. This study was initiated while Val Tsaplin was a PURC Visiting Scholar with funding from the FSA Contemporary Issues Fellowship Program. Michael Pollitt, David Sappington, Fernando Damonte, and an unknown reviewer provided very helpful comments on earlier drafts. We thank Patricia Mason for copy-editing the paper. The conclusions do not necessarily represent the views of organizations with which the researchers are affiliated.     

Urbanizing economics

Action takes place at a given time and place. As a science of human action, economics is, therefore, just as much about the spaces where real action occurs as it is about real time. The implications of real time for social order is better recognized than the significance of “action space.” The living city is the principal locus of action space and enabler of social change as well as the source of fundamental concepts in economic theory. Just as a loss of density and diversity in cities tends to retard dynamic discovery and development, the turn in economic theory in the mid-20th century toward static equilibrium reflected a move from an urban-based to a plantation-based conception of the economy—from the city to the farm. Some recent developments in network theory, game theory, and geography, however, can be interpreted as a re-urbanization of economics.

Clinical and economic impact of rivaroxaban on the burden of atrial fibrillation: The case study of Japan

Objectives: Atrial fibrillation (AF) affects an estimated 1.5 million individuals in Japan, increasing their stroke risk and imposing considerable costs on the Japanese healthcare system. To reduce stroke incidence, guidelines recommend using anticoagulants in moderate-to-high risk non-valvular AF (NVAF) patients; however, many patients receive no treatment, aspirin only, or remain poorly-controlled on vitamin K antagonists (VKAs) due to high VKA discontinuation rates and non-adherence to guidelines. A prevalence-based Markov model was developed to estimate the clinical and budgetary impact of treating these patients with Xarelto^TM (rivaroxaban, Bayer AG) in Japan.

Methods: Population, baseline risk of events, and associated management costs were estimated using data from Japanese publications where available. Treatment efficacy and safety were derived from published data and the J-ROCKET AF trial. Drug and physician visit costs were based on data from the Ministry of Health, Labor, and Welfare, the J-ROCKET AF trial, and Japanese clinical guidelines.

Results: This model demonstrates that increased use of rivaroxaban in inadequately-managed NVAF patients could avoid 456 081 non-fatal ischemic strokes (IS) and 76 975 cardiovascular deaths over 10 years in Japan. This clinical benefit offsets the increased incidence of myocardial infarctions and anticoagulant-related bleeding. Decreased event costs could lead to a ¥188.4 billion decrease in net spending over the analysis time horizon.

Conclusions: Introducing rivaroxaban may decrease the burden of NVAF in Japanese society. From a clinical perspective, the reduction in IS and embolic events outweighs the increased risk of anticoagulant-related bleeding; from an economic perspective, reduced event costs offset drug and physician visit costs, resulting in cost savings.     

Hospital-physician partnerships: a fairy tale?

To work together more effectively, clinical and finance leaders should: Recognize the cultural causes of tension, Conduct honest conversations to help build trust, Acknowledge their own blind spots to understanding.     

Trends in experimental high-energy physics

Data from a scan of papers in Physical Review Letters and Physical Review are used to demonstrate that American high-energy physicists show a pattern of accelerator and instrumentation usage characteristics of that expected from the logistic-substitution model of Marchetti and of Fischer and Pry.