The road to a market economy

The ongoing conversion of the economies of former socialist countries into market economies has so far suffered from the lack of a theory of system transformation (policy) which indicates the means of achieving the desired objectives and makes it possible to evaluate the transformation policies of individual countries. The following article outlines the essential aspects of such a theory.     

Elicitation using multiple price list formats

We examine the properties of a popular method for eliciting choices and values from experimental subjects, the multiple price list format. The main advantage of this format is that it is relatively transparent to subjects and provides simple incentives for truthful revelation. The main disadvantages are that it only elicits interval responses, and could be susceptible to framing effects. We consider extensions to address and evaluate these concerns. We conclude that although there are framing effects, they can be controlled for with a design that allows for them. We also find that the elicitation of risk attitudes is sensitive to procedures, subject pools, and the format of the multiple price list table, but that the qualitative findings that participants are generally risk averse is robust. The elicitation of discount rates appear less sensitive to details of the experimental design. Electronic Supplementary Material Supplementary material is available in the online version of this article at . JEL Classification C9, D81, D91 An erratum to this article is available at .     

CAP Reforms in the 1990s and their Price and Welfare Implications: The Case of Wheat

We use a nonlinear commodity market model to assess, theoretically and empirically, the impacts of recent reforms of the CAP on prices and economic welfare in the EU. The empirical analysis is based on an aggregate structural econometric model of the EU wheat economy and its links to the rest of the world. Instability issues are also investigated. Impacts of CAP reforms on the variance of domestic and world prices are analysed and a Monte Carlo simulation is used to evaluate uncertainty in the model's welfare computations. Recent reforms led to a net welfare gain within the EU during the period 1993–2000. Additional budgetary costs are less than the welfare gains of consumers and producers. Producers gained as lower price support was overcompensated by additional direct payments.     

Exchange Rate Pass‐through and Currency Invoicing: Implications for Monetary Integration in East Asia

Exporter's price‐setting behaviour and currency invoicing play a key role in the literature on the new open‐economy macroeconomics. This paper estimates exchange rate pass‐through coefficients for the exports of four ASEAN countries: Indonesia, Malaysia, the Philippines and Thailand. In addition, previous estimates of pass‐through as well as invoicing behaviour in East Asia are discussed in the context of regional integration. The new pass‐through coefficients are estimated under two alternate specifications for up to 34 goods for each of the four ASEAN countries destined for up to 13 major markets. The results suggest: (a) little pass‐through is occurring in Southeast Asia and (b) this lack of pass‐through is more likely attributable to the fact that they are small countries in a relatively integrated market, rather than evidence of pricing to market. The implications for regional monetary integration of this apparently low degree of pass‐through are detailed.     

Revisiting the Roots of Japan's Economic Stagnation: The role of the Japanese corporation

For a long period in the 20th century, the development of the Japanese corporation appeared congruent with the development of the Japanese economy. The growth-maximising behaviour of the Japanese corporation and the preference for internal growth over acquisitions (see Odagiri, 1992) appeared to suit the long-term ambitions of Japan. Now, that formerly clear connection between the ambitions of corporate Japan and the Japanese public interest is no longer so clear. Increasingly, the global ambitions of the corporation appear as an impediment to Japan's economic development. By favouring the development of large-scale transnational corporations, Japanese industrial policy-making appears to have contained a fundamental flaw. Japan is now dominated by large-scale organisations with global ambitions, controlled by corporate elites. It is unlikely that their strategic decisions will correspond with the wider public interest, which raises the possibility that Japan is now afflicted with 'strategic failure'. Other examples from around the world suggest that Japan is not unique in this respect. Alternative ways forward are suggested.     

The composition of interest: The judaic prohibition

An interest charge is made up of an award for waiting known as the real rate of interest, a premium for risk and compensation for transaction costs. Where inflation exists the lender seeks further compensation. In order to understand the composition and evolution of different versions of the usury prohibition it is necessary to ask which components of an interest charge are prohibited by each version. The Judaic prohibition has two aspects which are of particular interest to business historians and students of usury. First, the general rule is that a reward for waiting is prohibited. This focuses on the time-based part of interest charge. Second, interest is prohibited because it amounts to placing a stumbling block before the blind. This focuses on the typical gullibility of the borrower confronted by a more expert, better funded lender. Economics confirms and enriches our understanding of these important aspects of the prohibition. They achieve this by increasing our understanding of two facts: first, that the borrower is a gullible individual subject to irrational and inconsistent behaviour; and, second, that this behaviour relates to the waiting aspect of interest which is proscribed in the prohibition. How far these insights apply to other civilisations' prohibition, particularly those which derive from the Judaic prohibition, merits further study; so also do the ethical lessons of the Mosaic rules for a globalised society based on capitalism.     

Ludwig von Mises: The Man and His Economics

Kirzner, Israel M. (2001). Ludwig von Mises: The Man and His Economics . Wilmington, DE: ISI Books. ISBN 1-882926-61-7. xv, 226 pp.