Recent and Future Developments Related to “Gdp and Beyond”

Progress of societies? Well‐being of citizens? Trans‐generational impact of policies? To answer such fundamental questions and much more, the European Commission published, in August 2009, its Communication on “GDP and Beyond: Measuring Progress in a Changing World.” Through a co‐operative project, co‐chaired by Eurostat and INSEE (France), the ESS acted decisively and established an action plan to be carried out by 2020 in the context of the European Statistical Programme. This plan which also builds on Eurostat's work on Sustainable Development Indicators. For most of these actions, work has either been accomplished or is in good progress. Further challenges lie ahead, including reconciling macro‐ and micro‐data sources on household economic resources and completing the indicators set on Quality‐of‐Life. The work will also contribute to the global efforts on the Sustainable Development Goals/post‐2015 development agenda.     

Does competitive pricing cause market breakdown under extreme adverse selection?

We study market breakdown in a finance context under extreme adverse selection with and without competitive pricing. Adverse selection is extreme if for any price there are informed agent types with whom uninformed agents prefer not to trade. Market breakdown occurs when no trade is the only equilibrium outcome. We present a necessary and sufficient condition for market breakdown. If the condition holds, then trade is not viable. If the condition fails, then trade can occur under competitive pricing. There are environments in which the condition holds and others in which it fails.     

Attitude toward imprecise information

This paper presents an axiomatic model of decision making under uncertainty which incorporates objective but imprecise information. Information is assumed to take the form of a probability–possibility set, that is, a set P of probability measures on the state space. The decision maker is told that the true probability law lies in P and is assumed to rank pairs of the form (P,f) where f is an act mapping states into outcomes. The key representation result delivers maxmin expected utility (MEU) where the min operator ranges over a set of probability priors—just as in the MEU representation result of Gilboa and Schmeidler [Maxmin expected utility with a non-unique prior, J. Math. Econ. 18 (1989) 141–153]. However, unlike the MEU representation, the representation here also delivers a mapping, , which links the probability–possibility set, describing the available information, to the set of revealed priors. The mapping is shown to represent the decision maker's attitude to imprecise information: under our axioms, the set of representation priors is constituted as a selection from the probability–possibility set. This allows both expected utility when the selected set is a singleton and extreme pessimism when the selected set is the same as the probability–possibility set, i.e., is the identity mapping. We define a notion of comparative imprecision aversion and show it is characterized by inclusion of the sets of revealed probability distributions, irrespective of the utility functions that capture risk attitude. We also identify an explicit attitude toward imprecision that underlies usual hedging axioms. Finally, we characterize, under extra axioms, a more specific functional form, in which the set of selected probability distributions is obtained by (i) solving for the “mean value” of the probability–possibility set, and (ii) shrinking the probability–possibility set toward the mean value to a degree determined by preferences.