The European Union's debt question: A conceptional viewpoint

The state can be conceived as an organization to protect personal freedom and to provide public goods. Consequently, we expect a constitution to consist of two different sets of rules; rules on personal freedom and rules for making collective decisions on public goods (mostly budgetary rules). The constitution of the European Union as laid down in the treaty of Maastricht (1992) provides both types of rules, but the emphasis is mainly on the former rules. This paper investigates budgetary rules, in particular the welfare economic logic of deficit spending.     

A Laboratory Investigation of Multiperson Rationality and Presentation Effects

This paper reports the results of laboratory experiments in which subjects were presented with different two-person decision problems in both their extensive and normal forms. All games generated the same equilibrium outcomes. Our results indicate that the presentation of the decision problem significantly affects the strategy chosen. Surprisingly, these presentation effects were most prominent in the simplest games where differences in presentation would seem most transparent. It appears that subjects are much more likely to use (and fear) incredible threats when the problem is presented as a one-stage rather than as a multistage game. Journal of Economic Literature Classification Numbers: 026,215.     

Education for the moral development of managers: Kohlberg's stages of moral development and integrative education

Recent management behavior such as the PINTO gasoline tank decision has received a great deal of notoriety. In fact, repugnant examples of management amorality and immorality abound. One is forced to ask a number of questions. Does such behavior reflect a lack of a proper education in moral behavior? Can education result in moral behavior? If so, what kind of education might that be? Answers to these questions might point a way out of the moral shadows giant corporations have cast over much of the world. An attempt to answer these questions, then, might be a worthwhile venture.     

The case for trend-stationarity is stronger than we thought

In DeJong and Whiteman (1991a), we concluded that 11 of the 14 macroeconomic time-series originally studied by Nelson and Plosser (1982) supported trend-stationarity. Phillips (1991) criticizes this inference, claiming that our procedure is biased against integration, and that our results are sensitive to model and prior specification. However, Phillips' alternative models and priors bias his results in favour of integration; despite these biases, Phillips' own findings indicate that the data provide the greatest relative support to trend-stationarity. This result is similar to our own (1989, 1990, 1991b) findings concerning the sensitivity of our results; the trend-stationarity inference is remarkably robust.     

The allocation of a shared resource within an organization

Many resources such as supercomputers, legal advisors, and university classrooms are shared by many members of an organization. When the supply of shared resources is limited, conflict usually results between contending demanders. If these conflicts can be adequately resolved, then value is created for the organization. In this paper we use the methodology of applied mechanism design to examine alternative processes for the resolution of such conflicts for a particular class of scheduling problems. We construct a laboratory environment, within which we evaluate the outcomes of various allocation mechanisms. In particular, we are able to measure efficiency, the value attained by the resulting allocations as a percentage of the maximum possible value. Our choice of environment and parameters is guided by a specific application, the allocation of time on NASA's Deep Space Network, but the results also provide insights relevant to other scheduling and allocation applications. We find (1) experienced user committees using decision support algorithms produce reasonably efficient allocations in lower conflict situations but perform badly when there is a high level of conflict between demanders, (2) there is a mechanism, called the Adaptive User Selection Mechanism (AUSM), which charges users for time and yields high efficiencies in high conflict situations but, because of the prices paid, in which the net surplus available to the users is less than that resulting from the inefficient user committee (a reason why users may not appreciate ‘market solutions’ to organization problems) and (3) there is a modification of AUSM in which tokens, or internal money, replaces real money, which results in highly efficient allocations without extracting any of the users' surplus. Although the distribution of surplus is still an issue, the significant increase in efficiency provides users with a strong incentive to replace inefficient user committees with the more efficient AUSM.     

Confrontation analyses of United States-Soviet grain negotiations

From 1976 until 1991, the government of the former Soviet Union bought wheat and coarse grains grown in the United States, from private grain companies, under the terms of Long Term Agreements (LTAs). The author conducted interviews with U.S. and Soviet government officials actively involved in the negotiations to establish the terms of those LTAs. Analyses of the negotiations were carried out using confrontation theory. The subsequent analysis shows how the changing issues, actors and positions over time affected the grain trading relationship between the two countries.     

Costly information production and optimal capital structuring: Theory and implications for finance and accounting

By considering a broad class of securities offerings that we termcapital structurings, a firm can always avoid pooling with firms whose prospects are poorer. This result implies that firms need not indulge in costly information gathering, hoping thereafter to signal to investors. One application allows us to describe a new theory of capital structurings, in which firms choose their capital structure not (as in traditional capital structure signaling theory) to signal privately known prospects, but rather to signal that no (productively useless) investigation of prospects has been pursued. A second application addresses the issue of the impossibility of informationally efficient capital markets: firms are capable of establishing conditions under which investors will recognize informational efficiency. The authors wish to acknowledge helpful comments by participants in seminars at the University of Hawaii at Manoa and the Univeristy of Tsukuba. Particular thanks go to Adam Brandenburger and an anonymous referee. Naturally, any remaining errors are the responsiblity of the authors. C.J.J. is on leave at the Council of Economic Advisers. This article reflects the opinions of the authors and not that of the Council of Economic Advisers. Much of the work for this article was conducted while E.H.R. was on leave at the Institute of Socio-Economic Planning at the University of Tsukuba, Tsukuba, Ibaraki 305, Japan.