Credible expectations — The US Department of Energy's Hydrogen Program as enactor and selector of hydrogen technologies

There are many competing transition paths toward sustainability and even more competing visions and expectations, while only a limited of number of paths can be supported. In the literature so far, not much attention has been paid to the question: what makes one expectation more credible than another?On the basis of a case study on the US Department of Energy's (DOE) Hydrogen Program we show how credible expectations build on three arguments in favor of the promising option. First there is the technology's current level of performance and its historical progress toward that level. Second a path forward is constructed to argue that even higher levels of performance can be achieved. And third, an end target is constructed that relates to relevant societal needs. All three elements can, and often are, subject of contestation and competing options will provide the same type of arguments and relate to the same societal needs.Finally, a transition path needs promising enabling technologies to remain credible, and the ‘losers’ are dropped as soon as the credibility of the path is challenged.     

Entrepreneurial strategy v. accounting accuracy in ‘calculating’ capital and income

Both entrepreneurs and accountants ??calculate?? capital and income but their procedures diverge. The paper examines this divergence and the respective calculational objectives of entrepreneurs and accountants in the business enterprise. For the entrepreneur, capital and income are ex ante calculational judgments of prospective income gain from strategic use of the enterprise??s capital goods. But the accountant must shun entrepreneurial judgments to ??calculate?? the contemporary net market value of enterprise??s capital goods at a specified date. Hence, the accountant??s calculation of income is the net contemporary increase in the market value of the enterprise??s capital goods. These accounting calculations facilitate assessment of the success of an enterprise strategy. But critics assert that accounting practice ignores the need of external investor??s for accurate information on enterprise prospects. The paper concludes with a critique of accounting regulation and explores the feasibility and means of privatizing the entrepreneurial choice of accounting techniques.     

Evaluating market efficiency without price data: the Swedish market for wood fuel

The overall objective of this paper is to analyse the price development and price formation for wood fuel used by the Swedish district heating sector. According to Lönner et al., there is a significant potential for increasing the use of wood fuel in Sweden, at a fairly moderate cost. The basic question raised in this paper is then why this potential is not realized. Specifically, a methodology is proposed for testing whether the reason is that market imperfections are present. As a first step the shape of the technology in the Swedish district heating sector is estimated for the period 1989 to 1996. In the second step the estimated technology and the assumption of cost-minimizing firms are combined to calculate shadow prices, i.e. marginal valuation of wood fuel in this sector. If the average shadow price significantly deviates from the average observed price one may conclude that this market is functioning inefficiently due to imperfections. According to constructed bootstrap confidence intervals this difference is significant only for three out of eight years, implying that the quantities of wood fuel traded are too small. For the other years the difference is not significant, implying that one cannot, on statistical grounds, reject the efficient market hypothesis for all years.     

Disequilibrium and asymmetric price adjustment the case of the Swedish timber market

The major question raised in this paper is whether or not the Swedish timber market is in a state of disequilibrium. In recent discussions it has been claimed that the industry has been constrained in production because of timber shortage. In this paper I abandon the assumption of equality between demand and supply. The econometric model is based on a partial price adjustment model which allows for asymmetric adjustment. The test of equilibrium versus disequilibrium supports disequilibrium.This study was supported financially by grants from the research program private forestry at the Swedish Institute of Agricultural Engineering. I would like to thank Karl-Gustaf Löfgren for his insightful comments on earlier drafts. In addition, I would like to thank three anonymous referees for many useful suggestions.     

Public expenditure, international specialisation and agglomeration

It is widely recognised that public-sector purchasers tend to favour domestic suppliers. We study the consequences of such home-biased public procurement on international specialisation. Using a general-equilibrium model with a monopolistically competitive sector, we find that a country will specialise in that sector if it has relatively large home-biased procurement (the “pull” effect). Furthermore, home-biased procurement can counter agglomeration forces in that sector and thereby attenuate the overall degree of international specialisation (the “spread” effect). Our empirical analysis, conducted on input-output data for the European Union, yields supporting evidence for the pull effect and some support for the spread effect.     

The Economic Logic for Conditioning Bell Entry into Long Distance on the Prior Opening of Local Markets

One of the most important and most contentious issues for regulation and competition raised by the 1996 Telecommunications Act is when to authorize the regional Bell companies to offer long-distance services. The Department of Justice (DOJ) adopted a standard requiring that a Bells local market must first be irreversibly open to competition. This paper analyzes the competitive benefits and costs of authorizing Bell entry, explains the DOJs standard, and argues that the incentives created by this standard will help achieve the Acts competitive goals more efficiently and rapidly than other standards, ultimately reducing the need for intrusive regulation.     

Evaluating the cost-effectiveness of percutaneous closure of a patent foramen ovale versus medical management in patients with a cryptogenic stroke: from the UK payer perspective

Aims: Percutaneous closure of a patent foramen ovale (PFO) is known to lower the risk of recurrent stroke in patients with a cryptogenic stroke. However, the economic implications of transcatheter PFO closure are less well known. From a UK payer perspective, a detailed economic appraisal of PFO closure was performed for prevention of recurrent ischemic stroke in patients with a PFO who had experienced a cryptogenic stroke.

Materials and methods: A Markov cohort model was constructed using a 5-year time-horizon with a patient mean age of 45.2 years, reflecting the characteristics reported in the REDUCE trial. Transition probabilities, clinical inputs, costs, and utility values were ascertained from published and national costing sources. Total costs, incremental costs, quality-adjusted life-years (QALYs), and incremental cost-effectiveness ratios were calculated, utilizing a discount rate of 3.5%. A range of univariate and probabilistic sensitivity analyses were also performed.

Results: When applying a willingness-to-pay (WTP) threshold of £20,000/QALY in accordance with NICE guidelines, PFO closure compared with antiplatelet therapy alone showed a beneficial cost/QALY of £18,584, attained at 4 years. Applying discount rates of 0% and 6% had a negligible effect on the base-case model findings. PFO closure demonstrated a 76.9% probability of being cost-effective at a WTP threshold of £20,000/QALY at a 5-year time-horizon.

Limitations: This model focused specifically on UK stroke patients and typically enrolled young (mean age <65 years old) patients. Hence, caution should be taken when comparing data vs non-UK populations, and it remains unclear how older patients might have affected cost-effectiveness findings, as the risk of paradoxical embolism can persist as patients age.

Conclusion: Percutaneous closure of a PFO is cost-effective compared with antiplatelet therapy alone, underlining the economic benefits potentially afforded by this treatment in selected patients.     

Modeling the evolution of implied CDO correlations

CDO tranche spreads (and prices of related portfolio-credit derivatives) depend on the market’s perception of the future loss distribution of the underlying credit portfolio. Applying Sklar’s seminal decomposition to the distribution of the vector of default times, the portfolio-loss distribution derived thereof is specified through individual default probabilities and the dependence among obligors’ default times. Moreover, the loss severity, specified via obligors’ recovery rates, is an additional determinant. Several (specifically univariate) credit derivatives are primarily driven by individual default probabilities, allowing investments in (or hedging against) default risk. However, there is no derivative that allows separately trading (or hedging) default correlations; all products exposed to correlation risk are contemporaneously also exposed to default risk. Moreover, the abstract notion of dependence among the names in a credit portfolio is not directly observable from traded assets. Inverting the classical Vasicek/Gauss copula model for the correlation parameter allows constructing time series of implied (compound and base) correlations. Based on such time series, it is possible to identify observable variables that describe implied correlations in terms of a regression model. This provides an economic model of the time evolution of the market’s view of the dependence structure. Different regression models are developed and investigated for the European CDO market. Applications and extensions to other markets are discussed.