The Exchange Rate and its Fundamentals in a Complex World

We develop a nonlinear exchange rate model with heterogeneous agents. Some agents adopt a “fundamentalist” forecasting rule, while others use a “chartist” forecasting rule. We show that the model is capable of explaining the empirical puzzles relating to exchange rate movements. In particular, the model explains the “exchange rate determination” and PPP puzzles, the excess volatility, and fat tails in exchange rate returns.     

Toward a Phylogenetic Reconstruction of Organizational Life

Synopsis Classification is an important activity that facilitates theory development in many academic disciplines. Scholars in fields such as organizational science, management science and economics and have long recognized that classification offers an approach for ordering and understanding the diversity of organizational taxa (groups of one or more similar organizational entities). However, even the most prominent organizational classifications have limited utility, as they tend to be shaped by a specific research bias, inadequate units of analysis and a standard neoclassical economic view that does not naturally accommodate the disequilibrium dynamics of modern competition. The result is a relatively large number of individual and unconnected organizational classifications, which tend to ignore the processes of change responsible for organizational diversity. Collectively they fail to provide any sort of universal system for ordering, compiling and presenting knowledge on organizational diversity. This paper has two purposes. First, it reviews the general status of the major theoretical approaches to biological and organizational classification and compares the methods and resulting classifications derived from each approach. Definitions of key terms and a discussion on the three principal schools of biological classification (evolutionary systematics, phenetics and cladistics) are included in this review. Second, this paper aims to encourage critical thinking and debate about the use of the cladistic classification approach for inferring and representing the historical relationships underpinning organizational diversity. This involves examining the feasibility of applying the logic of common ancestry to populations of organizations. Consequently, this paper is exploratory and preparatory in style, with illustrations and assertions concerning the study and classification of organizational diversity.     

Voluntary development of environmental management systems: motivations and regulatory implications

Encouraging firms to develop voluntarily more comprehensive environmental management systems (EMSs) is touted as a policy tool to augment mandatory environmental regulations. Using a unique dataset of environmental management practices of Japanese manufacturers and controlling for self-selection bias in survey responses, we find that proxies for regulatory pressures and consumer pressures are the most important factors that motivate firms toward more comprehensive EMSs. Despite the oft-claimed “voluntary” nature of EMS development, our results show that the government may have a role to play in both directly and indirectly affecting EMS development by firms.      

Incentive effects of benevolent intervention: The case of government loan guarantees

There has been a substantial recent growth in government loan guarantees to ailing firms in the United States. This paper investigates the potential incentive effects of this practice. Using the simplest available two-period model, it is shown that when firms know that loan guarantees may be forthcoming, they may be induced to adopt riskier investments and take on more leverage. These perverse incentive effects imply that the actual loan-guarantees-related contingent liability of the government could be much larger than suspected. Our policy recommendation is that the government either abandon the practice altogether or set up a federal agency that sells loan guarantees to all firms at prices that depend on the riskiness of the firm's assets and its leverage.     

The relationship between technology and science: Some historical and philosophical reflections. Part I

This essay offers a detailed review of the literature on the relationship between technology and science. It is in two parts. Part I begins by describing science and technology, and the differences between them. It then discusses the commonly-held technology-as-applied-science (TAS) view; the origins of this view, the support for it, and the strong historical and philosophical challenges to it, beginning more than half a century ago, are explored. The development of the steam engine is then offered as a brief case study to illustrate that science-technology relations are more complex than implied by the TAS view. Part I concludes with a consideration of ontological arguments supporting the reverse view, namely that technology is often a necessary precursor to science.Part II, to be published in a following issue, explores some of the consequences of the TAS view. One consequence is that it has generated a story-line in which scientific ideas are emphasised and other factors necessary for technological innovation have been down-played. Another consequence is that, even in cases where technology does apply scientific knowledge, the process of application is often considered obvious; the difficulties of translating ideas into artefacts may not be appreciated. The essay argues for the telling of a more complex story of science-technology relations, one which recognises their historical independence in the past, and their mutual, two-way interaction in many modern fields of endeavour. It concludes with a consideration of some economic and educational implications.     

Using HMDA Data as a Regulatory Screen for Fair Lending Compliance

This paper describes and evaluates the Federal Reserve System's recently developed program designed to use HMDA data as a screening device for fair lending enforcement. The program is designed to identify institutions showing potentially discriminatory patterns in their treatment of minority mortgage applicants vis-a`-vis nonminority applicants. The program also selects specific loan files to pull for additional information in cases where a more comprehensive evaluation might be appropriate. This paper discusses the motivation behind the adoption of the program and its innovative matched-pair method and assesses its value and potential shortcomings.     

The conceptual understanding of scientific principles in Home Economics

This paper stresses the importance of scientific understanding as part of Home Economics courses and describes how personal misconceptions can interfere with this understanding. It examines the misconceptions held by third level undergraduate students of a basic scientific principle used in the cooking of food, that of boiling, and compares these misconceptions with those of second level pupils commencing their formal education in science. Little difference is reported between the two groups in terms of the misconceptions held. The effectiveness of a teaching methodology based on a constructivist view of knowledge, that of cognitive conflict, in changing misconceptions is reported.