Do Addicts Behave Rationally?

The theory of rational addiction assumes that addicts' behavior is fully rational. Common sense and psychological introspection suggest, however, that addictive behavior is irrational. Without knowledge of the addicts' preferences this dispute cannot be resolved. This paper reports the results of an experiment in which addictive preferences were induced. It turns out that ‘addicts’ consume systematically too much compared to the optimal consumption decision. We explain this systematic excess consumption in terms of the psychologically salient features of addictive goods.     

The Political,Economic, and Social Aspects of Katrina

In this paper, we examine the resiliency of community recovery after a natural disaster. We argue that a resilient recovery requires robust economic/financial institutions, political/legal institutions, and social/cultural institutions. We explore how politically and privately created disaster preconditions and responses have contributed to or undermined institutional robustness in the context of the Gulf Coast's recovery after Hurricane Katrina. We find that where postdisaster resiliency has been observed, private-sector responses contributing to the health of these institutional arenas are largely responsible. Where postdisaster fragility and slowness has been observed, public-sector responses contributing to the frailty of these institutional arenas are largely the cause. In other words, we engage in a comparative institutional analysis of civil society, entrepreneurial commercial society, and government agencies and political actors in the wake of a natural disaster.     

The Impact of Socialization on Youth Program Outcomes: A Social Development Model Perspective

This study employs a mixed-methods design and a social development model (SDM) to examine the role of socialization processes within an international immersion program for adolescents. Longitudinal data from 108 participant and 49 comparison group members are analyzed using structural equation modeling procedures. Qualitative data are also used to assess participants’ perceptions of these processes. The quantitative findings indicate that the SDM fits the data well and partially mediates the growth of observed recreation program outcomes. The qualitative findings offer additional insights into the role of within program socialization processes.     

Distortion Risk Measures and Economic Capital

Abstract

To provide incentive for active risk management, it is argued that a sound coherent distortion risk measure should preserve some higher degree stop-loss orders, at least the degree-three convex order. Such risk measures are called tail-preserving risk measures. It is shown that, under some common axioms and other plausible conditions, a tail-preserving coherent distortion risk measure identifies necessarily with the Wang right-tail measure or the expected value measure. This main result is applied to derive an optimal economic capital formula.     

Global Interdependence, the Corporation and the Changing World

This second of the annual Stockton Lectures starts by reflecting on the achievements of the founding fathers of the modern world economy in the immediate aftermath of World War II. Their legacy has been increasing interdependence and globalisation. Peter Sutherland argues that these have had a positive impact almost throughout the world and that these positive consequences of the market economy system do not necessarily have to be associated with increasing gaps between the rich and poor. He makes the case for multinationals to show commitment to what he calls "the common good" (as opposed only to shareholder returns). He examines the fundamental contradiction between free trade and national sovereignty and argues for more supranational (rather than just intergovernmental) decision-making and implementation. However, he also emphasises that some areas are not appropriate for integration or supranational action, most notably tax and workers' rights. These should remain within the domain of national governments. He concludes by discussing threats to the world economy posed by the tension between the US and the EU on trade-related issues, and argues that inappropriate use of the WTO process threatens to destroy the whole system which has yielded so many economic benefits worldwide since 1945.