Exploitation and Efficiency

Let us take any historical or contemporary economic society. Would economic efficiency become better if such society erects and enforces institutions that prohibit its members from the exploitation of excludable groups that can be defined by race, ethnicity, etc.? This question actually makes no sense. One must first identity the boundary of society, i.e., who make up the objective function. Irrespective of how one defines efficiency, one cannot assess the efficiency of institutions without determining who is covered and who is excluded. Efficiency judgments can make sense only when one defines the social boundary.     

WHY EUROPE? A CRITIQUE OF INSTITUTIONALIST AND CULTURALIST ECONOMICS

Abstract Economists have recently started to discuss the roles of institutions and cultural beliefs in explaining the performance of civilizations. This paper investigates two views, ‘institutionalist economics’ and ‘culturalist economics’, with regard to the question of why Europe rose economically a few centuries ago, while other regions of the world lagged behind. These two views share a common platform raised on two pillars. First, both regard institutions/beliefs as extra‐economic – as primordial entities that ultimately stand independent of economic performance. Second, both regard economic performance as fully determined by institutions/beliefs – i.e. normative causality in the sense that institutions/beliefs determine performance. Douglass North's (2005) analysis of economic performance, for example, is based on both pillars. Concerning the primordial pillar, he attributes ‘the mystery’ of the rise of Europe to primordial beliefs, viz. ‘Christian dogma’ and English ‘individualism’. Concerning the normative pillar, he presumes that such beliefs have almost one‐to‐one correspondence with economic performance. This paper, though, maintains that the two pillars (primordial analysis and normative causality) are rather fragile: Advocates of the first pillar fail to recognize that institutions/beliefs are endogenous. Advocates of the second pillar fail to recognize that institutions/beliefs can give rise to diverse economic performances.     

In God we hope,in ads we believe: the influence of religion on hope,perceived ad credibility,and purchase behavior

This research proposes and demonstrates that religiosity positively affects consumers’ hope for advertised benefits, leading to greater perceived advertisement credibility and, consequently, a greater likelihood of purchasing the advertised products. A multiple-step mediation analysis revealed that both hope for advertised benefits and perceived ad credibility play pivotal roles in explicating the effect of religiosity, whether measured (study 1) or manipulated (study 2), on purchase intentions of advertised products. The authors also investigated the interactive effect between religiosity and perceived product materialism on the observed effects (study 3). The effect of religiosity on hope for advertised benefits, perceived ad credibility, and purchase intentions was moderated by perceived product materialism, such that the positive effects of religiosity on hope, perceived ad credibility, and purchase intentions were observed only for non-materialistic (vs. materialistic) products. Theoretical and managerial implications are discussed.     

Use it or lose it

We examine the optimality of budget policies imposed by a funding authority on a bureaucrat who operates under a fixed budget. In particular, we study a “use‐it‐or‐lose‐it” (UILI) policy under which the bureaucrat has to return any unspent budget without being able to “roll over” any part to the next period. Instead of returning the unspent budget, the bureaucrat can go on a spending spree and engage in policy drift, which is inversely related to his motivation. The bureaucrat's motivation represents how well matched he is with the bureaucracy's mission. We show that a UILI policy is complementary to motivation as it has stronger ex ante positive incentive effects on more motivated bureaucrats. Such ex ante positive effects can overcome the ex post inefficiency of the policy and make a UILI policy optimal when the bureaucrat is well matched with the bureaucracy's mission or when its budget is large.     

Bribery versus extortion: allowing the lesser of two evils

Both bribery and extortion weaken the power of incentives, but there is a trade‐off in fighting the two because rewards to prevent supervisors from accepting bribes create incentives for extortion. Which is the worse evil? A fear of inducing extortion may make it optimal to tolerate bribery, but extortion is never allowed. Extortion discourages “good behavior” because the agent suffers from it even though he has done the right thing, whereas a bribe acts as a penalty for “bad behavior.” Our analysis provides lessons to fight corruption and explanations why developed countries may have an advantage in dealing with extortion.     

Liquidity and information asymmetry considerations in corporate takeovers

ABSTRACT

We examine how stock market liquidity and information asymmetry considerations influence the wealth effects of Mergers and Acquisitions (M&As). We present a simple model predicting that M&As of listed targets that have relatively illiquid stocks are profitable for acquirers due to (a) the weak bargaining power of the targets’ shareholders, and (b) the limited information asymmetry concerns when evaluating takeover synergies. Our results show that cash-financed M&As of listed targets that have relatively illiquid stocks are associated with an increase in acquirer risk-adjusted returns. These gains are equivalent to those realized from comparable private target M&As. When engaging in stock-financed listed-target M&As, acquirers with liquid stocks enjoy significant gains when the targets have relatively illiquid stocks. This result holds especially when the deal is announced during periods of deterioration in the overall stock market liquidity. Lastly, we find that liquidity considerations affect the acquirer’s choice of the target firm’s listing status, as well as the M&A method of payment.     

Working and organizing in the age of the learning algorithm

Learning algorithms, technologies that generate responses, classifications, or dynamic predictions that resemble those of a knowledge worker, raise important research questions for organizational scholars related to work and organizing. We suggest that such algorithms are distinguished by four consequential aspects: black-boxed performance, comprehensive digitization, anticipatory quantification, and hidden politics. These aspects are likely to alter work and organizing in qualitatively different ways beyond simply signaling an acceleration of long-term technology trends. Our analysis indicates that learning algorithms will transform expertise in organizations, reshape work and occupational boundaries, and offer novel forms of coordination and control. Thus, learning algorithms can be considered performative due to the extent to which their use can shape and alter work and organizational realities. Their rapid deployment requires scholarly attention to societal issues such as the extent to which the algorithm is authorized to make decisions, the need to incorporate morality in the technology, and their digital iron-cage potential.     

Institutions,Naturalism and Evolution

The paper recasts old and new institutionalist economics (OIE and NIE) in light of naturalism. While OIE views institutions as 'paradigms' which define the nature of the actor, NIE views institutions as 'conventions' which act as insubstantial traits, i.e. products of optimization subject to constraint. While the two conceptions are different, they are not alternatives: each one is a special theory limited to one kind of institution. In addition, the paper critically assesses the limits of OIE with regard to the theory of evolution of paradigms. The paper advances a developmentalist perspective of institutions which parallels non-Darwinian biological theory.