Japan's slow-down: monetary versus real explanations

Two kinds of view about the recent stagnation of the Japaneseeconomy have been particularly popular. The first adopts a 'monetary'perspective, arguing that Japan has fallen into a liquiditytrap from which only unconventional monetary policy can saveit. The second maintains that a large part of Japan's macroeconomicdifficulties is structural and related to problems in the 'real'side of the economy. We argue here that it is hard to justifya neat division between these real and monetary problems. Decliningexpectations of future productivity may have depressed realinterest rates and reduced monetary policy flexibility, butthey are also likely to have prompted real responses that havecontributed to stagnation. In the long run, the conclusionsof the two kinds of diagnosis are complementary, but in theshort term tension may exist, with loose monetary policy weakeningincentives for structural reform, and structural adjustmentexacerbating demand deficiency.     

Implications of Economic Interdependence for Endogenous Wage Indexation Decisions

This paper shows how economic interdependence affects the indexation decisions of atomistic wage setters in an environment in which monetary authorities do not observe stochastic disturbances before making their policy choices. If stochastic disturbances are common across countries, interdependence has no effect on equilibrium indexation choices in identical countries. However, if disturbances are country specific, numerical simulations show that interdependence is likely to reduce equilibrium indexation choices relative to a small open economy. We also show that indexation choices may be either strategic complements or strategic substitutes, but that strategic complementarity becomes more likely as the degree of interdependence rises.     

Perspectives for long-term energy policy

After a review of the basic questions facing energy-policy makers and the inability of such techniques as cost-benefit analysis and demand forecasting to provide long-term answers, the authors focus on the supply approach. They argue that energy resources can, for practical purposes, be regarded as infinite and that the focus of attention should be the speed at which energy supplies can be brought on stream using various technology options and assuming an ideal world. A possible model, employing energy analysis, is described and its utility in providing benchmarks for long-term policy making is strongly commended.     

Strategic Goals and Practices of Innovative Family Businesses

A profile of 231 Washington state family businesses is presented. This article focuses on the business strategies of these firms, analyzing the relationship between strategy, performance, and business practices. Firms categorized as Prospector firms reported more gains in their current market position than all other strategic types. These firms were more likely to value an effective management and employee team and to develop new quality products and services and career development plans for non-family employees. Implications for family businesses are discussed.     

A Solution Concept for Majority Rule in Dynamic Settings

We define and explore the notion of a Dynamic Condorcet Winner (DCW), which extends the notion of a Condorcet winner to dynamic settings. We show that, for every DCW, every member of a large class of dynamic majoritarian games has an equivalent equilibrium, and that other equilibria are not similarly portable across this class of games. Existence of DCWs is guaranteed when members of the community are sufficiently patient. We characterize sustainable and unsustainable outcomes, study the effects of changes in the discount factor, investigate efficiency properties, and explore the potential for achieving renegotiation-proof outcomes. We apply this solution concept to a standard one-dimensional choice problem wherein agents have single-peaked preferences, as well as to one involving the division of a fixed aggregate pay-off.     

Is it worth subsidising regional repertory theatre?

Subsidies to the performing arts are usually justified by referenceto externality and public goods arguments that are hard to quantify.We suggest that subsidies to theatres may be appropriate becauseof their inability to engage in spatial price discriminationto capture consumer surplus. For one major theatre, we use audiencedata and the Clawson-Knetsch travel cost method to assess theextent of consumer surplus and find that it exceeds the levelof subsidy received from public sources. On the basis of thisexample, current subsidy levels are justifiable even withoutrecourse to traditional externality/public goods arguments.