Explicit representation of the two-dimensional section of a production possibility set

Technical and scale efficiencies of Data Envelope Analysis are associated with a two dimensionalsection (a convex set) representing the amounts by which the input and output vectors of a reference decision making unit, may be scaled and still lie in the production possibility set. We describe a simple algorithm, closely resembling the simplex algorithm of linear programming, to traverse the boundary of this set. Given the output of our algorithm, the scalar efficiency measures and return-to-scale characterization are trivially determined. Moreover, the set may be graphically displayed for any problem in any number of dimensions with only a minimum of additional computing effort.     

ECONOMIC INTERACTIONS: CHINA VIS-A-VIS HONG KONG

Hong Kong's role has been integral to China's unprecedented economic growth, but privatization ranks first in importance. Another key factor is Beijing's putting economic reform before political reform. Giving democracy to a society in chaos likely makes matters worse. Hong Kong and China both have profited from their partnership. As China has opened up to allow transformation into a market economy, Hong Kong has provided informational impetus for change, a capitalist model to copy, and middleman functions for China to participate in outside-world goods and financial markets. The collapse of Communism in China and elsewhere has increased the supply of cheap labour perhaps by 2 billion. Manufacturing countries with expensive labour and high cost welfare programmes—such as those in the United States, Canada, and Europe—will have difficulty. Capitalists in these countries will do well by investing abroad but not in their own countries. Though wrong in detail, the factor price equalization theorem—that international movement of goods and international movement of factors of production are equivalent—basically is correct. If China continues moving toward privatisation and joining the international community, it will become fiercely competitive, and prospects will be bright for both China and Hong Kong. However, China's recent drift from capitalism clouds those prospects. Fundamentally, three kinds of rights systems exist: (i) a capitalist system, with well defined private property rights, protected by law, where control of resources is based on ownership; (ii) a hierarchical system, such as Communism, where control of resources is based on one's rank in the hierarchy; (iii) a system of corruption, where control of resources is based on bribes and patronage. China rapidly had been making a transition from the second system to the first but recently seems to have derailed into the third. In any case, Communism's collapse is one of the great events in human history. The hero of that event is Deng Xiaoping—not Gorbachev, nor Thatcher, nor Reagan. Hong Kong, by contributing significantly to China's capitalist movement, has led the Communist world to change.     

A note concerning the proposed emasculation of the legal services corporation

In its frenzy to dismantle the New Deal and Great Society programs of past progressive administrations, the Reagan administration has taken a special interest in the emasculation of the Legal Services Corporation. This should come as no great surprise.Then Governor Reagan and thethen Legal Services Program became immediate adversaries at the time of the program's inception. The purpose in this paper is to examine the pending emasculation of this instrumentality of legal reform in the context of structural changes elsewhere in the American legal profession.     

Fixing health care from the inside, today

Today, you are about as safe in a U.S. hospital as you would be parachuting off a bridge or a building. But it doesn't have to be that way. Right now, some hospitals are making enormous short-term improvements, with no legislation or market reconfiguration and little or no capital investment. Instead of waiting for sweeping changes in market mechanisms, these institutions are taking an operations approach to patient care. In case after detailed case, the article describes how doctors, nurses, technicians, and managers are radically increasing the effectiveness of patient care and dramatically lowering its cost by applying the same capabilities in operations design and improvement that drive the famous Toyota Production System. They are removing ambiguity in the output, responsibilities, connections, and methods of their work processes. These changes-which can be done in the course of an ordinary workday, sometimes in a matter of hours-are designed to make the following crystal clear: Which patient gets which procedure (output); Who does which aspect of the job (responsibility); Exactly which signals are used to indicate that the work should begin (connection); and Precisely how each step is carried out (method). Equally important, managers are being transformed from rescuers who arrive with ready-made solutions into problem solvers who help colleagues learn the experimental method. Thus, these hospitals are breaking free of the work-around culture that routinely obscures the root causes of so many problems, creates so much waste, and leads to so many unnecessary deaths.     

Options with Constant Underlying Elasticity in Strikes

Closed-form solutions are derived and interpreted for European options, with stochastic strike prices, that maintain constant elasticity of the strike with respect to the price of the underlying asset. We refer to such options as CUES. CUES preserve the relative shares of exercise price risk for both the buyer and writer of the option, regardless of whether the price of the underlying asset moves up or down. The relevance of the CUES concept is established through applications in two distinct fields. First, it is established that CUES-like options are embedded in private equity investments. This concept is then used in a novel application to determine the equity share of a private company corresponding to a given level of investment. Secondly, the advantages that CUES would provide over traditional executive stock option grants are considered and it is shown that CUES can provide enhanced incentive-alignment without increasing options expense to the company. JEL Classification: G130     

A Theoretic Analysis of Extent of Lender Participation in a Participating Mortgage

A participating mortgage is a loan in which a lender accepts a below-market coupon rate in return for a share (participation) in the cash flows generated by income-producing real property. The cash flows provided by participation are classified as contingent interest and are intended to compensate the lender for additional risk exposure as well as the reduction in coupon rate. In this paper, we present a partial equilibrium wealth-maximizing model to estimate the extent of lender participation and an analysis of the factors affecting it. The results of formal comparative statics analysis show that the lender's percentage participation is, in general, positively related to changes in the loan-to-value ratio and threshold cash flows above which participation is payable. Among yet other results, a change in the contracted loan life has an ambiguous effect on the lender's percentage participation. Then, in an effort to resolve ambiguities in the comparative statics results, we employ a numerical procedure in conducting sensitivity analyses. This allows us to estimate percentage participation levels, and their elasticities, under various assumptions regarding the underlying factors. JEL Classification: G21, C65