Thomas Jefferson on the repudiation of public debt

Thomas Jefferson's theory of public debt repudiation illustrates both the normative and positive aspects of public debt repudiation. Using Jefferson's model, this paper attempts to reveal several characteristics of public debt repudiation. First, that the positive characteristics of repudiation can not be analyzed apart from the normative and institutional issues. Second, how a debt repudiation rule might be incorporated into a country's constitution and, finally, how such a rule may lead to an improvement of the country's credit terms over those that would exist otherwise. In other words, a country may be better off announcing its standards for repudiation then if it denied any intention to repudiate under any conditions. A related issue, which is beyond the scope of this paper, is the sufficient conditions for repudiation. Jefferson's model develops only the necessary conditions. I would like to thank J. Richard Aronson, Wayne Brough, Dean Crawshare, James Dearden, Kenneth Greene, Vince Munley, the anonymous referees, and seminar participants at the 1990 Public Choice Society meetings and at Lehigh University for helpful comments and suggestions. Of course, the author is responsible for any errors. The author is grateful to The Martindale Center for the Study of Private Enterprise which supplied research support.     

Uncertainty and sustainability in the management of rangelands

We analyze a dynamic and stochastic ecological-economic model of grazing management in semi-arid rangelands. The ecosystem is driven by stochastic precipitation. A risk averse farmer chooses a grazing management strategy under uncertainty such as to maximize expected utility from farming income. Grazing management strategies are rules about which share of the rangeland is given rest depending on the actual rainfall in that year. In a first step we determine a myopic farmer's optimal grazing management strategy and show that a risk averse farmer chooses a strategy such as to obtain insurance from the ecosystem: the optimal strategy reduces income variability, but yields less mean income than possible. In a second step we analyze the long-run ecological and economic impact of different strategies. We conclude that a myopic farmer, if he is sufficiently risk averse, will choose a sustainable grazing management strategy, even if he does not take into account long-term ecological and economic benefits of conservative strategies.     

Effects of human activities on benthic macroinvertebrate community composition and water quality in the upper catchment of the Mara River Basin,Kenya

Land‐use changes in the upper reaches of the Mara River Basin have modified their biophysical and hydrological processes, resulting in water quality degradation in streams. This study was conducted to investigate the effects of human activities on water quality and macroinvertebrates along the Nyangores River, one of the main tributaries of the Mara River, Kenya. Seven sampling sites were chosen to correspond to the loss of riparian cover, livestock watering and human activities (e.g. laundry washing, bathing, cultivation, wastewater inputs, dumping of solid wastes from urban areas and settlements along the river). Physical–chemical variables and water samples for nutrient analyses were collected monthly from February to July 2012. Benthic macroinvertebrates also were collected at the same sites as for the water quality samples. Two‐way analysis of variance tested the significant differences for each variable among the sites. Similarity percentages (SIMPER) analysis was used to identify the key taxa contributing to differences between minimally disturbed and most disturbed conditions in the study area. The results indicated increased nutrient concentrations in agricultural and settlement areas. Significant (P < 0.05) spatial–temporal variations in water quality variables were observed. A total of 42 macroinvertebrate genera were encountered, with Ephemeroptera, Plecoptera and Trichoptera orders dominating the minimally disturbed areas, and Diptera dominating the disturbed areas receiving point and no‐point solid and liquid wastes, including nutrients, from urban areas and settlements. Canonical correspondence analysis (CCA) revealed significant relationships between macroinvertebrate communities and measured physicochemical variables. The results of this study indicate the need for protection of riparian zones and treatment of sewerage wastes before their release into waterways. The dumping of solid wastes near streams and rivers also is discouraged, to maintain the quality of surface waters and aquatic organisms.     

Adaptive water management in Israel: structure and policy options

Difficulties in integrating technical, economic and institutional factors present a major gap in analytical capacity to guide water policy. This article presents an integrated framework to support water policy and guide water management choices, with application to Israel. That framework rests on the theory of economic policy originally developed by Tinbergen. It sees national water challenges as consisting of external factors, constraints, policy instruments and targets. The need for a modern implementation of the theory of economic policy is motivated by emerging environmental requirements, scarce water, growing demands for domestic use, and ongoing needs to implement existing and potential peace agreements.     

Exploring the boundaries of the framing effect: The moderating roles of disparate expected values and perceived costs of judgmental errors

Framing effects on retail store choice decisions were investigated in four experiments. Subjects preferred the store that guaranteed (a sure option) good prices (experiment 1), product availability (experiment 2), or a rebate (experiment 3) when consequences were framed in terms of gains; subjects preferred the risky option when consequences were framed in terms of losses. Consistent with fuzzy-trace theory, framing effects were reduced when the expected values of options were disparate in a direction that disfavored sure gain or probabilistic loss options (experiment 2) and when the perceived costs of committing a judgmental error were high (experiment 3). Experiment 4 shows that the moderating effects of disparate expected values and costs of judgment errors generalize to within-subject designs.     

Economic Costs of Sustaining Water Supplies: Findings from the Rio Grande

Water claims in many of the world??s arid basins exceed reliable supplies. Water demands for irrigation, urban use, the environment, and energy continue to grow, while supplies remain constrained by unsustainable use, drought and impacts of climate change. For example, policymakers in North America??s Upper Rio Grande Basin face the challenge of designing plans for allocating the basin??s water supplies efficiently and fairly to support current uses and current environments. Managers also seek resilient institutions that can ensure adequate supplies for future generations. This paper addresses those challenges by designing and applying an integrated basin-scale framework that accounts for the basin??s most important hydrologic, economic, and institutional constraints. Its unique contribution is a quantitative analysis of three policies for addressing long term goals for the basin??s reservoirs and aquifers: (1) no sustainability for water stocks, (2) sustaining water stocks, and (3) renewing water stocks. It identifies water use and allocation trajectories over time that result from each of these three plans. Findings show that it is hydrologically and institutionally feasible to manage the basin??s water supplies sustainably. The economic cost of protecting the sustainability of the basin??s water stocks can be achieved at 6?C11 percent of the basin??s average annual total economic value of water over a 20?year time horizon.     

Trade-off Model of Debt Maturity Structure

In this paper, we suggest the trade-off model to explain the choice of debt maturity. This model is based on balancing between risk and reward of using shorter-term loans. Shorter-term loans have cost advantage over, but incur higher refinancing and interest rate risk than longer-term loans. Using the Compustat data, we show that the principal components of financial attributes are financial flexibility and financial strength. Therefore, only firms with greater financial flexibility and financial strength can use proportionately more short-term loans. We also document that financially strong firms take advantage of lower interest rates of short-term debt. They use proportionately more short-term loans when the term premium is high. The results of our study also provide evidence supporting the agency cost hypothesis, which is strongly supported by current literature.     

The Original Maturity of Corporate Bonds: The Influence of Credit Rating,Asset Maturity,Security, and Macroeconomic Conditions

We examine the determinants of the new issue maturity of corporate bonds. As credit rating decreases, new bond issues have longer maturities, but substantial variation in maturity within each rating class remains. We seek to explain the variation of new issue maturity within credit classes. We find that asset maturity, security covenants, and macroeconomic conditions influence the new issue maturity of bonds within rating categories.