Attitudes about EU expansion and zero‐sum thinking

EU expansion can be seen as a positive‐sum process benefiting all countries by creating larger markets that stimulate more productive economies through increased specialization and economies of scale, implying that the general public in all countries should favour expansion. Contrarily, expansion can be perceived as zero‐sum. Capital and production relocate from higher to lower wage regions while labour does the opposite, possibly raising unemployment and reducing wages in the higher wage regions. The general public in these countries may come to oppose EU expansion attributing any deterioration in their work situation to the gains of new citizens of the European Union. Analysis of changes in Irish attitudes towards EU expansion in 2002, 2007 and 2009 finds no evidence of a link from lowered economic conditions to increased opposition to EU expansion. The only evidence for zero‐sum thinking is that diminished economic circumstances are associated with increased opposition to immigration, but this is not associated with increased opposition to further EU expansion.     

Corporate governance and efficiency in banking: evidence from emerging economies

ABSTRACT

This article investigates the impact of corporate governance on bank efficiency across a sample of 139 commercial banks from 17 countries of Central and Eastern Europe during the period 2005–2012. Data on governance characteristics are hand-collected from banks’ reports. The empirical findings indicate that implementing rigorous corporate governance structures is associated with higher costs for banks and a lower level of efficiency. However, during the crisis, a tight governance mechanism significantly increases banks’ cost and technical efficiencies. We also show that prudent risk management is associated with both higher cost and technical efficiency for more capitalized banks, while rigid supervisory boards are linked with greater technical efficiency for more capitalized banks.     

Brain Drain: A Management or a Property Problem?

Abstract . Brain drain occurs when skilled individuals leave their native countries. It is often argued that this phenomenon has strong negative effects on the countries of origin, preventing them from capitalizing on their investment in human capital formation and thus realizing a higher growth. This analysis shows that the negative consequences of brain drain have been overemphasized, mainly because of the confusion between capital and technology. It demonstrates that investments in human capital are possible and profitable in a free market. State intervention in education is responsible for the systematic misallocation of human capital in general, and for brain drain in particular.     

Are Private Vices Public Finance Virtues? An Empirical Investigation

The article investigates the impact of widely accepted private vices (smoking and alcohol and gasoline consumption) on public finance. Introducing the concept of “vice-related deficit,” which aggregates the positive effects on public finance on the revenue side (cash inflows) and the negative effects on the expenditures side (cash outflows), the article looks upon cigarette, alcohol, and gasoline consumption as determinants of vice-related deficit for a number of 68 countries for year 2012. We found that smoking had a negative effect on vice-related budget balance, while alcohol and gasoline consumption had a positive effect. As control variables, we used life expectancy and size of the economy, both having been found with negative effects. The results prove robust to different sample adjustments. We also found that the negative effect of private vices on public finance is stronger for Christian countries than for non-Christian countries. Policy recommendations were made accordingly.     

Assessing the predictive performance of artifIcial neural network‐based classifiers based on different data preprocessing methods,distributions and training mechanisms

We analyse the implications of three different factors (preprocessing method, data distribution and training mechanism) on the classification performance of artificial neural networks (ANNs). We use three preprocessing approaches: no preprocessing, division by the maximum absolute values and normalization. We study the implications of input data distributions by using five datasets with different distributions: the real data, uniform, normal, logistic and Laplace distributions. We test two training mechanisms: one belonging to the gradient‐descent techniques, improved by a retraining procedure, and the other is a genetic algorithm (GA), which is based on the principles of natural evolution. The results show statistically significant influences of all individual and combined factors on both training and testing performances. A major difference with other related studies is the fact that for both training mechanisms we train the network using as starting solution the one obtained when constructing the network architecture. In other words we use a hybrid approach by refining a previously obtained solution. We found that when the starting solution has relatively low accuracy rates (80–90%) the GA clearly outperformed the retraining procedure, whereas the difference was smaller to non‐existent when the starting solution had relatively high accuracy rates (95–98%). As reported in other studies, we found little to no evidence of crossover operator influence on the GA performance. Copyright © 2005 John Wiley & Sons, Ltd.     

The failure of OCA analysis

Conclusion In this paper I have tried to show that OCA theory fails to advance the case for independent fiat currencies. It does so both because of its empirical irrelevance, and because of its internal inconsistencies. Therefore, from the perspective of international monetary economics, there is no theoretical justification for the present monetary organization. Rather other factors, more related to political interests than to sound economics, should be held responsible for it. It is perhaps interesting to consider the mainstream economists’ systematic reaction when they discover there is no scientific justification for a fluctuating fiat currency system. They simply throw away the whole analysis and return to “common sense” propositions. Some of them even go so far as to recognize the merits of a world currency, eventually pegged to gold, but then dishonestly dismiss the case on the basis of “beliefs,” or popular wisdom. All remaining errors are my own.     

Valuing Pharma R&D: The Catch-22 of DCF

There are two principal methods for valuing pharmaceutical R&D projects—discounted cash flow (DCF) and real options valuation (ROV). As typically practiced, DCF valuations tend to be lower than the estimates produced by ROV techniques. Part of the difference, as many have recognized, stems from DCF s limited ability to take account of managers' real option to cut its losses when new information reveals a drug candidate's lack of profit potential. Another reason for the difference, however, is the widespread use in DCF valuations of established success rates that do not distinguish between projects that fail to pass safety or efficacy trials and those that are abandoned for lack of economic viability. If the appropriate success rates are used, the two methods should yield identical project values because they assume the same scenarios. The practical reality, however, is that the two methods deal in a completely different way with the possibility of abandonment for economic reasons. Because ROV accounts for this possibility directly in the model itself, it is much better suited than DCF to this task—indeed, that is the uncertainty that it is designed to deal with. And the fact that 30% of all pharma R&D abandonments are for economic reasons is a strong argument for using ROV rather than DCF to evaluate new drug development.